120. Memorandum submitted by General Counsel
100 Group
1. This response sets out the combined comments
of the General Counsel 100 Group.
The General Counsel 100 Group (GC100) was launched
on 9 March 2005 in response to the increasing volume and complexity
of domestic and international law and regulation which impacts
on UK listed companies. Membership of the group is by invitation
only and restricted to general counsel in FTSE 100 companies.
A list of member companies is annexed. The main objectives of
GC100 are to provide a forum for practical and business focused
input on key areas of legislative and policy reform and to enable
members to share best practice in relation to law, risk management,
compliance and other areas of common interest. The group has been
formed with the support of the Practical Law Company, which acts
as its secretariat.
The views expressed in this response do not
necessarily reflect the individual views of members or their employing
companies.
2. In principle GC100 members do not object
to an offence of corporate manslaughter being introduced and are
supportive of the draft in so far as it does not impose prosecution
and/or imprisonment of individual directors or personal fines.
Positive legal duties already apply to company directors, secretaries
and other officers and senior managers in discharging their duties
in the workplace under section 37 of the Health and Safety at
Work Act (HSWA). However we have concerns that, in addition to
a charge of corporate manslaughter being brought against a company,
the existing manslaughter laws could be used against individuals.
Similarly, if a corporate prosecution against a company failed,
there would be no prohibition on a HSWA prosecution being brought.
In addition, a successful criminal prosecution against a company
is likely to facilitate civil actions against individual directors
and officers. It is presumably not the Government's intention
for multiple criminal and civil law suits against companies and
individuals but to ensure that companies have robust health and
safety regimes in place. The issues that the US Courts have been
faced with illustrate the risks of legislation being improperly
used to launch speculative or satellite litigation. The impact
of draconian measures upon employers' liability insurance and
D&O cover also needs to be factored into the equation.
3. In promoting the draft bill, the Home
Secretary, the Right Honourable Charles Clarke MP, states that
"a fundamental part [of a criminal justice system that commands
the confidence of the public] is providing offences that are clear
and effective". We would support this. However, if companies
are subject to criminal sanctions it should be clear as to what
constitutes a "gross breach of duty of care". Whilst
case law would no doubt in due course clarify this, it is our
concern both the prosecution and defence will rely extensively
on expert testimony and lengthy and complex trials will ensue.
Where criminal sanctions are involved, the relevant threshold
for imposing those sanctions should be higher than for an equivalent
civil offence and should, in our view, involve an element of intent.
It is therefore our belief that intent to cause a gross breach
should be shown by the prosecution in a criminal action and that
this should be clear in the legislation.
4. There is often institutional shareholder
as well as regulatory pressure to operate in a not only efficient
but also cost-effective manner. In light of this, we are concerned
that there is sufficient uncertainty in the draft legislation
that prosecutions may focus on economic arguments, assuming that
companies have unlimited funds available to cover the health and
safety area.
5. We are concerned about the lack of clarity
as to who a "senior manager" is intended to be. This
lack of clarity will invariably lead to uncertainty and costly
litigation. It should therefore not be left to case law to develop
a definition and it would be preferable for the statute to offer
certainty. Further, a clear and narrow definition would achieve
the intention to push safety management issues further up the
corporate chain of command. In order to remove uncertainty it
would therefore be preferable for a clear definition of "senior
manager" to be included in the statute.
6. The draft Bill also makes reference to
consideration of compliance with any health and safety legislation
or regulatory guidance. It is clear that the reference includes
the HSWA but it also appears to have a wider reach and may extend
to, for example, product safety legislation. In addition, liability
for corporate manslaughter will be looked at in light of a company's
compliance with guidance issued by the Health and Safety Executive
or any other authority responsible for enforcement of health and
safety laws. There is therefore uncertainty as to exactly what
a company needs to consider.
7. We believe that the legislation is also
uncertain, and could cause potential inequality, in how it deals
with the public sector. Whilst we accept that there should be
permitted exclusions to which the new legislation should not apply
(eg the armed forces), we do not believe it is in the public interest
for some government bodies to be exempt. Where services are carried
out by both government bodies and private sector companies (for
example, waste disposal and prison management), it would be illogical
if the government-owned body was exempt but in an analogous situation
a private sector company was not. As such, the result would be
a lack of a level playing field in industry sectors in which public
authorities and private companies compete, burdening private companies
which are subject to the legislation with additional potential
liabilities from which their public counterparts are exempt. The
public sector would therefore benefit from a certain competitive
advantage if it were exempt.
8. For the avoidance of doubt, we believe
it should be clarified that road traffic accidents occurring in
the normal course of discharge of an employee's responsibilities
are excluded.
9. Under the current proposals, parent companies
are only liable if their "own management failures were a
cause of the death concerned". Given the lack of clarity
surrounding this provision, it is likely that litigants will,
as a matter of course, include parent companies in any litigation.
However, within large groups it is often the case that the main
operating subsidiaries will have responsibility for health &
safety whilst the parent company may set a framework for compliance.
The framework will often be tailored to the individual subsidiary's
requirements (taking account of the particular industry in which
the subsidiary operates), but the proposals are unclear about
the question whether the mere setting of parameters by a parent
should be sufficient to impute a duty of care on the parent. The
potential liability of parent companies should therefore be better
defined, as it may otherwise lead to the delegation of responsibilities
to subsidiaries, rather than encourage parent entities to set
clear parameters for their subsidiaries.
GC100 GROUP—MEMBER
COMPANIES
Alliance & Leicester
Allied Domecq
Amvescap
Anglo American
Associated British Foods
AstraZeneca
Aviva
BAA
BAE Systems
Barclays
BHP Billiton
BP
British Airways
BT Group
Cable & Wireless
Cadbury Schweppes
Centrica
Diageo
Emap
Friends Provident
Gallaher Group
GlaxoSmithKline
Hanson
HBOS
HSBC Holdings
Imperial Chemical Industries
Imperial Tobacco
Legal & General Group
| Liberty International Holdings
Lloyds TSB Group
MAN Investments
Marks and Spencer
National Grid Transco
Prudential
Reckitt Benckiser
Reed Elsevier Group
Reuters Group
Rexam
Rio Tinto
Royal and Sun Alliance Insurance Group
Royal Dutch Shell Group
Schroders
Scottish & Newcastle
Severn Trent
Shire Pharmaceuticals Group
Smiths Group
Standard Chartered Bank
The BOC Group
The Royal Bank of Scotland
The Sage Group
Unilever
United Business Media
Vodafone
Whitbread
Wolseley
WPP Group
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