Bridging The "Atlantic" Gap - Extra-Territorial Jurisdictional Issues, In Light Of Globalization And Enlargement

Saturday, September 1, 2007 - 01:00

Introduction

It is somewhat of an understatement to say that the U.S. has led the way in tackling issues of extra-territorial jurisdiction in the light of globalisation. In relation to white collar crime, the Foreign Corrupt Practices Act (FCPA) 1977 allows the U.S., via the Department of Justice (DoJ), to claim jurisdiction over U.S. citizens, firms and foreign companies (whose shares are quoted on the New York Stock Exchange), where that individual or organisation partakes in corrupt business practices anywhere in the world. The DoJ is also able to claim jurisdiction over all foreign nationals who commit an act in furtherance of a foreign bribe while in the U.S.

The DoJ has aggressively sought to utilise the FCPA in its fight against global corrupt business practices. This, coupled with the powers granted under the numerous extradition treaties to which the U.S. is a signatory1, has enabled the DoJ to experience much success when investigating and bringing prosecutions against companies and individuals situated within U.S. and abroad.

But the UK is catching up. In the last decade or so the UK has been increasingly pro-active in implementing a plethora of domestic legislation, the aim of which has been to deal with issues directly resulting from globalisation and enlargement. A large proportion of these changes have come about as a result of the UK's obligations under European law but there is little doubt that many have been as a result of increasing encouragement from the U.S.

Although we do not intend to undertake a detailed analysis of each, it is useful to briefly list a few of the new or proposed UK legislative instruments intended to tackle issues arising from globalisation and changing attitudes towards corporate (and individual) accountability. These include:


The Anti-Terrorism Crime and Security Act 2001;


The Enterprise Act 2002;


The Extradition Act 2003 (the EA 2003);


The Fraud Act 2006;


The Corporate Manslaughter and Corporate Homicide Act 2007; and


The Corruption Bill.

Some commentators have argued that in certain cases legislation has been pushed through hastily in an attempt to combat international drug trafficking and terrorism post 9/11, and that the U.S. has erred in using this legislation to facilitate the extradition of business executives when that was not its intended purpose.

However, it is not true that international concerns about financial crime only emerged post 9/11. With the advent of faster and better communication systems that enabled and facilitated the growth of global business, there had been a recognition that a rise in international business crime would inevitably follow. This meant that a review of the UK's extradition laws was already underway by 1997. However, there is little doubt that 9/11 accelerated the process and subsequent cases like the 'Natwest Three'2 and the Ian Norris case3 illustrate the DoJ's willingness to utilise the new UK legislation to assist in combating international white collar crime and to facilitate extradition to the U.S., regardless of location. Indeed, it is a startling statistic that approximately 30 foreign defendants have served or are currently serving prison sentences in U.S. jails as a result of DoJ's cartel investigations and that in 2006 the Office of Criminal Enforcement (OCE) - which forms part of the DoJ - obtained the second highest amount of fines in history, totalling $473 million. This goes to explain why there is an increasing trend towards criminal and quasi-criminal sanctions.

Extradition Issues

Extradition has certainly been a key weapon in the armoury of the DoJ and following the much anticipated formal ratification (on 26 April 2007) of the 2003 Treaty4 between the U.S. and UK. It is now much easier for both nations to seek successful extradition across the Atlantic. The Treaty significantly amends the arrangements dating back to 1972 and essentially simplifies the extradition process by removing the requirement for the need (by the U.S.) to show a prima facie case, and diminishing the defendant's right of appeal. However, the UK is still required to show 'probable cause' (which remains for U.S. constitutional reasons), but it is worth noting that the 'probable cause' test is broadly comparable to the requirement for information which would justify the issue of a warrant for the arrest of a person that the UK will now require of the U.S.

The EA 2003 also gives effect to the European Arrest Warrant ("EAW") which essentially negates the need for extradition arrangements between participating European states and allows for the prompt extradition of suspects between those jurisdictions. Indeed, suspects can be transferred between jurisdictions within a matter of days following the issue of a warrant without any consideration being given to any of the relevant evidence.

Broadly speaking, this is now the same for extradition cases involving the U.S. Post EA 2003 the only requirements now imposed on the U.S. are: (i) the need to identify the conduct that an individual is suspected of; (ii) that the court is satisfied that the conduct would constitute an offence in the UK and is punishable with at least one year's imprisonment; and (iii) the extradition is compatible with the individual's ECHR rights.

Obstacles To Justice On An International Level

International cartel operations were brought to the fore with the ADM Lysine case5 and there then followed a whole host of successful cartel investigations across the U.S. and further afield. The DoJ attributes much of its success to its 'leniency programme' whereby the whistleblower of a cartel operation, who is prepared to inform on other members of a cartel, is granted full immunity - not only for the company but also for company executives.

