Examination of Witnesses (Questions 60
- 74)
THURSDAY 14 MAY 2009
PROFESSOR JEREMY
HORDER
Q60 Chairman: If there are adequate
procedures and they are enforced, that cannot very well be said
to be negligence, can it?
Professor Horder: So you might
think, but what we had in mind were cases where there are adequate
systems but because of the devolved nature of the company the
negligence is on the part of, and I think the example we gave
in the report was someone who has been tempted by an offer from
a rival company to go and join them and so is not paying proper
attention to their duties in relation to their existing firm,
something of that kind where the systems are in place but the
negligence is attributable to an individual person who has that
responsibility. We did not think that in those circumstances the
company should be liable for that because it is really down to
the individual's negligence. We wanted to provide some kind of
balance whereby a company would not be liable when its systems
were perfectly adequate but there was a failure solely by an individual
within a company. We did not think that would be fair basically.
It is consistent, but I understand what you are saying that the
two will in many instances be bound up together, that is to say
to show negligence on behalf of the company is almost by definition
to show that the procedures were not adequate. That would be true
in many instances and that helps the prosecution, but in some
instances it may not be true, the two will be separate, and we
wanted to allow for that.
Q61 Lord Goodhart: You seem to me
to have a problem with the formula used with it. The real problem
is your system requires that negligence should necessarily be
attributed to one or more people who are on the staff, the management
of the company, but that is going to lead to the sorts of problems
that meant corporate manslaughter, for example, was virtually
unenforceable because in a large company you could not find anybody
who was actually negligent. The problem is that in these large
companies it is because there has been a failure in the system
rather than a failure in a particular individual. Would it not
be better and simpler to say that where somebody acting on behalf
of a company has been found to be guilty of bribery that the company
should be liable irrespective of anybody's negligence unless the
company can then show that it has, in fact, had in position an
adequate system for preventing bribery?
Professor Horder: The short answer
to your question is yes, it would be simpler, there is no doubt
about that. However, our concern here was about the way that this
offence looks when stacked up against other similar offences in
English law. I have already mentioned the food safety case of
getting an earwig in your tin where that will be attributed to
the company unless they can show that they had adequate systems,
or exercised due diligence, or something. I do not see an analogy
between that kind of offence which occurs inevitably in the ordinary
course of your manufacturing or business conduct and an offence
like bribery where it is a very, very serious offence that carries
a stigma, a taint, with it. We felt that despite the extra complication
or extra hurdle that it was right, therefore to include some fault
element that had to be shown by the companies, if not their officers
at least someone responsible, so the area sales manager or whoever
it is. We thought that extra hurdle would be fairer to businesses
and would also mean that this offence was a step up, if you like,
in terms of severity from those other offences of food safety
or whatever they may happen to be. The model you are using is
the model that is used.
Q62 Lord Goodhart: Is manslaughter
not a serious offence under the Corporate Manslaughter Act?
Professor Horder: Yes.
Q63 Lord Goodhart: Where it is not
necessary to attribute negligence to any particular member of
the company, it is the company which is liable for the negligence.
Should it not be just the same here?
Professor Horder: I am not sure
I am following you now. Under the Corporate Manslaughter Act there
has to be effectively gross negligence shown, at least in part,
on the part of senior officers. It does not have to be wholly
them but it has to be partly them. It was designed very specifically
to catch the kind of P&O case where you had got some negligence
on behalf of senior management but also negligence by employees
down the line, so it is a kind of mixed thing. You do have to
show gross negligence on the part, at the very least, of senior
officers.
Q64 Lord Goodhart: Obviously you
have to show there has been a fault, but here it is the fault
of bribery. It may not be a senior officer of the company but
it is bribery and surely it must be legitimate to say, "You
must show to us that you had adequate methods for dealing with
this". That is the point. It does not matter who is guilty,
you do not have to find out which particular individual failed
to put adequate arrangements into service, but surely that is
the liability of the company and it should be the liability of
the company.
Professor Horder: Personally I
would not accept that because I think there is a difference here.
With corporate manslaughter you are talking about a consequence
that occurs as a result of negligence, so the company is negligent
and in consequence someone dies. It is just a tragic event, if
you like, which occurs as a result of negligence. This is not
like that. This is an offence that can only be committed deliberately,
a deliberate act of bribery committed by an individual under the
auspices of the company, and the question now is do you attribute
that deliberate act to the company. That is very different from
attributing causal consequences, like earwigs in tins or deaths
occurring on ships or wherever it may be, to a company. It is
a whole different ballgame, I genuinely believe. You can only
fairly, in my view, connect a deliberate act of bribery by an
employee or agent to a company via the company's own fault, if
I could put it that way, or here we have got it as "a responsible
person or number of persons" so it does not have to be necessarily
right up at directorial level, it can be the area sales manager,
to use that example. I know this adds a complication and I am
very sensitive to that point, and at the Law Commission we are
all very much against complication, but there is also the issue
of fairness and comparing like-with-like, and I do not think you
are comparing like-with-like, when you compare corporate manslaughter
and food safety on the one hand and on the other hand bribery,
they are different sorts of offences committed in different circumstances.
