Corporate Criminal Liability: UK Law Commission's Proposals For Reform

• Published date: 21 June 2022
• Subject Matter: Corporate/Commercial Law, Criminal Law, Corporate and Company Law, White Collar Crime, Anti-Corruption & Fraud, Corporate Crime
• Law Firm: Mayer Brown
• Author: Mr Sam Eastwood, Alistair Graham and Chris Roberts

The Law Commission has published its long-awaited proposals for reforming corporate criminal liability in the UK ("Options Paper"). Whilst anti-corruption campaigners, including Members of Parliament, have criticised it for not going far enough, the reforms canvassed in the Options Paper do represent a meaningful reinforcement of the existing law on corporate criminal liability and should cause companies to look afresh at their risk management procedures and internal controls.

"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.

It's imperative that we have the right mechanisms in place to allow companies to be effectively held to account for misconduct carried out in their name...the Government now has several viable routes to reform at its disposal"¹

Background

The Law Commission is a statutory independent body whose purpose is to monitor legislation and recommend legal reform. This Options Paper was requested by the Government and it sets out proposals as to how the Government may improve the law to ensure that corporates are effectively held to account for criminal conduct.

The general principle of criminal liability applied to corporations in English law is the "identification doctrine". In simple terms, this provides that where a mental state is a required element of an offence, only the mental state of a senior person representing the "directing mind and will" of an organisation can be attributed to a corporate.² This may be an individual, a group of individuals or a board of directors. In practice, this has meant that prosecuting a corporate for a criminal offence can be challenging, especially for larger organisations, as there are evidential difficulties in attributing the mental element of the offence to the "directing mind and will" of a given organisation. The shortcomings of the identification doctrine were highlighted in SFO v Barclays.³ The case suggested that, in order to establish liability, it is necessary to demonstrate that individual defendants must either be a company's "directing mind and will" for all purposes, or the "directing mind and will" for the particular function in question. This is understandably a high threshold for any organisation other than very small operations.

The Bribery Act 2010 ("Bribery Act") and the Criminal Finances Act 2017 introduced specific "failure to prevent" offences for...