Criminal Liability
Corporate and individual criminal responsibility
Introduction
The usual approach to the criminal law and the establishment of criminal liability often is achieved by looking at natural persons and their criminal ability in respect of actus reus and mens rea. However, it has been suggested that this model of analysis does not fit the nature of the corporation very well. This view is based on the assumption that corporations do not act intentionally or recklessly and is connected with the conceptual difficulties caused by the phenomenon of corporate harms. Part of the reason they are not perceived as crimes is that However, this formalistic position gradually shifted and in 1944, three landmark cases imposed direct liability on corporations, ie liability was imposed because the company was deemed to have acted as opposed to employees having acted on it behalf. These cases are taken to have surmounted the mens rea hurdle since they established that the mens rea of certain employees of the company could be considered as that of the company itself. In reaching these decisions, the courts were inspired by the alter ego doctrine of the law of torts by which acts of the most senior officers of the corporation were identified as being acts of the corporation itself.
However, despite these significant legal developments, it remained rather unclear which natural persons could make the corporation criminally liable. This was said to depend on 'the nature of the charge, the position of the officer or agent and other relevant facts and circumstances of the case' which may hardly be considered as definitive direction. Almost thirty years after the 1944 decisions, clarification was provided by the landmark case of Tesco Supermarkets v Nattrass. In that case, Tesco had been charged with an offence under the Trade Descriptions Act 1968. It was clear from the facts that the local manager was responsible for the alleged facts and that Tesco had done everything possible to train its local managers. The House of lOrds held that the local manger could not be equated with the corporation with the result that Tesco avoided any criminal liability. Reference was made to the dictum of lOrd Denning in a civil case in which he compared a corporation to the human body; noting that whilst some individuals working in a corporation represented the brains of the corporation, others represented the hands. It was their Lordships opinion that only the brains represent the company.
Whether an officer can be said to represent the corporation depends on the controlling officer test: does the person control the corporation as the brains control the human body? According to Lord Reid, this is a question of law, once the facts have been proved. The category of controlling officers usually encompasses the members of the board of directors, the managing director, and some other persons responsible for the general management of the corporation. If these persons delegate parts of their management functions to someone else in the corporation, that person will be a controlling officer as well, provided that he was acting independently of any instructions. The determining factor in the controlling officer test, therefore, seems to be whether the senior officer could act independently or not.
However, whereas Nattrass served to provide more clarity as to when the acts of natural persons would be attributed to the corporation to constitute the corporation's own actus reus, the case still does not provide sufficient guidance in situations where the corporation structures itself in such a way that no decisions are taken by controlling officers. In this regard, then, it is submitted that the law has not corresponded very well with prevailing economic realities wherein corporations are highly complex structures with collective decision making processes and in which many persons other than the most senior officers are involved.
The validity of this criticism became acutely clear after the capsizing off Zeebrugge of the Herald of Free Enterprise. In the aftermath, the coroner's jury returned verdicts of unlawful death. Yet, despite such a finding, no criminal charges were preferred against either individuals or the company. Consequently, during the inquest into the drownings an application was made to the Divisional Court to consider whether the coroner was right to rule out the possibility of a verdict of unlawful death caused by the company. The coroner's decision was subsequently upheld on the ground that as there was no obligation to allocate responsibilities within the company, it was impossible for the prosecution to prove which controlling officer was responsible for carrying out certain duties or preventing certain acts.
In addition to the weakness established above, the principles advanced by English law in establishing corporate criminal liability make it impossible to aggregate the actus reus or the mens rea of two or more controlling officers in order to establish corporate liability. Bingham LJ in the first reported case in the UK where the doctrine of aggregation was advanced rejected the aggregation argument in a sentence or two without analysing its demerits. There was to be one actor and one actor only who had the requisite knowledge before a company could be held criminally responsible.
However, this stance is unsatisfactory and does not address the intricacies of the corporate form as it operates in present day circumstances. It is not right that a company which has caused death or injury because its gross negligence spread throughout the organisation should escape liability merely because no one single senior employee was guilty in his or her own right.
Thus, it is clear that although the rules for establishing corporate liability for criminal violations have evolved over the past two centuries, English criminal law generally is yet to come to grips with making corporations accountable for criminal wrongs. Attribution of actions to the corporation are not easy and corporations may escape liability on technicalities that have been built into the law. This state of affairs leads prosecutors to focus on the easier way out; that is focus on individual culpability for crimes committed on behalf of the company.
Another factor which encourages this sort of focus is the problem of sanctions which may be levied against the corporation. In the next section, I consider this concern.
The problem of sanctions
English law has been conservative in the provision of penalties for companies' breaches of criminal law. This position is directly linked to the fact that the law of sanctions had consequences for substantive law. The original penalty for committing a felony was death. Since corporations, having no corporeal existence, could not be hanged, castrated, transported or sent to prison, there was no penalty available. Since the above penalties could not be levied against corporations, it was thought that corporations could not be found guilty of felonies such as murder or rape. When the penalty for many felonies became imprisonment, companies could not be imprisoned. Therefore, in relation to crimes for which the sanction was death or imprisonment, substantive law was that a company could not be liable for such offences.
The fact that companies lacked corporeal existence was not, however, a difficulty in respect of misdemeanours. The penalty was a fine, and a fine could be extracted from companies. In time most felonies also became punishable by fine. Felonies were assimilated to misdemeanours by virtue of the Criminal Law Act 1967, s. 1, and this conceptual issue evaporated but assimilation brought about by the 1967 statute affected no change in the substantive law of corporate criminal liability or in the law of sanctions.
