Lawyer Monthly Magazine - September 2021 Edition

48 WWW.LAWYER-MONTHLY.COM | SEP 2021 CORPORATE CRIME AND THE REGULATORY APPROACH Corporate criminal liability has been transformed beyond all recognition in the past 15 years. Not only have fines increased significantly, but the expectations placed on corporates have also changed fundamentally. Companies are now expected to behave responsibly. That does not only mean doing no wrong; it means preventing others from doing wrong as well. And if they do not, they risk not merely reputational harm but criminal prosecution and highly punitive fines. Background A key change has been the growth and development of the “regulatory” approach. Traditionally, the most serious offences have been “mens rea” offences. These offences require proof of the relevant mental element (e.g. knowledge or intention) as well as the relevant act. Regulatory offences, previously seen as less serious, are to the effect that if the proscribed thing happens, or the required thing does not, an offence is committed, and it does not matter whether an organisation meant it or even knew about it. Sometimes, regulatory offences have a due diligence provision – so that it would not be an offence if the person in question did all they reasonably could, but the proscribed thing still happened despite their efforts. However, it is the nature of regulatory offences to be easy to commit and difficult to defend. Identification doctrine It is hard for companies to commit mens rea offences because it typically requires a directing mind (usually a director) to commit the offence which is then attributed to the company. Often, directing minds are not involved with the relevant conduct – or at least not provably so. Legal scholars used to query the justification for fining corporations, effectively the shareholders, for conduct they might not have approved or been aware of, i.e. of which they were innocent. It was also doubted that the shareholders would be moved (or be in a position) to take steps to address the offending. In any event, it was thought to be curious reasoning that an innocent person should be punished in order to compel them to do something which the law could do directly. In more recent years the concern became that identification doctrine was shielding companies from criminal liability. The Corporate Crime and the Regulatory Approach Tom McNeill Senior Associate, BCL Solicitors LLP 51 Lincoln's Inn Fields, London WC2A 3LZ Tel: +44 020 7430 2277 www.bcl.com Corporate criminal liability has been transformed beyond all recognition, with companies now having to behave ‘responsibly’ or face not merely reputational damage but criminal prosecution and highly punitive fines. Tom McNeill, senior associate at BCL Solicitors, analyses the current position and identifies the corporate risks.