Corporate manslaughter: the new rules

After more than a decade the Corporate Manslaughter and Corporate Homicide Act 2007 (the Act) finally received Royal Assent on 26 July 2007, and will be brought into force by secondary legislation on 6 April 2008.

According to the new justice minister, Maria Eagle: 'The Corporate Manslaughter Bill is a ground breaking piece of legislation. This is about ensuring justice for victims of corporate failures. For too long, it has been virtually impossible to prosecute large companies for management failures leading to death. Today's Act changes this. For the first time, companies and organisations can be found guilty of corporate manslaughter [.. .] On the basis of gross corporate failure in health and safety. The Act will make it easier to prosecute companies who fail to protect people [. . .] We are sending a very powerful deterrent message to those organisations which do not take their health and safety responsibilities seriously.'

What does the Act mean in practice?

In essence, it will finally dispense with the need to find a controlling or directing mind that is also personally guilty of manslaughter. It further massively reduces the scope of Crown immunity that exists, some of which has been in existence for decades.

It has not previously been possible to pierce the corporate veil and successfully convict a large- or medium-sized organisation, and indeed the past decade is littered with previous failed attempts to successfully prosecute in these situations. With the advent of the Act, it is highly likely that such organisations will now be realistically in the telescopic sights of the prosecution agencies after April 2008.

In theory, this Act will not change the law regarding the prosecution of individuals who are in any event increasingly being imprisoned following conviction for manslaughter. For example, in A G v Shaw [2006] EWCA Crim 2570 following a reference by the attorney general, a director who had been given a two-year suspended sentence for pleading guilty to manslaughter after a hung jury at his trial was immediately sentenced by the Court of Appeal to 15 months' imprisonment. This trend is also shown by other recent cases including R v Connolly [2007] EWCA Crim 790 arising from the Teebay case where four men working on the railway were killed by a runaway trailer located with Railtrack (now Network Rail). The brakes of the trailer had been removed. The guilty party was sentenced to nine years' imprisonment reduced to seven years on appeal.

The reality is, however, that as police investigations increase, more individuals will be caught up in the process, resulting in more arrests and convictions. An increasing number of individuals are already being prosecuted for both manslaughter and under ss37 and ss7 of the Health and Safety at Work Act 1974, and this trend will accelerate after the introduction of the new Act.

The Act will permit the jury to review corporate culture inside an organisation and its general attitude to safety enforcement and control for the first time. Under s8 the jury will be able to consider 'the extent to which the evidence shows that there were attitudes, policies, systems or accepted practices within the organisation that were likely to have encouraged any such failure or have produced tolerance of it' (s8(3)(a)). This would include, for example, the situation where an organisation does not enforce its policy for employees to wear high-visibility jackets.

The jury may also have regard to any health and safety guidance that relates to the alleged breach (s8(3)(b)). Health and safety guidance is defined in s8(5) as 'any code, guidance, manual or similar publication which is concerned with health and safety matters'. For example, the Approved Code of Practice, Health and Safety Executive guidance, the Sector Information Minute and a wide variety of other documents will be allowed to be weighted in the scales by the jury. (See also the latest Institute of Directors and Health and Safety Commission guidelines for leadership actions of directors and board members of October 2007).

This new ability for the jury to assess and review the internal practices of an organisation will inevitably facilitate successful prosecutions, particularly when bolstered by recourse to previous health and safety violations and/or convictions.

Additionally, where an organisation is subsequently prosecuted the defence will find it much harder to prevent the organisation's previous convictions going before the jury, thereby making acquittals harder to achieve in the future.

Unlimited fines

Once convicted, an organisation will face unlimited fines. Fines imposed in recent health and safety cases such as Transco and Hatfield are rising in any event.

In the author's view, fines in excess of £50m are not far away particularly when compared to the £120m imposed recently on British Airways for anti-competitive conduct or the £300m on Microsoft. In the US BP has been fined some US $182m for environmental and price manipulation charges. Such a level of fines may soon be imposed in the health and safety sphere, both in the UK and in other jurisdictions.

Sections 9 and 10 of the Act provide for remedial orders requiring an organisation to remedy the breaches of which it has been convicted within a specified period of time.

Convicted organisations can also be given a publicity order, which is an order requiring them to publicise in a specified manner their conviction, particulars of the offence, the amount of the fine and the terms of the remedial orders imposed.

Publicity orders will result in greater damage to the reputation of the organisation causing lower share prices, higher insurance premiums, difficulty in recruiting and a greater difficulty when tendering for future work.

Schedule 1 to the Act contains a list of all the government departments that no longer have full Crown immunity. There are partial exemptions in some cases, including the police and Ministry of Defence, to cover situations which are truly deemed 'emergency situations' or those just short of it. It will come as no surprise that this is seen by certain government departments to be unhelpful and unnecessary.

Certain groups feel that there should be no exceptions at all and that the government has missed an opportunity to kick into touch Crown immunity in all its guises for ever.

In the author's view there will in time be a further gradual erosion of what limited immunity exists but we will have to wait and see.

Does the Act go far enough?

Many think that after such a long wait, the government has missed a major chance to rectify properly this legal lacuna. Detractors have and will continue to cite the following:

• The Act still provides immunity for many government departments. Importantly, the provisions relating to deaths in custody will not come into effect for at least another three to five years.
• The Director of Public Prosecutions has to give consent to any prosecutions. This may greatly increase especially in road-related work deaths.
• There is no extra-territorial bite to it: the detractors feel that it should apply to deaths abroad caused by management failures inside the UK. The Parliament select committee in 2005 wanted at the very least the jurisdiction of the Act to operate inside the European Union as member states would be covered by the European warrant. The committee stated: 'We recommend that the offence be extended so that deaths that take place in the rest of the UK are within the scope of the offence when the management failure occurred in England and Wales. We also urge the government to make provisions in the Bill for the offence later to be extended at least to cases where deaths have occurred in the EU.'
• The test of senior management failure as defined in the Act is too restricted. 'Only those persons who play a significant role in decisions or in the actual managing or organising of the whole or a substantial part of those activities' can be the catalyst for the offence. Many perceive this test to be too close to the previous 'directing mind' test and it will cause problems in the future. The select committee want a further extension to individual liability to help plug any gaps, and want a new offence (as does the Scottish Expert Group) so that any individual who has a secondary role in any gross management failure should also be prosecuted on an individual basis with a maximum sentence of 14 years' imprisonment.
• In reality, only increased opprobrium will distinguish this offence from general health and safety offences as there are unlimited fines for both. Further, it will also lead to many more contested trials, thereby increasing the suffering of the bereaved. This will be especially so when individuals are prosecuted alongside bodies corporate.

Opinions of the Act

For others, the Act goes too far and could cause an exodus from British management (in particular from hospital trusts and schools) and affect British competitiveness with the rest of the world. To a certain extent, this has already happened both in the UK and in those other jurisdictions which take a firm stand on health and safety (and corporate governance generally).

One view is that the Act, although perhaps not nirvana, is better than the present position where only small organisations have been prosecuted successfully.

In the author's view, there will be extensions to the Act especially in Scotland (and both Northern Ireland and the Republic of Ireland), Crown immunity will be further eroded, new individual criminal penalties will be introduced and there will be greater geographical cover.

Both corporate and non-corporate bodies (and individuals) will face an increasingly difficult time, and those not fully prepared will find themselves unable to withstand increased investigation and prosecution. The next six months are important for those not wishing to be in that position.