Law commission

Law Commission Releases Options Paper for Reforming Corporate Criminal Liability Laws

The Law Commission today released an options paper for the government on how it can change the law to ensure companies are indeed held accountable for committing serious crimes. A number of options are presented, which we will consider in due course. For now, here are the main points:

  • Doctrine of identification: Many corporate criminal offenses require “mental elements”, such as intent, knowledge, recklessness, or dishonesty. As corporations are not natural persons, for a corporation to be held criminally liable, a prosecutor must prove that the individuals involved in the crime had the requisite mental element for the offense and represent “the directing mind and will” of that business so that the actions of individuals can be seen as those of the business (the “identification doctrine”). This is very difficult to establish, especially in large organizations, and has led to criticism and low numbers of corporate convictions. The Commission recommends either maintaining the current doctrine or “permit conduct to be imputed to a corporation if a member of senior management of the corporation committed, consented to or connived in the offence.” A member of senior management would be anyone who plays a significant role in making decisions about how all or a substantial part of the business of the organization is to be managed or organized, or the actual management or organization of all or a substantial part of these activities. He presents another option that goes further and recommends that the organization’s CEO and CFO should always be considered senior management (probably in response to R v Barclays Plc [2018] 5 WLUK 736, where the criminal courts held that such individuals might not constitute the directing mind and will of the company if they lacked the power to engage in the conduct in question).
  • Failure to prevent offences: The Commission rejects a general ‘failure to prevent crime’ offence, but sees merit in introducing ‘failure to prevent’ offenses with respect to economic crimes. This should not be a general “economic crime prevention failure”, as it would overlap with existing offenses related to corruption and facilitating tax evasion; instead, they recommend an offense of “failure to prevent fraud by an associated person (such as an employee or agent)”. The Commission notes that the arguments in favor of the inability to prevent breaches are more convincing if the reforms are not to the doctrine of identification and lists three other offenses that could be created (i) failure to prevent human rights violations; (ii) failure to prevent abuse or neglect; and (iii) failure to prevent computer misuse.
  • Liability of Directors: The Commission concludes that, in principle, directors should not be personally criminally liable for negligence if the offense is one which requires proof of a particular mental state. Liability of directors for negligence should be limited to offenses of strict liability or negligence.