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Who has Jurisdiction for Cross- Frontier Financial Crimes?

Geoff Gilbert*

Copyright © 1995 Geoff Gilbert. First Published in Web Journal of Current Legal Issues in association with Blackstone Press Ltd.

* I am indebted to my colleague, Jane Wright, for reading over an early draft of this article. Needless to add, the views expressed and any errors are mine alone.

International financial markets now trade via computer screens as much as on the floor of some Stock Exchange. As such, the physical location of the Exchange and of the trader are not at all relevant. While this all aids economic activity and brings foreign earnings into the United Kingdom, it can create problems when crimes are committed in this somewhat 'ethereal world'. This article has been prompted by the Nick Leeson case, where a trader in the Japanese derivatives market was working in Singapore, but whose activities had the effect of bringing down Barings, the oldest merchant bank in the City of London. It examines the problems that arise when English courts seek to assert jurisdiction over someone who perpetrates cross-frontier financial crimes when they are physically located outside the territory. It also considers which State should have jurisdiction in these circumstances, particularly since the alleged criminal may now be in a third State.

• Introduction
• Extradition and Jurisdiction
• Jurisdiction and Common Law States
  • The General Position
  • English Rules of Jurisdiction
  • Statutory Intervention for the Future
• Priority of Extradition Requests and Re-Extradition
• Extradition and Human Rights

Introduction

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Extradition and Jurisdiction

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Jurisdiction and Common Law States

The General Position

The doctrine of ubiquity is a very unsophisticated test for determining the instances when territorial jurisdiction might be exercised. Blakesley provides a clearer analysis; in his view, territorial jurisdiction has both subjective and objective applications. Subjective territoriality equates with that part of the doctrine of ubiquity which grants jurisdiction if an element of the offence takes place in the prosecuting state. It is found in statutory form in section 7 of the New Zealand Crimes Act 1961 which provides:

For the purposes of jurisdiction, where any act or omission forming part of an offence, or any event necessary to the completion of an offence occurs in New Zealand, the offence shall be deemed to be committed in New Zealand, whether the person charged with the offence was in New Zealand or not at the time of the act, omission or event.

The Canadian Supreme Court decision in Libman v The Queen, (1986) 21 DLR (4th) 174 , reveals the practical application of subjective territoriality in a case pertinent to the Leeson extradition request and any other cross-frontier financial crime. In that case the accused was charged with fraud. He had telephoned residents of the United States from Canada and induced them to buy worthless shares in some Costa Rican gold mines by making false statements as to their value. The victims of the fraud sent their money to the accused's associates in Panama and Costa Rica as directed, although it was eventually received back in Canada. Adopting a traditional analysis of the forum of the crime, the deception took place in the USA and the result of the crime was the money being received in Central America. Applying the standard theory, the fact the funds eventually came to Canada is irrelevant. Neither the elements of the offence nor its results occurred in Canada. Nevertheless, the Supreme Court held that the accused could be prosecuted in Canada stating (at 198-201):

[The traditional analysis] ignores the fact that the fruits of the transaction were obtained in Canada as contemplated by the scheme. Their delivery here was not accidental or irrelevant. It was an integral part of the scheme. While it may not in strictness constitute part of the offence, it is...relevant in considering whether a transaction falls outside Canadian territory. For in considering that question we must...take into account all relevant facts that take place in Canada that may legitimately give this country an interest in prosecuting the offence. One must then consider whether there is anything in those facts which offends international comity....I might summarize my approach to the limits of territoriality in this way....[All] that is necessary to make an offence subject to the jurisdiction of our courts is that a significant portion of the activities constituting the offence took place in Canada....[It] is sufficient that there be a 'real and substantial link' between an offence and this country,....Just what may constitute a real and substantial link in a particular case, I need not explore....The outer limits of the test may, however, well be coterminous with the requirements of international comity.

Stated so broadly, subjective territoriality is tantamount to a form of extraterritorial jurisdiction, for nationality is irrelevant and no threat to the prosecuting state's vital interests needs to have arisen.