Consequently, fines remain the sole penalty available in English law for most corporate violations of criminal law. However, the imposition of fines raises several questions, which it is submitted, may not be adequately answered within the prevailing framework of sanctions for corporate crimes. For example, do fines rehabilitate companies? Are fines sufficiently powerful to be effective in exacting retribution from the company, in giving it its just desserts? Even in respect of deterrence, whether specific or general, are fines effective in introducing the stigma attaching to conviction as is the case with natural persons? In this regard, it is not known whether the same amount of stigma arises in respect of a company's conviction as an individual's or whether there can exist stigma without publicity.
Endorsing the scheme of fines, the Law Commission in Criminal Law: Involuntary Manslaughter opined that 'no respectable company...would leave in place systems or the people responsible for the operation of the systems which had been condemned by a jury.' It is, however, by no means certain that such optimism is justified. Some employers may not do what the Law Commission expected of them. Moreover, there is no mechanism envisaged to ensure that they do comply. In this regard, Gobert has argued that the Law Commission did not attempt to justify its 'optimism' and stated: '...empirical evidence would seem to contradict [this] assertion. In many instances corporate officials who have been convicted of crime have suffered no loss of salary or position and some have even been promoted subsequently.'
Thus, the establishment of corporate criminal liability may be defeated by the nature of sanction that is levied. The unsatisfactory nature of fines becomes most apparent when the penalty is demonstrated as having no effect on the company. In this regard, it has been noted that '[a] fine on the corporation alone can be absorbed merely as a cost of doing business...' An excellent illustration was provided by Slapper who notes that in 1987 BP Ltd was fined 750,000 by a Scottish court. This sum looks, to say the least, substantial, and it would be for many small and medium enterprises and for most individuals, but in relation to the company the amount was generous. It constituted 0.05% of after-tax profits, and was the equivalent of a fine of 7.50 on an individual earning 15,000 per annum. Even in major reported House of Lords cases the fine has been small. For example, in Tesco Supermarkets Ltd v Nattrass it was 25; in Alphacell Ltd v Woodward it was 24.
Consequently, the pursuit of corporate liability for criminal acts becomes less attractive for the prosecuting authorities. It is so difficult to establish corporate criminal liability yet the sanctions that follow successful prosecution are often derisory. It, therefore, still leaves the establishment of individual criminal liability as the more attractive option.
Conclusion
It is important that those who engage in criminal acts should be prosecuted and be duly sanctioned if they are found guilty. This principle must be enforced regardless of whether the person concerned is a natural person or a corporation. The framework of the law as it stands at the moment does not favour the imposition of criminal liability against corporations and consequently focuses prosecutorial activities on individual wrongdoing. The concepts of mens rea and actus reus ought not put the criminal justice system within a straightjacket since they themselves are nothing more than conceptual tools. Efforts must, therefore, be made to develop a framework for corporate criminal liability that more realistically reflects corporate organisational behaviour. Similarly, the system of sanctions also needs to wake up to corporate reality and make available forms of sanctions that more correctly address corporate criminal fault than is currently the case.
Bibliography
Cases
Alphacell Ltd v Woodward[1972] AC 824
Bolton Engineering Co Ltd v Graham Ltd [1956] 1 QB 159
DPP v Kentand Sussex Contractors Ltd [1944] 1 AllER 119
Lennard's Carrying Company Ltd v Asiatic Petroleum Company Ltd [1915] 2 KB 551
Moore v Bresler [1944] 2 AllER 515
R v British Steel plc [1995] 1 WLR 1356
R v HM Coroner for East Kent [1989] Cr App R 16
R v ICR Haulage Ltd [1944] KB 551
R v ICR Haulage Ltd [1944] KB 559
R. v. H.M. Coroner for East Kent, ex parte Spooner and others, 152 J.P. 115
Tesco Supermarkets v Nattrass[1972] AC 153
Books and articles
Ashworth, A Principles of criminal law (2003)
Bergman, D (1990) 'Recklessness in the boardroom' 140 NLJ 1496
Bergman, D (1991) 'Whither corporation manslaughter' 141 NLJ 1381
Burles, D 'The criminal liability of corporations' (1991) 141 NLJ 609
Field, S & Jorg, N (1991) 'Corporate liability and manslaughter: Should we be going dutch?' Crim LR 159-160
Gobert, J (1998) 'What impediments are there to the criminalisation of corporate conduct' Web Journal of Current Legal Issues available at < http://www.scottishlaw.org.uk/journal/oct2000/anonccgess.pdf>
Kelly (1991) Oil and Gas Law and Taxation Review 177
Law Commission Criminal Law: Involuntary ManslaughterConsultation Paper No. 135 (1994)
Slapper, G (1993) 'Corporate Manslaughter: an examination of the determinants of prosecutorial policy'2 Social & Legal Studies 423
Smith, JC and Hogan, B Criminal law (1992)
Wells (1993) 'Corporations: Culture, risk and criminal liability' Criminal Law Review 562
Wells, C (1988) 'The decline and rise of English murder: Corporate crime and individual responsibility' Crim LR 788
Wells, C 'Manslaughter and corporate crime' (1989) 139 NLJ 931
Welsh, R 'The criminal liability of corporations' (1946) 62 LQR 345
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