Civil and Criminal Legislation for Legal Entities - Essay Example

To what extent do the provisions of the civil and criminal law ensure that corporate bodies are held responsible for their harmful acts and omissions? Introduction A company can be regarded as a legal person, competent of being prosecuted, and should be necessarily be treated differently from an individual owing to its artificial personality. Corporate crimes features unlawful acts, omissions, or commissions by corporate organizations themselves as either legal or social entities or by the administrators or employees of the corporations acting as per the operative objectives or standard operating procedures and cultural norms of the organization, tailored at benefiting the corporations themselves (Wells 2001, p.8). The paper explores how the law responds to injuries, deaths, or other wrongs or harms caused via corporate operations. In doing so, the paper evaluates the degree to which the provisions of the civil and criminal law in the UK guarantee that corporate bodies can be held responsible for their harmful acts and omissions. Discussion Assigning responsibility for harm comes out as an important problem in both morality and law. The assertion that one is responsible for harm means that the individual can be blamed, punished, or required to pay compensation. In moral contexts (but not in all legal ones), an individual is responsible for a harm provided that the harm has a causal consequence of something that the individual has or omitted to do (Ashworth 2009, p.5). Legal exceptions to this general rule encompass corporations held liable for the harms inflicted by the companies’ employees or board of directors. Thus, companies, just like individuals, can be held responsible not only for the harmful consequence of their actions, but also for the harmful outcomes of their omissions (Fisse and Braithwaite 1993, p.2). Assigning professional responsibility for harm in instances of negligence frequently hinges on what is reasonable to expect from the members of any given profession. The liability of a company derives from the principle that comprehensive imposition of the criminal law against corporate offenders, where appropriate, delivers a deterrent effect, safeguards the public, and entrenches and reinforces ethical business practices. The prosecution of a company should not be identified as a replacement for the prosecution of criminally liable individuals such as officers, directors, employees, or shareholders (Wells 2001, p.160). The prosecution of such individuals avails a powerful deterrent against future corporate wrongdoing. Similarly, the consideration of prosecution of individuals should also feature deliberation of probable liability of the company where the criminal conduct is motivated by corporate gain (Gruner 2005, p.4). Development of Criminal Liability In the past, it was implausible that a corporation could be held liable. The overriding argument advanced then, was that a corporation, as an artificial person, bears no physical existence and could thus not be subjected to the stipulated penalties attached to the offences. Presently, under the common law, corporations can now be held criminally liable to corporate crimes, excluding a host of limitations such as assault, manslaughter, rape, and murder (Wells 2001, p.65). The existing position that makes it possible to hold corporations criminally liable is contrasting to the past where corporations were previously held liable for acts of nonfeasance (later extended to misfeasance). In the last two decades, corporations have come under increased scrutiny with an ever increasing regulation and oversight, the risk derivative shareholder suits, and a more elaborated prospect of personal liability for corporate directors. This, in turn, has established an atmosphere of constant risk for corporations as corporations are now more than ever liable for their harmful acts and omissions (Guy1994, p.494). At the heart of the developments, however, is the arena that presents arguably the greatest risk to corporations as entities (criminal prosecution). In the UK, corporations as entities can be criminally tried and convicted for offenses perpetrated by individual directors, managers, or even subordinate employees. The risk of indictment to corporations for their harmful acts and omission is itself devastating; a criminal indictment propels a quick market response, the ouster of the leadership, heavy expenses in legal fees, and the probability of conviction. Such a conviction would yield criminal penalties imposed (mainly a heavy fine), as well as collateral consequences-overwhelming financial and reputational repercussions that can, in some instances, force business entities out of business (Pinto and Evans 2003, p.4). The core issue in the latter assertion rests on determining the method through which this can be attained such as through the aggregation