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Anti-competition enforcement – digging up the past
11 July 2007
In 2003 for the first time it became a
criminal offence for UK individuals to participate in cartel
activity. This is when the Enterprise Act 2002 took effect. The Act
is part of a continuing trend towards the criminalisation of
regulatory breaches and follows the US approach of vigorously
pursuing and prosecuting individuals, rather than just the
companies for which they work, in an effort to deter
anti-competitive behaviour. UK businessmen and women are vulnerable
in a way that they have never been before, facing the possibility
not just of director disqualification, personal fines and
imprisonment but even extradition abroad, as demonstrated by the
high profile "NatWest Three" case which saw three British nationals
extradited to face charges in the USA in the wake of the Enron
affair.
Now, in a second extradition case, the House
of Lords will decide whether price-fixing activity that took place
before the 2002 Act constituted a criminal offence. The US
Government is trying to extradite Mr Ian Norris, former Chief
Executive of Morgan Crucible PLC, on charges of conspiracy to fix
prices and interference with witnesses. The so-called "double
criminality" rule means that a person cannot be extradited from the
UK unless the alleged conduct abroad would have amounted to an
offence in this jurisdiction if it had taken place here. The
difficulty for the US Government, and the reason why the case is
now going all the way to the House of Lords, is that at the time
when the alleged events took place (before 1999) the Enterprise Act
was not in force and in the UK there was no equivalent statutory
offence of the US price-fixing offence.
The US Government contended that the alleged
events amounted to the English common law offence of conspiracy to
defraud which is an extradition offence. Norris argued that,
without some form of dishonesty beyond mere secrecy, price-fixing
in the form of a cartel agreement did not constitute conspiracy to
defraud under English common law. Under the applicable US felony,
price-fixing or bid rigging agreements are intrinsically illegal
and there is no need to show that the perpetrators intended to
defraud or deceive. Therefore, Norris contended, there was no
comparable offence in the UK at the relevant time and so he should
not be extradited. The High Court disagreed and found against Mr
Norris. His conduct went beyond mere secrecy but even if it had
not, the objective of secret price-fixing was almost always to
mislead customers into believing that they were paying the true
market price rather than the rigged price. Such behaviour would be
regarded by ordinary people as dishonest, and realised to be so by
the perpetrators.
Norris argued that the action against him was
an attempt to criminalise conduct retrospectively but the High
Court rejected this argument. If the House of Lords takes the same
view UK businessmen and women could potentially face the threat of
criminal price-fixing charges for conduct before the 2002 Act came
into force. With the US taking an increasingly aggressive stance to
anti-trust enforcement it seems very likely that extradition
applications will become more common in the future. Leniency
programmes encourage whistle-blowers but their allegations may not
always be reliable. Under the controversial 2003 Extradition Treaty
the evidence threshold for extradition from the UK to the USA has
been lowered and the US no longer has to prove a prima
facie case. Individuals may therefore find themselves unable
to argue about the evidence until they have been transported across
the Atlantic. One possible argument against extradition for events
that took place a long time ago is that it would be unjust or
oppressive to order extradition due to the passage of time. Last
month, in another case, a UK based businessman succeeded in the
Magistrates' Court in escaping US extradition on charges relating
to activities dating back to 1991 because of the time that had
elapsed. However, that argument failed to convince the High Court
in the Norris case. It took the view that Mr Norris had suffered no
prejudice. He was on notice of the investigation and in any event
would have an opportunity to raise this issue before the US
courts.
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