Potential reform of corporate criminal liability for economic crime

On 13 January 2017 the Ministry of Justice ("MoJ") published a call for evidence ("CfE") regarding potential reform of the law concerning corporate criminal liability in respect of economic crime. This publication is the latest development concerning a potential new offence of failure to prevent economic crime, which was first announced by David Cameron in May 2016.

The purpose of the CfE is to enable the MoJ to obtain evidence as to whether reform of the law of corporate criminal liability is required, and if so, what form this should take.  If the government determines that reform is required following the CfE then the next stage will be a full consultation on a detailed proposal and draft legislation – likely to take place sometime in the summer of 2017.  The changes that may result from this process have the potential to be very significant for corporates, and the fact that there will be full consultation and scrutiny of the proposals is welcome, including the opportunity to engage at this early stage by responding to the CfE.

In setting out the premise of the CfE the MoJ notes a number of challenges currently presented by the need for prosecutors to establish corporate criminal liability under the common law doctrine of identification.  In particular, the CfE draws attention to the apparent inability of the Serious Fraud Office to prosecute banks involved in the LIBOR rigging scandal in circumstances where the United States Department of Justice were able to, and the suggestion that smaller companies may be easier to prosecute under the current doctrine because of the likely proximity of a "directing mind" to any criminal conduct.  The CfE does, however, recognise that the identification doctrine sits alongside a regulatory regime where many corporates can face large fines and reputational damage in respect of wrongdoing, and therefore do not necessarily escape sanction.

In response to these issues the MoJ have put forward 5 potential options for reform including extending the "failure to prevent" model already used under section 7 of the Bribery Act (as well as the new offences of failing to prevent the facilitation of tax evasion as set out in the Criminal Finances Bill), and introducing a US-style model of vicarious liability.  Although the CfE appears to consider a number of alternative routes to reform, the content of the CfE predominantly concerns an extension of the "failure to prevent" model, suggesting that this is still the government's favoured option.

The CfE closes on 24 March 2017.  We will be preparing a briefing on the topic in due course, but in the meantime we are happy to answer any questions you may have regarding this development. 

A copy of the CfE can be found here. 

Responses to the CfE can be submitted via this online form.