More in line with the accepted scope of the territorial principle is objective territoriality, which allows a state to assume jurisdiction where the effects of the crime are sustained in that state where the offence is 'completed'. This form of territoriality has received international approval. In The Steamship Lotus (France v Turkey, PCIJ, Series A, No 10 (1927)), Turkey claimed to have authority to prosecute the captain of the Lotus following its collision with the Turkish collier, the Boz Kourt, which resulted in the death of eight Turkish crewmen. The case is well known for its failure to endorse the passive personality principle of jurisdiction, that is, that a state could prosecute someone if the victims of the crime were nationals of that state. On the other hand, the majority of the Permanent Court of International Justice did find in Turkey's favour on the ground that since the Boz Kourt was flying the Turkish flag it was, as such, to be assimilated to Turkish territory and that, therefore, the result of the crime occurred in the jurisdiction of the state. It is a classic example of the objective territoriality principle.

The problem with objective territoriality occurs in relation to inchoate offences. If the crime is planned abroad, but is intended to have an effect in the state, then the objective territoriality approach is designed to grant jurisdiction to that state. Difficulties arise where the plan never comes to fruition. In those circumstances, neither an element of the offence nor its consequences have any impact within the territorial jurisdiction of the state

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English Rules of Jurisdiction

In R v Bevan (1986), 84 Cr App R 143, the accused was charged with using a cheque guarantee card to obtain by deception a pecuniary advantage, that is, a borrowing by means of an overdraft contrary to the Theft Act 1968 s 16(2)(b). At the time he wrote the cheques his account was in debit. Some of the guaranteed cheques were presented at banks in France and Belgium. The Court of Appeal accepted that while he could have been charged with theft or obtaining by deception from the foreign banks contrary to the Theft Act 1968 ss 1 and 15, English courts would not have had jurisdiction. However, the court held that the s 16 offence was only completed when the overdraft was obtained at his English bank, so that he could be prosecuted for that offence because the effect of the crime, its result, occurred within the territory. The Court of Appeal stated:

It emerges clearly from those cases that, where a particular result is part of the definition of a crime, then the crime may be tried here, even if only the result occurred in England and Wales.

It should be possible to frame a charge, therefore, that would give English courts jurisdiction to try Mr Leeson for obtaining £750 million from Barings in London - it would be for the trial in England to determine whether there was any deception and illegality. By analogy, cross-frontier financial crimes where money is obtained from an institution or person in England and Wales would be justiciable before English courts.

In cases of conduct crimes, such as blackmail or all varieties of inchoate offence, jurisdiction is asserted only if an element of the actus reus of the crime occurs within the territory of England and Wales. The leading authority on conduct crimes is Treacy v DPP [1971] 1 All ER 110. In Treacy the accused had sent a letter from England to Germany demanding money in return for not telling the recipient's husband of some allegedly discreditable conduct on her part. The question was whether the accused, having posted a letter demanding money with menaces from England to a person abroad, could be prosecuted for blackmail under the Theft Act 1968 s 21. If subjective territoriality were adopted by English courts there would be no problem, since a substantial part of the offence was performed within England. However, under English principles of territorial jurisdiction, the courts have to decide first whether the offence is a conduct or result crime. As indicated above, the process involves deciding at what point the offence was completed - if it was only when the victim received and read the letter, then it would be a result crime, but if it was when the accused had done the last thing necessary for the offence to take place (the posting of the letter in England), then it is a conduct crime. Lord Hodson, for the majority in the House of Lords, examined whether the demand had to have been received before the offence was completed, using that decision to determine whether the crime displayed characteristics of a conduct or a result crime. He stated (at p 118):

Some learning has been expended in dividing the commission of a crime into its initiatory and terminatory stages. This forms the basis for an argument that the crime is not completed until the terminatory stage is reached.4 This was not reached until the letter reached its destination outside the jurisdiction. Similarly, an argument can be built on a distinction between conduct leading up to a result and the result itself....So, in this case, the writing of the letter and the posting of it by the appellant is said to be no more than a preparatory act....[However,] I am in agreement with the Court of Appeal ([1970] 3 All ER 205) that the criminal offence of blackmail was committed in that the appellant made a demand when he wrote and posted this letter to Mrs X.

Lord Hodson is attempting to rationalise the conduct-result distinction on some objective test as to when the offence of blackmail was 'completed', a test that could, in principle, be applied to any criminal offence. However, on Lord Hodson's reasoning there is no substantive difference between conduct and result crimes, merely a decision as to when a particular crime is completed. The distinction between conduct and result crimes becomes, therefore, merely an afterthought to justify taking a decision which is, in fact, based on the prior determination as to when the offence was completed.5 And determining when some offence is completed is not a scientific test free from the subjective interpretation of the judges. The English approach is, therefore, doubly flawed, in that the conduct-result distinction is ultimately irrelevant and the completion approach is not free from subjectivity: by comparison, one can objectively see whether an element of a crime has taken place in the State (subjective qualified territoriality), or if the results are felt in that State (objective qualified territoriality).

