The Situation: At the direction of the Attorney General of Australia, the Australian Law Reform Commission ("ALRC") is undertaking a comprehensive review of Australia's Commonwealth corporate criminal liability regime. The ALRC is due to release a discussion paper on proposed reforms shortly.
The Result: The terms of reference indicate the ALRC is considering a broad range of issues including avenues to strengthen and simplify the existing statutory mechanisms for attributing criminal liability to companies found in Part 2.5 of the Criminal Code (Cth). The ALRC has also been asked to consider incorporating provisions of general application into Part 2.5 to facilitate senior corporate officers being held criminally liable for corporate misconduct and to consider the appropriateness of existing criminal procedure laws as they apply to corporations.
Looking Ahead: The ALRC review is occurring concurrently with other possible Commonwealth legislative reforms in this area, such as the introduction of a deferred prosecution ("DPA") scheme in Australia and amendments to the existing foreign bribery offences (including the introduction of a strict liability offence for companies).
The Existing Regime
Part 2.5 of the Criminal Code (Cth) ("Code") facilitates the attribution of both the physical and fault elements of criminal offences to corporations. If a "physical" element of an offence is committed by an employee, agent or officer of a body corporate (acting within the actual or apparent scope of his or her employment or within his or her actual or apparent authority), the physical element must be attributed to the company.
The "fault" (or mental) element must be attributed to a body corporate that expressly, tacitly or impliedly authorised or permitted the commission of the offence. The means by which such authorisation or permission may be established include proving that:
- The board of directors either carried out the relevant conduct or authorised or permitted the commission of the offence;
- A "high managerial agent" either carried out the relevant conduct or authorised or permitted the commission of the offence;
- A corporate culture existed that directed, encouraged, tolerated or led to noncompliance with the relevant provision; or
- The company failed to create and maintain a corporate culture that required compliance.
The Terms of Reference
The Terms of Reference direct the ALRC to specifically consider whether reforms are necessary or desirable to improve Australia's corporate criminal liability regime, including:
- The policy rationale and efficacy of Part 2.5 of the Code as a mechanism for attributing corporate criminal liability;
- The availability of other mechanisms for attributing corporate criminal responsibility;
- Additional mechanisms which could be used to hold senior corporate office holders liable for corporate misconduct; and
- The appropriateness and effectiveness of criminal procedure laws and rules as they apply to corporations.
The ALRC has been directed to consult with law enforcement authorities, the courts and other stakeholders with expertise and experience in the white collar crime sector. The discussion paper is due to be released on 15 November 2019, and the ALRC is to provide its final report to the Attorney General by 30 April 2020.
The corporate criminal responsibility provisions in Part 2.5 were introduced with the Code in its original form in 1995; however, the paucity of judicial consideration of those provisions demonstrates the hesitance with which Commonwealth prosecutors have approached reliance upon corporate attribution pursuant to Part 2.5. In particular, no Australian prosecution has ever successfully relied upon the "corporate culture" provisions to sheet home the "fault" (or mental) element of a criminal offence to a company.
A separate issue of real concern for senior office holders is the possibility that the ALRC may recommend the introduction of strict liability offences so that directors and other senior officers can be held liable for corporate misconduct in circumstances in which their level of knowledge of the offending conduct is insufficient for them to be charged with the substantive offence or as an accessory. Strict liability offences for corporate officers already exist in Commonwealth statute books for offences relating to, for example, environmental crime. However, amendments to the Code to provide strict liability offences of general application for senior corporate officers would be a significant development.
The Scale and Distribution of Corporate Criminal Offences
While Part 2.5 of the Code is the central mechanism by which criminal liability can be attributed to corporations through the acts or omissions of its officers, employees or agents, the current scale and distribution of criminal offences that are directly applicable to corporations is remarkable. The ALRC's preliminary research has identified more than 2,300 criminal offences applicable to companies across at least 15 pieces of legislation. Criminal liability in the Corporations Act currently extends to conduct as trivial as a failure to notify ASIC of a change in company office hours.
In this respect, an interesting topic for the ALRC to consider is whether the existing diaspora of corporate criminal offences is consistent with the rationale that underpins the imposition of criminal liability at the apex of the regulatory pyramid.
Criminal Procedure for Corporations
The ALRC has also been specifically asked to consider the effectiveness of criminal procedure laws as they apply to corporations. This is particularly relevant in the context of committal proceedings which are currently conducted in the local or magistrate's court.
Despite recent reforms in certain States (for example, the abolishment of the committal "hearing" in NSW to determine if there is sufficient evidence to warrant a trial), the appropriateness of local or magistrate's courts as a forum for large-scale, documentary-heavy white collar proceedings is questionable, particularly given the existing demands on those courts and their limited resources.
Three Key Takeaways
- The ALRC's discussion paper is due on 15 November 2019 and will provide the first real insight into the ALRC's view on the efficacy of the existing corporate criminal responsibility regime and how comprehensive any subsequent reform may be.
- Notable areas of reform could include amendments to Part 2.5 of the Code pursuant to which criminal liability is attributed to corporations through the acts or omissions of its officers, employees or agents and additional criminal offences for directors and senior office holders.
- The ALRC's final report is due in April 2020, prior to which stakeholders will be provided with an opportunity to contribute to the review by providing written submissions on the ALRC's discussion paper.
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