The United States government will be relying on a United Nations treaty aimed at combating international organised crime as the legal basis of its extradition to the US of Megaupload founder Kim Dotcom and other co-accused.
While the extradition hearing is scheduled to take place on February 22, some of the legal arguments that will be made at that hearing were foreshadowed at a bail-refusal appeal heard at Auckland High Court on February 3.
During the bail appeal, Dotcom's lawyer Paul Davison QC, said the US was seeking to have Dotcom and other employees of Megaupload extradited in relation to charges of conspiracy to commit racketeering, money laundering and copyright infringement.
At this point the judge, Justice Raynor Asher interrupted Davison, asking him: "These are extradition offences? I assume you have satisfied yourself on that?"
Davison replied that criminal breach of copyright was not a scheduled offence (under New Zealand's extradition treaty with the US). The racketeering charge was said to have a similarity with a scheduled offence however "everything is derivative" from the copyright infringement charge.
"The funds which were derived from the business activity and the involvement of a group of people around the business activity is the basis of the allegation that this was racketeering the movement of business proceeds and funds then becomes an allegation of money laundering, but the whole thing is pinned back to the existence of a criminal breach of copyright.
"I am not able to advance a position at this stage which would be as strong as to say that there is no strength to the US government's case. But suffice to say that there is a substantial challenge to it, and it's not at all clear that this is an extraditable situation."
Asked whether he had discussed these matters with Crown prosecutor Anne Toohey, Davison said that he had been waiting for 10 or 12 days for the prosecution to respond to his request for documents.
"I have been frustrated by being unable to get access to a range of documents that underpin the steps that were taken to issue the provisional arrest warrant."
"I have been requesting the Crown to provide me with the requisite documents, I have been told that the police hold the requisite documents and the police will respond."
Davison said that the legal basis of the extradition request "may give rise to another proceeding".
"It is a fundamental matter, it's not being overlooked, and it is likely to be litigated," he said.
Transnational organised crime
Fergus Sinclair, a lawyer with the Crown Law Office who appeared as co-counsel with Toohey on behalf of the United States, said that while it was true no copyright offences were named in the extradition treaty, certain crimes where they involved transnational organised crime, were subject to section 101b of the Extradition Act.
Under this section any offence which was punishable by a prison sentence of more than four years was deemed to be extraditable, and under the New Zealand Copyright Act the distribution of an infringing work could be punished by up to five years in prison.
Sinclair cited the United Nations Convention against Transnational Organised Crime (TOC), which was passed by a UN general assembly resolution in 2000, as the basis of invoking the organised crime provisions of the Extradition Act.
Under the terms of TOC Sinclair said an "organised criminal group" had to consist of a structured group of three or more persons acting in concert with the aim of committing serious crime.
US grand jury indictment
He said there were seven defendants in the Megaupload case, and that according to US grand jury indictment of January 5 members of the Megaupload conspiracy engaged in criminal copyright infringement and money laundering on a massive scale with estimated harm to copyright holders in excess of half a billion dollars.
Since the bail appeal hearing, several legal commentators have expressed the view that the Megaupload extradition case could be appealed to the New Zealand Supreme Court.
IT lawyer Rick Shera said that Davison's submissions reinforced his opinion that the extradition case would be complicated.
"My view has always been that there's a clear issue as to whether the extradition treaty is the end of the story or whether section 101b of the Extradition Act would be involved. Whatever happens you still go back to the New Zealand Copyright Act where differences between the NZ and US legislation may become significant.
"I would expect that after the first or second round, one or other of the parties will appeal.
"There hasn't been a case like this in New Zealand before and, as far as you can you look at it from a general perspective and considering what is at stake, you would want it to be heard by the Supreme Court."