Deaths Due To Corporate Negligence and enforcement of Libality
Subject: Corporate Law -I
Submitted to: Dr. Prof. Harpreet KaurSubmitted by: Rishiraj Singh
Shubham RathoreIVth Year – 7th Semester
B.A., LL. B (Hons.)
National Law University, Delhi
1.1 A Brief Overview
In the new age, companies are contributing significantly in the development of the economy of a place. Due to this a unique and peculiar relationship has emerged between the corporations and the society. Now there is a very strong linkage between corporate growth and social welfare. Corporate Governance and Corporate Social Responsibility are the two main ways in which the corporate sector interacts with the society. A proper balance needs to be maintained between making the corporations liable for their acts and giving them required freedom to conduct their operations. Due to this we can neither give the companies unbridled freedom to conduct their business, nor can we impose extremely strict restrictions as it would hamper the economic environment. In today’s era where maximising profits and wealth creation is of paramount importance, it is extremely crucial that laws are put in place and corporations are held accountable for their actions.
Unfortunately there have been many incidents where people have lost lives due to the actions of a company. This is termed as Corporate Manslaughter or Corporate Killing. There are jurisdictions which recognise this offence and penalise the responsible corporation (e.g. UK), on the other hand there are also jurisdictions which do not recognise this offence. In countries which do not recognise this offence, the main contention is that since a company is a fictitious entity therefore mens rea (which is a human faculty) cannot be attributed to it.
1.2 Objectives of Research
To delve into the nuances related to liability of the companies for its actions resulting into death of person(s) in the light of various theories, decided case laws and related events across the globe.
The law on corporate manslaughter is uniform in Australia, USA, UK, Canada, France, Germany and India.
1.4 Research questions
a) What is the law related to corporate manslaughter in various jurisdictions and the corresponding position in India?
b) Whether mens rea can be attributed to a company?
CORPORATE MANSLAUGHTER IN VARIOUS JURISDICTIONS
Corporations around the world are expanding. At one hand, they are necessary for the economic growth of a country, provide employment and ensure the well being of the society while on the other, they are responsible for some of the biggest disasters across centuries. In the light of the same, various countries have enacted laws to provide a safety net to the citizens against the actions of such corporations. There are countries like Canada which address the offence of corporate criminal liability as a whole. We also have countries like UK and Australia which have only legislated on the offence of corporate manslaughter (they do have in place various health and safety regulations though). At the far end of the spectrum, we have countries such as Germany which refuse to enact a law on such a matter. Presently, India does not have a law on corporate manslaughter. In the following section, the researchers have analysed the salient features of corporate manslaughter laws around the world.
2.1 The law in the United Kingdom.
A corporation was described as a person for the first time in the year 1877 in the case of Royal Mail Steam Packet v. Braham. The separate legal personality of a company was later firmly upheld by Lord Macnaghten in the landmark case of Salomon v. Salomon. In fact, much before that, the legislators had allowed a corporation to be included in the word ‘person’. The definition of ‘person’ in the Criminal Law Act, 1827 included corporation. Even in the Interpretation Act, 1889 the expression ‘person’ included a body corporate.
Given that a corporation enjoys a separate legal personality, it was still very difficult to impute criminal liability on this artificial legal entity. In order to make a corporation criminally liable, the UK courts evolved two instruments. One was the concept of vicarious liability and the second one was the identification doctrine (which emerged subsequent to the principle of vicarious liability). The latter doctrine was based on the identification of an active and directing will of the company which is usually considered to be vested in a person who has control and authority over the affairs of the said company.
Recognition of the offence of Corporate Manslaughter: Judicial Pronouncements ; Legislative Efforts
As early as 1927, Finlay J. in the case of R v. Cory Bros. ; Co. Ltd., refused to hold a company liable for the offence of manslaughter. This was supported by citing various judicial precedents. A different view was taken in the case of H. M. Coroner for East Kent ex. p. Spooner, by Mr. Justice Bingham. In this case, applications were filed for review of the coroner’s decision to not press manslaughter charges against a company or its directors. It was stated that mens rea as required for manslaughter can be established against a corporation. A landmark judgment in this area is that of R v. P.&O. European Ferries (Dover) Ltd, wherein Mr. Justice Turner recognised that a company can be held liable for manslaughter. However, in this particular case, the ferry company could not be held liable due to lack of proof in attributing the necessary mens rea to a senior officer of the company. In R v. Adomako, the House of Lords held that ‘the ordinary principles of the law of negligence apply to ascertain whether or not the defendant has been in breach of a duty of care towards the victim who has died. The first successful prosecution of a company for manslaughter happened in 1994.
