More than three and a half years after its call for evidence on reforming corporate liability for economic crime, the UK government has published its response.
Anyone hoping for reform in the short term will be disappointed: the government has found that the evidence submitted was inconclusive and that further work is required before making any change to the law.
However, the possibility of future reform is still very much alive, with the government announcing that it is commissioning an expert review of corporate criminal liability by the Law Commission, which it says will focus on providing a practical and considered route to law reform.
The call for evidence
In January 2017, the UK government launched a three-month call for evidence, following concerns that the current criminal law does not provide a robust framework for successfully prosecuting corporate bodies for economic crimes such as fraud, money laundering and false accounting. The call for evidence sought views from stakeholders on whether there was a case for reforming the current corporate liability regime.
In particular, it sought evidence on the suitability of the common law “identification doctrine” as a tool for enforcing the criminal law against large corporates. Under the identification doctrine, criminal liability for an offence will generally only attach to a company in circumstances where the offence can be attributed to someone who at the material time was the “directing mind and will” of the company.
Options for reform
The call for evidence canvassed views on five possible alternatives to the identification doctrine:
- Legislating to replace the current common law rules – this option envisages legislation that would establish criminal liability based on the complicity of persons from a much broader set of functions than the identification doctrine.
- Creating a US-style vicarious liability offence under which a company would be guilty, through the actions of its employees, representatives or agents, of a substantive economic crime offence without the requirement to prove that the individual responsible was the directing mind or will of the company.
- Creating a strict liability offence similar to s.7 of the Bribery Act 2010 – this option provides for a new offence of “failure to prevent” economic crime, with no need to prove intent on the part of the company. The company would however have a defence if it could prove that it had in place adequate procedures to prevent economic crime.
- Varying option 3 above so that the burden of proof shifts from the company to the prosecution. This would mean that the prosecution would have to prove not only the relevant criminal offence, but also that the company failed to have in place adequate procedures to prevent economic crime.
- Investigating regulatory reform on a sector by sector basis, focussing on the lessons arising from recent reforms to the financial services sector.
Responses to the call for evidence showed that while there were clear concerns about the current law, there was no clear consensus from respondents as to what should replace the identification doctrine. The government has therefore found that there was no conclusive evidence-base on which to justify changing the law in this area.
Reform – back on the agenda?
Although there is no prospect of immediate reform, the publication of the government’s response nevertheless represents a significant step.
Given the time that has passed since the call for evidence, this could have been something which simply fell off the legislative agenda completely, but instead the government has taken the step of commissioning an expert review of the identification doctrine by the Law Commission, signalling that it is serious about the possibility of reform.
It remains to be seen whether there will be any change in the law – there have always been strongly held competing views on the merits of reform, which will no doubt be aired during the Law Commission’s review – but the fact that this issue is back on the agenda is a meaningful development.