The extension of corporate criminal liability for economic crime: consultation closes 31 March 2017
Under the common law, whenever proof of criminal intent is required, corporate criminal liability for economic crime involves application of the identification doctrine - this demands that prosecutors prove that those who can be regarded as “the directing mind” of the company knew about, actively condoned, or played a part in the offending.
The identification doctrine sets the obstacle high for prosecutors and has been criticised as a barrier to otherwise meritorious prosecutions of culpable corporations. However, the Bribery Act 2010 introduced exceptions to this principle – notably the corporate section 7 'failure to prevent bribery' offence under which organisations can be prosecuted for simply failing to have adequate procedures in place to prevent bribery without the need to identify a directing mind.
Indeed, there have been a number of successful prosecutions under this provision and the Ministry of Justice is seeking views as to whether further exceptions should be made to the identification doctrine thus expanding the potential scope of corporate criminal liability into other areas of economic crime:
- Option 1: abolish the identification principle, or designate who within the organisation could be regarded as the directing mind.
- Option 2: create strict (vicarious) liability offences – this would include liability for actions of employees but could be subject to a 'due diligence' defence whereby an organisation would have a defence if it could show it had taken all reasonable steps to prevent the commission of the offence.
- Option 3: create strict (direct) liability offences – as with option 2 but focusing on the responsibility of a company to make sure that offences are not committed in its name.
- Option 4: extending the concept of 'failure to prevent' as an element of the offence – in this case the prosecution must prove not only that the predicate offence occurred but also that it occurred as a result of a negligent management failure or systemic inadequacies. This represents strict liability, but requires the prosecution to establish the failures, rather than requiring the company to set out its defence of due diligence or otherwise.
- Option 5: regulatory reform – deter misconduct through introducing regulatory rather than criminal liabilities (ie using industry regulators).
Those in favour of extending liability through the extension of strict liability or liability for 'failures to prevent' (Options 2 to 4) suggest this would be in line with current principles applicable to corporations under, for example, health and safety and environmental law and would inevitably promote pro-active management and good governance. Those against extending liability see it as a step too far that will impose further and unnecessary burdens on businesses – making them criminally responsible for the unforeseeable actions of unpredictable and uncontrollable employees who should face prosecution alone. Have your say here.