The Law Commission published a report on ‘Involuntary Manslaughter’. It proposed a new offence of corporate killing wherein it would have to be proved whether the conduct in question amounted to a failure to ensure safety in the management or organisation of the corporation’s activities (or management failure) and the failure constitutes conduct falling far below what can reasonably be expected of the corporation in the circumstances. Following a consultation paper by the Government on ‘Reforming the Law on Involuntary Manslaughter: The Government’s Proposal’ in 2000, the draft Bill was finally published on 23 March, 2005. After discussions and wide scrutiny, the Bill was finally passed as the Corporate Manslaughter and Corporate Homicide Act, 2007. This came into effect on April 6, 2008.
The Corporate Manslaughter and Corporate Homicide Act, 2007
-Key Features of the Act
The offence of corporate manslaughter
An organisation can be held guilty of an offence of corporate manslaughter if its activities are managed or organised by the senior management in such a manner so as to cause death of a person and are grossly in breach of the duty of care owed by the said organisation to the deceased.
The organisations have been given a very broad ambit. It includes a corporation, police force, partnership, trade union/employers’ association, and certain departments listed in schedule I.
Determining ‘gross’ breach of duty
The breach of duty would be gross if the conduct falls far below what can reasonably be expected of the organisation in the circumstances. In order to determine whether there was a gross breach of relevant duty or not, the jury has been directed to look at any health and safety legislation that the organisation failed to comply with. They may also consider any such evidences which show that such breach was encouraged or tolerated.
The UK law expressly states that an individual cannot be guilty of aiding, abetting, counselling or procuring the commission of an offence of corporate manslaughter. However, they can still be prosecuted under the common law of negligence or other legislations pertaining to health and safety.
There are three categories of sanctions provided by the 2007 Act.
Under this, the court may order a convicted organisation to take specified steps to remedy the breach. This is restorative in nature.
The court can ask a convicted organisation to publicise the same specifying the particulars of the offence and any other additional orders as mandated by the court.
If an organisation in convicted under this Act, it will be liable to pay fine. There is no upper limit to what the fine may be but as identified in the sentencing guidelines published in February 2010, this should be up to 10% of the annual turnover of the offending corporation.
Prosecution under the Act
On February 15th 2011 at Winchester Crown Court, Cotswold Geotechnical Holdings Ltd became the first organisation to be convicted under the Act after a falling wall on a building site operated by the defendant corporation crushed an employee, a Mr Alex Wright, to death. They were subsequently fined a sum of £385,000.6 The conviction has since been confirmed on appeal, and the Act is now being used to prosecute Lion Steel Ltd after one of their builders, a Mr Steven Berry, died falling through a roof panel whilst working at the defendant’s building sites.
2.2 The law in the United States of America
The evolution of the concept of corporate manslaughter in United States started with a legislation passed by New Jersey in 1837 whereby corporations could be charged with serious crimes but this legislation failed to mention the offences for which the corporations could be indictable.
The Courts passed judgments in cases that came up before them by using this legislation and held that the corporations could be held criminally liable. Like in State v. Morris and Essex R.R, the Court held the corporation liable for causing criminal nuisance but also noted that as a corporation cannot form the ‘corrupt intent’ therefore it cannot be liable for certain crimes like murder, perjury etc. Then came State v. Gilmore, where the Courts held a corporation criminally liable for wrongful death and imposed fine on the corporation.
Then again the attitude of the Courts shifted to the earlier stand that corporations cannot be held criminally liable as they cannot have criminal intent and the concept of vicarious liability cannot be applied to hold the principal liable for the criminal acts of the agent as it is ultra vires. Finally in United States v. Van Schaick, the Court held the corporation liable for manslaughter. In this case a steamboat caught fire and the 900 people in the boat drowned while escaping the flames. The court held that the corporation of the steam boat navigated without life preservers and caused death thereby.
