The efforts of the United States of America to extradite Kim Dotcom and three other Megaupload executives have been a hot topic in the media for some six years now. Yet, for all this publicity, comparatively little light has been shed on the intricate legal issues at stake, which have implications well beyond the current case, not only for the law of extradition but also for copyright law including the liability of Internet Service Providers (“ISPs”) for copyright infringement.
In February, the Court of Appeal heard an appeal by the four extradition respondents in what are generically known as the Dotcom proceedings. They have appealed against findings of the District Court, confirmed by the High Court, that they are “eligible for surrender” to the United States in order to face trial for charges arising out of alleged criminal copyright infringement.
Extradition is a relatively exotic bird in New Zealand. In contrast with Canada, for example, where multiple extradition cases are dealt with by the Courts every year, our Extradition Act 1999 (“Act”) has not been greatly tested since its enactment. Enter the Dotcom proceedings, in which nearly every aspect of the extradition process has been challenged and is being subject to scrutiny by the higher Courts.
The Law Commission having recently reviewed the Act and having recommended a draft Bill, it seems that the Dotcom proceedings are likely to inform a new statutory regime for extradition in this country.
What’s the story?
Many people in New Zealand will be familiar with how the Dotcom proceedings began: a January 2012 dawn raid by heavily armed police on the Dotcom mansion; with four Megaupload executives being arrested and brought before the Court in response to a request by the United States government for their extradition.
Much water has gone under the bridge since then. Two aspects of the case have been considered by the Supreme Court: whether the search warrants executed in January 2012 were valid and whether the United States government was required to provide disclosure of relevant documents in the extradition proceeding. The key issue though, namely whether or not the respondents will be extradited, is not one that has received a great deal of attention. It raises a number of significant legal issues, however, that are likely to inform New Zealand extradition law for years to come.
The charges against the respondents in the United States arise out of their operation of Megaupload and related websites. The United States alleges that the respondents were part of a criminal conspiracy to commit copyright infringement, and that they have unlawfully encouraged and profited from copyright infringement by users of those websites. Although Megaupload was a Hong Kong company, and none of the respondents was based in the United States, jurisdiction is claimed by the United States primarily on the basis that Megaupload leased space on computer servers located in the state of Virginia.
In very general terms, it is up to the New Zealand courts to decide whether the respondents are “eligible” for extradition. Whether or not they are actually extradited is a decision that would be made by the Minister of Justice if the Courts should ultimately decide that the respondents are so eligible.
In December 2015, the District Court found that the respondents were eligible to be extradited in relation to all of the charges against them. The High Court found, in a February 2017 judgment, that the District Court had fundamentally misunderstood its statutory task. However, the High Court confirmed the District Court judgment on the basis that the right overall outcome had been reached.
How is eligibility determined?
Whether a requested person is eligible for surrender is governed by s 24 of the Act. The two key inquiries for the extradition court (the District Court at first instance) are:
- Under s 24(2)(c): Whether the offences with which the requested person is charged in the requesting state are “extradition offences”; that is, offences for which NZ allows extradition. “Extradition offence” is defined in s 4 of the Act.
- Under s 24(2)(d): If the offence is an extradition offence, whether the evidence adduced at the extradition hearing would justify the requested person’s trial in New Zealand if “the conduct constituting the offence” had taken place here. This is commonly known as the “prima facie case test”.
The current leading authority on the s 24 test is United States of America v Cullinane  2 NZLR 1 (CA). In that case, the Court of Appeal:
- Held that, where there is an extradition treaty (as there is with the United States), the treaty replaces the s 4 definition of “extradition offence” in the event of inconsistency.
- Observed (in obiter) that the prima facie case test does not require any assessment in accordance with NZ law, other than in relation to evidence and procedure.
The effect of the decision is that, depending on an extradition treaty, New Zealand may extradite persons charged with conduct that would not be criminal in this country. That is, the principle of double criminality may not apply. That finding makes the New Zealand position anomalous: double criminality forms the basis of extradition in the UK, Canada, Australia, and elsewhere, including in legislation worded in a way largely mirrored by our Act.
In the Court of Appeal, the extradition respondents have challenged the correctness of the Cullinane decision, asking for it to be overturned. If successful, this would change the law in that, for a foreign offence to be an extradition offence, the underlying conduct charged would also have to establish a crime in this country (rather than simply having to be described in an extradition treaty). The prima facie case test would then require consideration of whether the evidence would be sufficient to justify trial in NZ for a specified NZ offence.
What are some of the s 24 issues in the Dotcom proceedings?
The hearing before the Court of Appeal lasted nine days: one of the longest hearings before that court in recent memory. It is impossible, in a short article, to detail or do justice to the myriad issues that have arisen in these proceedings. The two key s 24 inquiries are worthy of consideration, though, to enable the most significant points to be understood.
Extradition offences: s 24(2)(c)
As to whether the offences charged in the United States are extradition offences, the primary issue is whether the conduct underlying those charges either falls within the scope of an offence described in the relevant extradition treaty (on a Cullinane approach) or corresponds with a domestic offence (if Cullinane is overruled).
In this case, the United States says that the alleged conduct corresponds with “conspiracy to defraud”, which is an offence described in the NZ-US Treaty, as well as certain other NZ offences which are deemed to be described in the Treaty by virtue of s 101B of the Act. Copyright infringement is not included in the NZ-US extradition treaty but s 131 of the Copyright Act 1994 may, if the requirements of s 101B are met, be deemed to have been described therein.
