Government abandons plans designed to counter corporate wrongdoing

The Justice Minister says there is 'little evidence of corporate economic wrongdoing going unpunished'

A promise to make it easier to prosecute companies that fail to stop economic crimes such as fraud and money laundering through beefed-up corporate responsibility laws has been abandoned by the Government. In a surprise U-turn, the Justice Minister, Andrew Selous, said the Government was no longer considering creating a new criminal offence as “there was little evidence of corporate economic wrongdoing going unpunished.”

The Conservatives had pledged in their manifesto to strengthen powers to curb corporate misbehaviour, following widespread criticism of the failure to hold major companies such as international banks and other global financial institutions to account for scandals such as rigging the Libor index, tax evasion and insurance mis-selling.

Critics, who described the move as “incomprehensible, misguided and a serious failure of political will”, accused the government of watering down the UK’s anti-corruption measures – pointing out that it sat awkwardly alongside David Cameron’s tough anti-bribery message, which he reinforced during a trade mission to South-east Asia earlier this year.

In a new report, the campaign group Corruption Watch says the UK lacks the ability to properly prosecute major corporations. The larger the company, the less likely it is to be prosecuted and the more likely it believes it can act unlawfully with impunity, the report warns.

Susan Hawley, policy director of Corruption Watch, added: “This decision is shockingly short-sighted. The Government has missed a major opportunity to get its house in order on holding corporations to account.

“Companies in the UK are rarely brought to justice and are often effectively above the law because of the UK’s outdated corporate liability laws. It appears that the government is allowing its pro-business deregulation agenda to derails its anti-corruption commitments.”

She said the campaign group was seeking legal advice on whether the UK was breaching its international obligations.

The review was set up after the National Anti-Corruption Plan asked the Justice Ministry to examine the “case for a new offence of a corporate failure to prevent economic crime and the rules of establishing corporate criminal liability more widely”. The Plan said that: “In addition to bribery, there are likely to be other forms of economic crime for which it is appropriate to ensure that senior corporate actors are sufficiently accountable.”

The decision is a blow to the Serious Fraud Office (SFO), whose director David Green QC, has championed reform to improve his department’s ability to tackle economic crime.In a speech earlier this month, he said: “If the public interest, in terms of public confidence, demands more prosecutions of corporates, then such change is surely necessary.”

Reform would also benefit the use of US-style deferred prosecution agreements (DPAs) he said. 

The SFO have yet to use the controversial new powers – where a company agrees to pay a fine and improve its compliance measures in exchange for avoiding prosecution – but the first case of their use is believed to be imminent.

Until corporate liability is reformed “a corporate might conclude if the prosecution of a company is so difficult under our law, why should they agree to a DPA?”, he added.

The Law Commission, which advises the government on law reform, criticised existing corporate liability laws four years ago, describing them as “inappropriate and inadequate” but a full scale review has been dropped.