Stuart Irvin Scott v Government of the United States of America
| Jurisdiction | England & Wales |
| Judge | Lord Burnett of Maldon CJ |
| Judgment Date | 31 July 2018 |
| Neutral Citation | [2018] EWHC 2021 (Admin) |
| Court | Queen's Bench Division (Administrative Court) |
| Docket Number | Case No: CO/5201/2017 |
| Date | 31 July 2018 |
[2018] EWHC 2021 (Admin)
THE RIGHT HONOURABLE The Lord Burnett of Maldon
THE LORD CHIEF JUSTICE
Mr Justice Males
Case No: CO/5201/2017
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
DIVISIONAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Jonathan Caplan QC and Clair Dobbin (instructed by Gunner Cooke, Solicitors) for the Claimant
Mark Summers QC and Daniel Sternberg (instructed by Crown Prosecution Service) for the Defendant
Hearing date: 4 July 2018
Judgment Approved
This is the judgment of the court to which we have both contributed.
Introduction
The Government of the United States of America (“the Government”) seeks the extradition of the appellant, Stuart Scott, pursuant to an extradition request made on 30 January 2017 (“the request”) and certified under section 70 of the Extradition Act 2003 (“the 2003 Act”) on 9 March 2017. The United States is a Category 2 territory and accordingly Part 2 of the 2003 Act (as amended) applies.
Extradition is sought in order for the appellant to stand trial in the United States in connection with alleged fraudulent foreign exchange trading in December 2011 when his employer, HSBC, acted for Cairn Energy PLC. He faces one count of conspiracy to commit wire fraud and 11 substantive counts of wire fraud, which carry a maximum penalty of 30 years imprisonment. Before the District Judge the appellant resisted extradition on the grounds that:
i) The request had misrepresented the nature of the relationship between HSBC and Cairn, which had been governed by an agreement which made clear that they were dealing as principals and that HSBC was not acting as an agent of Cairn and did not owe it any fiduciary duty. Accordingly, HSBC had been entitled to deal in the market in whatever way it chose in order to generate maximum profits for itself from the transaction. This misrepresentation was said to constitute an abuse of process because, if the true position had been set out in the request, it would have been clear that no crime under English law had been committed. The requirement of dual criminality in section 137 of the 2003 Act would not therefore have been satisfied.
ii) The conduct of which he was accused had not occurred “in” the United States for the purpose of section 137(3)(a) and that the requirement of dual criminality was not satisfied for that reason.
iii) The forum bar in section 83A of the 2003 Act operated to prevent his extradition as it would not be in the interests of justice having regard to the matters specified in section 83A(3).
iv) His extradition would infringe his and his family's rights under article 8 of the European Convention on Human Rights.
By a written judgment handed down on 26 October 2017 District Judge Snow rejected all these arguments and sent the appellant's case to the Secretary of State pursuant to section 87(3) of the 2003 Act. On 6 December 2017 the Secretary of State ordered the appellant's extradition.
The appellant now appeals with permission granted by Jeremy Baker J on the issue of forum pursuant to section 83A of the 2003 Act. In addition, he renews his application for permission to appeal on the other grounds for which permission was refused. The principal issue before us is whether the Judge was wrong in rejecting the forum argument.
The request
The request alleges that between October and December 2011 the appellant, a banker employed by HSBC in London, participated in a scheme to defraud an oil and gas exploration company, Cairn Energy Plc, a British company based in Scotland, in connection with a currency market transaction.
In October 2011 Cairn (which was advised by Rothschild) invited HSBC and other banks to bid for the right to execute a foreign exchange transaction by which it planned to convert approximately US $3.5 billion (the proceeds of sale of an Indian subsidiary company) into sterling. The Request for Proposal stated that “the key criterion for the selection of bank for the role of Execution Bank will be the ability to deliver a seamless process for the currency exchange within a defined timetable whilst providing Cairn with the best execution strategy and pricing”. Before providing HSBC with information about this proposed transaction, Cairn required it to enter into a confidentiality agreement by which HSBC agreed to use the information solely for the purposes for which it was provided. Those given access to the information included the appellant and another HSBC banker, Mark Johnson.
HSBC was successful in winning the bid to execute the transaction. Its pitch materials to Cairn made representations about confidentiality and about HSBC's ability to execute the transaction at the best possible price and with the lowest possible risk of financial loss for Cairn. The notification that HSBC had been successful explained that it had been selected because (among other things) it had acknowledged that it had an obligation “to deliver best execution”.
The Government's case is that these facts gave rise to a fiduciary relationship between Cairn and HSBC as a result of which the latter was obliged to act in the former's best interests in connection with the proposed transaction.
The allegation against the appellant is that despite this, and despite the obligation of confidence undertaken by HSBC, he and Mark Johnson devised a scheme to benefit HSBC, and (because it would enhance their remuneration) ultimately themselves, at Cairn's expense by:
“(a) using their insider knowledge of the details of the [transaction] to front-run that transaction, and (b) ramping the price of Sterling/Dollar to the benefit of HSBC, and to the detriment of [Cairn]”.
We should explain that, in outline, “front running” involves the use of inside information about an imminent transaction which is likely to move the markets (in this case a substantial purchase of sterling on the foreign exchange market) in order to enter into transactions in advance of that market movement, thereby generating an almost certain profit for the insider dealer; and that “ramping” involves the execution of a transaction in a manner designed to cause the price to spike, thereby maximising the profits generated for the front runner.
