On 12 February 2025, the Supreme Court handed down judgment in El-Khouri v Government of the United States of America [2025] UKSC 3. In addition to clarifying the approach to double criminality under the Extradition Act 2003 ("the Act"), the judgment also has significant implications for Proceeds of Crime Act 2002 ("POCA") cases.
Background
For the past 2 decades, King's Prosecutor, Brussels v Cando Armas [2005] UKHL 67; [2006] 2 AC has been the authority on the meaning of "conduct" in extradition cases when determining whether the requirement for double criminality has been met.
Mr Armas was accused of being a member of an organised gang which facilitated the illegal immigration of Ecuadorian citizens to Europe. His alleged involvement in the offending was to direct the organisation from London and to arrange accommodation and passports for the illegal immigrants once they arrived in Belgium. He resisted extradition arguing, inter alia, that the conduct alleged did not amount to an extradition offence.
The criteria for whether a person's conduct constitutes an extradition offence is set out in sections 64, 65, 137 and 138 of the Act. Sections 64 and 65 govern category 1 territories and sections 137 and 138 govern category 2 territories although the terms are materially the same.
Mr Armas had been convicted and sentenced and so section 65 applied:
"(1) This section applies in relation to conduct of a person if—
a. he is alleged to be unlawfully at large after conviction by a court in a category 1 territory of an offence constituted by the conduct, and
b. he has been sentenced for the offence
(2) The conduct constitutes an extradition offence in relation to the category 1 territory if these conditions are satisfied—
a. the conduct occurs in the category 1 territory and no part of it occurs in the United Kingdom;
b. a certificate issued by an appropriate authority of the category 1 territory shows that the conduct falls within the European framework list;
c. the certificate shows that a sentence of imprisonment or another form of detention for a term of 12 months or a greater punishment has been imposed in the category 1 territory in respect of the conduct.
(3) The conduct also constitutes an extradition offence in relation to the category 1 territory if these conditions are satisfied—
a. the conduct occurs in the category 1 territory;
b. the conduct would constitute an offence under the law of the relevant part of the United Kingdom if it occurred in that part of the United Kingdom;
c. a sentence of imprisonment or another form of detention for a term of 4 months or a greater punishment has been imposed in the category 1 territory in respect of the conduct.
…"
The offences Mr Armas was convicted of fell within the European framework list and so the prosecutor relied on sections 65(2)[1] and 65(3) to satisfy the requirement for double criminality. The House of Lords held unanimously that while that the conditions of subsection (3) were satisfied, those in subsection (2) were not. In a leading judgment given by Lord Bingham of Cornhill, he held subsection (2) did not apply as some of the conduct alleged in the warrant has occurred in the United Kingdom. Dismissing Mr Armas' argument that as the conduct did not occur wholly within Belgium subsection (3) could not apply, Lord Bingham found that subsection (2) does not contain a qualification that no part of the conduct should have occurred in the United Kingdom and it was enough that some of the conduct occurred in the category 1 territory, even if part of the conduct had occurred in the United Kingdom.
Lord Hope of Craighead agreed with the conclusions but went on to add his own comments on the meaning of 'conduct'. He concluded that conduct occurs in the category 1 territory for the purposes of section 65(3)(a) "so long as its effects were intentionally felt there, irrespective of where the person was when he did the acts which constituted such conduct".
This definition has been accepted and adopted by the extradition courts ever since; until now.
El-Khouri v Government of the United States of America
The US sought the extradition of Mr El-Khouri, a dual UK/Lebanese national living in the UK, in relation to allegations of insider dealing. It is alleged that Mr El-Khouri made payments to a middleman, based in "London, Paris and elsewhere", for insider information which had been acquired by analysts in the London offices of investment banks about merger negotiations involving six different companies based in the United States. Mr El-Khouri then used that information to trade in CFDs based on anticipated movements in the prices on US stock markets of shares in those companies. These transactions were done through a broker based in the UK.
During extradition proceedings in the lower courts, Mr El-Khouri argued that extradition should be refused as the conduct alleged in the extradition request did not constitute an extradition offence under the Act as it did not satisfy the requirement for double criminality.
As the US is a category 2 territory, section 137 applied:
"(1) This section sets out whether a person's conduct constitutes an 'extradition offence' for the purposes of this Part in a case where the person –
a. Is accused in a category 2 territory of an offence constituted by the conduct, or
b. has been convicted in that territory of an offence constituted by the conduct but not sentenced for it.
(2) The conduct constitutes an extradition offence in relation to the category 2 territory if the conditions in subsection (3), (4) or (5) are satisfied.
(3) The conditions in this subsection are that –
a. the conduct occurs in the category 2 territory;
b. the conduct would constitute an offence under the law of the relevant part of the United Kingdom punishable with imprisonment or another form of detention for a term of 12 months or a greater punishment if it occurred in that part of the United Kingdom;
c. the conduct is so punishable under the law of the category 2 territory.
(4) the conditions in this subsection are that –
a. the conduct occurs outside the category 2 territory;
b. in corresponding circumstances the equivalent conduct would constitute an extra-territorial offence under the law of the relevant part of the United Kingdom punishable with imprisonment or another form of detention for a term of 12 months or a greater punishment;
c. the conduct is so punishable under the law of the category 2 territory
…"
Section 137 distinguishes between conduct alleged to constitute an extradition offence which occurred in the category 2 territory (section 137(3)) and conduct which occurred outside the category 2 territory (sections 137(4) and (5)).
