Are U.K. Courts Pushing Back Against DOJ’s Global Reach?

by Evan Norris and Alma M. Mozetic

On July 31, 2018, the High Court of England and Wales denied the U.S. Justice Department’s request for the extradition of Stuart Scott, a British foreign exchange trader indicted in 2016 as part of the DOJ Fraud Section’s multi-year effort to investigate and prosecute foreign currency market manipulation.  The decision in Scott v. Government of the United States of America marks the second time in 2018 that DOJ has lost an extradition fight in London.  The Department has reportedly indicated that it will appeal.  If the decision stands, Scott will join a handful of U.S. court cases that have the potential to impact DOJ’s ability to reach across the globe to pursue foreign nationals for violations of the FCPA and other financial fraud statutes.

Background

Scott, the former head of currency trading for Europe at HSBC in London, allegedly participated in a scheme to defraud HSBC’s client, a Scotland-based energy company, by driving up the price of sterling before a multi-billion currency order in December 2011.  The charges against Scott were first unsealed when his former boss and alleged co-conspirator, Mark Johnson, was arrested at Kennedy Airport in New York in 2016.  While Scott remained in England to contest his extradition, Johnson fought his case in a Brooklyn federal courtroom, where he was ultimately tried, convicted and sentenced to two years in prison, though he has been freed pending the outcome of his appeal to the Second Circuit.

As for Scott, after his efforts in the lower court were unsuccessful and he was ordered extradited, he appealed to the English High Court, where he found a panel sympathetic to his “forum bar” argument under section 83A of U.K.’s Extradition Act 2003, a provision inserted into the 2003 Act by the Crime and Courts Act 2013.  The resulting decision, authored by Lord Chief Justice Burnett, relied in significant part on the same judge’s February 2018 decision in “the leading case on the forum bar”, which ruled on DOJ’s request to extradite Lauri Love, a British-Finnish national charged with committing cyberattacks on U.S. government agencies.[1]  While the court in Love also ruled against extradition, a key factor in that case – absent in Scott – was the physical and mental condition of the defendant and his ability to stand trial in the United States.[2]

Extradition Not in the “Interests of Justice”

In denying the extradition request in Scott on the basis of the same statutory forum provision relied on in Love, the Scott court concluded that “the interests of justice” militated against extradition.[3]  The court considered seven statutory factors in its de novo review of the lower court’s decision in favor of extradition.  Based primarily on two of those factors – “the fact that most of the harm took place in” the United Kingdom, and Scott’s “strong connection” to the United Kingdom and “absence of any significant connection with” the United States – the court reversed.[4]  In so doing, the court effectively elevated the forum bar over the extradition treaty between the United States and United Kingdom, which contains few exceptions to the countries’ mutual “[o]bligation to [e]xtradite”.[5]

There is a long history of attention in the U.K. legal community and public to a perceived imbalance in the U.S./U.K. extradition treaty, particularly in the context of cases understood to involve DOJ’s extraterritorial reach.[6]  The High Court’s decision in Scott appears to have attracted the attention of commentators both because of that history and because the reasoning would seem to have the potential for broad application.[7]  For instance, the court found that any harm to U.S. financial markets was “unquantified” and there was, in any event, “no reason to doubt that equal or greater harm was suffered to the integrity of the United Kingdom markets where more of the trading in question took place”.[8]  The court also suggested that the use of U.S. correspondent accounts in the alleged scheme was “essentially a technicality” that merited little, if any, weight.[9]  Last, while the court considered the Serious Fraud Office’s statements that (1) it “at no stage considered [Scott] a suspect” in its own forex investigation and (2) it “d[id] not intend to investigate [Scott]”, the court concluded, interestingly, that neither statement decisively pointed in favor of extradition.[10]

What To Watch for Next

If Scott is not overturned on appeal, it will join a handful of U.S. court cases – perhaps most importantly the still-pending appeal in United States v. Hoskins, in which DOJ has asked the Second Circuit to reverse a district court’s decision curtailing FCPA accomplice liability for non-resident foreign nationals – that have the potential to impact DOJ’s ability to police cross-border financial crimes.[11]  If the decision stands, it will be particularly interesting to see if Scott serves to usher in a shift in the bilateral U.S./U.K. treaty relationship such that we will see fewer extraditions of U.K. nationals to the United States and vice versa.

Other things to watch for:

  • Will non-U.K. citizens have similar success invoking the forum bar in section 83A in fighting extradition from the United Kingdom to the United States?
  • Will defendants arrested overseas for financial crimes increasingly opt to challenge extradition in cases where they previously might have consented to extradition in exchange for agreements with DOJ regarding the terms of their pretrial release in U.S. courts? Will the judiciaries in other countries follow the lead of the U.K. courts, or will the absence of statutory analogues to the forum bar leave defendants with fewer bases upon which to challenge U.S. extradition requests?
  • Will Scott cause DOJ to turn its attention away from London-based financial-crime targets, or will it rather employ other tactics – such as deploying lures or otherwise seeking to apprehend such targets in third countries, or including more detail about harm and territorial connections to the United States in charging instruments to increase its chances of success before U.K. courts?
  • Even though by all accounts the SFO and Crown Prosecution Service have sought to assist DOJ in its efforts to prosecute Scott, will the decision of the U.K. courts nonetheless strain DOJ’s relationship with the U.K. enforcement authorities?

Conclusion

Cases like Scott are worth watching closely to see what they may signal about how foreign jurisdictions – enforcement authorities and judges alike – are responding to DOJ’s global approach to investigating and prosecuting financial crimes.  If Scott stands, it will be interesting to see if the High Court’s views on the territorial limits of U.S. law will begin to be used by U.K. banks and corporations outside the extradition context when they are facing investigation by DOJ, SFO and other enforcement authorities.  And on this side of the Atlantic, it will be interesting to see how DOJ responds to resistance abroad in the extradition context at the same time that it continues to respond to challenges in U.S. courts to the global exertion of its jurisdiction.

Footnotes

[1] Scott v. U.S.A. [2018] EWHC 2021 (Admin) [23] (Eng.) (citing Love v. U.S.A. [2018] EWHC 172 (Admin) [22] (Eng.)).

[2] Love at [11], [32]-[33], [42]-[43].

[3] Scott at [24], [60]. 

[4] Id. at [60].

[5] Article 1, Treaty Between the United States of America and the United Kingdom of Great Britain and Northern Ireland, March 31, 2003.

[6] E.g., Corker Binning partner comments on US/UK extradition treaty, Corker Binning News (March 30, 2012), available at https://www.corkerbinning.com/corker-binning-partner-comments-on-usuk-extradition-treaty/.

[7] E.g., Richard Vanderford, Comment:  Ex-HSBC trader’s rare win in UK extradition fight a headache for US prosecutors, MLex Market Insight (Aug. 1, 2018), available at http://www.mlex.com/GlobalAntitrust/DetailView.aspx?cid=1011496&siteid=215&rdir=1; Michael Griffiths, “US prosecutors will have to get smarter” after blocked HSBC trader extradition, GIR (Aug. 9, 2018), available at https://globalinvestigationsreview.com/article/1172960/%E2%80%9Cus-prosecutors-will-have-to-get-smarter%E2%80%9D-after-blocked-hsbc-trader-extradition.

[8] Scott at [39].

[9] Id.

[10] Id. at [18], [46].

[11] U.S. v. Hoskins, 123 F. Supp. 3d 316 (D. Conn. 2015), appeal docketed, No. 16-1010 (2d Cir. Apr. 4, 2016).

Evan Norris is counsel and Alma M. Mozetic is an associate at Cravath, Swaine & Moore LLP.

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