Corporate criminal provisions too complex

John Kavanagh

The law contains too many criminal provisions covering corporations and most of them are never enforced, according to an Australian Law Reform Commission report.

In its Corporate Criminal Responsibility report, the ALRC says Commonwealth law contains a variety of complex mechanisms for attributing criminal responsibility to corporations. It argues that the law should contain just one standard mechanism for attributing criminal responsibility to corporations.

The ALRC set out to answer a question raised by the Hayne royal commission: why corporations and their senior officers are not adequately held to account under the criminal law for serious misconduct.

It found that prosecutions of corporations, compared with individuals, for corporate crimes are extremely rare. Prosecutors withdraw a significantly higher number of charges against corporations than they withdraw against individuals for corporate crimes.

“This suggests that existing laws present real difficulties for prosecuting corporations,” the report says.

One reason for this is that there has been a proliferation of criminal offences applicable to corporations. The ALRC identified more than 3100 offences in 25 laws relevant to corporate misconduct.

This has created “unnecessary complexity and over-particularisation of offence provisions”, which may be allowing misconduct to go unchecked.

“Commonwealth law should contain just one standard mechanism for attributing criminal responsibility to corporations.”

Instead, “Commonwealth law contains a variety of complex mechanisms for attributing criminal responsibility to corporations.”

The report says there is a distinct purpose for corporate criminal responsibility, one that reserves the criminal law for instances of corporate misconduct that cannot be adequately regulated by civil penalties.

It should be a criminal offence for a corporation to engage in a system of conduct or a pattern of behaviour that leads to breaches of civil penalty provisions.

The ALRC has recommended that “the law should contain one clear method of determining when a corporation is responsible for a crime.”

A corporation should be criminally responsible for the conduct of a person acting on its behalf. It should apply to overseas misconduct. A corporation should have a defence of having taken reasonable precautions.

Enforcement is also a problem. Infringement notices, which the ALRC says are the equivalent of speeding tickets, are used regularly as an enforcement response to criminal offences committed by corporations.

The ALRC has recommended that infringement notices should not be available as an enforcement response to criminal offences committed by corporations, saying “they do not convey adequately the seriousness of criminal misconduct”.

It says repeated civil penalties may be regarded in some corporations as a “cost of doing business” and has recommended that sentencing options be widened beyond financial penalties to include non-participation in specified commercial activities, corrective action, community service and disclosure. It said courts should be able to consider victim impact statements.

“Courts should be able to make orders dissolving a corporation, if it is the only appropriate sentencing option and they should be able to make orders disqualifying a person from managing corporations if that person managed a corporation that has been dissolved by a court.”

It has recommended that the Australian and state government develop a national “debarment regime” to overcome the current situation, where each government has different rules about whether a corporation that has been convicted of a criminal offence can be awarded contracts for government work.

The ALRC says there is insufficient data relating to corporate crime, which obscures the nature and extent of corporate crime. It wants to see national polices for the collection and dissemination of corporate criminal justice data.