Lords, loopholes and corporate crime

house-of-lords-chamber.jpg

Following the 9th March debate on the Criminal Finances Bill in the House of Lords, Fiona Gooch and Tom Wills look at the next steps that the UK can take in curbing corporate crime.

If an individual seriously injures or kills someone in most countries in the world this is a crime. However, when a company does this it appears that they are able to get away with it. To correct this anomaly in the UK, the government must update our criminal law.

In November of last year, Traidcraft handed a petition of more than 20,000 signatures into No 10 Downing Street. Part of our ‘Justice Matters’ campaign, the petition called on the government to update the law so that large UK companies can be prosecuted when they have caused serious harm abroad. This sent a strong message that people in the UK want to see irresponsible British companies held answerable in our courts.

Traidcraft staff and campaigners hand in the ‘Justice Matters’ petition to Number 10 Downing Street

Traidcraft staff and campaigners hand in the ‘Justice Matters’ petition to Number 10 Downing Street

Since November the government has introduced the Criminal Finances Bill, aimed at closing loopholes in tax law and stopping tax evasion. This is a welcome step, and doubly so as it has started UK parliamentarians thinking about how the law can be used to curb corporate crime.

The second reading of the bill in the House of Lords on 9 March included peers from all sides of the house recognising that corporate crime takes a range of guises, from tax evasion to human rights violations, and that these are underpinned by a lack of a healthy and accountable corporate culture. Baroness Hamwee sits on Parliament’s Joint Committee on Human Rights, which is currently looking at the accountability of companies for their human rights violations. She pointed out that there is a need for companies to report and be transparent about their activities. It is encouraging that the government has recognised the links between economic crimes and human rights violations. But companies should also be held to account when they are implicated in severe human rights violations, such as causing injuries or death, or harming health through pollution. In these circumstances criminal law should be used, in addition to civil remedies.

Before looking further at what is needed, it is worth going over the case for action.

The Business and Human Rights Resource Centre recorded 303 allegations of human rights abuses made against 127 UK-linked companies between 2004-2014.[3] Despite it being clear that some companies are serial offenders there have been zero criminal prosecutions of companies.

Nearly half of the allegations (47%) were made against extractives companies, whilst the vast majority of cases featured allegations of extra-territorial abuse, mostly in the global south, with 29% relating to Africa and 24% relating to Asia. It is likely there is under-reporting of harms caused by international businesses because of the challenges in documenting human rights violations and the litigious nature of some companies.

Traidcraft understands that not all circumstances can be foreseen and that a company may make a mistake which results in severe harm caused to others. In such an event Traidcraft would expect the company to undertake a review and put in place procedures to avoid recurrence. However, the existence of serial offenders suggests that relying on companies to voluntarily improve is insufficient and there are gaps in the UK’s ability to prosecute such rogue companies.

Broader corporate criminal law reform is needed to ensure that irresponsible companies can be held liable for failing to have put in reasonable measures to prevent offences. This will require statutory changes to replace the outdated identification doctrine with a regime that reflects both the realities of modern corporations and public expectation of corporate accountability - as explained in this blog.

We look forward to the government passing the Criminal Finances Bill to deter tax evasion. Having tackled that issue, the obvious next step is to modernise criminal law to enable prosecutions to be brought against companies, as opposed to individuals, for wider serious human rights violations. The government should look at this when it responds to the open consultation on ‘Corporate Liability for Economic Crime’.

Fiona Gooch is Traidcraft’s Senior Policy Adviser. She tweets @FionaGooch