Should it be possible to convict corporations of crime? Assuming that is should, what is the best way?

In most developed western jurisdictions there has been a proliferation in the academic discussion of criminal liability for corporations. The well publicised disasters that are cited by nearly every author on this subject seem to be the unanimously agreed impetus for this increase in popularity of this subject and there is no need to further consider why corporate criminality is such a large issue, however it is worthwhile stating at the outset that the existence of impetus does not preclude any evaluation of the merits of attaching criminal liability to corporate acts.

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The problems of corporate criminal liability are far from new and the fallacy of anthropomorphic laws applied to corporate entities have transcended the ages and been immortalised by the words of the Lord Chancellor Baron Thurlow in the eighteenth century that described corporations as lacking a ‘soul to be damned’ or a ‘body to be kicked’ . As the proceeding discussion will show the lack of unifying ‘soul’ or corporeal ‘body’ by which to establish criminality and punish it has been the main ideological problems which corporations present to the criminal law. These are argued to be direct developments of the law in the early sixteenth century and show as we shall see a distinct lack of a sophisticated theory of legal personality. However, before we go onto consider these questions we have to take a moment and consider whether we ought to criminalise corporate behaviour at all.

The aims of any criminal law system are far from settled or clear and we have not the space to do adequate justice to the diversity of penal theory but we must have some sort of standard by which to judge which behaviour ought to be criminalised. The overarching concern of a penal system is arguably ‘to forbid and prevent conduct that unjustifiably and inexcusably inflicts or threatens substantial harm to individual or public interests’ . The criminal law is thus aimed at protecting society; whilst we have undoubtedly seen the potential for industrial disasters to occur it is not necessarily rational to assume that a corporation can assume moral blame like an individual because as Thurlow intimated they have neither an identifiable ‘soul’ or ‘body’.

It may seem self-evident to turn towards corporations as the responsible parties, it always easier to blame faceless, nameless entities such as corporations however a corporation lacks a mind of its own to make independent decisions, it is made up of so many individuals that it may require nearly no culpability on the part of these individuals which taken in aggregate can cause serious harm to the public and individuals which ought to be stigmatised and prevented by the criminal law. This potential for harm / lack of self determination dichotomy is what underlies a lot of the writing in this area and there is no self-evident reason for coming down on the side of criminality.

Many American scholars of the have argued that there is no need for a distinct treatment of corporate crime and in certain circumstances it is arguably positively detrimental to the public good. There are various perspectives on corporate sanctions which in the light of their failure are arguably justificatory for abandoning corporate criminality. The fundamental argument is that following the Berle-Means thesis that the modern public corporation has undergone a divergence between ownership and control. It suggests that people in corporations will often act to maximise their own ends rather than corporate ends logically therefore attachment of criminality to corporations will fail to meet the ends of criminal law because such people might perceive illegal conduct as serving their own interests even though they may be detrimental to the corporation . The main locus of this sort of divergence will be at the middle management level where the pressures of targets set by senior management will lead to this hypothetical middle-level manager having to weigh up some remote criminal conviction of the corporation that may never be discovered versus the more immediate threat of demotion or dismissal for failure to meet targets. The latter is more personal and it is arguably going to exert far more pressure on a decision-maker. However, it is logically arguable that the mere fact that the law isn’t an effective deterrent belies the argument that the existence of the crime could be enough to create the socio-economic climate that stigmatised such behaviour and forced corporations to address this problem internally. This is not a full solution to the problem because opposing academics draws on further arguments that positively deny that the attachment of criminal liability will serve the ends of criminal justice because of the incorporeal nature of corporations. This is called the ‘Externality Problem’ which argues that because a corporation cannot be put in prison the only alternative punitive scheme is a system of fines, the problems concerned with fines are well publicised within the literature. Whilst many writers have suggested that merely altering the fines system and being more inventive with the sanctions is a remedy for this problem it fails to appreciate what happens after the sanction is applied; a corporate body as an economic entity will attempt to externalise its operating costs of which criminal law compliance can be classified. We then begin to see a paradox appear where a sanction forms such a small part of the profits then it will fail to deter criminal behaviour on the part of the corporation however if the fine reaches the upper limit and threatens the actual solvency of the business then the first action will be loss of low-level jobs via redundancy, thus the people who will feel the punishment are the lower level employees who by dint of the individualistic approach of the courts to corporate mens rea will rarely have been involved in the commission of or proceeds from the crime. If the fine isn’t quite large enough to threaten solvency but is sizeable then the likelihood is that the punishment will be felt by the consumer through elevated prices of products and thus a law to protect consumers and the wider public is not causing any real harm to the corporations and the punishment is being externalised onto people who are morally innocent or blameless.

