In a world where crimes, with increasing frequency, cross borders and involve conduct which occurs in countries outside the one where the complaints are made, there is a need for the law and its jurisdictional reach to catch up. Arguably, the UK parliament needs to bring our money laundering laws up to date to reflect this fast-changing criminal world.
In El-Khouri v USA [2025] UKSC 3, the Supreme Court reviewed and changed the approach to be taken to dual criminality in extradition cases where conduct occurs outside of the requesting state. It was case about insider dealing and the resulting flow of money. The Supreme Court’s decision, handed down on 12th February 2025, significantly impacts extradition cases under the Extradition Act 2003 and will also have an effect in domestic prosecutions under the Proceeds of Crime Act (POCA 2002) for conduct which occurred outside England and Wales.
Mr El-Khouri was wanted in the US to face trial on charges concerning securities fraud, wire fraud, fraud in connection with a tender offer and conspiracy to commit such offences. The allegation was that he made substantial payments to a middleman, who was located in places including London and Paris, to obtain confidential inside information about prospective mergers and acquisitions of companies listed on US stock exchanges and then used this information to trade securities and make large profits. These transactions were done through a UK-based broker.
Limits of jurisdiction
While the conduct could have been prosecuted for insider trading in this jurisdiction, the UK Financial Conduct Authority decided not to prosecute, after carrying out an investigation.
In the extradition proceedings, the defence representatives argued that 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 under section 137 of the Extradition Act. Section 137(3) provides that dual criminality will be satisfied where the conduct occurred in the category 2 territory (here the US) and that the conduct would constitute an offence punishable with at least 12 months’ imprisonment under the law of the UK if it occurred here.
Section 137(4) applies to conduct which occurred outside the category 2 territory and requires that 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 of at least 12 months. These provisions echo those in Part 1 (usually European) cases.
The law on dual criminality had, up to this point, been shaped by King's Prosecutor, Brussels v Cando Armas [2005] UKHL 67.
The House of Lords had determined that where conduct takes place outside of the requesting state but has an intended effect within it, that is enough to meet dual criminality requirements under s137(3)). Thus, the law was that conduct could be taken to have occurred in the territory simply by virtue of the effects being ‘intentionally felt,’ irrespective of where the person was at the time.
Rethinking dual criminality
The Cando Armas principle had been consistently upheld and consistently applied for two decades. Against this background it was perhaps surprising that the Supreme Court were critical of Counsel for failing to challenge the long-established position. The reasoning the Supreme Court ultimately settled upon was unexpected on all sides.
The joint judgement written by Lord Lloyd-Jones and Lord Leggatt, with whom Lord Reed, Lord Briggs and Lord Stephens agree, rejected the observations of Lord Hope.
The Supreme Court declared his obiter dicta remarks in Cando Armas as interchangeably "illogical," "mistaken," "flawed" and "defective." The court concluded that application of the Cando Armas approach “created a paradox comparable to the fate of Schrödinger’s cat”, where the same acts could be classified as being committed “outside” the requesting state because they occur geographically outside of it, while simultaneously being committed “in” it because that is where their intended effects are felt.
The court held that this approach could not ‘withstand[ing] scrutiny’ because it does not accord with the statutory language and renders the distinction between the mutually exclusive categories in sections 137(3) and 137(4) unworkable.
Having so stringently rejected this previously settled principle of extradition law the court set about outlining the correct approach.
To the hypothetical reasonable onlooker the approach endorsed is the obvious and common-sense interpretation of the statute; whether the conduct specified in the extradition request occurred in or outside the requesting state for the purposes of section 65(3) and 65(4) is a question of fact to be answered simply by considering where the acts of the requested person specified in the extradition request are alleged to have occurred (ignoring mere narrative background and focusing on the substance of the criminality alleged).
Implications for extradition law
Extradition practitioners are left weighing up the consequences of this seismic shift in approach. Where the ‘effects’ doctrine provided an easy answer, there is now no shortcut for requesting states when seeking to meet their evidential burden in establishing dual criminality. Time will tell how prosecutors endeavour to meet this challenge but the discussions below (in relation to the domestic position) may offer some answers.
A number of ambiguities remain. The Supreme Court observed that sections 137(3) and (4) were “clearly intended to be mutually exclusive” and offer a “binary choice” however it did not interfere with the principle that conduct need not occur exclusively within the requesting state for it to be considered as occurring in that state. In the context of increasing trans-national offending (including online and more traditional international criminal enterprise) the question remains as to the approach to be adopted where criminality falls equally within and without of the jurisdiction.
The impact of El Khouri is not confined however to extradition cases. The importance for domestic law results from the Supreme Court’s finding that R v Rogers [2014] EWCA Crim 1680 was wrongly decided. Rogers was a case in which it was held that conduct carried out by the Appellant wholly in Spain could be tried in England as an offence of money-laundering (converting criminal property) under s.327(1)(c) of the Proceeds of Crime Act 2002 (POCA).
The primary basis of English criminal jurisdiction is territorial, although in some cases, parliament has legislated for extra-territorial criminal jurisdiction. Examples are to be found in the Criminal Justice Act 1993, for theft, fraud, blackmail, handling stolen goods, etc (but not money-laundering), and in the Bribery Act 2010.
There are also common law expressions of extra-territoriality, the leading modern case being R v Smith (Wallace Duncan) (No 4) [2004] EWCA Crim 631 in which it was held that where “a substantial measure of the activities [not necessarily its consequences] constituting a crime” takes place in England, then a crime justiciable in England is committed, unless there is some rule of international comity to the contrary.
Clarifying extra-territorial reach
In Rogers the Court of Appeal held that the appellant’s conduct of converting criminal property in Spain was justiciable in England for two reasons.
Firstly, because by s.340(11) of POCA, parliament had intended to confer extra-territorial jurisdiction in relation to s.327 offences where the acts were committed abroad.
Secondly, applying R v Smith, because the antecedent crime which made the money “criminal property” took place in England, it followed that “the significant part of the criminality underlying the case took place in England.”
Rogers was relied upon by the USA in El-Khouri as a last-ditch effort to justify their argument that El-Khouri’s conduct, which had almost all taken place in England, amounted to an extradition offence under s.137(4) of the Extradition Act 2003 because equivalent conduct in the USA would amount to an extra-territorial money-laundering offence triable in England.
The Supreme Court held that the Court of Appeal’s reliance in Rogers upon s.340(11) POCA was misplaced, and that in fact that subsection indicated the reverse – that s.327 did not have extra-territorial effect – and that “it follows … that Rogers was wrongly decided.”
The Supreme Court did not address the second (common law) line of reasoning in Rogers: whether that survives is a matter for another court on another day. In the meantime, it would be relatively simple for parliament to clear the matter up by making express provision for extra-territoriality of POCA offences if it wanted to.
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