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Law Commission begins Government-mandated project on corporate criminal liability

11 November 2020

THE GOVERNMENT (specifically the Ministry of Justice, Her Majesty’s Treasury, the Home Office, the Attorney General’s Office and the Department for Business, Energy and Industrial Strategy) has asked the Law Commission of England and Wales to investigate the laws around corporate criminal liability and provide options with a view towards reforming them.

Concerns have been raised over the effectiveness of current laws in criminalising corporate entities when they commit economic crime. Calls for reform have been revived following the mixed success of recent high-profile prosecutions. Without action to reform this area of the law, there’s a potential risk that the UK will fall behind international standards in terms of the prosecution of economic crime.

The Law Commission has been asked by the Government to draft an Options Paper in which the Commission will analyse in detail how effective the law is at present and outline where it could be improved. The Commission will present various options for reforming the law such that corporate entities can be held appropriately to account.

This project will be run as a cross-team collaboration between two Law Commission teams, namely 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.

Public trust “damaged”

Professor Penney Lewis stated: “Public trust in the law and in business is damaged when firms cannot be prosecuted for criminal offences carried out in their name. We will analyse how the current regime of criminal liability is working and provide options for reform to ensure the law is fair and robust.”

Professor Sarah Green added: “Corporate crime causes harm to the public and also undermines the environment in which British companies operate. This review is an important step forward when it comes to protecting the UK’s internal competitiveness and reputation and reassuring companies that the UK is a reliable place to do business.”

The Commission is aiming to publish the Options Paper in late 2021 and will work with the Government on next steps, including the potential for a full Law Commission project on the subject of corporate criminal liability.

Thorn in the side

Rahman Ravelli’s senior partner Aziz Rahman has reviewed the Law Commission’s announcement. He subsequently informed Security Matters: “The issue of corporate criminal liability has been a long-running thorn in the side of prosecutors. It was perhaps one reason why Serious Fraud Office director Lisa Osofsky voiced her wish for an offence of failure to prevent economic crime back in 2018.”

According to Rahman, the call for change stems from the need to establish the controlling mind of a company in order to show corporate criminal liability. This has made it difficult to prosecute companies and especially so the larger ones with big, complex and diverse management structures. This has led to what Rahman references as “some spectacular failures, perhaps most notably the Serious Fraud Office’s inability to successfully prosecute Barclays over its Qatar fundraising”.

Rahman continued: “If a failure to prevent economic crime offence were to be introduced, it could save the Serious Fraud Office and other agencies a lot of trouble. The failure to prevent tax evasion offence contained in the Criminal Finances Act 2017 and the failure to prevent bribery offence enshrined in the Bribery Act 2010 have shown that a ‘failure to prevent’-style approach is possible. It’s still early days for the failure to prevent tax evasion offence.”

Admittance of wrongdoing

While the Bribery Act offence has, to date, only resulted in two convictions, it has nevertheless been instrumental in a number of deferred prosecution agreements or DPAs which do require companies to admit wrongdoing.

Rahman feels it would be “premature” to try and second guess what may develop from the Law Commission’s work. “Other possibilities exist and the Commission will certainly produce its own proposals. Moves to introduce criteria for clarifying a company’s controlling mind and/or whether that mind can be shown to have acted in a way that makes the company criminally liable are just two possible avenues to be explored.”

He concluded: “At this stage, the issue is a blank canvas for the Law Commission. Enforcement agencies will look on with great interest to see what picture the Commission paints for the future of corporate criminal liability.”