John Binns

BCL Solicitors LLP recognised as a leading firm in The Legal 500 UK 2021-2022 Guide

BCL Solicitors LLP are pleased to be once again recognised as a top-tier firm with an extensive team of outstanding individuals in the new Legal 500 United Kingdom 2021-2022 Guide with a total of seven leading practice areas identified and 14 lawyers commended for their standout contribution in their respective practices.

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Corporate Criminal Liability: A Response to the Law Commission’s Discussion Paper – Part Four: Some Questions About Enforcement

Following an earlier call for evidence in 2017, the Law Commission has been tasked with considering options to reform the law on when and how companies should be held liable for criminal offences. Earlier this year it published a discussion paper and invited responses to 13 questions. BCL partner John Binns continues his four-part response. Read part one of this series here.

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Corporate Criminal Liability: A Response to the Law Commission’s Discussion Paper – Part Three: More ‘Failure to Prevent’?

The Bribery Act Template

The story so far

The Law Commission devotes surprisingly little of its discussion paper to what most would expect to be the government’s next step – one or more new ‘failure to prevent’ offences, based on the template created in the Bribery Act 2010, and followed in the Criminal Finances Act 2017 (the CFA). The offence of paying a bribe, often committed in order to win a contract or other advantage for the benefit of a business, was and is well suited to this model, whereby the organization becomes liable for the act of an ‘associated person’, unless it can show it had ‘adequate procedures’ to prevent that happening. The main effect of its creation has not been in convictions but in Deferred Prosecution Agreements (DPAs) under the Crime and Courts Act 2013 between the Serious Fraud Office (SFO) and companies, invariably not accompanied by convictions of ‘associated persons’. The offences of facilitating tax evasion (domestic or foreign) are perhaps less well suited to this model, and we have not yet had time to see whether and how companies will be held liable for the acts of ‘associated persons’ under the CFA, or how they might use the defence (subtly different from that in the Bribery Act) that they had ‘reasonable procedures’, or that it was reasonable for them not to have any. When considering further such offences, there are several points to bear in mind.

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Corporate Criminal Liability: A Response to the Law Commission’s Discussion Paper – Part Two: Tesco v Nattras, and the Alternatives

The Law Commission’s discussion paper seems to start from an assumption that there is something wrong with the status quo, as represented in the ‘identification principle’ set out in the case of Tesco Supermarkets Limited v Nattrass [1971] UKHL 1. But is that right? To the extent that criminal liability is about moral judgements, it surely makes sense that the liability of a company (or other ‘non-natural person’) should depend on the acts and intentions of a person controlling it (its ‘directing mind and will’). To the extent that many modern criminal offences address acts or omissions where no fault is necessarily involved, the law has evolved to enable the courts to vary that principle according to context (by reference to the New Zealand case of Meridian Global Funds Management Asia Limited v Securities Commission [1995] UKPC 5). Various statutory offences, including corporate homicide, and the ‘failure to prevent’ offences, have been created in response to specific identified needs. In these circumstances, it is far from clear that there is any general case to abandon the identification principle, certainly not based on the examples cited by prosecutors.

 

Considering the Alternatives

Senior managers

The Commission looks at alternative methods from other jurisdictions of attributing criminal liability to companies. In Canada and Australia, statutes have substituted ‘senior manager’ for ‘directing mind and will’, so that companies can be made liable by reference to a broader set of individuals. Should that approach be taken here, of course some thought would need to be given to what ‘senior manager’ means – an issue that will be familiar to those who work in the financial sector, but which is far from simple, and would not easily translate into other, less strictly regulated, sectors.

Corporate culture

The Commission also asks about an even harder, less familiar concept, also used in Australia, where a company can be held liable where a ‘corporate culture’ has ‘directed, encouraged, tolerated or led to non-compliance’. There is surely a risk that this concept is too nebulous to provide legal certainty or to guide juries in knowing when to convict, which may in turn prompt companies to resolve the uncertainty by agreeing Deferred Prosecution Agreements for commercial reasons, rather than because the offence has genuinely been committed. That would in turn have impacts on them in terms of increased cost and risks, and on individuals who may be unfairly identified in the process.

The US system

Finally, the Commission asks about the system in the US, where companies are held liable for the actions of ‘any employee, representative or agent acting in the scope of their employment or agency’. To adopt this principle in the UK would represent a huge change and would come with huge costs and risks to companies and individuals. The case for making such a change has simply not been made out.

 

Due Diligence Defences

It seems axiomatic that, if any of these alternatives were adopted, they should be accompanied by a defence of due diligence (or, to use the language of the ‘failure to prevent’ offences in the Bribery Act 2010 and the Criminal Finances Act 2017 (CFA), procedures that are ‘adequate’ or ‘reasonable’. Even without such a defence, due diligence steps would be indirectly encouraged by a combination of internal risk management, insurers’ requirements, and sentencing practice. Considering the parameters of any such defence illustrates the difficult issues involved. Would the state provide guidance, as it has in the case of the Bribery Act and the CFA, to help companies with what procedures would be considered ‘adequate’ or ‘reasonable’ in these contexts? To what extent would they be sensitive to the differences between offences, industry sectors, and individual businesses? In what circumstances, if at all, might it be appropriate for a small company to conclude (as it may under the CFA) that it was reasonable not to adopt procedures?

 

The Consequences for Companies (and Others)

It also seems axiomatic that changes along these lines would come at a cost to companies. While it is true that some procedures already exist – including those aimed at meeting risks from the Bribery Act and the CFA, and those specific to the regulated sector for the purposes of the Proceeds of Crime Act 2002 and money laundering regulations – any of the mooted alternatives would require expansions not just of paperwork and protocols but also of personnel, requiring more people to train in and perform functions relating to compliance (and, as we have already seen, some businesses will find it expedient to ‘poach’ compliance personnel from the public sector). The risk of companies having to pay fines and/or fund legal investigations and defences would also increase and (for some risks and some companies) translate into insurance costs. These increased costs may in turn lead to increased prices for consumers and/or impact on the competitiveness of certain market sectors, where barriers to entry become too high for new market participants. The scope for individuals to become suspects in criminal cases, whether rightly or wrongly, would also increase, with all the potential for serious injustice that this implies.

John Binns is a partner at BCL specialising in all aspects of business crime, with a particular interest in confiscation, civil recovery and money laundering under the Proceeds of Crime Act 2002 (“POCA”). His business crime experience includes representing suspects, defendants and witnesses in cases invoking allegations of bribery and corruption, fraud (including carbon credits, carousel/MTIC, land-banking, Ponzi and pyramid scheme frauds), insider trading, market abuse, price-fixing, sanctions-busting, and tax evasion. He is also one of the partners in BCL’s cannabis department, which assists clients with Home Office licences, listings, and proceeds of crime issues.

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Corporate Criminal Liability: A Response to the Law Commission’s Discussion Paper – Part One: Some Points of Principle

Following an earlier call for evidence in 2017, the Law Commission has been tasked with considering options to reform the law on when and how companies should be held liable for criminal offences. Earlier this year it published a discussion paper and invited responses to 13 questions.

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