The angst surrounding the cases of the NatWest Three and Ian Norris has raised awareness of the new risks facing businesspeople from US prosecutors. US criminal jurisdiction is extraordinarily wide. To take an important example, the Sherman Antitrust Act (relating to cartels) applies to any activity that is in restraint of trade in the US or between the US and other nations. The activity does not have to occur within the US. Agreements made abroad but affecting US commerce, even in minor ways, can be prosecuted.
The US Department of Justice (DOJ), which enforces antitrust law, is a keen pursuer of overseas cartels and the individuals involved. More prosecutions and extradition requests are occurring, in part due to the effect of DOJ policies granting leniency to those who first provide evidence, but co-conspirators are penalised heavily.
Many businesspeople in Europe assume that all they have to consider is local law and the attitudes of local or European authorities. But many European businesses will have a presence in US markets or have US investors. They should not think that activity which risks being seen as amounting to a cartel cannot lead to a transatlantic prosecution.
The same is true in relation to other offences that in the past were more tolerated. For example, overseas corruption continues to be seen by many people as ‘how things are done’ in certain countries. Whether or not that is true, corruption is a crime for which extradition may be sought, either by the state in which the alleged corruption occurred or by another state whose law has been infringed.
The long arm of US law is made yet longer via the offences that will frequently accompany cartels, frauds or corruption. Money laundering, tax evasion and obstruction of justice charges could arise. US law also criminalises mail fraud and wire fraud. These involve using the US postal system or any form of electronic communication based in the US for criminal purposes.
US prosecutors other than the DOJ are also keen to target overseas defendants, as witnessed in the case of BetonSports’ former chief executive officer David Carruthers, who was arrested while changing planes in Texas and who now awaits trial for conducting internet gaming, which is legal in the UK, as well as tax offences and other issues.
This legal framework, and prosecutorial zeal presents particular risks for UK nationals. The reasons why the UK (unlike Germany or France, for example) has granted the US the right to extradite UK citizens without providing prima facie evidence are political. However, the effect in law is that Britons are uniquely vulnerable to extradition to the US, where they are likely to face lengthy delays before trial, high and irrecoverable costs, much higher sentences and an unfamiliar legal playing field.
Although the US is by far the leading source of extradition requests at present, the relaxed regime of the Extradition Act 2003 also applies to requests from EU member states, which benefit from the even more straightforward European Arrest Warrant procedure, and also to such states as Russia and Albania. Extradition requests from other states look likely to become more common over the next few years.
For companies and executives this situation will require more investment in due diligence, training and legal risk management. Certain insurers are already amending the terms of directors’ and officers’ (D&O) insurance to reflect these risks. Individuals should check the terms of their D&O insurance, and of course make sure they are not even implicated in any wrongdoing, even indirectly.
Of course there are obvious benefits to the UK in discouraging illegal cartels, frauds and white-collar crime generally, even if the main markets currently being protected are those in the US. But attempting to manage a company in accordance with a less predictable legal environment will be costly for businesses in the short term and is likely to lead to increasing risk-aversion. It would be bizarre if a side-effect of internationalised law enforcement was a more defensive approach to overseas investment and a retreat from wider markets by UK businesses.
Eoin O’Shea, barrister, Simmons & Simmons