Expansion of Corporate Criminal Liability

One to watch - 2024 may see changes introduced to health and safety legislation that make it easier to punish companies for criminal offences. Companies should therefore be alive to, and stay abreast of, any legislative updates/changes.

The identification doctrine 

The identification doctrine is the relevant test for attributing criminal culpability to a corporation. It allows for companies to be convicted of an offence where the individual who committed it could be regarded as its ‘directing mind and will’ [1]. This has been narrowly interpreted to include members of the Board, those with ‘full discretion to act independently of instructions from them’ [2], and those who are not responsible to the Board or others for the manner in which they discharge their duties [3].

On 15th June 2023, the government announced plans to ‘modernise the identification doctrine’ by introducing its biggest reform in more than 50 years [4].

This doctrine extends to corporate manslaughter where the company is culpable if the way in which its activities are managed or organised by senior management is a substantial element in a gross breach of a relevant duty of cared owed by the organisation to the deceased [5].

The Economic Crime and Corporate Transparency Act 2023

The government planned to broaden this doctrine through introduction of the Economic Crime and Corporate Transparency Act 2023 [6] (“ECCTA”), which received Royal Assent on 26th October 2023. It was enacted with the aim of preventing the abuse of UK corporate structures and to strengthen the response to economic crime [7].

ECCTA brought senior managers within the scope of those who can be considered the ‘directing mind and will’ of a business [8]. Relevant offences include various types of fraud and economic crime, as prescribed by s.196(2). 

“Senior manager” is defined as an individual who plays a significant role in:

a)    the decision making about how the whole/substantial part of the activities of the body corporate are to be managed or organised; or 

b)    the actual managing or organising of the whole or a substantial part of its activities [9].

This reform was made to place small business owners and corporate giants on a level playing field. Large corporations could no longer argue that their senior executives (holding a huge amount of influence) did not meet the high bar of ‘directing mind or will’.

However, this reform applies to economic crime only. 

The Criminal Justice Bill

The Criminal Justice Bill [10] (“the Bill”) will extend corporate criminal liability beyond economic offences to all types of crime and will introduce a new test for corporate criminal liability. 

The Bill is presently at the Committee Stage [11], following its Second Reading on 28th November 2023 [12].

Section 14(1) of the Bill proposes to function similarly to that of s.196(1) ECCTA in that where a senior manager of a body corporate acting within the actual or apparent scope of their authority commits an offence, the organisation also commits the offence. The definition of ‘senior manager’ will remain the same. 

The Explanatory Notes confirm that ‘actual or apparent scope of their authority’ does not mean that the senior manager must have been authorised to carry out the offence. It would be sufficient to show that the act was of a type that they were authorised to undertake or would ordinarily be undertaken by a person in that position [13].

Clause 14(7) of the Bill proposed to repeal s.196 ECCTA, removing the limitation of the similar provision to economic offences [14].

Conclusion

ECCTA has undoubtedly broadened the scope of the identification doctrine in a manner which will make it easier to prosecute companies for the economic crimes of their senior employees. 

The introduction of the Criminal Justice Bill would remove the limitation of such culpability to just economic crimes alone. It is possible that this will include the offence of corporate manslaughter and so it is possible we will see more large corporations being prosecuted for offences committed by their senior management as the test is widened beyond an individual with a ‘directing mind or will’. 

Ultimately, it is not yet clear whether the Criminal Justice Bill will apply to offences under the Health and Safety at Work etc. Act 1974 and environmental offences.

We will have to wait and see how this unfolds with further readings of the Bill before it gains Royal Assent.   

[1] Tesco Supermarkets Ltd v Nattrass [1971] 2 W.L.R. 1166
[2] Tesco Supermarkets Ltd v Nattrass [1971] 2 W.L.R. 1166 - page 117, paragraph G
[3] SFO v Barclays PLC & Another [2018] EWHC 3005 (QB) 
[4] More action to fight fraud, bribery and other economic crime - GOV.UK (www.gov.uk)
[5] Corporate Manslaughter and Corporate Homicide Act 2007
[6] Economic Crime and Corporate Transparency Act 2023 (legislation.gov.uk)
[7] Economic Crime and Corporate Transparency (parliament.uk)
[8] S.196(1) ECCTA
[9] S.196(4) Economic Crime and Corporate Transparency Act 2023
[10] Criminal Justice Bill (parliament.uk)
[11] Criminal Justice Bill Stages - Parliamentary Bills - UK Parliament
[12] Criminal Justice Bill 2nd reading - Parliamentary Bills - UK Parliament
[13] Criminal Justice (parliament.uk)
[14] And ss. 197, 198, 217(5)(f) and Schedule 12 of ECCTA