Author
Armen Varvachtian  
Solicitor

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Roger Forbes  
Partner
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Sydney
Mark Darian-Smith  

Melbourne
John Waters  

Canberra
John Topfer  

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Bankers, and other professionals, involved in transactions within the potentially long reach of foreign criminal laws could find themselves spending many years and a lot of money explaining their business dealings before foreign courts.

Business people around the world need to carefully consider the implications of their actions in this age of the email and the videoconference and an increasingly global economy. The recent controversy about whether three British bankers could be extradited to the US on US fraud related charges demonstrates the extraterritorial reach of the criminal law and operation of the extradition laws. However, the risk is not confined to the UK or to the sorts of offences alleged against the three NatWest bankers.

Extradition of the NatWest 3

Three British bankers traded in their business suits for orange overalls just over a week ago as they were extradited from the UK to the US. David Bermingham, Giles Darby and Gary Mulgrew, “the NatWest 3”, stand accused of a multi-million fraud involving an offshore company at one time controlled by Andrew Fastow, the former Chief Financial Officer of Enron.

The three former employees of Greenwich NatWest, a division of the UK’s National Westminster Bank, are said to have received $7.3 million from the sale of an offshore entity in conjunction with Mr Fastow. The transaction’s only real connection with the US was a meeting in Houston between Mr Fastow and the three on 22 February 2000. During that meeting the bankers presented alternative proposals to the Enron CFO.

Consequently the NatWest 3 tried to argue in the UK courts that, as British citizens and because the victim of their allegedly criminal conduct is a British bank, if anyone should be prosecuting them it should be the UK’s Serious Fraud Office. However the English High Court ruled in February 2006 that there is no rule of law which forces the UK authorities to pursue criminal proceedings. As a result, the High Court upheld the US prosecutors’ application to extradite the three to Texas for trial on US fraud related charges. Appeals to the House of Lords and the European Court of Human Rights were unsuccessful.

The case brings into focus some far-reaching implications of revised extradition arrangements agreed between the US and the UK after 9/11 to accelerate the extradition of terror suspects. One particularly contentious aspect of the UK’s new extradition regime is that US prosecutors do not have to provide UK authorities with any evidence of a prima facie case against the accused. Ironically, although the US-UK arrangements were apparently a US initiative, the US legislation required to give those arrangements legal effect in the US has been delayed by a US Senate reluctant to enact it. UK citizens are now subject to a US inspired regime to which US legislators are reluctant to subject their own citizens.

Extradition law and extraterritorial offences.

Australia has not adopted similar post-9/11 US-UK extradition arrangements, so its citizens are not yet subject to some of its more curious features. However some of the features that appear to have excited particular comment about the NatWest 3 have had parallels in the Australia/US and Australia/UK extradition arrangements for some years, and well before 9/11. For example, the evidentiary threshold applicable to a US application for extradition from Australia was lowered very significantly in the early 1990s. However, the NatWest case highlights the extraordinary power extradition treaties can give countries to conduct prosecutions in their own courts against people accused of criminal conduct outside their jurisdiction.

Under Australian law, an extradition request by a foreign country, concerning acts committed outside that country’s jurisdiction, may be granted if Australian law would punish such conduct committed outside Australian territory in similar circumstances. However, even if the equivalent Australian law does not have extraterritorial effect, the extradition treaty between Australia and the United States provides that an extradition request may be granted at the discretion of the Australian government. For example, if an Australian citizen and resident, while in Australia, engaged in conduct which constitutes an offence under US criminal anti-trust laws (which have been found to have some extraterritorial operation), he or she could be extradited at the discretion of the Attorney-General even if the equivalent criminal Australian law did not have extraterritorial effect. In any event, the necessary territorial connection may be supplied by a purely incidental feature of the relevant transaction. For example, funds may pass through a bank in the US.

Apart from the obvious downside of being faced with serious criminal charge, fighting that charge in a foreign jurisdiction like the US involves all sorts of additional burdens. The witnesses you will need to call or documents you may want to rely on are thousands of miles away. Your foreign lawyers may be more expensive than those you usually use. The system is unfamiliar and possibly prone to delay. As a foreigner and a flight risk you may be held in detention pending a trial. The prison system may be somewhat less comfortable than Australia’s.

The case of the NatWest 3 (irrespective of whether they are eventually found guilty) should make business people carefully assess where their actions may lead them.