A landmark case in United States regarding corporate manslaughter is New York Cent. ; Hudson River R.R. Co. v. United States, the Supreme Court held that a corporation can be criminally liable for the acts of its agent who acts within the scope of his employment and justice requires as such. But despite this landmark judgement there were a number of cases were the Courts have been reluctant to hold the corporations liable for manslaughter as they are not capable of having criminal intent which is an essential ingredient of a crime.
Then again in 1980s the Courts attitude changed. In Commonwealth v. Fortner LP Gas Co., the defendant was a corporation and its driver due to defective brakes fatally killed a child. The Court held the corporation criminally liable for manslaughter. Similarly in Vaughn ; Sons, Inc. v. State, the Court while holding the corporation liable for criminally negligent homicide under the Texas Penal Code made a note that the emerging view in corporate criminal liability is that corporations can be held liable for specific intent crimes and offences of criminal negligence.
It can be seen the attitude of the courts kept swinging and finally it is now the accepted view that corporations can be held liable for manslaughter. This is clear the decision of the Court in People v O’Neil where two corporations namely, Film Recovery Systems and Metallic Mining Systems, were fined US$48,000 for causing the death of a worker employed to clean vats of cyanide as they failed to inform the employees about the toxicity of the substance they were dealing with and they even scrapped the warning labels from the vats.
After a number of case laws holding a Corporation liable for manslaughter a need was felt to introduce a statute in this regard. Therefore, State Rep. Dan Stevenson of Indiana state had announced that he would draft a bill titled the Corporate Manslaughter Act and ensure that it is passed. The Bill was introduced in 2006 in the General Assembly of the State of Indiana and aims to hold the corporations liable for manslaughter of their employees. Important feature of the Bill is that it targets the corporate entities and their agents. It provides that if an employer or agent of the employer, recklessly or knowingly or intentionally violates a rule adopted under this Bill and causes bodily injury to the employee commits a class A misdemeanour. Also provides that if an employer or agent recklessly, or knowingly or intentionally violates a rule adopted under this Bill and causes the death of an employee commits corporate manslaughter a class D felony and class C felony respectively.
2.3 The law in Canada
(a) Prior position in Canada
Like other jurisdictions, in Canada also, a company has been attributed legal personality. This means that it qualifies as a person for all legal matters. Traditionally, there were two methods of holding a company criminally liable in Canada. One is the doctrine of respondent superior also known as vicarious liability and the other is the identification doctrine. The concept of vicarious liability finds its origin in the tort law. Under this, the master (or the company) is held responsible for the acts of the servant (the employee). The Canadian law on corporate criminal liability follows the identification doctrine. This focuses on identifying the ‘directing mind’ of the company so that the intention of such a mind can be attributed to the company and therefore held liable. The identification doctrine was applied in the 1941 Canadian case of R v. Fane Robinson. In this case, the company and its two directors were convicted of the crimes of conspiracy to defraud and obtaining money by false pretences. The two directors were held to be the directing mind and will of the company.
Another leading case on corporate criminal liability in Canada is Canadian Dredge and Dock Co. v. The Queen, in which the Supreme Court of Canada accepted the identification doctrine as the basis for liability. The Canadian court in the latter case unlike the decision given by the House of Lords in Tesco Supermarkets Ltd. v. Nattrass, identified the directing mind at the lower level of the company. However, in a later case of The Rhone v. The Peter A.B. Widener, the Supreme Court of Canada observed that the directing mind should be the one who has authority to make decisions based on corporate policy and not just the person responsible for implementing such policy on an operational basis.
The identification theory is not bereft of criticism and therefore a need for reform was felt in the Canadian law. This was augmented by the 1991 Westray Mine disaster in Nova Scotia which led to death of 26 people. Many attempts were made to prosecute the company and other perpetrators but to no effect. An inquiry was conducted by Mr. Justice Peter Richard of the Nova Scotia Supreme Court. It made 74 recommendations for various legislative as well as administrative changes. The 73rd recommendation of the report suggested that necessary amendments should be made to the legislation in order to ensure that corporate executives and directors are held adequately accountable for safety at workplace. This served as the catalyst for reforms that followed.
Almost after 11 years of this unfortunate incident, Bill C-45 was tabled in the Canadian Parliament to amend the Canadian Criminal Code It finally came into force on March 31, 2004. This Bill intends to lay down the law with respect to criminal liability of corporations and their sentencing. Before tabling the Bill, it was deliberated whether a specific legislation for corporate manslaughter needs to be in place but this was not accepted.
