2015 may see an extension of the corporate offence under the Bribery Act to make companies liable for “failing to prevent” any economic crime.
- In 2015 we are likely to see the introduction and/or prosecution of a range of new offences, including energy market manipulation and insider dealing offences and a strict liability cartel offence, the first prosecution of which may well be in 2015
- However, the most significant potential change to corporate criminal law expected in the UK this year is the proposed new offence of corporate failure to prevent economic crime.
- The Ministry of Justice stated in its Anti-Corruption Plan that it will examine the case for this possible new offence, at the same time as it reconsiders the general rules on establishing corporate criminal liability.
An “extension” of the Bribery Act
- The proposal has its origins in section 7 of the Bribery Act, which created an offence for a commercial organisation of failing to prevent bribery by agents, employees and subsidiaries acting on its behalf, unless it can prove that it had “adequate procedures” in place at the time the offence was committed.
- This is an exception to the general rules of corporate criminal liability, which provide that (save in the case of strict liability offences) a company can be found criminally liable only for the actions of those individuals who represent its “directing mind and will”, typically its senior management.
- The idea that this offence might be extended to other types of corporate offending was first aired in summer 2013 by David Green, Director of the SFO, and he has since spoken regularly about it to the press.
- The suggestion that the section 7 offence could be extended to other forms of corporate offending has steadily gained support from across the political spectrum. Supporters of the proposal included the Attorney General and shadow Attorney General in the last Parliament. The proposal was also a manifesto pledge for the Conservative Party. The following statement can be found at page 11 of their 2015 manifesto:
- “We are also making it a crime if companies fair to put in place measures to stop economic crime, such as tax evasion, in their organisations and making sure that the penalties are large enough to punish and deter.”
Which crimes?
- It is unclear precisely which “economic crime” offences may fall within the scope of this proposed new offence.
- In previous statements Mr Green has indicated that such offences could include acts of dishonesty and fraud.
- The Crime and Courts Act 2013, which sets out the framework for Deferred Prosecution Agreements (DPAs), lists the offences in relation to which a company may enter into a DPA.
- This list could conceivably form the basis for a list of “economic crimes” for the purposes of the new offence, though it may well be narrower.
- Offences eligible for DPAs include
- conspiracy to defraud;
- theft;
- fraud;
- bribery;
- customs and excise and forgery offences;
- Companies Act offences,
- cheating the public revenue;
- tax evasion;
- certain offences under the Financial Services and Markets Act 2000; and
- money laundering offences under the Proceeds of Crime Act 2002.
- It also remains to be seen precisely how the new offence could be introduced.
- The suggestion that a “small amendment” to the Bribery Act will suffice to make such a significant change is unrealistic. If introduced, the offence could result in companies being convicted for a wide range of offences committed by any of their employees and agents.
- This is a significant change to the existing legal framework, which must be properly considered and consulted on by the government.
- That the proposal is to be considered in tandem with a review of the existing rules on corporate criminal liability is encouraging.
- A full scale review of the rules on corporate criminal liability has been awaited since 2010, when the Law Commission indicated that it wished to conduct such a project. However, this has yet to come to fruition. In its absence, the law in this area has been developed by the creation of exceptions to the general principles which are applicable to specific offences, such as corporate manslaughter and bribery. However, to introduce the proposed failure to prevent economic crime offence by way of an amendment to the Bribery Act would stretch this reform by exception approach too far, and risks creating a fragmented and inconsistent approach to corporate criminal liability.
- Adding further uncertainty, the meaning of “adequate procedures” in the context of the Bribery Act is still largely untested, and will remain so until the courts hear the much awaited pipeline of corporate bribery cases.
- The process of producing government guidance on the Section 7 offence was drawn out and difficult; the introduction of such guidance in relation to a wide range of offences would be simply unworkable.
- What is clear, however, is that the section 7 Bribery Act offence has led many companies to consider their existing anti-corruption policies.
- Should the failure to prevent economic crime offence become law, companies may be required once again to consider whether their internal policies are sufficient; this time to defend them against prosecution for a much wider range of offences.
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