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anti-competition enforcement - Lords deal blow against extradition rules

2 April 2008

The business community will, no doubt, greet with great relief the news that the House of Lords has dealt a blow against the controversial US-UK extradition rules and has thwarted an attempt to criminalise price-fixing activity retrospectively.

Companies and their executives have watched with increasing alarm moves by the US Government to criminalise regulatory breaches and to flex its extraterritorial muscles by pursuing and extraditing UK nationals on cartel offences. Now the Lords have struck back in their ruling in the high profile Norris case, involving former Morgan Crucible PLC Chief Executive, Ian Norris, whom the US has been trying to extradite on price-fixing charges.

The Norris case was highly controversial because extradition to the US is only possible if the activity accused of constituted a criminal offence on both sides of the Atlantic and Norris argued that at the material time (1989 - 2000) participation in a cartel was not a criminal offence. Such activity was only criminalised by statute when the 2002 Enterprise Act came into force. See our previous bulletin: Anti-competition enforcement - digging up the past.

The US Government argued that the price-fixing conduct was tantamount to the common law offence of conspiracy to defraud and the High Court agreed. However, the House of Lords rejected this argument unanimously and held that the US was not entitled to extradite Mr Norris on this count. After an extensive review of the case law, previous legislation and ministerial statements, their Lordships concluded that price-fixing, of itself, had never been a common law offence and that it was wrong in principle for any court to characterise it as such. Indeed, up until 2002 neither Parliament nor the courts necessarily regarded price-fixing agreements as against the public interest. It was felt that undesirable cartels were best dealt with by regulation and so it was unlikely Parliament could have envisaged them as criminal at that time.

There being no "double criminality", the US Government was not entitled to extradite Mr Norris on the principle charge contained in count 1 of the indictment. However, counts 2 - 4 alleged conspiracy to obstruct justice, tamper with witnesses and cause the destruction of evidence. These counts, held the Lords, translated to the equivalent offence under English law of obstructing a criminal investigation being conducted by a regulatory body, carrying a possible sentence of 12 months imprisonment. These were therefore extraditable offences.

Although the House of Lords upheld the part of the appeal relating to count 1, holding that there could be no extradition on that ground, it sent the case back to a District Judge to consider counts 2 - 4 and to determine whether extradition should be denied on Human Rights Act grounds. However, commentators suggest Norris is unlikely to be extradited on these subsidiary charges.

It would seem that the extraterritorial teeth of the US Government may have been somewhat blunted by the Lords ruling, at least in relation to pre-Enterprise Act activities. But it appears to have succeeded in persuading countries to pursue competition infringers more vigorously on their own turf. The US Department of Justice recently allowed three UK executives, who work for Dunlop Oil and Marine Ltd, to enter a plea-bargain in relation to cartel charges and to serve their sentences in the UK. As part of the plea-bargain arrangement the "Dunlop Three" will also now stand trial before a UK court and if they are found guilty this will be the first UK conviction for price-fixing and may well pave the way for such cases to be dealt with domestically and at lower cost. The risk to executives of having to take a "free plane ride" to the States may have subsided but compliance with competition rules remains even more important than ever.

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