In El-Khouri, almost all of the conduct occurred in the United Kingdom. The only act said to have been done in the US by Mr El-Khouri was to pay for a hotel room for one of the middlemen in New York, in exchange for the inside information.
The prosecution relied on section 137(3) to satisfy double criminality, arguing that conduct specified in the extradition request occurred in the US. This argument was accepted by the District Judge on the basis Mr El-Khouri's actions were likely to have been felt by US markets. This was not challenged by the defence, either in the High Court, or in the grounds of appeal in the Supreme Court. Instead, the defence focussed solely on whether the conditions of subsection (3)(b) were met.
The Supreme Court held the courts below were wrong to find that the test for double criminality in subsection (3)(b) was satisfied.
Ordinarily, where the conduct occurs in a different country, the court is required to undertake a transposition exercise, i.e. if what is alleged to have occurred in the requesting state were to have occurred in the UK, would those acts constitute a criminal offence under the laws of the UK. However, in El-Khouri, no transposition exercise was necessary because almost all of the conduct did occur in the UK. The prosecution attempted to argue that the correct approach would be to ask whether the conduct that did actually occur in the UK would constitute an offence under UK law. It had previously been agreed that, if the conduct of Mr El-Khouri, if proved, would constitute an offence of insider dealing.
The defence argued that the correct approach was to undertake a transposition exercise so that conduct which occurred outside the US should be treated as having occurred outside the UK.
The court rejected both of these arguments, finding it was necessary or permissible to assume that relevant conduct which in fact took place outside the US took place outside the UK under section 137(3)(b), however section 137(4)(b) does require this; conduct alleged to have occurred outside the US is assumed to have occurred outside the UK.
The court then went on to consider the approach in Cando Armas, rejecting the view of Lord Hope that acts done outside the territory of the requesting state will be sufficient to constitute conduct in that territory as long as their intended effect was to bring about harm within that territory.
It held Lord Hope's interpretation was inconsistent with the language used; conduct would normally and naturally be understood as a synonym for acts done by the requested person in the specified location and not as including effects (whether intended or not) felt in that location of acts done somewhere else. Lord Hope's interpretation also rendered the distinction drawn in sections 65 and 137 between conduct that occurs 'in' and 'outside' the territory of the requesting state unworkable as they are mutually exclusive.
No part of Mr El-Khouri's conduct could be said to have occurred in the US and therefore the prosecution and defence were wrong to conclude it fell within subsection (3)(a); it fell within subsection (4)(a).
The court then went on to consider the offence of insider trading contrary to section 52(1) Criminal Justice Act 1993:
a. "he was within the United Kingdom at the time when he is alleged to have done any act constituting or forming part of the alleged dealing;
b. the regulated market on which the dealing is alleged to have occurred is one which, by an order made by the Treasury, is identified…as being, for the purposes of this Part, regulated in the United Kingdom; or
c. the professional intermediary was within the United Kingdom at the time when he is alleged to have done anything by means of which the offence is alleged to have been committed.
Carrying out a transposition exercise, none of these conditions would have been met. Mr El-Khouri was not in the US at the time he was alleged to have done any act constituting or forming part of the alleged dealing; the dealing is not alleged to have occurred on a market regulated in the US; and the professional intermediary Mr El-Khouri is alleged to have paid was not within the US when the dealing is alleged to have occurred.
POCA offences
The prosecution then sought to argue that the extradition request disclosed other offences under UK law, including an offence under section 329 POCA. It relied on R v Rogers [2014] EWCA Crim 1680; [2015] 1 WLR 1017 to contend that section 329 has extra-territorial application.
In Rogers, the defendant, a UK citizen living in Spain, was convicted of an offence under section 327 POCA after funds deriving from a fraud on persons in the UK were paid in and out of his Spanish bank account. On appeal, he argued the UK did not have jurisdiction as all of the acts occurred in Spain. In rejecting this argument, the Court of Appeal relied on section 340(11) POCA which states:
"Money laundering is an act which –
a. constitutes an offence under section 327, 328 or 329,
…, or
d. would constitute an offence specified in paragraph (a)…if done in the United Kingdom."
The wording of section 340(11), held the Court of Appeal, appeared "to admit of no other construction that that Parliament intended, extra-territorial effect to this legislation".
Rejecting the prosecution contention an offence under section 329 was made out by the conduct alleged, the Supreme Court criticised Rogers as wrongly decided, pointing out that it was "unfortunate" the court failed to recognise that section 340(11)(d) merely defines "money laundering" and does not either create an offence itself or extend the territorial scope of the offences created by sections 327, 328 and 329 to acts done abroad.
It therefore followed that it was not seriously arguable that acquiring, using or possession in the US money which represents the proceeds of a crime in the US can constitute an offence under section 329 POCA.
Conclusion
The judgment provides much welcomed clarity on the meaning of "conduct" in the context of double criminality, substituting Cando Armas with a much more pragmatic reading of the Act.
It will also be welcomed by critics of the UK-US extradition treaty who feel it will go some way to redressing the balance by providing protection against jurisdictional overreach of the United States. Only time will tell whether it does in fact prevent such requests being made, or whether future requests will simply be drafted in a way to include extra-territorial offences and/or to bring conduct within the US.
The finding that the principal money laundering offences under POCA do not have extra-territorial effect will also have a significant effect not only on extradition cases where the alleged conduct occurs outside the requesting state, but also in domestic UK criminal cases.
[1] Amended by European Union (Future Relationship) Act 2020 and no longer in effect
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