Kim Dotcom and his former Megaupload associates should not be extradited to the US because the judicial process was flawed and the charges are not valid under extradition law, the Court of Appeal in Wellington heard this morning.

Lawyers for the co-accused said one example of this was the failure to disclose the illegal spying by the Government Communications Security Bureau when applying for an arrest warrant.

The hearing started today and is the latest legal saga in an ongoing process dating back to the dramatic police dawn raid on the Dotcom mansion in January 2012.

Dotcom, who was not in court today, and co-accuseds Matthias Ortmann, Bram van der Kolk and Finn Batato were arrested for their involvement in the file-sharing website Megaupload. They are facing charges of criminal copyright breaches, money-laundering, and running an organised criminal enterprise.


The Government's lawyers have been trying to extradite Dotcom and the co-accused to the US to face charges, and a District Court ruled the extradition should go ahead.

That was appealed to the High Court, where it was again upheld. However, Dotcom and his co-accused gained a substantial win by having the court recognise there was no such thing as criminal copyright in New Zealand law.

But the court accepted that other US charges matched New Zealand laws, and therefore qualified as extradition offences.

This morning, lawyers for the co-accused told the court the US copyright charges did not apply under New Zealand law, and allowing extradition would go against what lawmakers intended.

Grant Illingworth QC, counsel for Ortmann and van der Kolk, said a number of judicial procedures in the extradition process were invalid.

Illingworth said double criminality - an offence under US law that can be matched to an offence under New Zealand law - applied and a prima facie case had to be established to make it an extradition offence.

Justice Forrie Miller challenged the strength of Illingworth's argument the judicial process was not properly followed.

"Even if you succeed, you're still faced with a High Court judgement ... that said, 'Is there a prima facie case?', and the court said, 'Yes, with bells on.'


"You're going to have to persuade us that the [High Court] judgement, even assuming your interpretation of the law is correct, was wrong."

Illingworth said the purpose of the law was to use New Zealand law as a yardstick for establishing a prima facie case, and to do that the court had to look at the conduct behind the alleged offending.

"The underlying conduct is the important factor."

He used the money laundering charge as an example.

"What is the conduct alleged in the indictment? ... New Zealand law requires concealment, and the US accepts there has been no concealment in this case."

Illingworth referred to changes in New Zealand law around homosexual sex acts and abortion to illustrate how domestic laws could become out of sync with the laws of other countries that have extradition treaties with New Zealand.


"New Zealand law prevails in the event of conflict between the provisions of the treaty and the local law."

Illingworth also said the process of applying for the arrest warrant was improper.

"We say that there was misleading conduct at that stage because there was no reference to the fact that information had been gathered illegally by the GCSB, and we have a judgement of the High Court to demonstrate that illegality.

"It calls into question the jurisdiction of the district court to embark on the proceedings."

He said the District Court judge who had heard the extradition case had misinterpreted the law and deemed the defence's submissions to be irrelevant.

"In the district court, it all went wrong and the case went off the rails completely."


The trial is adjourned for the day but is continuing, and is expected to take up to four weeks.

The saga has been fraught from the outset with questions about the police use of the elite anti-terrorist squad to carry out the raid, and the discovery the GCSB had unlawfully spied on the targets.

Last year, a secret settlement was made between Dotcom and police over alleged unreasonable force, in which police are believed to have paid a six-figure sum to the millionaire.

Regardless of what the Court of Appeal decides, either side is expected to ask the Supreme Court to hear a further appeal. If that fails, the next step in the process would involve Justice Minister Andrew Little being asked to sign off on extradition.

That can also be challenged through a judicial review application to the High Court.​