Legal Briefing

Extradition risks in the spotlight

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Crime, fraud and licensing | 01 April 2010

In principle, there can be no argument that someone who commits an offence in one country should be able to avoid justice by fleeing to another. Generally, it is likely to be in the interests of justice for the trial to take place in the country where the crime was committed. Provided that fundamental human rights are guaranteed, that there is a fair trial and that the offence is not motivated by political, racial or other improper considerations, the offender ought to be returned to face justice. Extradition reform over the past 25 years has sought to put such principles into effect, culminating in the Extradition Act 2003 (the 2003 Act).

However, with the introduction of the 2003 Act, the current controversial extradition treaty with the US and the often overlooked fast-track European Arrest Warrant (EAW) procedure, the extradition risks for company executives suspected of white-collar crimes has increased exponentially. Although the extradition laws were brought into force to tackle serious cross-border crime and terrorism, an extraditable offence does not actually have to be at the most serious end of the spectrum of criminal activity. It only needs to be an offence that carries a 12-month sentence or more in the UK, or in the requesting state, and white-collar crime offences are clearly within scope. Companies and their employees need to be aware of these risks, and must take steps to ensure that they do not become caught up in lengthy and damaging extradition proceedings.

Long arm of the US

Extradition requests from the US have undoubtedly attracted the greatest publicity. The proactive stance of the US authorities towards extradition is not surprising, given the US’ role in international trade and finance. The US is also at the forefront of the battle against financial crime and arguably has the most aggressive prosecution system.

The US is a party to a bilateral extradition treaty with the UK. Under the current 2003 treaty, the UK must show a probable cause to justify a request, whereas the US is not required to do so. This is explained by the constitutional protection that prevents the US authorities from extraditing a US citizen purely on the say-so of a foreign government. The majority of extraditions do not require an examination of the evidence by the country that has received the request. Trust in the criminal process of the requesting country is usually sufficient. Whether such an argument will be accepted by the press or by politicians as more cases come before the courts remains to be seen.

Ian Norris, the former chief executive of engineering group Morgan Crucible, recently failed in his latest legal challenge to avoid extradition to the US (under an earlier 1972 treaty), where he faces charges of obstructing justice. Norris, who retired from the company in 2002, won a House of Lords ruling last year that blocked his transfer to the US over different price-fixing allegations. The House of Lords called a halt to earlier extradition proceedings on the grounds that the activities of Norris took place between 1999 and 2001, and price fixing was only made a criminal offence in England and Wales in 2002. However, the US authorities refused to let the matter drop and continued to pursue the extradition on the ‘subsidiary’ charge of obstructing justice. This charge alleges conspiracy to:

  • tamper with witnesses;
  • preparing witnesses with a false ‘script’;
  • providing fictitious information to the grand jury; and
  • destroying or concealing – or persuading others to destroy or conceal – incriminating evidence.

After losing his extradition battle on the second round of charges in the lower courts, Norris appealed to the Supreme Court, Britain’s highest appeal court, in November last year. Despite claims from Norris that extradition would cause damage to his and his wife’s mental and physical health, and that prosecution in the US would be incompatible with his human rights, namely a right to a private family life, the Supreme Court unanimously dismissed Norris’ appeal against extradition, which will see him tried by the US authorities.

Lord Phillips, the president of the Supreme Court, said that ill health could not be a determining factor in this case and the ruling mirrored the high-profile case of Gary McKinnon, the autistic computer hacker who also lost a recent appeal to stop being made to face justice in the US. Phillips explained:

‘One has to consider the effect on the public interest in the prevention of crime if any defendant with family ties and dependencies, such as those that bind Mr Norris and his wife, was thereby rendered immune from extradition to be tried for serious wrongdoing. The answer is that the public interest would be seriously damaged.

It is for this reason that only the gravest effects of interference with family life will be capable of rendering extradition disproportionate to the public interest that it serves. This is not such a case.’

Norris is understood to be asking the European Court of Human Rights (ECHR) in Strasbourg to take his case. This plea to the European court will be his last chance of avoiding extradition after a long-running and expensive legal battle.

controversy

The protracted legal battle over the extradition of Norris has been keenly watched by the British business community. The extradition of UK subjects accused of offences overseas has become an emotive and political issue in recent years. High-profile US extradition cases, such as those of the so-called NatWest Three, extradited to the US on fraud-related charges, and that of Gary McKinnon for hacking into the Pentagon computer, have attracted an enormous amount of publicity. These notable cases have demonstrated that US authorities will aggressively pursue the extradition of individuals, whatever the offence.

Companies operating in the US, or whose business is in some way connected to the US, have taken note as the risks have become very apparent. However, it is also important to note that the conduct leading to the request for extradition need not have taken place in the US, but would simply need to have affected a party in that territory. For example, there are cases where the US is seeking extradition because an e-mail server is based in the US and the alleged fraud or criminal activity has been conducted in part by e-mail. Under the new regime, a wire transfer, a telephone call or a meeting that takes place in the US, which furthered the alleged criminal activity, could also justify a request for extradition.

Another reason for controversy in extradition to the US is that periods of imprisonment for white-collar crime in the US can be significantly higher than those handed down in the UK for the same offence. It is difficult to comprehend that the likes of Bernard Madoff would have received, at most, a sentence of 7-10 years in the UK, whereas in the US his sentence was 150 years (an actual life sentence).