(b)Current position in Canada: Bill C-45
Under the Canadian Criminal Code, both individual as well as corporate liability is contained. Bill C-45 deals only with the criminal responsibility of the organization and makes no change in the current law dealing with the personal liability of directors, officers and employees. Directors and officers, like anyone else, are liable for all crimes that they commit personally, whatever the context.
Subject of the offence – an organization
Bill C-45 refers to an ‘organization’ and then defines it to mean a public body, a body corporate, a society, a company. It also includes a firm, a partnership, a trade union or an association of persons created for a common purpose. These new provisions that define an organization will also apply to other groups that have an operational structure and make themselves known to the public.
Defining the ‘directing mind’
It has tried to overcome the identification doctrine by replacing a ‘directing mind’ with ‘senior officer’. Senior officers are defined to include all individuals who have an important role in setting policy or managing significant aspects of the organization’s activities. The latter part of the definition is an addition to the Canadian law prior to introduction of the Bill C-45. It focuses on the function of the officers rather than particular titles. Through such a definition, not only the top level management people can be held liable but also those who are involved in day-to-day activities of the organization.
In addition, the new definition makes it clear that the directors, the chief executive officer and the chief financial officer of a corporation are, by virtue of the position they hold, automatically ‘senior officers’.
As in every crime, the prosecution in this case also has to prove the actus reus and the mens rea related to the prohibited act. Bill C-45 differentiates between crimes requiring the Crown to prove negligence and crimes requiring the Crown to prove knowledge or intent, and establishes separate rules for each.
For negligence-based crimes, the mental element of the offence is attributable to corporations and other organizations through the aggregate fault of the organization’s senior officers (which will include those members of management with operational, as well as policy-making, authority).
In general, for an organization to be found guilty of committing a crime of negligence, the Crown will have to show that employees of the organization committed the act and that a senior officer should have taken reasonable steps to prevent them from doing so.
With respect to the physical element of the crime, Bill C-45 provides that an organization is responsible for the negligent acts or omissions of its representative. The Bill provides that the conduct of two or more representatives can be combined to constitute the offence. It is not therefore necessary that a single representative commit the entire act. As for the intent necessary to find the organization guilty, the proposed amendments under Bill C-45 would require that the senior officer responsible or senior officers collectively, must have departed markedly from the standard of care that could be expected. The organization might be convicted if, for example, the director of safety systems failed to give the one negligent employee basic training necessary to perform the job.
For crimes of intent or recklessness, criminal intent is attributable to a corporation or other organization where a senior officer is a party to the offence, or where a senior officer has knowledge of the commission of the offence by other members of the organization and fails to take all reasonable steps to prevent or stop the commission of the offence.
The proposed reforms in Bill C-45 sets out three ways an organization can commit a crime requiring an awareness of a fact or a specified intent. In all cases, the focus is on a senior officer who must intend to benefit the organization at least to some degree. The most obvious way for an organization to be criminally responsible is if the senior officer actually committed the crime for the direct benefit of the organization. However, senior officers may direct others to undertake such dishonest work. The Bill therefore makes it clear that the organization is guilty if the senior officer has the necessary intent, but subordinates carry out the actual physical act. Finally, an organization would be guilty of a crime if a senior officer knows employees are going to commit an offence but does not stop them because he wants the organization to benefit from the crime.
Corporations cannot be imprisoned so the Criminal Code provides for fines when corporations are convicted of crimes. Bill C-45 has increased the maximum fine on an organization for a summary conviction offence to $100,000. For the more serious, indictable offences, the Code already provided no limit on the fine that can be imposed on an organization.
Bill C-45 has added more factors that a court should consider in fining an organization. The gravity of the crime, including the extent of injury caused or whether death results, were already considered when determining sentencing. The factors introduced by the Bill are
Moral blameworthiness – the fine should be higher when the economic advantage gained by committing the crime is higher and it should also be directly proportional to the degree of planning involved.
Public interest – the fine should not be as high as to result in bankruptcy of the organization. The cost of investigation and prosecution should be taken into account so as not to burden the public unnecessarily.