Nevertheless, despite the fallacy in the majority's reasoning in Treacy, courts still divide crimes up into the two categories, sometimes without even adopting the completion approach - it is as if the determination can be snatched from thin air. In R v Berry [1985] 1 AC 246, the House of Lords decided that making or possessing an explosive substance without a lawful object, contrary to the Explosive Substances Act 1883 s 4(1), was a conduct crime and, as such, it did not matter that the explosives were to be exported. Lord Roskill failed to even ask the more straightforward question of when, on a plain reading of s 4(1), the offence had been completed. Adopting that approach, it is clear that the offence is completed once the device is made and its ultimate destination is irrelevant - he could then have labelled it a conduct crime, but, as indicated, no further level of analysis would be provided by such a determination.

That the conduct-result distinction may sometimes be used to cloak an assertion of competence where use of the completion approach would deny jurisdiction, however, can be seen in Re Reyat, unreported, Queen's Bench Division 1989. Reyat was charged in Canada with the manslaughter of two airport baggage handlers in Japan and the issue was whether, for the purposes of the double criminality requirement of extradition law, English courts would be able to prosecute someone who in England had made bombs that were placed on board an aircraft and which then killed people in Japan. Because the case concerned homicide and because Reyat was a United Kingdom citizen, it was possible to find there would be jurisdictional competence under the Offences Against the Person Act 1861 s 9, one of the rare examples of England being able to utilise the Active Personality Principle. Watkins LJ went on, however, to consider whether the unlawful act manslaughter per se would be triable in England, even if the accused was not a British citizen. He was persuaded that on the basis of the reasoning in Berry, where the charge was possession and making of explosive devices, that manslaughter might be a conduct crime. Yet the definition of manslaughter adopted in Reyat would indicate that it is a result crime,[1975] AC 819; R v Button (1848) 11 QB 929, 3 Cox CC 229, where the accused made personal profits from using their employer's assets, the typical scenario for cross-frontier financial crimes, whether that be funds or private information; R v Wai Yu-tsang [1991] 4 All ER 664; R v Allsop (1976) 64 Cr App R 29 at 32). If, relying only on the information available now, fraud and deception charges against Mr Leeson were to be made, the situation under the common law rules on jurisdiction is a little murky, for Barings would have been deceived in England, but Mr Leeson would only have obtained the funds when they reached Singapore. On the other hand, proposed changes to jurisdictional competence over cross- frontier financial crimes in the Criminal Justice Act 1993 would probably give future courts the right to prosecute for the suggested offences: Part I of the 1993 Act is not yet in force, so the common law is, at the time of writing, the sole means of asserting jurisdiction in such cases. However, the fact that the legislation has been enacted indicates that this is a problem that is here to stay and that existing law is seen as inadequate.

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Statutory Intervention for the Future

(1) For the purposes of this Part, 'relevant event', in relation to any [listed] offence, means any act or omission or other event (including any result of one or more acts or omissions) proof of which is required for conviction of the offence.

(2) For the purpose of determining whether or not a particular event is a relevant event in relation to a [listed] offence, any question as to where it occurred is to be disregarded.

(3) A person may be guilty of a [listed] offence if any of the events which are relevant events in relation to the offence occurred in England and Wales.

Section 2 ranks as one of the worst pieces of Parliamentary draftsmanship. To understand it, subsection (3) should be read first: if a relevant event occurred in England and Wales, the offence will be triable once the Act is in force. Relevant events are, according to subsection (1), any conduct or result that forms part of the offence. Under subsection (2), one determines the relevant events regardless of where they occurred, thus showing that there can be more than one relevant event. For the purposes of asserting jurisdiction, only one relevant event, no matter how minor, so long as proof of it is required for the offence, must have occurred in England and Wales. For a s 1 crime, therefore, English criminal jurisdiction will eventually be as extensive as that in New Zealand under the Crimes Act 1961 s7.

Section 4 will make it even easier to assert that a relevant event 'occurred' in England and Wales. This provides:

In relation to a [listed] offence -

(a) there is an obtaining of property in England and Wales if the property is either despatched from or received at a place in England and Wales; and

(b) there is a communication in England and Wales of any information, instruction, request, demand or other matter if it is sent by any means -

(i) from a place in England or Wales to a place elsewhere; or

(ii) from a place elsewhere to a place in England and Wales.

