Going stateside

Date: 11 April 2008
Authors: Francesca Richmond
Issue: Vol 158, Issue 7316
Categories: Features, Procedure & practice, Constitutional law, Public

When can individuals be extradited for pre-2003 cartel offences? Francesca Richmond reports

The recent judgment of the House of Lords in Norris v Government of the United States of America and others [2008] UKHL 16, [2008] All ER (D) 158 (Mar) has made clear that individuals can be extradited to the US for involvement in price-fixing activities that occurred prior to June 2003 and the implementation of the statutory criminal cartel offence under s 188 of the Enterprise Act 2002 (EnA 2002). Extradition on this basis will only be granted where some aggravating feature, such as dishonesty, is also alleged against the individual because agreements to fix prices have not historically been treated as dishonest in themselves (and so entering into such an agreement and/or failing to declare participation in a cartel alone cannot be treated as an indictable criminal offence prior to 2003).

EXTRADITION ACT

The Extradition Act 2003 requires that the offending conduct cited by any state requesting extradition must be criminal in England and Wales and also the state requesting extradition at the time that the conduct occurred. The House of Lords ruled that to allow extradition in circumstances where the relevant conduct was not deemed criminal in England and Wales at the time that it occurred would undermine legal certainty for the individual and be inherently unfair. The question in Norris was whether price-fixing activity that occurred prior to 2003 could be characterised as a conspiracy to defraud the customer and so be treated as criminal conduct for the purposes of extradition. The House of Lords determined that an undeclared agreement to fix prices could not be treated as a conspiracy to defraud in itself, overturning the earlier judgment in the case. To have concluded otherwise would have essentially created a common law cartel offence with retrospective effect in England and Wales. The House of Lords reviewed previous authorities on the legality of price-fixing agreements and commented at para 17 of the judgment:

“The effect of these authorities may be simply summarised. The common law recognised that an agreement in restraint of trade might be unreasonable in the public interest, and in such cases the agreement would be held to be void and unenforceable. But unless there were aggravating features such as fraud, misrepresentation, violence, intimidation or inducement of a breach of contract, such agreements were not actionable or indictable.”

So, while a price-fixing agreement might be viewed as a conspiracy to defraud once all aggravating factors have been taken into account, it would not be viewed in of itself as criminal. The House of Lords accepted that the implementation of the statutory criminal cartel offence in EnA 2002 demonstrated that no such common law offence had previously existed, an argument that had been expressly rejected in the previous judgment in the case. It also rejected the argument that public perceptions regarding pricefixing agreements have changed so much in recent years that offenders might have expected their actions to attract criminal sanction.

These conclusions created a problem for the authorities seeking Ian Norris’s extradition and prosecuting the case in the UK. The US offence of price-fixing is a strict liability offence in the US, requiring no more than the fact that such an agreement was made in order for criminal liability to arise. The Crown Prosecution Service translated the indictment allegations against Norris by asserting that he conspired to defraud buyers of carbon products by dishonestly entering into an agreement to fix, maintain and coordinate the price for the supply of carbon products in the US.

NO COMPARABLE ENGLISH OFFENCE

However, no allegations of dishonesty or fraud in relation to price-fixing were made in the US indictment, although conspiracy to defraud was referred to in supporting papers. It was therefore Norris’s case that a comparable English criminal offence had not been identified and so he could not be extradited on the basis of involvement in price-fixing. The House of Lords agreed that, since “mere undeclared participation in a cartel” was not intrinsically unlawful or dishonest prior to the implementation of the statutory criminal cartel offence in 2003, and because no aggravating features had been identified on the indictment in Norris’s case, the necessary mirroring of criminal allegations had not been achieved so as to form a basis for extradition.

DOUBLE CRIMINALITY

It is worth noting the House of Lords’ conclusions on “double criminality”, the question of how a court should determine whether criminal allegations raised by the country requesting extradition sufficiently mirror the criminal charges identified in the UK so as to form a basis for extradition. Arguments had been raised that, since dishonesty is an essential element of conspiracy to defraud but is not an ingredient of the US offence of price-fixing, the allegations did not match sufficiently so as to form a basis for extradition, even if a common law cartel offence could be said to have existed in England and Wales. The House of Lords explained that there were two possible approaches to the construction of the statutory requirements to grant extradition. The court could either consider the elements of each offence and ensure that these corresponded (the “offence approach”) or it could consider the conduct alleged against the accused abroad and the correspondence of that conduct with the relevant domestic offence (the “conduct approach”). The offence approach would require a similar legal formulation of the relevant offences that might prove overly restrictive and form an unnecessary bar to extradition. The House of Lords therefore preferred the broader conduct approach—reaffirming its earlier judgments in Office of the King’s Prosecutor, Brussels v Cando Armas [2006] 2 AC 1, [2006] 1 All ER 647 and Dabas v High Court of Justice, Madrid, Spain [2007] 2 AC 31, [2007] All ER (D) 373 (Feb).