doctrine, reactive corporate fault, vicarious liability, management failure model, creation of definite corporate offences, and corporate mens rea. Currently, in offences requiring proof of mens rea, companies can readily be made liable by ascribing the state of the mind (of the directors considered to be the alter ego and directing mind of the company). In other cases, corporations may be vicariously and criminally held liable for the acts of their employees. The English legal system embraces the position at common law to the effect that corporations can be criminally held liable, although not for all offences (Fisse and Braithwaite 1993, p.4). The employment of criminal sanctions against companies is widely established. The argument supporting corporate criminal liability hinges on the assertion that it is the company via its policies or practices that have violated the law; thus, prosecution and punishment should be directed at the actual wrongdoer (Ashworth 2009, p.6). Individuals facing prosecution may be acting in compliance with the company’s sloppy or absent procedures that have inflicted the harm. Global Experience The UK, like United States of America, imposes significant criminal liability to corporations. This is informed by the fact that the laws of both countries flow from the Common Law tradition, one that has never accommodated societas delinquere non potest, and a doctrine that stipulates “a legal entity can never be blameworthy.” In fact, the UK, like the United States, has embraced a far more robust and far-reaching form of corporate criminal liability than other common law countries. Criminal liability of corporations gained prominence in the 20th century; however, the debate gained topicality following the 1990s, when both the U.S. and Europe faced an upsetting number of cases of antitrust, environmental, fraud, false statements, food and drug, employee death, bribery, obstruction of justice, and financial crimes concerning corporations (Richard 2004, p.3). One of the most well-known and recent cases include Enron Scandal whereby a prominent accounting firm, Arthur Andersen LLP was indicted with obstruction of justice (See Arthur Andersen LLP v. U.S., 544 U.S. 696 (2005). Some corporations such as Adelphia Communications, WorldCom, Health South, and Royal Ahold have been indicted for falsifying their financial disclosures. Similarly, other corporations such as Olympic Pipeline, Exxon, and Bayer, indicted for breaching the environmental or health and safety laws (Gruner 2005, p.10). The consequences of corporate crimes bear a significant societal impact in terms of monetary losses, jobs, and even lives. Simultaneously, the long-term impacts of these crimes encompass aspects such as damaging effects upon the environment or health, whose scale should not be underestimated. The reactions to these corporate criminal phenomena encompass the creation of juridical regimes that have the capacity to deter and punish corporate wrongdoing. Corporate misconduct can largely be addressed by civil, administrative, and criminal laws. Presently, most countries concur that corporations, as entities, can be reprimanded as per the provisions of civil and administrative laws (Wells 2001, p.101). Nevertheless, the proposal for criminal liability of corporations has, in some instances, drawn widespread controversy. Whereas several jurisdictions have embraced and employed the concept of corporate criminal liability under diverse models, other law systems have not been capable or willing to incorporate it. Critics have advanced strong arguments against the efficiency and consistency with the principles guiding criminal law. Simultaneously, a considerable number of partisans have enthusiastically defended corporate criminal liability. Different countries have assumed diverse models of criminal liability or declined to implement such models owing to their unique socio-economic and political developments. This precedence set the stage for countries to respond appropriately to the criminal behaviour perpetrated by corporations in diverse ways. However, none of the systems is perfect as each bears its own advantages and disadvantages. Although the American system appears to be well placed and a bold response to the criminal liability of corporations, different models of corporate, criminal liability bear some elements that should be incorporated for the purpose of creation of an enhanced model (Cross 2010, p.4). The core objective of criminal liability of corporations is comparable to those of criminal law in general. The first attribute of corporate criminal punishment features deterrence-effective avoidance of future crimes. The second attribute centres on retribution and mirrors the society’s duty to reprimand those who inflict harm. The third objective explores rehabilitation of corporate criminals while the fourth goal of corporate criminal liability is to align with the objectives of