To say that corporate criminal liability has been viewed as a thorny issue in recent years is to understate the situation. After all, if it had not been such a great cause for concern, the Law Commission would not have been asked to examine it and produce options for change.
Having grasped this particular thorn, the Commission has now presented the government with possible ways to reform the law around corporate criminal liability in England and Wales. The Commission’s findings were keenly awaited. Corporate criminal liability has been the issue that most white-collar crime commentators agree has needed change, in order to ensure that large corporations are held to account when wrongdoing is alleged.
Options
The Commission’s much-anticipated report details 10 options for the UK government to consider. The Commission makes clear that its proposals are intended to make sure that corporations can be properly convicted of crimes without what it calls “an administrative burden’’ being placed on law-abiding businesses.
Its options include extending the attribution of liability to corporations for the conduct of senior management. This would involve reforming the established “identification doctrine”. This doctrine currently involves needing to prove that the most senior officers of the corporation – its “directing mind and will” - had the requisite criminal intent. Only if this is established can the corporation be held criminally liable.
Yet retaining the identification doctrine is another option put forward by the Commission.
The Commission also puts forward the idea of extending “failure to prevent” offences – such as what we have with the Bribery Act’s failure to prevent bribery offence or the offence of failure to prevent the facilitation of tax evasion in the 2017 Criminal Finances Act - so that they capture other economic crimes. Introducing an offence of failure to prevent fraud would be a possibility. This would cover a situation in which the company has failed to put measures in place to prevent its own employees or agents from committing fraud for the benefit of the company. New financial penalties and reporting requirements for corporations are also suggested as possible reform measures.
Taken as a whole, all the Commission’s suggestions are welcome. They are an understandable response to an issue that few would argue does not need to be addressed.
Directing Mind And Will
As it stands, the aforementioned “directing mind and will’’ requirement is a stumbling block to successful corporate prosecutions – at least that would be the view put forward by the Serious Fraud Office(SFO) and possibly other enforcement agencies. The difficulty arises from there being no precise legal definition of what constitutes a directing mind. It has long been held that in order to successfully prosecute such a case one would need to find a senior executive – or someone at an equivalent grade - guilty of the alleged criminality.
Critics of the identification doctrine argue that the make-up and organisational structure of most modern companies is designed to prevent any single individual from having full discretion to act without accountability to others. An example was the fraud charges brought against Barclays by the SFO in 2019 over the bank’s 2008 fundraising from Qatar. The case was eventually thrown out after the Criminal Court of Appeal ruled that Barclays’ ex-chief executive John Varley was not the directing mind of the bank. It found that ultimate authority for its fundraising rested with the bank’s board and that Barclays could not be prosecuted on the SFO’s evidence.
It was a case that highlighted the difficulties involved in holding a corporation to account. Since that ruling, prosecutors have pushed for a fresh look at the law and the protections that many large companies are believed to benefit from. But at the same time – and this was recognised by the Commission – care needs to be taken to make sure corporations are not saddled with a new and burdensome compliance regime.
Conclusion
It is important to remember that the Commission’s options are not recommendations. But the publication of the Commission’s report is only likely to make the calls for change regarding corporate criminal liability noticeably louder. It would not be going too far to suggest that there is a broad consensus that the law must go further to ensure that corporations – especially large companies – can be convicted of serious criminal offences, such as fraud.
The Commission has given the government a number of ways to reform a prickly issue that has long been viewed as needing change. It is now the government’s turn to grasp it.
About the author: Niall Hearty is Partner at Rahman Ravelli.