The Bill puts in the Code a specific section dealing with probation orders for organizations. The list of conditions the judge can impose includes:
providing restitution to victims of the offence to emphasize that their losses should be uppermost in the sentencing judge’s mind;
requiring the corporation to inform the public of the offence, the sentence imposed and the remedial measures being undertaken by the organization. Having to run ads in the media admitting to criminal acts could have a serious effect on an organization’s business.
The offence of corporate criminal liability does not find place in Germany. The concept of guilt (Schuldprinzip) is considered to be personal in character and therefore a legal body, such as a company, cannot be said to fulfil the condition of possession guilt, a pre-requisite for establishing criminal liability. However, Germany does acknowledge administrative liability of such legal bodies. According to German law, the acts of legal representatives and company directors can be attributed to the corporation only if they have acted in these capacities. German law requires that the offence be capable of being qualified as Verbandsunrecht, which means that the wrongful act (either a criminal offence or an Ordnungswidrigkeit) has to be linked with the corporation’s activities.
Under German law, the maximum fine (Verbandsgeldbusse) varies according to whether the conduct attributed to the corporation was a criminal offence (Straftat) or an administrative one (Ordnungswidrigkeit). In the case of deliberate criminal offences the maximum is DM 1 million, for non-intentional offences DM 500,000.F. However, these amounts should be increased if they are less than the ill-gotten gains.
Russia does not have any provision for recognition of corporate criminal liability. However, there are impending discussions which might in the near future come up with such a law. As per the existing Criminal Code of Russian Federation 1996, individuals may be held liable if they commit a crime for the benefit of the legal body but there exists no likelihood of punishing the legal entity as such. Like Germany, it does recognise administrative liabilities of a legal body.
ATTRIBUTING MENS REA TO A CORPORATION
3.1 Theory of Vicarious Liability
From late 1800s and through the early 1900s, this was the theory using which the Courts held the Company liable for the harm caused. The basis of this theory is Qui facit per alium, facit per se, which means that he who acts through another acts himself and respondeat superior (let the master answer). According to this theory, a company is liable for the harm caused by its employee while acting during the course of employment. In order to apply this theory two steps need to be followed:
It should be determined as to what constitutes the actus reus of the acts committed by the employee
The determined actus reus must be imputed on the Company due to employer-employee relationship.
This theory was used by the Courts in England and Wales for crimes in the nature of strict liability. The point to be noted here is that, in this period the Courts were of the view that corporations were incapable of committing homicide as they lacked requisite intent.
Identification theory, known as Alter Ego theory, was introduced by the Courts in the case of H.L. Bolton Co. v. TJ. Graham ; Sons in order to expand the scope of corporate criminal liability by holding the company liable for crimes that require intent. In H.L.Bolton case, the Court explained that a Company is like a human body with brain, nerves and hands. The managers and directors of the Company represent the directing will of the Company and control the actions of other employees. The employees of the Company represent the hands of the Company. They are just mere servants and agents and do not control the Company. Hence, the state of mind of the managers is the state of mind of the Company.
Identification theory is different from the theory of vicarious liability, in the sense it widens the ambit of criminal prosecution of Companies by holding them liable for offences that require mens rea. The Companies can be held vicariously liable for negligent acts or omissions on part of the servants of the Company but not for criminal liability for manslaughter. To hold the Company liable for in such cases it has to be established that the person acted not for but as the Company itself. This difference was clearly explained by the Courts in R v HM Coroner for East Kent, Exparte Spooner ; Others
Concept of Reactive Fault
The Concept of reactive fault has been combined with identification theory in the Corporate Manslaughter and Corporate Homicide Act. It is used by Russian law with regard to administrative liability. Reactive fault means that the Company failed to take adequate preventive measures before the criminal act was committed. Here, the mens rea is derived from the preceding neglect omission of the Company. But this concept also has a limitation as only senior management can be held liable.
This theory in influenced by the theory of vicarious liability and it was introduced by the Courts in United States. The Court in United States v Bank of New England, has beautifully explained this theory. The Court stated that as per principle of aggregation all the criminal acts and mens rea of various employees of the Company have to be summed up in order to hold the entire company criminally liable. For example, if A, B and C are employees of the Company X. then, the knowledge of A. B and C will be summed and imputed as the knowledge of the Company. This theory is useful in cases where the acts and mens rea of one employee is not sufficient to constitute a criminal offence. Therefore, the thoughts of different agents of the Company are linked together in order to create the required mental element. This theory takes into account the practical realities of the corporate decision-making. As there are different directors in a Company each of whom has specialised knowledge and responsibility therefore, when a at times it is important to aggregate the knowledge of two or more directors to create the needed mental element for holding the Company criminally liable.
