On 9 June 2021, the HSF London Corporate Crime and Investigations ("CCI") team hosted the launch event for the Law Commission's consultation on what (if any) reform should be proposed to HM Government in relation to the law on corporate criminal liability in England and Wales. This was the first in a series of Law Commission discussion events relating to this topic.
The topic is a significant issue for companies and has been the subject of debate following numerous calls for the Government to explore again the question of when criminal liability should be attributed to companies. Most recently, on 3 November 2020, the Ministry of Justice published its Response to a Call for Evidence on Corporate Liability for Economic Crime, which dated back to March 2017 (see our briefing on that here). It found that there was no clear consensus on the way forward in this area of the law, and therefore requested that the Law Commission conduct a review of the options for reform and put forward an Options Paper highlighting the various routes for reform in this area of the law. As part of this process, the Law Commission is running a series of webinars to invite discussion on the state of the current law and options for reform going forward The HSF London CCI team hosted its launch event in this series, discussed further below.
On the same day, the Law Commission published a Discussion Paper explaining the background to the calls for reform of this area of the law, highlighting different models of corporate criminal liability, and asking for input on a number of discussion questions.
The event was well attended by clients and practitioners alike who first watched a distinguished panel of speakers put forward introductions to the topic and then present the case for and against reform of the current law.
The event was introduced by Lisa Osofsky, Director of the Serious Fraud Office. Ms Osofsky raised questions as to whether the current regime based on the 'identification doctrine' shields large companies where the wrongdoing is done by employees too junior to constitute the 'directing mind and will' of a company but whose acts ultimately benefit the company. She put forward a preference to introduce a 'failure to prevent economic crime' offence as a measure of reform which would have positive impact on this area of the law. This 'failure to prevent economic crime' offence would have a similar model to the Bribery Act 'corporate offence' - which we note would have important implications for corporate clients in all sectors from both a risk profile and compliance perspective.
The Law Commissioner for Criminal Law, Professor Penney Lewis and a member of the Law Commission, Robert Kaye, then provided an overview of the Law Commission's work in this area, including consideration of the use of Deferred Prosecution Agreements and the relationship between the civil and criminal law in this area, using the models in other jurisdictions as comparisons. They asked the fundamental questions of: what are the goals of prosecuting companies, and how can these goals be best achieved?
The debate for and against reform was then discussed by Lord Garnier QC, Richard Lissack QC, Alison Pople QC and Susannah Cogman. Brian Spiro chaired the event and fielded the lively debate sparked by questions from the audience in the second half.
The debate and discussion involved questions as to:
- whether the current law, which stems from a time when companies consisted of a small number of employees and were based in one jurisdiction, is now outdated;
- whether the extension of corporate criminal liability via the Bribery Act 2010 and the Criminal Finances Act 2017 has had a positive impact in deterring criminal conduct by companies;
- whether a failure to prevent offence would simply shift the debate as to where attribution should be found (i.e. from whether a person is the directing mind and will of the company to whether there was a failure to put in place adequate procedures);
- what criminal penalties achieve over and above regulatory/civil penalties where the person being punished is a non-natural person;
- whether detailed guidance and specific assistance to SMEs would mitigate any burden that a new failure to prevent offence would have on corporates and whether meaningful guidance as to how to reasonably prevent economic crime would in fact be practically possible;
- whether reform would really change corporate culture; and
- whether in principle a company should be liable for acts done by anyone other than its senior management.
This Discussion Paper highlights:
- the state of the current law on corporate criminal liability including the general approach to attributing liability through the identification doctrine (which involves identifying whether the wrongdoing was done by persons who constitute the 'directing mind and will' of a company);
- the criticisms of the current law;
- alternative approaches in other jurisdictions such as in the US, Australia and Canada as well as non-common law jurisdictions such as Germany, Italy and France;
- an Appendix which outlines examples of cases where a wider corporate criminal liability may have been significant both outside and within the financial services sector.
The Discussion Paper poses a number of questions, including:
- what respondents think should be the principles which govern the attribution of criminal liability to companies;
- whether the current identification doctrine regime provides a satisfactory basis for attributing criminal responsibility to companies;
- questions relating to the merit of regimes in other jurisdictions;
- the question of whether companies should have a 'reasonable measures' type defence if the basis for establishing corporate criminal liability was extended;
- what the economic and other consequences for companies would be if the identification doctrine was extended or a new 'failure to prevent' economic crime offence was introduced;
- when civil penalties might be appropriate as an alternative to commencing a criminal case against an organisation; and
- what principles should govern the individual criminal liability of directors for the actions for corporates.
The deadline for responses to the Law Commission Discussion Paper is 31 August 2021 and HSF is currently preparing its response. The Law Commission is expected to publish an Options Paper by the end of the year.
The Law Commission is holding a series of further webinars on specific aspects of the corporate criminal liability debate, and it is possible to register for future events here.
The CCI team would be happy to discuss this important topic with clients – please contact any of your normal HSF contacts if you would like to do so.