The Law Commission and corporate crime
Caroline Day reviews the Law Commission’s paper on economic crime offences
At the government’s invitation, the Law Commission has made proposals for reform of the law of corporate criminal liability. The ten options it sets out in the 10 June Options Paper reject the creation of principles of vicarious liability and a widely drawn ‘failure to prevent’ economic crime offence. They instead seek to address perceived practical issues with the identification doctrine and to extend the use of ‘failure to prevent’-style offences to ensure that corporate Britain is focused not just on the risks posed to their business by bribery, corruption and tax evasion, but also human rights violations in their factories, processing plants and supply chains.
The first option in the paper is to retain the existing law on corporate criminal liability: the identification doctrine. This common law concept, whereby a company can be identified with the actions and state of mind of an individual, should that individual be the ‘directing mind and will of the company,’ has stood the test of time, from its early 20th century origins to the House of Lords decision in Tesco v Nattrass  UKHL 1 in the early 1970s. However, calls for reform have recently been brought back into the spotlight.
Some campaigners supported the introduction of ‘vicarious liability’ – a form of which is a feature of US criminal law. Notably, the Law Commission rejected this concept – which would have been a novelty in English criminal law for fault-based offences, considering it an unsuitable alternative to the identification principle. Instead, they proposed a regime that is partly based on the Canadian Criminal Code as well as the concept of ‘senior management’ that can be found in the Corporate Manslaughter and Corporate Homicide Act 2007, which is intended to ensure that the conduct of senior management can be more readily attributed to the company in question. This proposal retains the intellectual underpinning of the identification doctrine, but seeks to address the question: who exactly is the directing mind and will of a company?
Of note is the fact the Law Commission’s proposal draws on the definition of ’senior management’ in the Corporate Manslaughter and Corporate Homicide Act 2007. The Law Commission is clear its Options Paper is focused on economic crime – but there is still much to be learned from other areas of the criminal and regulatory law, where practitioners and regulators alike regularly grapple with the liability of corporate entities. It is notable in the health and safety field, the certainty of statute has been preferred over the slightly elastic common law concepts of corporate criminal liability.
The Law Commission has also rejected another much-discussed proposal for tackling economic crime: a wide-ranging ‘failure to prevent economic crime’ offence. It has instead proposed a ‘failure to prevent fraud by associated persons’ offence, which would cover at a minimum a set of ‘core fraud offences.’
While the Commission’s aim to avoid ‘disproportionate burdens upon business' is to be welcomed, if a ‘failure of prevent’ offence is to mirror the impact of s7 Bribery Act 2010 in increasing corporate Britain’s focus on preventative compliance measures, then it needs to have a clear scope. For those supporting reform, the attraction of the ‘failure to prevent economic crime’ model was its breadth, but this was also its weakness. Should the government decide to adopt a narrower version of this model and provide a list of offences to which it applies, clear and defined guidance would be vital to ensure companies are in the best position to build the necessary compliance procedures, and to ensure that they don’t fall foul of the provision. This will inevitably need further consideration and review.
The Law Commission Options Paper builds on what we have and seeks to provide greater certainty to businesses and law enforcement agencies alike. Should the government decide to adopt any of the options, this would have a significant impact on the corporate criminal liability landscape moving forwards. Now it’s over to the government…
Caroline Day is partner in the criminal litigation team at Kingsley Napley LLP: kingsleynapley.co.uk/our-people/caroline-day