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NGOs: Prosecute big business for corruption and human rights abuses

UK corporate liability regime ‘not fit for purpose in the 21st century’, say campaigners

9 March 2017

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The government needs to get tough on irresponsible behaviour in big business, a group of NGOs said ahead of a debate on legislation which creates a new offence of ‘failure to prevent fraud’ and new powers allowing for the seizure of UK assets from human rights abusers.

Organisations including Amnesty International, Corruption Watch, CORE Coalition, and Traidcraft have called for criminal law reform to help UK prosecutors go after large businesses accused of involvement in global corruption and human rights abuses.

Under current laws, proposed prosecutions must pass the so-called ‘directing mind’ test, with proof needed that senior board level executives intended misconduct to occur. The Law Commission has said this makes it ‘impossibly difficult’ to prosecute large firms.

The Crown Prosecution Service has publicly acknowledged that corporate liability laws prevented the prosecution of News Group Newspapers in the phone hacking scandal.

Meanwhile, the Serious Fraud Office has brought no charges against banks involved in the LIBOR or FOREX rate-rigging scandals. Fines levied in the UK for these scandals were 84 per cent lower than in the US, which was able to impose both criminal as well as regulatory sanctions on offenders.

The NGOs’ call for reform came ahead of a House of Lords debate, held today 9 March, on the Criminal Finances Bill, an adaptation of the Proceeds of Crime Act, which passed in the Commons last month. Under pressure from campaigners, the government is using the bill to create a new corporate offence of ‘failure to prevent tax evasion’.

MPs including former solicitor general Sir Edward Garnier, Catherine McKinnell, and Nigel Mills tabled amendments to the bill in the Commons to have this extended to ‘failure to prevent economic crime’, a move that has split the legal community, with some expressing concern that the government is continuing to ‘march criminal law into the business sphere’.

For law reform campaigners, these amendments do not go far enough. Sue Hawley, director of policy at Corruption Watch, said: ‘The UK’s corporate liability regime will remain fundamentally flawed until large firms can be held to account as easily as smaller firms.

‘Introducing a failure to prevent offence alongside changes to the identification doctrine would create a corporate liability regime genuinely fit for the 21st century.’

Human rights groups are hopeful that reform will also lead to British companies being prosecuted for serious human rights abuses in their global operations. The Business & Human Rights Resources Centre recorded over 300 allegations of abuse made against 127 UK-linked companies between 2004 and 2014.

‘If the government is serious about getting tough on irresponsible behaviour in big business, it must deal with problems of corporate impunity for human rights abuses internationally,’ said Marilyn Croser, director of CORE.

A cross-bench group of 50 MPs, led by former justice minister Dominic Raab, had proposed an amendment to the bill that would have allowed the High Court to pass freezing orders on the UK assets of human rights abusers. Under the Magnitsky amendment, NGOs and individuals would have been allowed to persuade a judge to seize the suspect assets.

The amendment was named after the Sergei Magnitsky, a Russian lawyer who died in a Moscow prison in 2009 following the exposure of an alleged £184m fraud carried out by Kremlin officials. It is estimated that £30m of the money exposed by the lawyer was sent to the UK.

‘People with blood on their hands for the worst human rights abuses should not be able to funnel their dirty money into the UK. This change in the law will protect Britain from becoming a safe place for despots and dictators to hide their money,’ said Raab, who later agreed to drop his proposals in favour of the government-sponsored amendment he said was not as robust.

Calls to criminalise corporations involved in human rights abuses have been renewed in recent months. A study published last October found almost half of global businesses never undertake due diligence into human rights risks despite the danger of reputational damage, fines, and legal claims.

John van der Luit-Drummond is deputy editor of Solicitors Journal

john.vanderluit@solicitorsjournal.co.uk | @JvdLD

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White collar crime Human rights International

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Criminal Finances Bill FAILURE TO PREVENT