Taking ss 2 and 4 together, the fact that Mr Leeson acted at all times in Singapore should not mean that English courts could not in some similar case in the future prosecute the accused for any alleged illegal activities that had an effect in England and Wales. The Criminal Justice Act 1993, once it comes into force, is tantamount to giving English courts extraterritorial jurisdiction over international financial crimes so long as at least part of the offence has had an effect in this country.

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Priority of Extradition Requests and Re-Extradition

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Extradition and Human Rights

Were Mr Leeson to reach the stage of exhausting all avenues of appeal before the German courts, he might then seek protection under the European Convention on Human Rights. The European Court of Human Rights has held in the Soering case, Series A, Vol 161, that a person cannot be sent to another country where his human rights and fundamental freedoms would not be respected. Soering itself held that it would be inhuman and degrading treatment, a violation of Article 3 of the ECHR, if a fugitive were to be returned to the USA to spend time on Death Row. Without knowing the details of the Singaporean prison regime, it is difficult to know whether any aspect might violate rights Germany owes to Mr Leeson under the ECHR. To ensure that they have fulfilled their duties to Mr Leeson, the German authorities have already requested their embassy officials in Singapore to examine prison conditions there (The Guardian, 14 March 1995, p 15). Furthermore, questions about the fairness of any trial in Singapore can be raised once again because of the potential violation of Article 6 of the ECHR. Moreover, the Commission and Court will examine all aspects of that question and would not be bound to observe any rule of non-inquiry, as domestic courts often seem to be - however, any denial of fair trial would have to be flagrant before it would prevent extradition. "The right to a fair trial in criminal proceedings...holds a prominent place in a democratic society....The Court does not exclude that an issue might exceptionally be raised under Article 6 by an extradition decision in circumstances where the fugitive has suffered or risks suffering a flagrant denial of fair trial in the requesting country." (Soering, Series A, Vol 161, at para 113.)

Amidst all this uncertainty what is clear is that the Leeson case may well run and run. And at least German remand conditions seem to be better than those in England.

Postscript

According to The Guardian (28 April 1995, p 15), the Singaporean authorities have laid twelve charges of forgery and cheating against Nick Leeson. The United Kingdom authorities do not seem to be proceeding with any extradition request following the Serious Fraud Office's finding that no major fraud occurred in the United Kingdom: however, a Labour MP is challenging this approach in the House of Commons. As suggested in this article, Mr Leeson is now focussing his defence against extradition on Germany's obligation to protect his human rights.

1. Most of the background facts of the Leeson case were gleaned for this article from the reports in The Guardian. The law is stated as at April 11th 1995. Return to text.

2. For a more detailed analysis of some of these issues, see Gilbert, 'Crimes Sans Frontieres: Jurisdictional Problems in English Law' (1992) 63 Brit Yb Int'l L 416. See generally Extraterritorial Criminal Jurisdiction (Council of Europe, 1990); Blakesley, 'Jurisdictional Issues and Conflicts of Jurisdiction', at pp.131 et seq. of Bassiouni, Legal Responses to International Terrorism: US Procedural Aspects (hereinafter, Blakesley, Jurisdiction); Hirst, 'Jurisdiction over Cross-Frontier Offences', (1981) 97 LQR 80; Glanville Williams, 'The Venue and Ambit of Criminal Law' (1965) 81 LQR 276, 395 and 518; Leigh, 'Territorial Jurisdiction and Fraud' [1988] Crim L R 280: American Law Institute, Restatement of the Law of Foreign Relations of the United States (3d), 1986 (hereinafter, Restatement). See also Harvard Draft Convention on Jurisdiction with Respect to Crime, (1935) 29 Am J Int'l L Supp 439; Mann, 'The Doctrine of Jurisdiction in International Law' [1964-I] Hague Rec, and 'The Doctrine of Jurisdiction in International Law, Twenty Years Later' [1984-I] Hague Rec; Bowett, 'Jurisdiction: Changing Patterns of Authority over Activities and Resources' (1982) 53 Brit Yb Int'l L 1; and Law Commission, The Territorial and Extraterritorial Extent of the Criminal Law (Law Com No 91) and Jurisdiction over Offences of Fraud and Dishonesty with a Foreign Element (Law Com No 180). Return to text.