The inherent problems with the attachment of liability to a body corporate and the ‘classical dilemma’ between individual and organisational liability have lead certain scholars to reject the latter in favour of the former to all exclusion. Therefore criminal acts can only be applied to individuals. This has been the position of many European Civil Law systems until recently and still has academic support that argues we should focus on the decision-maker, this would circumvent the problems about deterrence as it would make the crime more immediate and the risk assessment for the middle-level managers would be more inclined to gravitate towards legal compliance. However, Coffee Jr. rejects the individual as a target for a number of reasons but mainly that the probability of detection adds an extra dimension to the picture presented above, the relatively low probability of detection of illegal behaviour and the almost 100% probability of detection of internal failure will still sway the middle-level managers towards committing crimes. Whilst the narrowing of crimes to individuals may promote in some circumstances ‘better ethical behaviour by individual human corporate actors’ it is not in itself sufficient to prevent harm to the public and individuals through corporate disasters. It also belies the reality of corporate decision-making; take for example the Clapham Rail crash which might have been diverted if British Rail had paid attention whether its safety policy was being followed, if the technician had been competently trained and if the supervisor had fulfilled his role . In a situation such as this which Individual do we attach blame, perhaps the use of anthropomorphic criminal law would deem that the acts separately fell below the threshold of criminal negligence as required by the crime of manslaughter, society is therefore robbed of any protection for crimes that come about through an aggregate of minor transgressions.

The solution has therefore been advocated by many writers is the dual system of individual and corporate responsibility, without a composite of both societies will not be adequately protected. Wilson & Braithwaite argue that what is required is a ‘legal order based less on neatly defined categories of guilt, and more on the dialectics of group and individual responsibility’ . We therefore find ourselves in a position where the acceptance of some form of corporate responsibility is necessary if we want to protect societies from the potentially disastrous consequences of corporate failure or crime. The next debate which is intermingled with the concerns identified above is the form such corporate liability ought to take.

The problem the law faces is succinctly stated by Smith & Sheldon to be:
‘How can a company, which is a metaphysical entity, form a criminal intention and perpetrate the offence?’
In attempting to answer this question I will critique the current approach of the courts to corporate liability and then move onto discuss how the dialectic perhaps ought to be changed to be given a more realistic approach that provides greater protection to society from the dangers of corporations?

Mays estimates there is about 7,000 statutory crimes that a corporation could commit never mind common law crimes such as manslaughter. These crimes tend to be classified into three sub-divisions; Strict Liability, Statutory Liability via vicarious liability or the controlling mind doctrine and Common Law liability building on the same individualistic tendencies as with Statutory Liability. As we will see all of them build on an atomistic and individualistic conception of corporate liability that tries to locate the fault at the door of certain individuals. The following discussion will centre on the various conceptions of the actus reus and the mens rea that a corporation can commit.

