Corporate Criminal Liability: The Law Commission’s ten options for reform

14 June 2022

On 10th June, the Law Commission launched its Options Paper which presents a number of ways in which the law of corporate criminal liability could be reformed.  The detailed paper, accompanied by a 14 page summary document, sets out potential options for reform in this area and rules out other possibilities as not viable.
 

Back in 2017 the Ministry of Justice issued a Call for Evidence on the issue of corporate liability, with the results of that consultation considered inconclusive. In November 2020 the Law Commission was asked by the Government to examine this issue more closely. The project included a consultation process, with a discussion paper published last year posing a number of questions, and additional stakeholder engagement. (See our related blogs[A1] :

The Commission’s review, as noted in the paper, was agreed to consider “the challenges faced by the criminal justice system under the current law relating to corporate criminal liability,” whilst avoiding “disproportionate burdens upon business”. This has resulted in the Law Commission’s Options Paper launched last week.

The Fraud Lawyers Association annual conference, jointly held with the European Fraud & Compliance Lawyers Association, was the platform for this launch, and I was very pleased to host Commissioner Professor Penney Lewis (Criminal Law) and Commissioner Professor Sarah Green (Commercial and Common Law) as they presented this paper.   We heard that the options focus on attribution of criminal liability to corporations, the extension of “failure to prevent” offences” to fraud, as well as consideration of failure to prevent human rights abuses and two other discrete offences.  There is consideration of the liability of directors and senior managers, and also included is the possibility of maintaining the status quo by retaining the current identification principle (Option 1). As to the outcomes or potential sanctions, consideration is given to the sentencing of non‑natural persons and some civil options.  The full list, as defined by the Law Commission, is detailed below.

OPTIONS as set out in the Law Commission’s paper:

1. Retain the current general rule of criminal liability applied to corporations – the “identification doctrine” – as it stands.  

2. Allow conduct to be attributed to a corporation if a member of its senior management engaged in, consented to, or connived in the offence. This could be drafted so that chief executive officers and chief financial officers are always considered part of an organisation’s senior management.

3. Introduce an offence of failure to prevent fraud by an employee or agent. This would apply when the company has not put appropriate measures in place to prevent their own employees or agents committing a fraud offence for the benefit of the company.

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.

7. Make publicity orders available (requiring the corporate offender to publish details of its conviction) in all cases where a corporation is convicted of an offence.

8. Introduce a regime of administratively imposed monetary penalties.

9. Introduce civil actions in the High Court, based on Serious Crime Prevention Orders, with a power to impose monetary penalties.

10. Introduce a reporting requirement requiring large corporations to report on anti-fraud procedures.

It is important to note that this is a series of options and not, as with some law reform projects, a set of recommendations.   It is now up to Government to decide which of these options to pursue, which will involve further consideration and likely taking some time.  Any reform would need to be accompanied by detailed guidance to ensure that obligations and expectations are properly understood. However, the publication of this Options Paper keeps the focus firmly on corporate behaviour and corporate compliance, and we can expect to see further movement on this topic in the months and years to come.


 [A1]Related Blogs

Corporate criminal liability reform – the pressure is on the Law Commission as MPs express their frustration at delay

Corporate criminal liability review could yield “radical and seismic” changes - Louise Hodges quoted in GIR

Reform of corporate liability: two ways about it - Louise Hodges & Alun Milford write for PLC Magazine

FURTHER INFORMATION

For further information on the issues raised in this blog post, please contact a member of our criminal team.

 

ABOUT THE AUTHOR

Caroline Day is a Partner in our Criminal Litigation team. Caroline specialises in complex fraud and financial crime. She acts in cases of serious fraud, money laundering, corruption and cartels and has advised individuals and companies subject of investigations and prosecutions by various agencies including the Serious Fraud Office (SFO), the Financial Conduct Authority (FCA), HM Revenue and Customs (HMRC) and the Competition and Markets Authority (CMA) (formerly the OFT).

 

Share insightLinkedIn Twitter Facebook Email to a friend Print

Email this page to a friend

We welcome views and opinions about the issues raised in this blog. Should you require specific advice in relation to personal circumstances, please use the form on the contact page.

Leave a comment

You may also be interested in:

Skip to content Home About Us Insights Services Contact Accessibility