Importantly, the charges all rely on allegations of copyright infringement. However, as the High Court accepted, the kind of copyright infringement alleged is not actually criminalised under s 131 of the Copyright Act (although infringement may be challenged in civil proceedings). The US has sought to challenge this finding in the Court of Appeal.
Assuming the High Court was correct, a key issue is whether copyright infringement that is not criminal under the Copyright Act could nevertheless be prosecuted under the Crimes Act. The High Court held that it could be, in particular because a “conspiracy to defraud” could include a conspiracy to commit a civil wrong. However, the criminal offence of conspiracy to defraud (s 257) was repealed from the Crimes Act in 2003 so, if Cullinane is overturned, s 257 would not be available for the purposes of categorising the US offences as extradition offences. The fact that it has been listed in the treaty would not be enough of itself.
The United States also relies on other Crimes Act offences such as dishonest use of documents, and dishonestly accessing a computer system, which the US says are deemed to be described in the Treaty and correspond with the respondents’ alleged conduct. The Court of Appeal will consider whether these offences are available (if the conduct is not criminalised by the Copyright Act) and, if so, whether they do actually correspond with the essential conduct alleged. The respondents argue that they are not, and they do not. If the respondents are correct, then the case fails at s 24(2)(c) and there would be no need for the Court to go on to consider s 24(2)(d).
Prima facie case: s 24(2)(d)
In reliance on Cullinane, the High Court found a requesting state is only required to provide prima facie evidence of the essential conduct in order to satisfy this part of the inquiry. Copyright, and the copyright-infringing status of files allegedly hosted by Megaupload, not being matters of conduct, the United States did not have to prove them. Instead, by application of the doctrine of transposition (a complex legal fiction applying in extradition proceedings), copyright and copyright infringement could be assumed by the extradition court. On that basis, the respondents could be extradited for mass copyright infringement without proof of a single instance of such infringement. Importantly, the High Court held that if the United States was required to prove the subsistence or infringement of copyright, the case against the respondents would fail for lack of proof.
The finding that only conduct must be proved has been challenged by the respondents in the Court of Appeal. If Cullinane is overturned, and the ordinary test for committal to trial applies (i.e. the prima facie case test as we know it in domestic criminal proceedings), then the requesting state would be required to give evidence in respect of every limb of a NZ offence, upon which a properly instructed jury, acting reasonably, could convict. The United States not having given evidence of copyright or copyright infringement, the respondents say that s 24(2)(d) has not been satisfied and they are not eligible for surrender.
Abuse of process
In addition to the eligibility question, the respondents have sought a stay of proceedings on the basis of various abuses of process. In particular, the United States has obtained orders in its courts purporting to forfeit the respondents’ assets located in New Zealand and Hong Kong. It obtained these orders on a default basis: the respondents were debarred from defending against forfeiture as they have been deemed “fugitives” as a result of their opposing extradition. The principle of fugitive disentitlement (which is not recognised in New Zealand) means that the respondents had no right to contest the forfeiture application.
The respondents’ assets include monies which the respondents access to pay for their defence in extradition proceedings: they are able to do so in accordance with orders of the Hong Kong courts releasing the funds to them for that purpose. Pending registration of its forfeiture orders in Hong Kong, the United States has said that it will enforce its forfeiture orders against money released by the Hong Kong court if it is paid to parties in the United States.
The respondents say that, to defend extradition, they need to instruct and pay experts located in the United States. Having prevented them from doing so, they say that the United States is abusing the process of the Court.
The District Court and the High Court have disagreed. The District Court did not accept that any expert evidence from any US expert would be relevant to the proceedings. The High Court essentially agreed, and said the respondents should have obtained the evidence earlier (i.e. prior to the forfeiture orders being made). Leave to appeal to the Court of Appeal on this issue was denied by the High Court: applications for special leave have been made but not yet determined.
Broader significance of these proceedings
As the Law Commission observed in its Issues Paper 37 Extradition and Mutual Assistance in Criminal Matters, we now live in a largely borderless world. It stands to reason that, as the world continues on its current trajectory of globalisation, extradition cases may appear before our courts with a greater frequency.
In its report, which is currently under consideration by the Ministry of Justice, the Law Commission has proposed a new Extradition Bill. Notably, it is based squarely on the Cullinane interpretation of the 1999 Act, which allows extradition to be governed, in many respects, by extradition treaties entered into by the Executive. In the Government’s July 2016 response to the Law Commission’s report, it was agreed that new extradition legislation should be considered. If the Court of Appeal takes a different view as to the correctness of Cullinane, this is likely to impact on the nature of such legislation.
The copyright issue, similarly, is almost certain to have implications beyond this case. The extent of criminal liability of ISPs for copyright infringement by their users will be of significant importance to ISPs based in New Zealand, and those which provide services to New Zealanders.
The Court of Appeal may not be the final word. There is a right to seek leave to appeal to the Supreme Court from the Court of Appeal decision. Whether that occurs or not, the Court of Appeal decision may well set an important precedent that will shape aspects of our criminal law for years to come.
Disclosure: Along with Grant Illingworth QC, Peter Spring and Amanda Hyde represent two of the respondents in the Dotcom proceedings.