3. Extraterritorial Criminal Jurisdiction (Council of Europe, 1990) at p.24. Return to text.

4. The author prefers to use the concept of when the offence is completed rather than Glanville Williams' usage of "terminatory" theory - see Williams, 'The Venue and Ambit of Criminal Law' (1965) 81 LQR 276, 395 and 518. Terminatory theory might indicate that the offence can continue until the last element of the crime has occurred: in blackmail that would be when the demand was received, not when the demand was posted - cf Lord Hodson in Treacy. Leigh, 'Territorial Jurisdiction and Fraud' [1988] Crim L R 280, argues thoughtfully that neither the "terminatory" nor the "initiatory" theory represents what courts do in practice. Rather than trying to locate but one or more elements in England and Wales, the judges attempt to place the entire offence there (p 282 ). However, as he goes on to point out (at p 283), "it scarcely matters": what has to be recognised is that, by a variety of judicial fictions such as the 'continuing attempt' in R v Baxter, [1972] 1 QB 1, the courts assume jurisdiction rather than allow the accused to escape trial. Leigh's functional approach is subliminally applied through the use of these fictions.Return to text.

5. There is an argument to be made that rather than adopt a wider concept of the territorial principle or even extraterritorial principles, one could ignore legal rules of competence and apply a test of factual competence based on, for example, the following criteria:

(a) ready access to admissible evidence; (b) criminal laws capable of testing the accused's guilt or innocence, disregarding cross- frontier elements; (c) sufficient interest in prosecution.

6. See R v Goodfellow (1986) 83 Cr App R 23. "The questions which the jury have to decide on the charge of manslaughter of this nature are: (1) Was the act intentional? (2) Was it unlawful? (3) Was it an act which any reasonable person would realise was bound to subject some other human being to the risk of physical harm, albeit not necessarily serious harm? (4) Was that act the cause of death?" While elements (1) to (3) could be construed as indicating manslaughter is a conduct crime, ground (4) focuses on the death of the victim indicating some result is essential for the offence to be completed. Return to text.

7. Unreported, Queen's Bench Division (Crown Office List), CO/252/90, Marten Walsh Cherer, 20 June 1990; see also, Queen's Bench Division (Crown Office List), CO /2496/92, CO/2654/92, (Marten Walsh Cherer), 30 November 1992; Queen's Bench Division (Crown Office List), CO/2496/92, CO/2654/92, (Marten Walsh Cherer), 20 November 1992; Queen's Bench Division (Crown Office List), CO/1292/92, CO/1310/92, (Marten Walsh Cherer), 22 September 1992; Queen's Bench Division (Crown Office List), [1993] Crim LR 214, CO/1292/ 92, CO/1310/92, (Marten Walsh Cherer), 30 July 1992; Queen's Bench Division (Crown Office List), [1992] Crim LR 741, (Marten Walsh Cherer), 28 February 1992; Court of Appeal (Civil Division), (Association), 11 December 1991; Queen's Bench Division, [1992] 1 All ER 579, 14 November 1991; Queen's Bench Division (Crown Office List), CO/1508/91, (Marten Walsh Cherer), 7 October 1991; [1992] 1 All ER 122, [1992] 1 WLR 36, 22 May 1991; The Times, 17 December 1990, C0/252/90, (Marten Walsh Cherer), 12 December 1990; Queen's Bench Division (Crown Office List), CO/252/90, (Marten Walsh Cherer), 15 November 1990; [1992] 1 All ER 108, [1991] 1 WLR 281, 93 Cr App Rep 202, 14 November 1990; Queen's Bench Division, (Transcript: Laidler, The Independent, 12 January 1990, Haswell), 21 December 1989; [1990] 1 All ER 999, [1990] 1 WLR 878, 91 Cr App Rep 409, 17 November 1989; The Times, 24 December 1988, The Independent, 5 January 1989, 133 SJ 121, 21 December 1988; [1988] 3 All ER 173, 90 Cr App Rep 313, 11 May 1988; [1989] 3 All ER 701, [1990] 1 WLR 277, 90 Cr App R 281, 1988 Crim LR 611. Return to text.

8. Cf R v Governor of Brixton Prison, ex parte Kolczynski [1955] 1 QB 540, where the Queen's Bench Division was prepared to look at the motives behind the Polish government's extradition request at the height of the Cold War. Return to text.