predictability, clarity, and consistency with the criminal law principles in general. The fifth goal pursues efficiency while the overriding goal centres on the goal of general fairness. The U.S. Experience The models of corporate liability established by diverse countries differ significantly, and none of the countries mirror all these goals perfectly. Although corporate criminal liability originally started by emulating the criminal liability of natural persons, fresh models of criminal liability such as aggregation or self-identity theories align seamlessly with the outlined corporate structure and operation (Pieth and Ivory2011, p.64). The U.S. system of corporate criminal liability can be regarded as the most developed and widespread system of corporate criminal. The American system incorporates a broad variety of criminal sanctions for corporations (such as corporate probation, fines, and order of negative publicity) in an effort to penalize corporations when any employee perpetrates offense amid the scope of employment. A prominent and distinctive and bold element of the U.S. model of corporate criminal liability details the adoption of the aggregation theory. The theory infers that corporations can be held criminally liable depending on the culpability of one or more of its employees, who, cumulatively, rather than individually, satisfy the stipulations of actus reus and/or mens rea of the crime (Pieth and Ivory2011, p.65). Despite the fact that this system satisfies the objectives of retribution, rehabilitation, predictability, and clarity, it is evident that the system possesses the tendency of being somewhat over-deterring and costly (Ashworth 2010, p.220). Similarly, the system manifests significant overflow effects on innocent shareholders and employees with some critics stipulating that the adopted aggregation theory lacks uniformity with the traditional principles of criminal law (Wells 2001, p.156). The English and French Experience The Anglo-American legal system has embraced the concept of corporate criminal as it became necessary owing to increasing instances of corporate crime, and absence of adequate civil or administrative sanctions devoid of thinking and rethinking the traditional doctrinal traditions and arguments. The English and American law systems incorporated corporate criminal liability models successfully, even though the English system can be regarded as highly restrictive compared to the American model (Pieth and Ivory2011, p.92). Some of the reasons constraining the advancement of the English system include probable negative effects on blameless individuals, and the high costs that companies may be required to pay for a monitoring system that might efficiently and effectively deter crimes. The English and French models can be regarded to be more restrictive chiefly owing to their requirement that the individuals acting on behalf of the corporation (those holding high position or playing a central function within the corporation’s decisional structure) are criminally liable. These systems declined to implement the aggregation theory owing to the contemporaneous propensity of corporations to fragment, and entrust the power to decide and take action with regard to the prosecution and prevention of several crimes (Pieth and Ivory 2011, p.150). France abandoned the conventional maxim of societas delinquere non potest and embraced a comprehensive, yet restrictive, system that tackles corporate criminal liability. Hence, although the demands of clarity and uniformity with the conventional principles of law are satisfied for the most part, these models appear to be minimally-deterring, less retributive, and overall, less efficient. Furthermore, owing to the absence of the sanction of criminal probation and the absence of other forms of sanctioning as implemented in U.S., as well as in the UK, the rehabilitative requisite is not sufficiently satisfied. The Germany Experience In Germany, the criminal responsibility of businesses is largely non-existent. As a substitute, Germany employed a comprehensive administrative-penal scheme that controls corporate criminal wrongdoing. The German legislators consider that the administrative liability of corporations satisfies the objectives of deterrence, certainty, transparency and general fairness, besides being less costly to execute (Gardner and Anderson 2012, p.127). Moreover, in declining to embrace the model of corporate liability, the German law system aligns with the traditional concepts of the criminal law. Hence, Germans assert that the administrative-penal system is adequate. Nevertheless, critics have pointed out the close resemblance between the German administrative-penal law and the criminal law, and suggest that this system may be just a pretence for criminal sanctioning devoid of the protections availed by the criminal procedure (Ashworth 2010, p.219). The German system also underemphasizes the