This exposition of the approach to the requirement of double criminality as a basis for extradition will also resolve any question mark over the extradition of individuals on the basis of the statutory criminal cartel offence. EnA 2002 requires that the individual dishonestly agrees with one or more other persons to enter into a price-fixing or other anti-competitive agreement. If strict correspondence between the elements of the offence alleged by the requesting state and its mirror in English law were required, a barrier to the extradition of individuals for infringement of competition law would be raised.

The adoption of the offence approach and its application in this way would apparently also have been inconsistent with the approach to construction of the requirements for extradition adopted in most other countries. Therefore, price-fixing agreements formed and implemented prior to 2003 can constitute indictable criminal activity capable of forming a basis for extradition where aggravating features, such as dishonest misrepresentations or an agreement with the predominant purpose of injuring another’s business interests, are also alleged.

OPERATION HOLBEIN

It is understood that a similar conclusion was reached in the case of GG plc, although this judgment has been made subject to reporting restrictions. GG plc is related to the ongoing “Operation Holbein” investigation and prosecution of generic-drug manufacturers by the Serious Fraud Office for conspiracy to defraud the government by dishonest and deceptive price-fixing.

Again the indictment in the case did not apparently assert any aggravating feature to the alleged price-fixing so as to justify

criminal charges prior to 2003. However, the Serious Fraud Office reportedly has a significant amount of evidence that deceptive and dishonest conduct occurred and so may well apply to amend the indictment accordingly.

An interesting argument regarding jurisdiction was also raised by counsel in GG plc, which was addressed by reference in Norris at paras 50 and 51. It was asserted that the provision in Council Regulation 1/2003/ EC requiring that member states designate a competition authority or authorities responsible for the application of Arts 81 and 82 EC meant that the courts do not have jurisdiction to try a common law cartel offence. While the issue fell away once the House of Lords had concluded that no common law offence of price-fixing existed in criminal law, the judgment continued for the sake of clarity that:

“if the formation or operation of the price fixing agreement involves additional dishonesty (eg lying to potential purchasers about the existence of the agreement), then nothing in the regulation would prevent the dishonesty founding the basis for a criminal charge. Recital 9 states that the regulation does not apply where “the national legislation pursues predominantly an objective different from that of protecting competition on the market”. As already explained, in a case involving dishonest misstatement in the connection with price fixing, it would be the punishment of the dishonesty not price fixing which would be the “objective” of the criminal law.”

Overall, the judgments in Norris and GG plc have brought welcome clarity to the issue of what circumstances will justify the extradition of individuals in England and Wales on the basis of cartel offences occurring prior to the introduction of the statutory criminal cartel offence in 2003. These judgments reject the concept of a common law criminal offence, which conflated dishonesty and price-fixing without recognising that the two do not necessarily go hand in hand or that price-fixing might be justified in some circumstances. The recognition of such an offence would also have created legal uncertainty for both individuals and companies with potentially far-reaching retrospective effect. These judgments also make clear that extradition on the basis of behaviour occurring prior to 2003 is possible. As in the case of GG plc, prosecutors will often have evidence of dishonest or fraudulent behaviour that is linked to the individual’s anticompetitive activities and this will suffice to justify extradition.

ROOTING OUT CARTELS

An increasing number of investigations, fines and criminal prosecutions are being brought by authorities across the world—all contributing to the rising pressure to end international cartel activity. For example, individuals who participated in the marine-hose cartel are also awaiting criminal prosecution in the US—with two French executives involved in the case negotiating a plea bargain of 14 months in jail and fines of US$75,000 and US$100,000 respectively. Norris and GG plc leave open the possibility of extradition to jurisdictions capable of imposing severe individual penalties and make clear that previous misdemeanours need not be overlooked by prosecutors. This will no doubt only add to the incentive for company executives to ensure that cartel participation is rooted out of their organisations.

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