The theory like the previous theories has its own limitations in the sense that the men rea requires mere knowledge of wrongdoing or negligence. Therefore, it becomes difficult when mens rea requires intention or recklessness. In such cases the Company will only be liable when one of the employees satisfies the required mens rea
FORMULATING A LAW ON COPORATE MANSLAUGHTER IN INDIA
4.4 Why do we need a law on corporate manslaughter?
India does not have any specific legislation or specific offence regarding corporate manslaughter like that present in U.K , Australia Capital Territory and other jurisdictions as already discussed before. These countries enacted laws after they experienced incidents/accidents but there is no need for India to wait for an accident to happen to make a law, a stitch in time saves nine. Also an important fact to be taken into account is that companies are becoming very powerful these days due to globalisation and industrialisation. Most of the business takes place in company form of organisation in the present world, and after liberalization the competition between the companies is increasing with each passing second. In such an environment of cut throat competition it becomes essential to make laws to prevent the companies from resorting to unscrupulous practices.
The following section discusses the salient features of a proposed corporate manslaughter law in India. This has been done after a careful analysis of the law in various jurisdictions and adapting the best facets of such laws to the Indian context.
Common OR Specific legislation?
UK enacted the Corporate Manslaughter and Corporate Homicide Act in 2007. The latter only deals with the offence of manslaughter. Apart from the 2007 legislation on corporate manslaughter, the UK Health and Safety Commission (HSC) helps to set the regulatory standards that company must meet in order to satisfy the statutory provisions of the Health and Safety at Work Act. The HSC are, typically, responsible for the investigation of any violations including cases of corporate manslaughter where a senior manager can be shown to be guilty of gross negligence manslaughter. The UK Act has been criticised as restrictive in nature. Rather than tackling the generic problem of corporate criminality, the Act is limited to one statistically minor dimension of a much more complex problem – injuries and deaths caused by an organisation’s blatant disregard for the safety and welfare of employees, consumers and members of the public.
The Canadian law, on the other hand is of wide import. Canada amended its Criminal Code to include provisions on criminal liability of corporations and sentencing of corporations. it is not limited to the offence of manslaughter. Though, Canada has its Labour Code and provincial labour statutes which generally require employers to ensure the safety and health of their employees in the work place. These regulatory statutes also provide more complete safety regimes and complaints and inspection procedures. Breach of these statutory obligations is usually a punishable offence. However, it still opted for corporate criminal liability because a narrowly tailored offence may be unable to respond to other types of corporate malfeasance, such as environmental transgressions or the manufacture and distribution of dangerous consumer products. Another possible problem with creating specific offences is the difficulty associated with identifying and enumerating all possible forms of misconduct deserving of specific offence. In this regard, it should be noted that the criminal law is a law of general application which normally sets down basic minimum standards applicable to everyone.
As per some of the statistics, almost 30 people died in the Sivasaki factory fire in Tamil Nadu recently while more than 45 are said to have suffered serious injuries. In one of the worst disasters to have taken place in India, the Bhopal gas tragedy, close to 20,000 people died while some 5.7 lakh people suffered serious bodily damage. It is clear from the above two instances that when industrial accidents happen, the number of injured people is on an average more than the ones who die. Also, on a routine basis, the chances of a person getting injured while working in a corporation are more than a person getting killed. It is true that a specialized offence does provide clarity and certainty in the application of the law to corporations and targets the most serious kinds of behaviour. However, it is not clear what the value would be if the victims of corporate malfeasance are injured and no death results, or for other types of malfeasance such as fraud or environmental crimes. The creation of an offence of corporate manslaughter seeks to address all three issues by providing for a workplace homicide offence that facilitates the prosecution of corporations and imposes increased and more effective penalties.
It is in this context the researchers suggest that instead of a specific legislation on corporate manslaughter as has been enacted in UK and Australia, the Indian legislature should look towards legislating provisions on corporate criminal liability as a whole in the Indian Penal Code itself as has been the case in Canada.
Who all are covered?