US extradition is not the only risk

While the focus in the media has been on requests for extradition received from the US government, the threat posed by the UK’s European neighbours has often been overlooked. Although battles against extradition to the US grab the headlines, it is important not to forget that the EAW makes it even easier to extradite people between countries in Europe.

In 2002 the EU created the EAW, a fast-track system for extraditing people from one EU country to another. It was transferred into UK law by the 2003 Act and came into force in the UK on 1 January 2004. It was rushed in as part of Europe’s response to the terrorist threat and was intended to help tackle serious cross-border crime more effectively.

The new system has done away with the traditional barriers to extradition. It is based on the principle of ‘mutual recognition’. If one country demands a person’s extradition, others must recognise that decision without asking too many questions. The EAW makes it easy to extradite people between countries in Europe and it is difficult to resist even when the courts take your side. The fast-track system is based on a relatively straightforward administrative process. When the UK receives a warrant, it is checked for compliance with the 2003 Act and, if all is in order, certified for arrest. The warrant is passed on to the police and the suspect is arrested. After as little as two court hearings in the space of 21 days, the suspect could be extradited to the requesting country.

The effect of the new system became particularly apparent for Garry Mann, a UK national, who is currently awaiting a decision of the ECHR on whether he will be extradited to Portugal to serve a sentence imposed after a trial that saw him arrested, tried and convicted in the space of 48 hours. He was given a two-year prison sentence for his role in football-related violence during the 2004 UEFA European Football Championship tournament. Portugal is seeking extradition under the EAW procedure after Mann did not serve his sentence in the UK following deportation. Earlier this year, Mann lost the latest stage of his fight to avoid extradition when the Appeal Court said that the High Court had no jurisdiction to intervene. Moses LJ said that he hoped the ECHR would intervene, or that diplomatic authorities in the UK or Portugal could:

‘Strive to achieve some measure of justice for Mr Mann, a justice of which he has been so signally deprived by those on whom he had previously relied.’

As the number of countries operating the EAW system has extended across Europe over recent years, there are real dangers that the fundamental basis of the system is being eroded. Owing to large disparities in the criminal justice systems of the countries operating the EAW and the lack of uniformity in national laws, there are great differences between countries on issues such as detention, bail, sentencing and the trial process. Although extradition to the US is an unpalatable prospect, at least the language and the legal system are familiar, whereas someone extradited to a country in the EU could find themselves detained in poor conditions in a foreign prison, not understanding the local language or the legal system.

The recent ordeal of Jason McGoldrick and Michael Turner demonstrates the true extent of the EAW’s power. Hungarian prosecutors used the EAW system to extradite and detain the two men on suspicion of fraud after their company collapsed, alleging that the company’s creditors were the victims of fraud. The men had been on bail in the UK while they fought the extradition request, but on arrival in Hungary they were thrown into jail without being charged and without any consideration of bail. McGoldrick and Turner had been held without charge in Hungarian jail since November 2009, allegedly locked up for 23 hours a day in appalling conditions. In an unexpected move by the Hungarian authorities, the two men were freed without explanation at the end of February this year.

A record 1,000 requests came from European countries in 2008, many for minor offences. As long as the offence is recognised by the UK and there are no legal bars to extradition, there is little that can be done to resist the process. Some extreme examples include the extradition of a suspect to Poland for the theft of a dessert (with the warrant listing all of the ingredients) and another suspect extradited to Lithuania for ‘piglet rustling’. The situation is aggravated by the fact that some European prosecutors have no discretion to decide whether a prosecution is in the public interest. They have to pursue every allegation, no matter how trivial.

Implications for businesses

UK businesses that operate internationally need to be aware of the risks and would be well-advised to acquaint themselves with the domestic laws of the countries they do business with. The risk of extradition shows no sign of retreating, and the globalisation of business has given rise to more regulatory breaches and criminal offences. Regulators and prosecutors around the world are acutely aware of this, and laws and regulations are slowly but surely being developed to ensure that information and evidence can be exchanged quickly. In the wake of the current economic climate, we can expect more regulation, investigations, prosecutions and international co-operation.

Extradition will continue to pose a significant and frightening threat to the directors and officers of all corporates with international operations. As soon as a problem is detected, whether it is a black hole in the accounts, employee fraud or overseas corruption, businesses must be ready to react swiftly. Directors fighting extradition proceedings will inevitably face enormous financial strain in relation to bail, security for bail, legal and travel expenses, as well as damage to their reputation and wellbeing. Companies may attract the attention of the regulators, and will inevitably suffer business disruption and damage to their reputation.

Individuals and companies need to be clear about which activities could lead to investigation or prosecution for criminal offences. They also need to ensure that the company Directors and Officers Insurance policy would cover legal costs for extradition proceedings should the worst happen. Some policies will offer additional features, such as the services of a public relations firm to assist in contesting extradition, the cost of psychological counselling to assist the defendant in dealing with the stress of extradition and the funds to cover a bail bond.

The key for businesses and individuals is to minimise the risk of extradition in the first place by:

  • raising awareness of the latest developments;
  • having effective risk assessment, training and compliance programmes in place; and
  • ensuring that their internal policies are updated on a regular basis.