In the UK, despite recent changes in the law, the regulatory agencies have far less powers and resources available when investigating cartels, fraud, corruption and other white collar crimes. For example, the Serious Fraud Office, the agency charged with investigating complex fraud cases in the UK has found itself severely under-resourced when dealing with cases in the past. Notwithstanding this, there has been significant progress, within the last few weeks. The Office of Fair Trading (OFT) has imposed a fine of 121.5m on British Airways in relation to price fixing offences in the UK.6 However, there is no facility in the UK for plea bargaining and the law relating to corruption, (even taking into consideration the amendments introduced by the Anti-Terrorism Crime and Security Act 2001), is fragmented and in need of codifying7 . One could certainly argue therefore that the UK is at a relative disadvantage, when compared with the U.S., when attempting to tackle what is often complex and sophisticated international crime.

As things currently stand, there is a clear disparity between the systems operating on each side of the Atlantic (and indeed around the globe), despite the fact that a large number of jurisdictions are attempting to tackle the same (or similar) issues. The U.S. is clearly leading the way, although, the UK and other European countries like France and Germany have made progress in recent years. However, the added dimension of fulfilling their obligations in Europe has in some part been an obstacle to speedy reform. In addition, notwithstanding the U.S.'s taking a firm stance against what it considers corrupt and underhand business practices, it is evident that attitudes across the world differ as to what business practices are so reprehensible that they should be considered 'criminal'. There is no escaping that business culture has a large part to play. What many in one jurisdiction would consider to be a corrupt transaction may well be considered a good and necessary business practice in another.

Taking into account the difference in the investigative and prosecution methods available in the UK, U.S. and in other parts of the world, it is possible that there might be situations where an individual suspected of committing corruption offences internationally might choose to reside in their country of origin in full knowledge of the fact that there is no risk of extradition. For example, countries like Russia and China have no extradition treaties in place with either the U.S. or UK. Alternatively, a defendant may prefer (and even seek), in circumstances where charges are imminent, to be prosecuted in one jurisdiction where he knows that the chances of being convicted are significantly less than they might be if prosecuted in another jurisdiction (like the U.S.) or where the penalties imposed upon conviction are less severe in that jurisdiction.

However, those individuals hoping to find a safe haven in the UK should bear in mind the recent decision in Norris where even though the offences in question were alleged to be committed prior to the price fixing offence coming into force in the UK, the District Judge, Nicholas Evans, said that when considering the 'double criminality requirement,'8 he was not required to find an exact match in English law. As long as the conduct in question equated to a criminal act (in the Norris case, the conduct was said to amount to conspiracy to defraud), the double criminality requirement was satisfied and it was irrelevant that the offence was not the same in both jurisdiction.

Even with the amendments brought about by the 2003 Treaty and the continuing attempts by not only the U.S. and UK but also a host of other countries, particularly in Europe, to work together to tackle global crime, it is telling that extradition proceedings involving the U.S., on average, still take a minimum of 18 months.

Conclusion

An increasing number of governments have introduced legislation to combat the impact of international crime. Aside from diplomatic issues which frequently act to frustrate international co-operation (the current diplomatic climate with Russia following the poisoning of former KGB agent Alexander Litvinenko is a case in point), the main obstacle to achieving justice on a trans-jurisdictional basis is the time it takes to secure extradition of suspects because of the operation of sometimes vastly different administrative systems in those jurisdictions, as well as the difference in cultural attitudes towards certain offences. With the introduction of the EAW, regulatory authorities throughout Europe now have significantly improved powers to assist in combating international crime. Perhaps, in time, we may see the introduction of a Euro-U.S. Arrest Warrant. Although, as things currently stand, this would seem a long way off.1 The U.S. is a signatory to more than 120 bilateral extradition treaties throughout the world.

2 U.S. v. Bermingham, Darby and Mulgrew , Cr. N:H-02-0597.

3 Norris v. Government of the U.S. and others , [2007] EWHC 71 (Admin) [Norris (2)].

4 Extradition Treaty between the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of the United States of America - Washington, 31 March 2003.

5 U.S. v. Andreas and Wilson 216 F.3d 645 (7th Cir 2000) .

6 With the DoJ recommending a fine of $300m in the U.S. However, this needs to be approved by the Courts.

7 The Corruption Bill is slowly winding its way through Parliament but it is unclear as to when it will finally receive Royal Assent.

8 This is the requirement that the conduct alleged has to be an offence under the law of both the state requesting extradition and also in the state requested (had the offence occurred within that state).

John Heaps is head of the litigation and dispute management group and also heads the litigation team in the London office of Eversheds LLP. Gerallt Owen is a Partner in Eversheds' litigation and dispute management practice and head of the fraud and financial crime team. He specialises in domestic and international investigations, fraud, corporate crime, disciplinary proceedings and regulation.

Please email the authors at johnheaps@eversheds.com or geralltowen@eversheds.com with questions about this article.