One conception, predominantly used in strict liability cases, is vicarious liability which is borrowed from tort law to fit certain criminal law cases. Generally vicarious liability will be limited to crimes of strict or absolute liability which don’t have to deal with the problems of mens rea . The judiciary haven’t been expansive with this concept as they have been in America and have tended to use it tentatively. In the case of Tesco Stores Ltd v. Brent London Borough Council the court rejected the use of the controlling mind doctrine and imputed simple vicarious liability for the situation where a 18-rated video was sold to an under age child. They did this with clear reference to parliamentary intention. In a similar cases vicarious liability was imputed in Mackay Brothers & Company v. Gibb and National Rivers Authority v. Alfred McAlpine Homes East Ltd however in the case of Seaboard Offshore Ltd v. Secretary of State for Transport the court strictly stated that as long as the corporation had acted reasonably by satisfying their obligations under the Merchant Shipping Act 1998 that they could not be held liable for the acts or omissions of its employees. The message certainly seems confused and writers seem to diverge on the rationale by which the courts choose to invoke vicarious liability some argue that the courts pick and choose their moments according to when they feel criminal responsibility should be imputed and others argue that the rationale based on the cases of Tesco Stores and Mackay Brothers is that it will be used where the controlling mind test would produce absurd results that would defeat a statutes purpose . The latter seems to have been ratified by an obiter comment by Lord Hoffman in Meridian Global Funds Management Asia Ltd v. Securities Commission :

"... there will be many cases ... in which the court concludes that the law was intended to apply to companies and that, although it excludes ordinary vicarious liability, insistence on the primary rules of attribution would in practice defeat that intention. In such a case the court must fashion a special rule of attribution for the particular substantive rule”

In the recent case of Re Attorney General's Reference (No.2 of 1999) the court said that choice of tests would ultimately depend on the ingredients of the offence which seems a highly vacuous concept which doesn’t advance the argument any further.

Whilst vicarious liability may be a useful concept in certain situations it is not always useful. There are many drawbacks to its use such as the penalisation of companies that have taken all possible steps to minimalise accidents and furthermore the difficulties of proof. It is vary rare where corporate disasters such as happened in Seaboard will be the result of one individual acting alone, it is generally an aggregate approach and vicarious liability is an inefficient tool for imputing liability as we need an individual to blame. The court also uses a separate doctrine called the ‘controlling mind’ doctrine whilst as I have argued in relation to vicarious liability that the UK courts approach to these issues has been far from coherent the idea of ‘controlling mind’ which can be used to establish both actus reus or mens rea. It is consequently all the more complicated.

The seminal case in this area is Tesco Supermarkets ltd v. Nattras which established that in looking for a causal connection between the person(s) causing the harm and the corporation then this liability would be limited to those officers of the corporation that embody the controlling mind or will of the company. As long as they have discharged their duty with due diligence then they will be exonerated. There is no exhaustive definition of the categories that might be caught within this approach but it will tend only to be the very uppermost officers such as directors or presidents that satisfy the test laid down by Viscount Dilhorne in Nattras which requires that it be someone who is ‘in actual control of the operations of a company or part of them and who is not responsible to another person in the company for the manner in which he discharges his duties’.

However this test has also been heavily criticised as flawed for a number of reasons. Primarily it locates corporate responsibility with the senior officers even when they are acting contrary to explicit corporate policy and therefore is arguably not representative of the corporation. It also is very limited in the number of people it applies to, as was argued earlier the modern corporation is compartmentalised and devolved into various sub-units. Generally the senior officers are removed from the middle order managers to a sufficient degree that they will insulate themselves from any knowledge of wrongdoing . This means that is works disproportionately harshly on smaller business and this can be seen in cases such as Lennard’s Carrying Co. ltd v. Asiatic Petroleum Co. ltd and R v. Kite where sole directors where held liable, especially in the later which was the first ever conviction for corporate manslaughter. Again this suffers, as do all the atomistic conceptions, with the fact that thus far the courts have tried to use the controlling mind doctrine to pin point one individual who is responsible for the direction of the company and this may not reflect reality where decisions are taken by a board of directors or a committee. It is well established in academia that this test whilst totally inappropriate rendering virtual immunity to big corporations especially in the case of corporate killing is still being dogmatically adhered to by the courts a situation which is highly unsatisfactory .