Q65 Lord Thomas of Gresford: Professor
Horder, you have had discussions with business organisations and
the simplified constructive criminal liability would not be acceptable,
I would have thought, to those organisations. They would be looking
for something rather more than the constructive liability because
of bribery at a lower level.
Professor Horder: To be honest,
I do not believe I have discussed this specific point with them.
You may be right, it is speculation. We are just trying to take
a view on what is fair and what is balanced even if trying to
secure those goals involves an added element of complication.
We have not been pressed particularly by, for example, Transparency
International or someone on what you might call the other side
of the table. I do not like to speak in those terms, but if one
thinks in that way they have not said, "Oh well, a negligence
requirement will make the whole thing impossible" and quite
reasonably not because I do not think it will. As I have already
said, I think juries often infer negligence from failures in any
event.
Q66 Lord Thomas of Gresford: You
will recall from our seminar in Hong Kong recently that we were
told in America there is a federal organisation that gives advice
so that a business can go to that person or organisation—I
cannot recall which particular department of state it was—and
say, "Well, I have got this contract and it is suggested
that I do this or that, can you tell me whether that would be
all right". Is that what you had in mind in relation to adequate
procedures?
Professor Horder: That is going
quite a long way because that is contrary to our traditions of
what public servants can and cannot do, generally speaking. For
example, if I could start from a slightly different view, were
we to have in this country an anti-bribery body, a commission,
a semi-official body of some sort, charged with giving this kind
of advice I could well see as being appropriate. For the prosecution
to be giving this kind of advice, for example, would put them
in a rather difficult position, would it not, and I am not sure
about that. Were we to have somebody charged with giving advice
of this kind I think that would be very much of benefit both publicly
and to companies and would give them reassurance.
Q67 Lord Thomas of Gresford: There
is the independent Commission against Corruption in Hong Kong.
Professor Horder: Yes. Something
of that nature here would add very much. I do not want to speculate
too much about that. I have said very firmly in my written evidence
that I would not be confident about letting this offence loose
on the general public unless and until there has been adequate
guidance agreed so that there is public confidence, business confidence
in how this is going to work. It is quite clear to me from having
been round City firms and talking to lawyers that there is plenty
of this guidance around in relation to different companies and
the big law firms all specialise in giving advice that is tailored
to particular countries where particular standards are this way
or that way, they are very good about that. I do not think it
will be hard to find a model from which one can work, we are not
starting from a basis of zero information here.
Q68 Chairman: I have got a list of
people who want to ask questions but there is, however, one thing
on clause 5 that I would like to explore with Professor Horder.
That is the extent of the jurisdiction which is now in the Bill
because it is much broader than what you had in your draft and
involves the possibility of foreign companies being prosecuted
simply on the basis that they have a small part of their business
over here in the UK. Would you like to comment on that?
Professor Horder: We found ourselves
in some difficulty about this because we are the Law Commission
for England and Wales and it did not seem appropriate for us to
be saying that Scottish companies, say, should have liability
extended to them without our proceeding fully along with the Scottish
Law Commission and Scottish legislature, but there was not time
for any of that. We had quite a narrow understanding of where
businesses should be. However, when we met the OECD after the
report—effectively the session was about "will it pass
muster as far as you are concerned"—one of the things
they said was that they were a bit worried about businesses doing
business here, if you like, but not being registered here in England
and Wales, so they are a sort of outpost. What the Bill does is
the Government has extended the scope, if you like, to include
companies doing business here as well as companies registered
in England and Wales, and that is their choice, that seems reasonable
to me. It is the parallel to the individual provision that we
put in, and which appears in the Bill, that if someone is ordinarily
resident in Britain then they should be liable in exactly the
same way as a British citizen. That seemed right to us because
the number of people ordinarily resident here has risen very substantially
over the last 20 years and a lot of people here are ordinarily
resident in order to do business so it seems wrong that they would
fall outside the scope of offences. What the Government has done
is provide a parallel provision for businesses, so businesses
that are, if you like, ordinarily resident here, which means doing
business here, are included. Clearly because that was not in our
minds we did not do any impact assessment on it or any investigation
of how widely that would impact on companies. We have not been
able to do that because, as I say, it was not in our minds. I
perfectly see the justification for it. If two companies are jointly
making a bid for something on an illegal basis, why should one
be caught because they are a British company and the other one
not caught because they are a company just doing business here.
That does not seem very logical. I can see the case for the Government's
amendment and extension.
Q69 Lord Williamson of Horton: This
is on territorial application and nothing whatever to do with
people, it is only to do with companies. The territorial application
for people is very widely drawn in clause 7, and there is no problem
with that at all, but a company, and I refer to a company which
is operating in an overseas dependency or tax haven of some kind,
those types of companies—
Professor Horder: Yes.
Q70 Lord Williamson of Horton: In
order to fall within this they have to be a body incorporated
under the law of any part of the United Kingdom. That is in 7(4)(h).
