The United States sought the extradition of Mr. El-Khouri, a dual UK-Lebanese national residing in the United Kingdom, for prosecution in the United States District Court for the Southern District of New York under Section 137 of the Extradition Act 2003.  The Supreme Court held that the extradition request fell within Section 137(4) but failed the double criminality test under subsection (4)(b), as Mr El-Khouri’s conduct did not constitute offences in corresponding circumstances under the UK law.

Background:

Mr El-Khouri was accused of insider dealing by having made several substantial payments to a middleman to obtain confidential inside information about prospective mergers and acquisitions of companies listed on US stock exchanges.  Most of the substantial payments happened outside the United States.  Mr El-Khouri used the information acquired to trade in contracts for difference (“CFDs”) with a broker based in the United Kingdom.  A CFD allowed a trader to speculate on share price movements in the underlying security without actually owning the underlying shares.  CFDs did not trade in the United States.  Through the CFD trading, Mr El-Khouri made profits amounting in total to nearly US$2 million.

The United States first argued that Section 137(3) of the Extradition Act 2003 applied, asserting that Mr. El-Khouri’s actions, though committed outside the United States, had effects intentionally felt within its territory, thereby constituting conduct occurring within the United States.  Alternatively, the United States contended that Section 137(4) applied, as Mr. El-Khouri’s alleged offences fell within the scope of extra-territorial jurisdiction under UK law.

Court’s Decision:

The Supreme Court discharged Mr. El-Khouri and quashed the lower court’s extradition order.  It held that subsections (3) and (4) of Section 137 are mutually exclusive.  Subsection (3) applies to conduct alleged to constitute an extradition offence which occurred in the requesting State’s territory, while subsection (4) applies the one occurring outside the requesting State’s territory.  Although the binary distinction drawn in Section 137 does not specify the criteria to be applied in allocating cases to one category or the other, the Supreme Court determined that the only coherent way to interpret their relationship is to give “conduct” its ordinary meaning and to read subsections (3)(a) and (4)(a) as referring solely to the location of the alleged physical acts, rather than where their effects—intentional or otherwise—were felt.

However, the Supreme Court agreed that neither subsection (4) nor (3) requires that the conduct occur exclusively within or outside the requesting State’s territory.  In this case, all relevant conduct of Mr. El-Khouri took place outside the United States.  As a result, the applicable test was under subsection (4), not (3).  The key issue was whether the double criminality requirement under subsection (4)(b) was met—specifically, whether Mr. El-Khouri’s alleged conduct would constitute an offence under UK law had it occurred outside the United Kingdom.  Since his actions would not be considered offences in corresponding circumstances under UK law, the extradition request failed the double criminality test.