function of the moral stigma that goes along with the criminal sanction; hence, the system is not illustrated by the retribution of the criminal punishment. In addition, the absence of corporate criminal liability may orchestrate the unwelcome effect of attracting corporations whose acts may not be endured by the criminal law of other countries; this may yield an enhanced level of corporate crime. Germany still declines to embrace the criminal liability of corporations and remains dedicated to the old maxim societas delinquere non potest. Some of the motives reinforcing this assertion detail that corporations’ lack capability to act, are short of culpability, and inappropriateness of criminal sanctions. The overriding reason for this case is the contention that the moral stigma of criminal sanctions is not essential to satisfy the scopes of the punishment (Gardner and Anderson 2012, p.126). Simultaneously, corporations within Germany have been effectively controlled by the remarkably advanced German system of administrative law. Underlying Legal Principles The culpability of companies derives from two principles; the first principle dwells on the conduct of the business entities-acts and omissions while the second principle dwells on the relationship between companies and third parties. As detailed in many CSR stories, the responsibility may also stem from the company’s culpable omission to observe and influence its business partners. A company is complicit in law violations (such as human rights abuses) if it sanctions, tolerates, or knowingly ignores the violations (such as human rights abuses) undertaken by an entity related to it, or if the company consciously avails practical assistance or support that bears a considerable impact on the commissions of the violations (Brody, Acker and Logan 2001, p.514). With regard to omission, the principle remains profoundly litigated as plaintiffs have pursued to “hold others” (persons and institutions) whose negligence possibly set the stage for the injuries in some way- are responsible for the harm inflicted by such persons. Liability for omissions is a detached area in the law of negligence. Negligence law imposes liability for culpable actions (commissions) as well as for omissions, although the latter draws legal liability only in exceptional situations (Gobert and Pascal 2011, p.10). There are four primary circumstances that give way to complicity, three of which involve culpable omissions. These omissions are when the company actively assists (directly or indirectly) in the violations; when the business entity is in partnership with a government or another entity, in law violations; when a business entity profits from violations; and when the business entity is silent or inactive in the face of methodical or incessant violations such as inaction or acceptance by business entities of systematic discrimination in employment law against certain groups. Establishing Company Liability There are two main techniques developed for attributing to a corporate the acts and states of minds of persons it employs; these include the identification principle and vicarious liability. In most instances where a duty remain imposed by statute (expressly or implied), the breach of duty sums up as disobedience of the law. A breach of a statute is mainly an offence for which a corporate entity may be indicted regardless of whether the statute refers to the entities as corporations. As outlined above, some statutes features offences explicitly directed at corporations. For instance, the Bribery Act imposes a liability, in a set of circumstances, on corporations that fail to deter acts of bribery on their behalf (Stessens1994, p.493). Similarly, statutory/regulatory provisions impose liability upon employers (both corporate and human) to guarantee compliance with the pertinent regulatory legislation. Non-vicarious liability stems from “identification principle” that determines whether the wrongdoer was a directing mind and will of the company. This principle applies to all forms of offences, inclusive of those requiring mens rea (Gobert and Punch 2003, p.87). Corporate entities can commit a broad range of offences excluding offences for which imprisonment features as the sole penalty (such as treason or murder), and offences that can only be perpetrated by physical persons. Certain statutes dictate that where corporate entities have committed a crime, the officers are in given situations to be deemed guilty of that offence. The punishment of corporate entities encompasses fines, confiscation, compensation orders and bar from public procurement (Gobert and Pascal 2011, p.15). In instances in which there is evidence that the wrongdoer has profited financially from the crime, the court bears an obligation as per the provisions of Proceeds of Crime Act 2002 to evaluate whether to deliver a confiscation order. The fines imposed can be momentous to put the corporate