Corporate Criminal Liability – Everything Changes?

To say that corporate criminal liability has been seen as a thorny issue in recent years is to understate the situation. After all, if it hadn’t been such a big concern, the Law Commission wouldn’t have been asked to review it and come up with options for change.

Having grasped this particular thorn, the Commission has now presented the government with possible ways of reform the law of corporate criminal liability in England and Wales. The Commission’s findings were eagerly awaited. Corporate criminal liability is the issue that most commentators on white-collar crime believe needs to be changed, to ensure that large corporations are held accountable in the event of allegations of wrongdoing.

Choice

The details of the Commission’s long-awaited report 10 options that the British government must consider. The Commission makes clear that its proposals are intended to ensure that companies can be properly convicted of crimes without imposing what it calls an “administrative burden” on law-abiding companies.

His 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 the need to prove that the highest leaders of the company – its “directing mind and will” – had the requisite criminal intent. Only if this is established can the company be held criminally liable.

However, maintaining the doctrine of identification is another option put forward by the Commission.

The Commission is also advancing the idea of ​​extending the offenses of “failure to prevent” – such as we have with the Bribery Act’s offense of failure to prevent or the offense of failure to prevent the facilitation of tax evasion in the Criminal Finances Act of 2017 – so that they capture other economic crimes. The introduction of an offense of failure to prevent fraud would be one possibility. This would cover a situation where the business has not put measures in place to prevent its own employees or agents from committing fraud for the benefit of the business. New financial penalties and reporting requirements for corporations are also suggested as possible reform measures.

Overall, all the Commission’s suggestions are welcome. It’s an understandable answer to a problem that few believe doesn’t need to be solved.

Directing the mind and the 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 advanced by the Serious Fraud Office. (SFO) and possibly other law enforcement agencies. The difficulty stems from the absence of a precise legal definition of what constitutes a directing mind. It has long been considered that to successfully prosecute such a case would require finding a senior official – or someone of equivalent rank – guilty of the alleged crime.

Critics of the identification doctrine argue that the makeup and organizational structure of most modern businesses is designed to prevent any 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 in Qatar. The case was eventually thrown out after the Court of Criminal Appeal ruled that former Barclays chief executive John Varley was not the bank’s directing mind. He concluded that the ultimate authority for its fundraising rested with the bank’s board and that Barclays could not be sued on the SFO’s evidence.

It is a case that has highlighted the difficulties of holding a company to account. Since that decision, prosecutors have pushed for a fresh look at the law and the protections that many large companies are supposed to enjoy. But at the same time – and this has been recognized by the Commission – care needs to be taken that businesses are not burdened with a burdensome new compliance regime.

Conclusion

It is important to remember that the Commission’s options are not recommendations. But the publication of the Commission’s report will only significantly strengthen calls for change regarding corporate criminal liability. It wouldn’t be an overstatement to suggest that there is a broad consensus that the law needs to go further to ensure that companies – especially large companies – can be convicted of serious criminal offenses, such as fraud.

The Commission has given the government a number of ways to reform a thorny issue that has long been seen as needing change. Now it’s the government’s turn to take it up.

About the Author: Niall Hearty is a partner at Rahman Ravelli.

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