After having defined the offence, it becomes imperative to focus on the aspect of defining the entity sought to be covered by these provisions. It could be as narrow as a company or it could be broadly defined to include other organizations as well. In the absence of a codified law, the criminal liability has been restricted to companies. In this regard, the researchers have opted to define it broadly.
Corporate criminal liability should apply to organizations. The organization may be defined as “a public body, a body corporate, a society, a company, a firm, a partnership, a trade union or an association of persons created for a common purpose.” This definition should exclude the acts of defence forces.
This is a very broad definition and includes not just companies but any and every association of persons. This definition of organization will also apply to other groups that have an operational structure and make themselves known to the public. This will ensure the law does not apply to an informal group that gets together regularly.
The Method of holding a Corporation liable
The offence of corporate manslaughter as described above is a mixture of the theory of Vicarious Liability, Identification doctrine and Aggregation theory. As already discussed in the second chapter doctrine of vicarious liability means that the company is held liable for the acts of its employees. As per identification doctrine the criminal intent of the conduct and intent of a person who controls the company can be imputed to the company and aggregation theory states that after summing up the acts and mens rea of all the employees of the company it results in an offence then it can be imputed to the company.
These theories have been mixed in order to ensure that by the acts of employees of the company and the directors who direct the mind and will of the company, criminal liability can be imputed on the company for any action that leads to an offence.
To hold a corporation liable the following steps have to be followed accordingly.
Divide the crime into actus reus and mens rea.
Actus Reus of an offence may be defined as a conduct, result of conduct or a circumstance in which conduct or a result of conduct occurs. Conduct means an act, an omission to perform an act or a state of affairs.
Now, this Actus reus can be attributed to the company if it is committed by an employee of the company by using the principle of vicarious liability in criminal law.
Mental element of an offence in relation to the Actus Reus may be recklessness, intention, knowledge or negligence.
Now, where the mental element of an offence is recklessness, intention or knowledge then it can be attributed to the company in two ways:
By using the identification doctrine, if the board of directors or high managerial staff of the company expressly, tacitly or impliedly authorised or permitted the commission of the offence, or
Corporate culture to link the requisite mens rea of the offence to the company. Corporate culture means an attitude, policy, rule, course of conduct or practice existing within the body corporate generally or in the part of the body corporate in which the relevant activities takes place. This will enable to establish the criminal liability of the company by its administration, its policies or its course of conduct in cases where identification doctrine is difficult to apply.
Where the mental element of the offence is negligence then by using the theory of aggregation, if the conduct of the employees, agents or officers of a company, seen as a whole results in negligence then it can be attributed to the company.
Provision for dual liability
It is truly enough said that a corporation has no conscience; but a corporation of conscientious men is a corporation with a conscience.
One of the major criticisms of the UK Act is that it excludes the liability of individuals. This might weaken the deterrence factor. This provision seems to be in conflict with the way the offence has been defined. The offence of corporate manslaughter requires that the breach of duty is a result of the way activities are organised by the senior management. This indicates that certain individuals would be responsible for the death of the victim. Even in such a scenario, letting them goes scot free is a patent contradiction.
Secondary liability of individuals needs to be present. Some duty on directors or the staff is a requirement to assure that a corporate culture that takes into account relevant safety and health laws that are already in place.
Another relevant facet of any criminal liability provision it to penalise the entity once the liability has been established. The main form of penalising a person when convicted of a criminal offence is to put the person behind bars. However, the major problem faced while dealing with corporate criminal liability is that an organization cannot be imprisoned. Imprisonment can only be talked of while dealing with delinquent directors and other employees. Therefore, alternate methods of penalising an organization have to be resorted to. Usually, there are three motives for enacting a criminal law – retribution, deterrence, and rehabilitation.
A lot of people argue against punishing a company since the ultimate loss is that of the shareholders and the public at large. Drawing an analogy, even when an individual is punished, the effect is felt more by the people dependant on him. Besides, shareholders do share in the profits. Also, the company has been known to have civil liability. The researchers have identified four methods of imposing penalty on an organization which are discussed in the following section.
Though fines are an essential aspect of the penalty, they might not be very effective especially for a large corporation. Fines work on a cost-benefit analysis model. The fine should reflect the consequence of such a serious breach. They should ensure that the ones in the position of governance are fully aware of the need to have a safe environment to work in. Finally, the cost of being penalised should not be less than the benefit accrued by committing the offence/negligence. The corporation will seek to avoid the cost of criminal sanction if it exceeds the profits it is making. It is suggested that fine should be made directly proportional to the profits earned by the company.