The request goes on to say that Mr Johnson and the appellant were notified on 28 November 2011 that the transaction might occur soon, that on 5 December they learned that the sale of the Indian subsidiary had received regulatory approval, and that on 7 December they discussed with Cairn the best way to execute the transaction. In the course of that discussion the appellant advised Cairn that the transaction should be executed at “the 3 pm fix” in London as distinct from the “4 pm fix”, falsely stating that there would be more liquidity in the market at 3 pm, whereas in fact the contrary was true. In the minutes leading up to 3 pm there is generally less trading in the market than an hour later, which means that it is easier to manipulate the market price at that time. A “fix” comprises a benchmark exchange rate published by WM/Reuters representing the market rate at certain times of day; thus execution at the 3 pm fix meant that Cairn would pay for the sterling at whatever the published rate for that time turned out to be, not necessarily that the transaction would in fact be executed at that time; the published rate would be derived from transactions carried out 30 seconds before and after 3 pm.
Following that telephone call the appellant in London and Mr Johnson in New York, who were in communication with each other, began to purchase sterling for HSBC and caused other foreign exchange traders in both cities to do likewise. Recorded telephone conversations between the two of them describe Cairn as “starting to bite” and included the comment by the appellant, on learning that Cairn had authorised the purchase of the full order of £2.25 billion, of “Ohhh, f***ing Christmas”. A further conversation included a discussion of how high Mr Johnson and the appellant could ramp the price of sterling before Cairn would “squeal”. In the result, by aggressive purchases of sterling in the period leading up to 3 pm London time, the appellant and Mr Johnson succeeded in pushing the price up to a market high for the day, generating significant profits for HSBC when they sold the sterling which they had purchased at the high price to which the market had been driven.
Meanwhile Cairn and its advisor Rothschild had been monitoring the price of sterling in the foreign exchange market and had noticed the upward movement in the period leading up to 3 pm. When this was queried by them, a HSBC sales person who had been purchasing sterling under the appellant's and Mr Johnson's direction told them that this was because of purchases in the market by an unidentified Russian purchaser. This, as the appellant knew, was false. There was no such purchaser. These statements were designed to conceal HSBC's role in ramping the market price.
The result of these transactions, according to the request, was that HSBC made approximately US $5 million from its execution of the Cairn transaction and generated approximately US $3 million from trading on its own account in London and New York.
It is alleged that these facts, many of which are disputed by the appellant, constitute conspiracy to commit wire fraud as well as 11 substantive offences of such fraud. Wire fraud under United States law requires the use of interstate or international wire communications in furtherance of a fraudulent scheme. That particular element is not a part of the equivalent offences under English law, but it was not disputed that the facts described above (at face value and if they stood alone: see...
To continue reading
Request your trial
-
Michael Lynch v Government of the United States of America
...to appeal, and not a re-hearing. 82 We were referred, in particular by Mr Bailin, to Scott v Government of the United States of America [2019] 1 WLR 774, another decision of the Lord Chief Justice on forum, this time sitting with Males J (as he then was). At [23] the Court described Love a......
-
Appeal Under Section 103 Of The Extradition Act 2003 By James Craig Against Her Majesty's Advocate
...well be so, but I also see force in the what was said by the Divisional Court in Scott v Government of the United States of America [2019] 1 WLR 774 at para 35: there is an air of unreality about considering the ease or otherwise with a 24 prosecution could be brought in the United Kingdom ......
-
Petition Of James Craig Against Lord Keen Of Elie Qc, Advocate General For Scotland And The Scottish Ministers For Judicial Review
...1 WLR 2889 at paragraph 22. The relatively complicated provisions are discussed in some detail in Scott v The Government of the USA [2018] EWHC 2021 (Admin) at paragraphs 23-35. The background to the forum bar provisions in the 2013 Act [2] The 2013 Act was preceded by a review chaired by S......
-
Evers Gonzalez Lazo v Government of the United States of America
... [2013] EWHC 2671 (Admin) (President of the Queen's Bench Division and Thirlwall J), and Scott v United States of America [2018] EWHC 2021 (Admin); [2019] 1 WLR 774 (Lord Burnett of Maldon CJ and Males J), at paragraph 16. In Schlesinger, at paragraph 15, having referred to Zakrzewski and......
-
UK Courts Raise The Bar To US Extradition
...towards greater protection given by the courts to UK citizens from extradition to the US. Footnotes Scott v United States of America [2018] EWHC 2021 (Admin) Extradition Act 2003, section 83A(2) See our previous blog post on Love v USA ( Lauri Love: The Forum Bar Shows Its Mettle) Love v Un......
-
UK Courts Raise the Bar to US Extradition
...shift towards greater protection given by the courts to UK citizens from extradition to the US. 1 Scott v United States of America [2018] EWHC 2021 (Admin) 2 Extradition Act 2003, section 83A(2) 3 See our previous blog post on Love v USA (Lauri Love: The Forum Bar Shows Its Mettle) 4 Love v......
-
Former Forex Trader Successfully Avoids Extradition From The UK Through Appeal To UK's High Court Of Justice
...trading for Europe, reversing a lower court ruling that had granted the request. Scott v. Government of the United States of America [2018] EWHC 2021 (Admin). The U.S. Department of Justice (“DOJ”) sought to extradite the trader to face ten counts of wire fraud and one count of conspiracy i......
-
The Forum Bar in UK Extradition Law: An Unnecessary Failure
...and Austria. These are the cases reported on Westlaw as at28 May 2019.48. [2018] EWHC 172 (Admin), as designated in Scott v US [2018] EWHC 2021 (Admin). The High Court in Love v US reversedthe decision of the Magistrates Court, United States v Love [2016] Lloyd’s Rep. F.C. 597.49. See G Dav......