Defending Failure To Prevent Offences

• Published date: 20 May 2022
• Subject Matter: Corporate/Commercial Law, Criminal Law, Corporate and Company Law, Contracts and Commercial Law, Corporate Crime
• Law Firm: BCL Solicitors LLP
• Author: Mr Tom McNeill and John Binns

'Failure to prevent' offences have changed the landscape of corporate criminal liability. Commercial organisations can now be held criminally liable if an 'associated person' commits certain types of offence, subject to a defence which requires them to prove that they did all they reasonably could to prevent the offending. BCL Senior Associate Tom McNeill and partner John Binns explore the reasons why organisation are not defending themselves.

'Failure to prevent' (FTP) offences have changed the landscape of corporate criminal liability.¹

For bribery and facilitation of tax evasion offences, and potentially more economic crimes on the way,² investigating authorities have a route to prosecute commercial organisations that side-steps the requirement to prove wrongdoing by a 'directing mind'.

Commercial organisations can now be held criminally liable if an 'associated person' commits certain types of offence,³ subject to a defence which requires them to prove (broadly speaking) that they did all they reasonably could to prevent the offending. ⁴

The question is: why aren't more organisations defending themselves?

Failure to defend

To date all FTP prosecutions have concerned bribery, and the almost universal preference has been to resolve the prosecution by deferred prosecution agreement (DPA).

While DPAs avoid a criminal conviction, organisations must in practice admit serious wrongdoing, pay a financial penalty comparable to a fine following conviction, and comply with onerous measures to prevent future offending.

For some organisations, commercial certainty and risks in relation to disbarment from public procurement may make these prices worth paying in all circumstances. ⁵ Other organisations, however, will weigh the chances of proving themselves innocent before accepting the certainty of reputational and financial harm.

That only one organisation has sought to defend an FTP prosecution to date inevitably reflects a view that such offences are difficult to defend. Few lessons however can be drawn from the conviction of Skansen Interiors Limited. One of its directors pleaded guilty to bribery, and the company did not have any anti-bribery and corruption policy in place at the time that the offending commenced, making it hard to argue a defence of 'adequate procedures'.

The defence in theory

Without contested prosecutions and a body of interpretive case law we cannot be sure how the defence will operate in practice. The guidance issued to date is not particularly helpful.

One key area of uncertainty is the extent to which organisations could rely on the defence in circumstances where individuals did not follow, or deliberately circumvented, the measures in place. With the considerable efforts and costs that many organisations have invested in developing systems, often this will be the question that determines the organisation's guilt or innocence.

When drafting the failing to prevent bribery offence, however, we know that the Law Commission had in mind specific 'regulatory' due diligence defences, which assist with this precise question. These include section 21(1) of the Food Safety Act 1990 and section 24 of the...