One big difference between corporate criminal liability in the U.S. compared to corporate criminal liability in the U.K. is what is called the identification doctrine.

Under that U.K. doctrine, only the mental state of a senior executive within the company, representing the company’s “directing mind and will,” can be attributed to the company.

This doctrine severely restricts the scope of corporate criminal liability.

But things are changing in the U.K. 

The U.K. Law Commission was out earlier this year with a discussion paper on corporate criminal liability outlining ways forward. 

And the general consensus seems to be that reform is on its way.

Judith Seddon is a partner at Ropes & Gray in London and an editor of The Practitioner’s Guide to Global Investigations.

How does the prosecution of corporate crime in the U.S. compare to that in the U.K.?

“The most important difference is the legal basis for which corporates face criminal liability,” Seddon told Corporate Crime Reporter in an interview last month. “Generally speaking, it’s much more difficult to establish criminal liability in the U.K. than in the U.S.”

“In the U.K., in the main, prosecutors have to provide evidence of guilt by the so-called controlling mind of the organization. And that is not such an easy hurdle to overcome, especially in larger organizations. Historically that has made it much harder to pursue convictions against corporations. That is significant because, of course, part of the incentive for a company in either country to enter into a deferred prosecution agreement is to avoid a criminal conviction. And that is a much more realistic prospect under U.S. law than it is in the U.K.”

“Successive directors of the Serious Fraud Office have acknowledged that the issue of corporate criminal liability needs to be resolved for deferred prosecution agreements to have their full impact and potential. And the U.K. Law Commission is currently considering the options with a view to publishing an options paper later this year or early next year. It could potentially lead to reform thereafter.” 

“The important caveat to that is the U.K. Bribery Act Section 7. Section 7 is an offense aimed at companies that fail to prevent persons associated with them from bribing others on their behalf. You don’t have the difficulty of proving that conduct went to the very top. Instead, it’s an offense subject to a defense if the company can prove that it had adequate procedures in place to prevent persons associated with it from bribing.”

Where is the controlling mind within a corporation?

“That phrase comes from case law in which it was referred to as the directing mind and will of a corporation. That is really a question of fact. It will depend on whether the person is sufficiently senior in a business so that you can say that their state of mind can be attributed to the corporate. Corporate liability is dependent on and parasitic upon their culpability. That is often difficult to prove.” 

What are the prospects for reform of corporate criminal law in the U.K.?

“The majority view is probably that Section 7 of the Bribery Act should be extended to other economic crimes. The Law Commission is considering a number of options including an option that would reflect the current state of the U.S. law. My sense is that that won’t happen. And instead we are likely to end up with something similar to Section 7 – failure to prevent certain forms of economic crime.”

Have the corporations in the U.K. weighed in with the Law Commission?

“Yes they have. There is a consultation and firms have responded and there has been a fair degree of input.”

How would you compare corporate crime prosecutors in the U.K. to those in the United States?

“My understanding is the Serious Fraud Office has a fraction of the funding of the Department of Justice in the United States. During the last year, the SFO’s funding was something like $71 million. That would be a fraction of what the Department of Justice gets.”

“The Serious Fraud Office stance and tone is very much set by the director. Things can change quite markedly from director to director. David Green said – we are out to prosecute, we are not a regulator. He was pushing against the view that the SFO could give advice as to whether a particular course of action would be frowned upon from a compliance perspective.” 

“Lisa Osofsky is a former FBI officer. In private practice, she worked as a monitor. She is much more concerned with forward looking compliance and making sure that deferred prosecution agreements under her tenure have strong corporate compliance provisions, including monitors or quasi monitors with more teeth than the earlier deferred prosecution agreements.”

A couple of years ago we exported to the U.K. the deferred prosecution agreement. What is the status of that experiment?

“We have now had twelve deferred prosecution agreements since they were introduced in the last eight years or so. It marks a significant shift in the U.K.’s approach to corporate criminal liability. It certainly did align it with U.S. enforcement methods. And it was definitely imported from the United States. And also it was introduced shortly after the Bribery Act came into force. Deferred prosecution agreements were expected to be used to enforce the U.K. Bribery Act, in particular the Section 7 provision aimed at preventing bribery. And that is how they are being used, although they are being used for other offenses as well.”