entity out of business (Anwar and Deeprose 2010, p.126). For individuals (directors and senior officers), possible consequences include disqualification, fines, and imprisonment. Similarly, the directors may be susceptible to civil claims and regulatory action or inaction. Directors may be potentially liable for aiding or encouraging, or conspiring to commit an offence. Limitations Governing Corporate Liability The limitations overseeing corporate liability dictate that the offence must be carrying a punishment with a fine, which in effect prohibits crimes such as murder, treason, and piracy. Similarly, a company cannot be criminally answerable for violations that cannot be undertaken by an official of a company in the course of their employment such as rape (Harley 2008, p.41). A company can be involved in a criminal conspiracy, but only with at least two other conspirators (human beings). Companies have a duty to care imposed based on inactions or omissions and statements (whether written or oral). Vicarious Liability A corporate employer is considered to be vicariously liable for the acts of its employees and agents, just as a natural person would be equally liable (Mousell Bros Ltd v. London and North Western Railway Co. [1917] 2 KB 836). In establishing whether a company is vicariously liable, one must take into account terms of the statute shaping the offence. This may require mens rea, nonetheless impose vicarious liability (Wells 2001, p.152). On the other hand, it may generate strict liability devoid of expressly imposing vicarious liability. This includes offences that do not necessitate deliberation, carelessness, or even negligence, as part constituents in the Actus Reus (Gobert and Punch 2003, p.97). The American approach can be regarded to be too broad for conventional offences while the English direct liability scheme remains perceived as too narrow (Gobert and Punch 2003, p.53). Corporate Liability-Offences demanding Mens Rea (the Identification Principle) As outlined, companies are legal persons and may, as well, be criminally liable for crimes demanding mens rea via the application of the identification principle (Gobert and Punch 2003, p.87). As discussed, companies are legal persons and may be criminally responsible, especially for offences requiring mens rea through the application of the identification principle (Bolton Engineering Co v Graham [1957]). In the case, Tesco Supermarkets v. Nattrass [1972] AC 153 the court restricts the relevance of this principle to the undertakings of the Board of Directors, the Managing Director and other senior officers who undertake functions of management and represent the company (Wells 2001, p.70). The identification principle recognizes the existence of corporate officers who are the personification of the company when engaging in their tasks. The acts and states of mind are considered to be those of the company (Gobert and Punch 2003, p.59). Thus, the executives can be indicted for offences as individuals, but also violations for which legal action can be taken against them owing to their position in the company (Ashworth 2010, p.158). A corporation may be held liable for the acts or omissions its servant regardless of whether such acts were undertaken in fraud of the company itself (Moore v. I.Bressler Ltd [1944] 2 All ER 515). Some of the regulatory offences may demand a more purposive interpretation of aspects such as the constitution of the company. In support of the imposition of strict criminal on companies, the English Law Commission, as detailed in one of its working papers dwelling on the criminal liability of corporations, aligns with the principle that outlines that corporate should be liable at least within the regulatory arena. According to the report, the core objective of criminal law centres on prevention of crime. Thus, it can be stipulated that the publicity attendant availed through the prosecution of a corporation for the omission of an offence embodies the breakdown of oversight by the company, and it is socially attractive to place the company’s name before the public (Lacy2002, p.43). The Law Commission continues to propose distinct crime of corporate manslaughter whereby a corporation is guilty of manslaughter if the management failure by the corporation is the sole reason or part of the basis of a person’s death, and that omission comprises of conduct falling under what can be reasonably expected of the corporation in the said circumstances (Khanna 1996, p.1477). One of the leading authority on the criminal liability of corporations features in the case Griffith v. Studebaker. In this case, the court held that an employer can be vicariously held liable in respect of strict liability offences perpetrated by an employee amid his/her employment provided the wording of the statute is suitable (Ferguson 2007, p.6). The liability of the employer for the criminal acts manly hinges on how the