The UK Government begins its consultation for potential
changes to law on corporate criminal liability for economic
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
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
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
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
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.
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guide to the subject matter. Specialist advice should be sought
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It was back in 1998 that Jack Straw, the then Home Secretary, asked the Law Commission to examine the law on fraud and whether a general offence of fraud would be an improvement to the body of criminal law.
The Fraud Act 2006, which represents the most radical change in the law of criminal fraud since the Theft Act 1968, came into force on January 15, 2007. We are now over a year into the new law, which seems a reasonable juncture to pose the question: has it had any impact?
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