Court case may restrict international reach of TPR’s powers

In a recent judgment, the Supreme Court held that the information-gathering powers of the Serious Fraud Office under section 2(3) of the Criminal Justice Act 1987 did not have extraterritorial effect, and could not be used to compel an overseas company to produce information and documents held outside the UK to the SFO, even where that information relates to an investigation into a UK subsidiary.

This judgment contains some much-needed commentary on the circumstances in which such powers may have extraterritorial effect. 

It is relevant to overseas sponsors of UK pension schemes (and other overseas entities) if they were to receive a request for information from the Pensions Regulator under section 72 of the Pensions Act 2004, or if TPR were to use its new information-gathering powers to be introduced by the Pension Schemes Act 2021.

We suspect that TPR will think twice about issuing a section 72 notice on an overseas entity, particularly where the same information may be available from a UK entity or individual

Extraterritorial powers not intended in legislation

The judgment discussed the presumption against extraterritorial effect in legislation, and considered whether this was rebutted by the language of the Criminal Justice Act.

The court noted that a number of other legislative provisions — for example, section 12 of the Bribery Act 2010 — expressly state that they are intended to have extraterritorial effect, while section 2(3) of the CJA 1987 does not.

The Supreme Court held that even when legislation does not expressly have extraterritorial effect, this can be implied into the legislation by the public interest, but that this depends on the legislative history of the particular statute, and whether parliament intended that the purpose of the legislation be achieved by means other than an extraterritorial effect.

On both of these points, the judgment found that there is nothing that might give extraterritorial effect to section 2(3).

The judgment noted that the number of sophisticated agreements for international co-operation in criminal matters meant that it was “inherently improbable” that parliament intended the SFO to have the ability to issue its demands to foreign companies directly, without the protection afforded by the safeguards put in place under these schemes of mutual legal assistance.

What does this mean for pension schemes and sponsors?

This judgment is likely to have implications for the extraterritorial use of TPR’s information-gathering powers; for example, its powers under section 72 of the Pensions Act 2004.

Like section 2(3), section 72 gives TPR the power to require any person (including scheme sponsors, advisers and administrators) to provide specified documents or other information as set out in the notice.

Criminal sanctions may also be imposed where a recipient fails to comply with the request. However, as is the case with a notice issued under section 2(3), section 72 does not have any express extraterritorial reach. The same is true of TPR’s new information-gathering powers to be introduced by the Pension Schemes Act 2021.

Data from TPR show that the number of section 72 requests has increased significantly since 2015, with more than 130 such requests being issued in each year from 2015 to 2019.

The number of requests fell to 65 in 2020, although this dip is likely to be due to the impact of Covid-19 on the regulator’s approach to enforcement and we would expect the number of requests to rebound in future years, particularly once the new pension criminal offences and regulatory powers come into force.

Given the lack of express extraterritorial reach for section 72 notices, we would expect TPR to be required to make use of the existing international co-operation agreements that are in place, where these apply.

TPR has shown a willingness to use such arrangements; most recently, it announced on March 20 that it had successfully co-operated with the police to extradite a pension fraud suspect from Spain under a European Arrest Warrant issued by Westminster Magistrates’ Court.

Despite this example, in light of the Supreme Court’s recent judgment, we suspect that TPR will think twice about issuing a section 72 notice on an overseas entity, particularly where the same information may be available from a UK entity or individual.

Aaron Zack is a pensions associate and John Whiteoak is a litigation partner at Herbert Smith Freehills