“There are differences between deferred prosecution agreements in the United States and the United Kingdom. In the U.K. they only apply to corporates and not individuals. And the agreements in the U.K. are subject to greater judicial review and ultimately judicial approval. The deferred prosecution regime was introduced as well to self report wrongdoing. But it is still possible to get a deferred prosecution agreement absent self reporting provided that the cooperation thereafter is exemplary. And we did see a bit of a difference between the U.S. and the U.K. in that respect.”

“Also, it seems to me that U.K. prosecutors have provided significantly higher penalty discounts for corporations without self-reporting than do their counterparts in the U.S. In the U.K., a firm can get a discount of fifty percent regardless of whether it has self-reported provided that its cooperation thereafter is exemplary.”

Is it your sense that monitors are being more widely used in the U.K. than in the U.S.?

“I don’t know whether they are being used more here. All I would say is that monitors were a concept that was quite foreign to the U.K. There have been compliance reporting obligations from the earliest deferred prosecution agreements. But recent cases do suggest that the independent reviewer is now more similar to the U.S. monitor. They go through a process that is similar to the U.S. process. And in one deferred prosecution last year, Lisa Osofsky referred to it as an unprecedented multi-year scrutiny and assurance. Many people expected these monitors to increase under her directorship given her background. And it does look as if the predictions are being borne out.”

“One other point on deferred prosecutions. In the U.K., there have been no successful prosecutions to date of any individuals whose conduct underpinned the twelve deferred prosecution agreements entered into by the Serious Fraud Office. There have been prosecutions that have failed – the individuals have been acquitted. Or there simply have not been prosecutions of individuals. In Rolls Royce and Airbus the individuals were not prosecuted in the U.K.”

What are the implications of that?

“When Lisa Osofsky took over from David Green, the Rolls Royce investigation was already under way. It was a wide ranging large scale investigation. She just decided to close that investigation and drop all investigations into the individuals. In Tesco, arguably the prosecution set out its narrative and tried to get those individual facts to fit that narrative. The jury didn’t find that to be the case”. 

“In the U.K. many individuals will fight a prosecution. You have fewer individuals pleading guilty than in the U.S. You have the uncertainty of the jury trial. A deferred prosecution agreement is obviously an agreement between the prosecution and defense. That is something which is easier in some ways for the prosecution to achieve”. 

“There are a number of reasons why prosecutions against individuals have failed. But it is a problem for the Serious Fraud Office. There does appear to be this disconnect between the corporate settlements and the individuals not being prosecuted.”

We are witnessing in the United States right now the Boeing criminal prosecution. The prosecutors and defense attorney got together and hammered out this lenient deferred prosecution agreement. And then they threw a low level test pilot – Mark Forkner – under the bus and criminally prosecuted him. His defense attorney, David Gerger, put out a strong statement saying he was proceeding to trial and his client was a scapegoat.

“To those of you who know the truth – you may have worked at Boeing or the FAA or an airline – now is the time to help the truth come out. Please contact us, get us a message, do not be intimidated,” Gerger said. “Help us make Mark’s trial a search for truth, not a search for a scapegoat.”

There is this tension between those who represent the corporations and those who represent the individuals.

Do you see the same dynamic there?

“Definitely we do see it here. The corporations want to reach a settlement, and have not been too worried about throwing individuals under the bus, as you put it. When a jury makes a judgement, they come to a different conclusion. Yes, that is an issue.” 

“At the beginning of the deferred prosecution practice here in the U.K., there were more details and sometimes names of individuals whose conduct underpins the agreement. Today, there is a much greater sensitivity toward that issue in the more recent deferred prosecution agreement.” 

“In July, there was a deferred prosecution agreement, for example, where the judge made it clear that the court was not making findings of fact against any individual and the individuals were anonymized. Reporting restrictions were put in place. There was great disregard for the individuals back in the early days of the deferred prosecution agreement than there is now.”

[For the complete q/a format Interview with Judith Seddon, see 35 Corporate Crime Reporter 41(13), October 25, 2021, print edition only.]