A possible disadvantage of fines is the spill-over effect i.e. it may be passed on to consumers by a rise in the price of the product produced by the offending company. Hence, for effective punishments, the need for a variety of sanctions is felt.
Adverse Publicity Orders
Under the UK Act, the court has the power to require the corporation to make a publicity order convicted of the offence. The researchers are of the view that this aspect of the legislation should be made a major part of the awareness campaign since it will have a tremendous deterrent effect. It is believed so, as the currently globalized world has rendered the reputation of a corporation valuable. Once lost, it will take years to rebuild, and the company may lose valuable customers, investors, and insurers. Recent research conducted by the Chartered Institute of Environmental Health (CIEH) revealed that 59% of businesses regarded a publicity order as a greater threat than a fine of any sort. The organization may be required to advertise the fact of its conviction and the terms therein. The organization should publicise the same in one national newspaper and one local daily. At the same time, it could be required to publish a notice in its annual report or distribute a notice to shareholders of the corporation.
Probation refers to penalties which involve the offender agreeing to comply with certain undertakings and being subject to a period of supervision. The corporation may be made subject to a period of probation if the death is a result of management failure or due to the lack of certain safety regulations in place. The corporation may be asked to form certain committees which would periodically submit reports to some supervisory authority.
This may include a remedial order to remedy the breach which has resulted in the death or damage/injury. The court might also ask the organization to address any deficiency in its set up through such an order so as to avoid such an incidence in the future.
Another form is community service orders which compel the offending organization to take up urban renewal projects, or cleaning up a river/land polluted by them. There are two objectives that community service orders seek to achieve –
To undo the harm caused by the offending act, and,
To remind the corporations of their duty towards society.’
For example, in the case of U.S. v. Danilow Paatry Corporation, the convicted bakeries were ordered to supply freshly baked goods absolutely free of cost to needy organisations for a year.
In the cases of very severe nature where there is no hope of remedying the loss or where the organization is a habitual offender and fails to act with due regard to everyone’s safety and well being despite repeated warnings, the organization should be laid to rest (wound up). This will ensure any further infractions on its part. However, the organization should be made to pay the fines and necessary compensation out of its assets.
While countries such as Germany, Russia have no provision for holding a company liable, others such as UK, Canada, Australia, US have a statutorily recognised offence to hold them liable. However, the law is not uniform in all these countries. As far as India is concerned, we still have not legislated upon this matter and it is the concern of the researchers that the same should be undertaken at the earliest but only after eliciting wide awareness and an informed debate. The researchers have suggested that the law on corporate criminal liability in India should be incorporated in the Indian Penal Code instead of a specific legislation on corporate manslaughter. Such a law should have a wide coverage including not just companies but other organizational entities as well. For imputing the liability, a mix of identification and aggregation theory and the principles of vicarious liability have been made use of. The corporate criminal liability law should also take into account the misdeeds by an individual so as not to render the law toothless. Finally, the penalty should be strict and keeping in tune with the deterrent effect. Fine should be imposed upon compulsorily. The organization should be asked to publicise the fact of its conviction and the other details about the same. Finally, if needed the court may ask the organization to undertake remedial measures or perform some sort of community service. The law should not be kept under wraps and proper awareness campaign for the same should be held. After all, we would not want the fate of such a law in India to resemble that of an unwanted pregnancy as Celia Wells remarked regarding the UK law. Hence, the hypothesis has been disproved since the law in the abovementioned countries with respect to corporate manslaughter is not uniform and India has no law on this subject.
Most of the jurisdictions in the world started with the attitude that company cannot have mens rea and therefore cannot be held criminally liable. Subsequently, a plethora of theories developed which made it possible to attribute mens rea to a company. The Courts using these theories shifted to a stage where they recognised a company to be capable to have mens rea and therefore can be held criminally liable. But then there was the problem of sentencing. As a company cannot be imprisoned therefore it could be held liable for offences that impose imprisonment or imprisonment and fine. This problem was answered by the courts by giving discretion to Judges to ignore the imprisonment and just impose fine in such cases where the offender is a company.
Therefore the present position in many jurisdictions around the world is that mens rea can be attributed to a company.