Managers of global businesses face an increasingly difficult job managing legal risks arising from business operations carried out across national borders. There has been an increasing trend in legislatures in the UK and elsewhere imposing a long-arm jurisdiction based on nationality, as opposed to the traditional territorial jurisdiction. This approach has in particular been taken in relation to anti-bribery legislation.
Accompanying this, the focus on anti-money laundering legislation has led to businesses potentially incurring liability in respect of underlying criminal conduct that has occurred outside the UK. The streamlining of the extradition process in the UK now means that UK nationals can be extradited to face prosecution in the US courts and elsewhere in Europe without proof of a prima facie case against them. As well as the businesses that they run facing increased risks, managers themselves must therefore be aware of the enhanced risk to them personally as a result of these developments.
The UK’s anti-bribery legislation, which was passed in the late 19th and early 20th centuries, was updated by the Anti-Terrorism Crime and Security Act 2001 (Acsa) to impose a nationality-based jurisdiction. The effect of Section 109 of Acsa is to impose criminal liability on UK nationals or UK-incorporated companies in respect of corrupt activities wherever they occur in the world. A prosecution may be brought in the UK against persons in respect of conduct that occurs outside the UK, provided that the conduct in question would constitute a corruption offence under UK law if the conduct had occurred in the UK. Conduct that is engaged in by UK companies, which may be acceptable in the country in which it occurs, could therefore expose a UK company to prosecution in the UK.
The enlargement of the scope of UK anti-corruption legislation has required UK businesses to reassess business practices in the jurisdictions in which they operate, and in theory has resulted in a move towards a ‘cleaner’ business environment in certain jurisdictions where corruption may be prevalent. However, the imposition of long-arm jurisdiction in this area, particularly where UK legislation does not tolerate facilitation payments, can be perceived as expecting UK businesses to comply with unrealistic standards.
The UK’s anti-money laundering legislation is also extra-territorial in scope. The definition of “criminal conduct” in the Proceeds of Crime Act 2002 embraces conduct that occurs outside the UK, but would constitute an offence in the UK had it occurred here. A money laundering offence will be committed if a person acquires or has possession of criminal property. A UK business therefore needs to ensure that it does not commit a money laundering offence where, for example, it receives income from business activities that take place abroad and where those activities could in some way involve the commission of a UK offence had the conduct occurred here.
An area for debate has been whether the definition of “criminal conduct” involves a concept of dual or single criminality – that is, is it sufficient for the conduct in question to be an offence under UK law, or does it also have to be an offence under the law of the country in which the conduct occurs? The Serious Organised Crime and Police Bill should resolve this issue, to an extent, by introducing a defence against money laundering where the conduct is not unlawful in the overseas country. The use of this defence will be limited, as it will not be available in the case of certain types of criminal conduct (expected to include corruption offences and people trafficking).
The Extradition Act 2003 came into force in January 2004. This act implemented the European arrest warrant, replacing extradition agreements between 16 EU member states and removing the requirement for certain designated territories, including the US, to prove a prima facie case against a defendant. Essentially, the designated territory seeking extradition is required to provide information about the offence; extradition then becomes almost an administrative process, subject to certain safeguards. One of the aims of the act was to make it easier to extradite those suspected of being involved in terrorist activities. These changes were particularly controversial, as no reciprocal arrangements were secured to make it easier to extradite individuals to the UK from the US.
In 2002, a court in Houston, Texas indicted three former employees of the National Westminster Bank in the UK on seven counts of wire fraud designed to defraud the bank. The Texan court has sought the extradition of the so-called ‘Enron Three’. The men deny wrongdoing and argue that, if they should be tried at all, they should be tried in the UK, as that is the place where the alleged conduct took place and is where the principal protagonists are based. If extradited, the three bankers face time in custody in the US while they await trial as they are unlikely to be granted bail.
At the extradition hearing on 15 October 2004, the district judge decided that there was a “good and proper basis” for prosecuting the three men and ruled that the case should now be sent to the Home Secretary for a decision on whether to extradite. That decision is expected soon. If he rules in favour of extradition, it is likely that the men will appeal and, if necessary, take their case to the House of Lords and the European Court of Human Rights.
The Home Secretary’s decision is likely to have a significant impact not only on the case of the Enron Three, but more widely in relation to the long-arm jurisdiction of the US courts. The creation of effectively a ‘fast-track’ extradition route has already encouraged more extradition applications and a positive decision to extradite the Enron Three will doubtless act as further encouragement. Indeed, one of the effects of the 2003 act is to remove “triviality” objections, such as when the Czech authorities sought to extradite an individual who apparently acted as a lookout when a car radio was stolen. The 2003 act was not really implemented to catch this kind of offence.
Any decision from the Home Secretary should be of concern to company officers, particularly in regulated sectors where it may be comparatively easy to commit inadvertent breaches of regulatory laws overseas, particularly in the US. Do such individuals in the UK now face the prospect of being subjected to the long-arm jurisdiction of the US courts? If so, was this really the aim of the 2003 act?
Arun Srivastava is a partner in the business crime unit at Baker & McKenzie and was assisted in this article by senior associate Sanjay Bhandari