A third and almost non-existent approach in UK law is the aggregation approach as outlined by Grobert. This most definitely has not grabbed the legal psyche as shown by the approach in Attorney General’s Reference above that enumerated three potential possibilities: Personal liability, vicarious liability and the controlling mind doctrine . However it was briefly discussed and dismissed in the case of R v. HM Coroner for East Kent ex parte Spooner a case related to the P&O ferry capsizing outside Zeebrugge, Bingham J. refused to apply any sort of aggregative approach which looks at the actus reus and mens rea of many actors within a corporation that where responsible for the harm and combines them in order to prove a crime. It is fundamentally American in origin and is used in a variety of contexts in that jurisdiction. It certainly ahs the attraction of realism but the UK courts appear to have rejected its approach in its sole concern with an individualist crime. This has the added advantage of widening the scope of people to whom the corporation’s behaviour can be attributed to and would allow us to deal with the middle-level manager problems. However, as has been argued by Gobert this solution isn’t a satisfactory alternative because it still relies on attributing the actions of individuals to the corporation by whatever method. This represents the atomistic approach that seems to typify all solutions in this area including the Law Commission proposals for a separate crime of Corporate Killing which still concentrates on ‘management failure’ . This approach also seems to have been definitively rejected north of the border in the recent case of Transco Plc v HM Advocate

However, the foregoing account is highly influenced by the respective judicial decisions within that area and unfortunately the judiciary seem to have taken no notice of the wealth of literature on a more progressive approach. Most commentators seem to advocate a move away from the atomistic individualistic conceptions of corporate criminality towards a much more holistic metaphysical understanding and to gain a better conception of organisational responsibility. It is argued by such writers that ‘corporate liability requires a corporate basis’ more specifically this refers to an assessment of a companies working practices including policies, procedures, systems, workloads, informal rules &c… in other words a more sophisticated way of developing a character or a ‘soul’ of the corporation. This would mean developing our law along the same lines as perhaps the Dutch law especially following the Kabeljauw case where the court was concerned with looking at the institutionalised practices of a corporation in determining guilt. They have also developed a power and acceptance discourse that allows for those dynamics within a corporation to be analysed so as to establish whether a corporation itself has been negative. The attribution of intention or negligence is also argued to be able to be achieved by use of a sort of parliamentary approach whereby presumably the majority of people who hold a view make that the view of the corporation. If the predominant view was negligent then the corporation was negligent. Whilst such corporations are in their infancy they are infinitely better equipped to deal with the problems of applying essentially anthropomorphic criminal laws to legal entities such as corporations.

 

Books

McCall Smith, R & Scots Criminal Law 1997 / 2nd ed. /
Sheldon, D Butterworths

Smith, JC Smith & Hogan Criminal Law 2002 / 10th ed.
Lexis Nexis UK

Articles

Case Comment Manslaughter: Corporate Liability 2000 Crim LR 475
For Manslaughter

Clark, Bryan &
Langsford, Hannah A Re-Birth of Corporate Killing? 2005 ICCLR 28
Lessons from America in a new law
For Scotland

Coffee Jr, John ‘No soul to damn: no body to kick’: 1981 Mich LR 386
An unscandalised inquiry into the
Problem of Corporate Punishment

Field, S & Jorg, N Corporate Liability & Manslaughter 1991 Crim LR 156
Should we be going Dutch

Gobert, James Corporate Criminality: four models [1994] Legal Studies
Of fault 393

Mays, Richard The Criminal Liability of 2000 4 ELR 46
Corporations and Scots Law:
Learning the Lessons of Anglo-
American Jurisprudence

Ross, Jennifer Corporate Criminal Liability: One 1999 Jur Rev 49
Form or many forms?

Wells, Celia (2) The Corporate Manslaughter 1996 Crim LR 545
Proposals: Pragmatism, Paradox &
Peninsularity

Wells, Celia Corporate Liability for Crime: The 1995 IBFL 42
Neglected question

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