courts decide to interpret the statute in question, especially depending on whether the offence involves strict liability or one demanding full mens rea. As outlined above, it is evident that corporate bodies are presently held criminally liable both under Common Law, codes, or statute. In the majority of the cases where corporations bear corporate liability, the companies have largely been fined even where there is provision for a jail term (Cross 2010, p.135). Another prominent issue in corporate liability revolves around the issue of whether or not companies should be held responsible for all forms of crime such as manslaughter. In the UK, offences under the Corporate Manslaughter and Corporate Homicide Act 2007 are mainly prosecuted by the CPS, which has outlined separate guidance on those offences (Anwar and Deeprose 2010, p.128). Corporate prosecution takes diverse approaches and may be undertaken by the Director of Public Prosecutions, Director of Serious Fraud Office, and Customs Prosecutions Office. There is a broad range of offences in the UK targeting corporate entities and concerned with the regulation of business activities such as Health and Safety at Work Act 1974. Two of the topical, high profile statutes fashioned for corporate entities encompasses Corporate Manslaughter and Corporate Homicide Act 2007, as well as the Bribery Act 2010 (Duthie and Lawler 2010, p.146). The two provisions spotlight on the management systems and controls of a corporate entity that imposes criminal liability on corporations, and senior management for giving bribes, receiving bribes, or receiving foreign public officials. Other measures include Corporate Homicide Act (2007) that details that corporate entities may be prosecuted for a broad range of criminal offences, inclusive of common law offences of gross negligence manslaughter guided by the identification principle (Duthie and Lawler 2010, p.148). Conclusion In conclusion, the present civil and criminal provisions are adequate to guarantee against harmful acts and omissions by corporate bodies. Overall, corporations in the contemporary society influence the lives of people both positively and negatively and just as individuals have an obligation not to harm or injure others in society, so do corporations have an obligation not to endanger the lives and safety of their clients, employees, and the public at large. Corporations can now be punished for crimes through denial of the window to do business with the government or even by revocation of the company’s articles of incorporation. Imposing sufficient controls over multinational conduct and attaining accountability by corporations for their conduct both domestically or abroad is a significant step towards minimizing harms or omissions by corporations. References List Anwar, A. & Deeprose, G. (2010). The Bribery Act 2010, Scots Law Times, 23, pp.125-128. Ashworth, A. (2009). Principles of Criminal Law, 6th edn, Oxford, Oxford University Press. pp.5-8. Ashworth, A. (2010). Sentencing and criminal, Cambridge, Cambridge University Press. pp.3-220. Brody, D., Acker, J. & Logan, W. (2001). Criminal Law. Gaithersburg, Aspen. pp.514-516. Cross, N. (2010). Criminal law & criminal justice: An introduction, London, Sage. pp.3-35. Duthie, T. & Lawler, D. (2010). The United Kingdom Bribery Bill, Const. L.J., 26 (2), pp.146-152. Ferguson, P.W. (2007). Corporate Manslaughter and Corporate Homicide Act 2007, Scots Law Times (News), 251. Fisse, B. & Braithwaite, J. (1993). Corporations, Crime and Accountability, Cambridge, Cambidge University Press. pp.2-5. Gardner, T. & Anderson, T. (2012). Criminal Law, Belmont, Wadsworth. pp.126-127. Gobert, J. & Pascal, A. (2011). European developments in corporate criminal liability, Oxon, Routledge. pp.10-15. Gobert, J. & Punch, M. (2003). Rethinking corporate crime, London, LexisNexis Butterworths. Pp.53-100. Gruner, R. (2005). Corporate criminal liability and prevention, New Journal, Law journal Press. pp.3-11. Guy, S. (1994). Corporate Criminal Liability: A Comparative Perspective, 43 Int’l & Comp. L.Q. 493, 494. Harley, R. (2008). Corporate crime: A reference handbook, California, ABC-CLIO. pp.41-50. Khanna, V. (1996). Corporate criminal liability: What purpose does it serve? Harvard Law Review, 109 (7), pp.1477 Lacy, J. (2002). Reform of UK Company Law, London, Cavendish. pp.43-45. Pieth, M. & Ivory, R. (2011). Corporate criminal liability: Emergence, convergence, and risk, London, Springer Dordrecht Heidelberg. pp.63-150. Pinto, A. & Evans, M. (2003). Corporate criminal liability, London, Sweet & Maxwell. pp.3-20. Richard, G. (2004). Corporate Criminal Liability and Prevention, New York, Law Journal Press. pp.2-7 Stessens, G. (1994), Corporate Criminal Liability: A Comparative Perspective, International & Comparative Law Quarterly 43, 493. Wells, C. (2001). Corporations and criminal responsibility, Oxford, Oxford University Press. pp.63-160. Read More