Is it the case that there can be companies in the Cayman Islands,
for example, a well-known place for doing business, which are
not incorporated under the law of any part of the United Kingdom?
If there are such companies incorporated, for example, under the
law of Delaware or something they would be excluded, of course,
from the application of clause 5. Is that the case?
Professor Horder: It is, yes.
The position basically is this: as you know perfectly well we
cannot force the crown dependencies and overseas territories to
accept a bit of our law although we can perhaps apply a little
bit more pressure to the crown dependencies. If I may quote him,
probably wrongly, our Ambassador to the OECD said very clearly
to the OECD, "We respect the principle of self-determination
and in the case of overseas territories they must decide to what
extent their law goes along with what we are recommending for
England and Wales. We cannot start acting like an imperial power,
even if we had the legal ability to do so, in imposing law on
them". You may say what is the consequence then, what will
happen, will there just be a sort of Maginot Line type gap through
which everyone will hurriedly rush setting up companies in the
BVI or wherever. The medium-term answer to that is they will not
be able to escape because what may happen is that the OECD will
treat the governments of BVI, the Cayman Islands or wherever as
foreign public officials and, therefore, it will make it easier
to convict them of offences based on Cayman Island law, whatever
it may be, so in that way they will hope to catch them. There
will be a way round it but it will have to come through an OECD
initiative, unless and except insofar as the British Government
can put pressure through diplomatic channels on crown dependencies
and overseas territories to change their law, but what the prospects
are for that I could not say.
Lord Williamson of Horton: No comment,
my Lord Chairman, except remember the Cayman Islands!
Q71 Chairman: I think we ought to
start drawing this to a conclusion but there is one point left
that I would like to ask Professor Horder about. Broadly speaking,
you have confined the consent to prosecution to the Director of
either the Public Prosecutions or the Serious Fraud Squad or Revenue
and Customs?
Professor Horder: Yes.
Q72 Chairman: That does not deal
with the Serious Crime Act 2007 which still leaves the Attorney
in charge, including matters of bribery and matters which go to
the economic interest of the United Kingdom, which is a very substantial
anomaly as it seems to me.
Professor Horder: That is right.
I would have to go back now, but I thought in our report we had
said that the consent provision should apply not only to the completed
offence but also to inchoate offences, but I could be wrong, that
might just be wishful thinking. My position on this has been absolutely
clear, and I gave evidence to this effect to the Joint Select
Committee on the role of the Attorney, that there is a serious
worry about the way in which a consent of prosecution will operate
if the Attorney is likely to, will, may, take account of economic
factors either as a result of the Shawcross exercise or in some
other way. There is the perception at least that may happen. Of
course, I would be perfectly happy to accept an assurance, and
an assurance was indeed given by Lord Goldsmith, when he held
that office, that he would not take into account economic factors
in giving consent. If an assurance is given by an Attorney in
those terms I would accept it absolutely, but it is a sort of
odd way of going about things, I suppose, having to make these
assurances each and every time a new Attorney takes up office.
For example, would it not be better to bring the law into line
with every other offence and not make a big deal of bribery. In
fact, I believe that is what the substance of the Constitutional
Renewal Bill does, it moves the consent down a peg, if that is
the word I am looking for, from Attorney to DPP, and that seems
to me to be entirely right. It is still open, of course, for the
DPP or any other prosecution officer to informally take advice
or whatever from the Attorney General in appropriate cases, that
should always perhaps go on. In general terms that would be my
view.
Q73 Chairman: There are two points,
are there not? There is the remaining power which brings in the
Attorney under the 2007 Act, which is not being repealed, and
there is the introduction of the economic wellbeing of the country,
which is in the 2007 Act, which is contrary to what the OECD requires.
Professor Horder: It is, that
is right. I was mainly addressing myself to that point. That looks
just like it may be a legal gap, I suppose, something that has
been overlooked and we might have to look at that. I am not sure
about that, I have to confess. I do not know what the position
is about the 2007 Act. I would have to go back and have a talk
to the officials to see what the position is on that one, I do
not know.
Q74 Chairman: I think it would be
very helpful if you could do that because I believe it is an anomaly
upon which we ought to comment.
Professor Horder: That may well
be right. It could be I have just forgotten something and I am
not being helpful. Yes, I will do that.
Chairman: I think we had better draw
this to a conclusion. The next meeting will be on Wednesday 20
May in the Boothroyd Room at 9.45 which ought to give plenty of
time for you to go and listen to Prime Minister's questions if
you want to. To judge by the progress we have made this morning,
and we have covered a good deal of the ground but not by any means
all of it, I have a strong suspicion that we may have to have
two sessions a day later on in the process of this investigation,
so if you will brace yourselves for that possibility. We will
not do it next Wednesday, but thereafter we may have to come back
in the afternoon as well, otherwise I do not see how we will get
through all this material in accordance with the timetable that
is in the motion that set us up. Perhaps you would like to bear
that in mind and look at your diaries accordingly. I am very sorry
but we have got a very tight timetable and there is an awful lot
of ground to cover. I will adjourn until next Wednesday. Thank
you all very much. Thank you very much, Professor Horder.
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