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Corporate criminal liability: ten options for reform

The UK’s Law Commission has published its options paper for reform of corporate criminal liability. This much-anticipated report sets out ten options for the UK Government to consider in trying to ensure that corporations are effectively held to account for committing serious crimes. The options are set out below.

  1. Retain the current general rule of criminal liability, the “identification doctrine”. The Law Commission rejected the US vicarious liability model, with the Law Commissioners noting that the model didn’t lend itself to the judicial landscape in the UK.
  2. Allow conduct to be attributed to a company where a member of that company’s “senior management” engaged in, consented to or connived in the relevant offence. The definition of “senior management” for these purposes could be drafted so that a company’s CEO and CFO are always considered part of the senior management. This option seeks to deal with the criticism which has been levelled at the identification doctrine; that it is disproportionately difficult to prosecute large companies due to responsibility for decision-making being more diffuse than in smaller companies.
  3. Introduce an offence of “failure to prevent” fraud by an employee or agent. Companies would have a defence if they could show they had reasonable prevention procedures in place. The introduction of a failure to prevent offence has been the subject of much discussion in recent years with many calling for the introduction of a failure to prevent economic crime offence. At the launch of the options paper, Penney Lewis, Law Commissioner for Criminal Law, noted that the Law Commission considered that a failure to prevent economic crime, or even failure to prevent crime offence, would be too wide-reaching in scope to introduce at this stage. The Law Commission were of the view that the law should evolve more slowly, moving from failure to prevent bribery, to failure to prevent the facilitation of tax evasion (both already in force), to failure to prevent fraud and only then once lessons were learnt, would it be sensible to introduce a broader offence of failure to prevent economic crime.
  4. Introduce an offence of “failure to prevent” human rights abuses.
  5. Introduce an offence of “failure to prevent” ill-treatment or neglect.
  6. Introduce an offence of “failure to prevent” computer misuse. This would build on the back of the Computer Misuse Act 1990 (CMA), which is still relied on in many cases to prosecute various data-related offences, despite criticisms for being out of date. The CMA is currently under separate review by the Home Office and the Law Commission stated that this option should be considered as part of that review.
  7. Make publicity orders available in all cases where a company is convicted of an offence. This was considered particularly valuable where the offender was a public body or charity and a large fine could therefore impact public services.
  8. Introduce a regime of administratively-imposed monetary penalties. Whilst this would be a way of dealing with wrongdoing where it was held that the company was less culpable, the Crown Prosecution Service and the Serious Fraud Office were not keen on this option as it would require them to re-organise internally to be able to administer the regime.
  9. Introduce civil actions in the High Court in order to impose monetary penalties (as well as punitive and preventative measures) on companies. This would primarily be aimed at companies that were found to have conducted themselves in a way likely to facilitate fraud.
  10. Introduce a reporting requirement to require companies to report on their anti-fraud procedures.

The above are not recommendations, simply options for reform. The Law Commissioners noted at the launch of the options paper that the recent introduction of the Economic Crime (Transparency and Enforcement) Act 2022 meant that there was interest and engagement within Government on this topic. The hope is that the momentum will be maintained and we will see a number of these options implemented in the coming months and years.

There is broad consensus that the law must go further to ensure that corporations — especially large companies — can be convicted of serious criminal offences, such as fraud.

Tags

litigation, corporate crime, criminallaw, reform, corporateliability, fraud, failuretoprevent

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