Lawyers have told a House of Lords committee there is a ‘sense of unfairness’ in anti-bribery procedures that result in big corporate entities appearing less likely to face criminal prosecution than small and medium-sized enterprises.
Giving evidence to the House of Lords’ Bribery Act 2010 committee yesterday, lawyers from criminal defence firm Kingsley Napley and City outfit Reed Smith answered questions on corporate criminal liability and identifying the so-called ‘controlling mind’.
The committee discussed the case R v Skansen Interiors in which interior design company Skansen was convicted of bribery offences despite having self-reported and fired the wrongdoers.
Eoin O’Shea, partner at Reed Smith, said the case represented an example of an individual and company that attempted to do the right thing but found itself subject to criminal proceedings.
Referring to the case, Conservative peer Lord Hodgson of Astley Abbotts said most convictions appeared to involve ‘small’ companies and that the ‘big boys are able to play to a completely different set of rules.’
‘It’s potentially very unsatisfactory that every now then a small person will be hung in front of everyone while the big boys pay a bit of money and off they go,’ Lord Hodgson said.
Rodney Warren, partner at London firm Warren’s Law and Advocacy, said there is a ‘sense of unfairness’ within smaller organisations because it is easier to point to the ‘controlling mind’ to identify wrong-doing.
Under the 2010 act, corporate liability occurs when the offence is committed by a natural person who is the ‘directing or controlling mind or will of the organisation’ – known as the identification principle.
Warren said: ‘Larger companies tend to have more tiers of management and responsibility. The sense I get is that smaller companies do feel more vulnerable because they can see that bigger organisations have different processes that are not open to them.’
O’Shea said that there might be 30 people who are potential ‘decision makers’ in a large company, making it more difficult to identify who is ultimately responsible. O’Shea, who is also chair of the corporate crime and corruption committee at the City of London Law Society, said the identification principle is a ‘hugely difficult’ topic about which views differ.
‘There’s a narrative that big companies are aware of the principle and organise their affairs to insulate senior managers from decision making and therefore insulate the company from criminal liability. In my experience that seems wrong, well run business do not spend much time thinking about very obscure points of law and organising their affairs accordingly,’ he said.
Louise Hodges, partner at Kingsley Napley, said companies who had been through the Deferred Prosecution Agreement route, mainly larger companies, would not ‘treat it as though they were being let off.’
O’Shea added the US model of a ‘declination’, currently being piloted by the Department of Justice (DoJ) may be worth considering in England and Wales.
Under that system, if a company self-reports in sufficient time, a prosecution will not be pursued. A company would instead disgorge its profits made from the illegal activity. ‘The idea is that authorities only know about the situation because a company has blown the whistle on itself,’ O’Shea said.
The House of Lords committee was established earlier this year in order to consider and report on the effectiveness of the 2010 act.