Corporate Criminal Liability In England & Wales: Former Lord Chancellor Signals That Reform Is On The Way

• Published date: 17 October 2022
• Subject Matter: Corporate/Commercial Law, Criminal Law, Corporate and Company Law, White Collar Crime, Anti-Corruption & Fraud, Corporate Crime
• Law Firm: McDermott Will & Emery
• Author: Mr Simon Airey, James Dobias and William Merry

Former Lord Chancellor Sir Robert Buckland KC MP has reportedly hinted that new corporate 'failure to prevent' offences may be added to the Economic Crime and Corporate Transparency Bill (the Bill) that is currently making its way through Parliament. Speaking at an event hosted by the American Bar Association on 10 October 2022, Mr Buckland (now the Secretary of State for Wales) stated that he is "sure there will be further amendments tabled to the Bill, particularly centred around failure to prevent economic crime". His remarks come after the Law Commission (a statutory independent body tasked with keeping the laws of England & Wales under review) published its much-anticipated Options Paper in June 2022, setting out ten potential options for the reform of the laws of England & Wales on corporate criminal liability.

This is the latest development in an area of law which has been the subject of significant criticism from prosecutors in recent years, largely due to the legal and evidential difficulties experienced in securing corporate convictions in a number of high-profile cases.

Four of the ten options advanced by the Law Commission relate to the potential introduction of new corporate 'failure to prevent' offences in areas such as fraud and human rights abuses, while the remaining six options include: maintaining the status quo (which now appears not to be the UK Government's preference); modifying the scope of who constitutes a company's 'directing mind and will'; introducing new civil and administrative monetary penalties; and / or enhancing corporate compliance obligations. Significantly, the Law Commission considered and rejected the possible introduction of a general corporate 'failure to prevent economic crime' offence. This suggests that Mr Buckland's remarks referred to the introduction of specific 'failure to prevent' offences (e.g., in relation to fraud), rather than a broader offence referring to economic crime more widely.

Given the apparent direction of travel as articulated by Mr Buckland, it seems likely that the scope of criminal liability for companies will expand over the coming years. As such, there is little room for complacency and companies may wish to give renewed thought as to whether existing policies and procedures are sufficiently broad, have been properly implemented and will withstand scrutiny by the authorities.

IN DEPTH

Background: Current Law in England & Wales

As the law currently stands in England & Wales, criminal liability for certain offences can be attributed to companies through the 'Identification Principle', which provides that, in general and with the exception of certain strict liability offences (e.g., in the health and safety sphere) or 'failure to prevent' offences (discussed further below), a company can only be liable for an offence where the individual committing the offence represents that company's 'directing mind and will' (i.e., an individual or group of individuals who are sufficiently senior that their conduct and state of mind can be attributed to the company). Under the current law, this directing mind will generally be that of the members of the board of directors (individually or collectively) and those to whom they (or a company's articles of association) have expressly delegated relevant authority.

However, over time and as this principle has been applied by the courts, numerous practical difficulties have arisen, especially when seeking to establish the directing mind of large companies with complex governance structures.

In R v Andrews Weatherfoil [1972] 1 WLR 118, the Court of Appeal quashed the conviction of a company accused of corruption, partly on the basis that the employee paying the bribe (a manager of a division) did not have the requisite status and authority for his mental state to be attributed to the company. Almost 40...