Reforming Corporate Criminal Liability: The Law Commission's Options Paper

• Published date: 16 June 2022
• Subject Matter: Corporate/Commercial Law, Criminal Law, Corporate and Company Law, White Collar Crime, Anti-Corruption & Fraud, Corporate Crime
• Law Firm: Herbert Smith Freehills
• Author: Ms Susannah Cogman, Daniel Hudson, Brian Spiro, Kate Meakin, Robert Hunt and Jessica Chappatte

On 10 June 2022, the Law Commission (the "Commission") published its long promised "options paper" (the "Paper"), the next stage in the potential reform of the UK's corporate criminal liability laws.

The Commission was asked by the Government to carry out a review of the current law on corporate criminal liability and present a set of options for strengthening it in ways that will not "overburden businesses". The review followed frequently aired concerns that the current law falls short in adequately holding corporations - especially large companies - to account, particularly for economic crimes such as fraud.

Those who have previously called for a broad "failure to prevent economic crime" offence will be disappointed with the Commission ruling this option out, although the narrower "failure to prevent fraud" offence remains on the table as one of the ten options that are outlined in the Paper. The other options range from: the retention of the current general rule of corporate criminal liability based upon the "identification principle" (either in its current form or through the adoption of the Canadian model); to alternative specific failure to prevent offences and also include a number of civil options including administrative monetary penalties and High Court civil actions.

In this briefing, we outline (i) the context in which the Paper has arisen; (ii) the scope of the Commission's review; (iii) the Commission's ten proposed options for reform; and (iv) our analysis of the impact of the Paper.

1. Background

The review arose following numerous calls over a number of years for the Government to reform how criminal liability is attributed to companies in the UK. The principal way under common law is to show that an offence has been committed by an individual who is deemed to be the "directing mind and will" of the company. Ordinarily, this will be the board and senior officers carrying out the functions of management, but the board may also delegate to others "full discretion to act independently of instructions from them". This is known as the identification doctrine and derives from the House of Lords decision in 1972 of Tesco Supermarkets Ltd v Nattrass [1972] AC 153.

Many, including the Serious Fraud Office ("SFO"), have argued that the current identification doctrine is inadequate in attributing criminal responsibility to large corporations. Others have contested this and challenged the Commission to demonstrate that criminal liability is the most appropriate way to deal with misconduct within corporates, especially in sectors which are already liable to regulatory...