• At Kemp Little, we are known for our ability to serve the very particular needs of a large but diverse technology client base. Our hands-on industry know-how makes us a good fit with many of the world's biggest technology and digital media businesses, yet means we are equally relevant to companies with a technology bias, in sectors such as professional services, financial services, retail, travel and healthcare.
  • Kemp Little specialises in the technology and digital media sectors and provides a range of legal services that are crucial to fast-moving, innovative businesses.Our blend of sector awareness, technical excellence and responsiveness, means we are regularly ranked as a leading firm by directories such as Legal 500, Chambers and PLC Which Lawyer. Our practice areas cover a wide range of legal issues and advice.
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Corporate criminal liability for economic crime: regime consultation begins

The UK Government begins its consultation for potential changes to law on corporate criminal liability for economic crime

The UK government has issued a call for evidence to academics, business, civil society, lawyers and other interested parties across the UK to consider whether there is a case for changes to the regime for corporate criminal liability for economic crime in the United Kingdom. The call to evidence, which remains open until 24 March 2017, notes in the introduction that “corporate economic crime is serious offending that causes harm to individuals, businesses and the economy at large. It needs to be addressed effectively”.

The crux of the issue is the so called “identification principle” in English law, which provides that (other than in relation to strict liability offences) a company can only be criminally liable where the offence can be attributed to a person who was the “directing mind and will of the company”. This has made it notoriously difficult to successfully bring criminal proceedings against UK companies, particularly large multi-national businesses. The Bribery Act 2010 introduced a potential new way of attributing liability to companies; section 7 of the act provides that a company will be guilty of an offence if it fails to prevent bribery. The company may have a defence if it can show that it implemented procedures designed to prevent bribery. A similar “failure to prevent” model will be included in the forthcoming Criminal Finances Act as a way to prevent tax evasion.

The consultation paper explores in depth the corporate “failure to prevent” model, and presents a number of options for potential reform of the law:

  • Amendment of the identification doctrine – This option would involve abolishing the current common law and create a new version of the identification principle in legislation, for example by broadening the scope of those regarded as a directing mind of a company.
  • Strict (vicarious) liability offence – This would make the company guilty, through the actions of its employees, representatives or agents, of the substantive offence, without the need to prove any fault element such as knowledge or complicity at the corporate centre. A similar “let the master answer” principle exists in United States.
  • Strict (direct) liability offence – Rather than focus on the substantive offence (as the option above does), this offence would allow a company to be convicted (without the need to prove fault) of a separate offence akin to a breach of statutory duty to ensure that economic crime is not used in its name or on its behalf. The company would have a defence if it could show that it has proper procedures in place for the prevention of the relevant underlying offence.
  • Failure to prevent as an element of the offence – Here, failure by those managing a company to prevent the relevant crime would be an element of the corporate offence. The prosecution would need to prove both the predicate offence and also that it occurred as a result of a management failure (either negligent conduct or lack of proper systems to prevent the predicate offence occurring). This is similar to the previous option, but would place the burden on the prosecution to show that the company had not taken adequate steps to prevent the wrong doing.
  • Investigate the possibility of regulatory reform on a sector by sector basis – The paper notes that there has been significant reform in the regulation of the financial services industry, and comments that there may be lessons which can be learned which may be applicable more broadly.

The government will review the information received pursuant to the call for evidence and, if it determines that a new form of corporate liability for economic crime is required, there will be a full consultation on a detailed proposal and draft legislation.

Contact our experts for further advice

Adam Kuan