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Toughen up the law on corporate crime

Toughen up the law on corporate crime
4 min read

Member of Parliament for Newcastle upon Tyne North and Shadow Attorney General, Catherine McKinnell, calls on the Government to strengthen the law on corporate liability in the wake of the phone hacking scandal 

The phone hacking scandal had a devastating effect on its victims, which is why many will understandably be feeling let down by Friday’sannouncement by the Crown Prosecution Service (CPS) that their involvement in current investigations have been brought to a close.

Phone hacking victims are reportedly set to seek a review of this decision, but there is no doubt that it still raises serious questions about this country’s law on holding companies criminally liable for wrongdoing, and whether they are fit for purpose.

In setting out the reasons for its decision, the CPS was pretty frank in its assessment of the law on corporate liability.

It said the law “in its present state” makes it “especially difficult” to establish the criminal liability of a company if it benefits from the criminal activity of its employees undertaken in the course of their employment.

Under UK law, to hold a company criminally liable, prosecutors must identify an individual sufficiently senior – usually at board level – as the ‘controlling mind’ of that company. In an increasingly globalised world where multinational organisations – and their complicated management structures – are the norm, this is extremely difficult, as the CPS itself noted.

There are other, arguably more effective, ways of holding companies criminally liable, which do not set the bar so high for prosecutors.

In the US, for example, a company can be held vicariously liable in criminal law for the actions of its employees in the course of their employment. That is why the US Department of Justice, according to one estimate, brought in over $4bn in plea deals alone in 2014 from companies accused of corporate wrongdoing.

But there is precedent in UK law, too.

Section 7 of the UK Bribery Act, introduced in 2010 by the previous Labour Government, holds companies criminally liable if they fail to prevent acts of bribery by their employees. That puts the onus on companies to take necessary steps to prevent it from happening.

And the Section 7 model of corporate liability is one this Government has actively considered applying to other crimes. In his inaugural speech in September 2014, the current Attorney General stated that officials were considering proposals for a new offence of corporate failure to prevent economic crime, modelled on Section 7 of the Bribery Act.

Indeed, the Tories pledged in their manifesto to make it a crime if “companies fail to put in place measures to stop economic crime.”

Yet, only through an answer to a Written Parliamentary Question did we discover in September that the Government had quietly dropped these plans.

The justification? Because there had been no prosecutions under Section 7, nor was there any evidence of such crimes “going unpunished”, apparently.

But two weeks ago, we saw the first prosecution, under a Deferred Prosecution Agreement of a company for failure to prevent bribery. The company, the British arm of South Africa’s Standard Bank, will pay a $25 million fine as a result.

And the first conviction of a company for failure to prevent bribery is reportedly expected very soon.

This demonstrates that it is possible to hold companies to account for the criminal acts of their employees undertaken in the course of their employment, provided prosecutors have the right tools for the job.

The recent clear and unequivocal statement from the CPS suggests prosecutors are not properly equipped to deal with corporate wrongdoing, and the burden is surely now on the Government to act accordingly.

I have therefore written to the Attorney General this week calling for a full and transparent review of the UK’s law on corporate liability and whether it is fit for purpose.

The time has come for Ministers to take on board the concerns that have been raised time and time again, including very recently by Labour MPs in Parliament.

There is no doubt that phone hacking did enormous damage, not only to the victims and their families, but to the general public too. It is clearly vital that those responsible are brought to justice.

The recent decision and accompanying statement from the CPS makes it clear that the law on corporate liability needs re-examining.

There should be no hiding place for criminality. It is now up to the Government to ensure that is the case.

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