The Law Commission will begin a review of the UK’s corporate criminal liability legislation, after the Government instructed the body to examine potential reforms. The Commission will draw up an Options Paper, analysing the effectiveness of the UK’s interlocking strands of legislation, and suggesting areas of improvement for the Government to consider in legislation. The review will draw on domestic and international models and identify the most effective and viable options for the UK.
The announcement of the review follows the “call for evidence” on the reform of corporate liability, put out by the Ministry of Justice back in January 2017. Despite receiving numerous responses by March of that year, the Government resisted publishing the findings. It has now judged that “the evidence submitted was inconclusive” and requested that the Law Commission take the examination forward.
In announcing the review, the Justice Secretary Rt Hon Robert Buckland MP outlined the areas the review would examine:
“A Law Commission review comes at an opportune time and will be able to take into consideration more recent developments since the closure of the Call for Evidence. This includes the commencement of new corporate criminal offences in the Criminal Finances Act 2017; the expansion of the Senior Managers & Certification Regime in the financial services sector; the Money Corporate Liability for Economic Crime Call for Evidence: Government Response 4 Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017.”
The past few years have seen growing calls for reform of the UK’s current corporate liability framework, which has provoked criticism from prosecuting bodies like the Serious Fraud Office (SFO), who believe the existing legislation hinders effective prosecution of corporate entities. We have previously blogged on public calls from Lisa Osofsky, the director of the SFO, to expand the existing “failure to prevent” offences under the UK Bribery Act 2010 and the Criminal Finances Act 2017, into a general “failure to prevent economic crime” offence.
Aside from the “failure to prevent” offences, UK corporate criminal liability primarily functions via the identification principle, under which culpability can only be attached to a corporate entity where wrongdoing can be established on the part of senior officer of the company, who can be said to represent the entity’s “directing mind and will”.
The initial call for evidence set out five possible reform options, which the review will now examine:
- legislation to replace the identification principle with a broader range of measures;
- the introduction of US-style vicarious liability, in which a company is liable for any acts of an employee committed during the course of their employment that benefits the company;
- a “failure to prevent economic crime” offence, as advocated by the SFO;
- a variant on the “failure to prevent economic crime” model, in which the prosecution is put to a higher standard of proof; and
- investigating the scope for further regulatory reform targeted at individual accountability for senior officers; building on recent introductions in the regulated sector such as the Senior Managers Regime.
This review is a collaboration between two law Commission teams: The Criminal Law Team and the Commercial and Common Law Team. It will be led by Professor Penney Lewis, the Commissioner for Criminal Law, and Professor Sarah Green, the Commissioner for Commercial and Common Law.