knowledge 15 April 2020 |

Recent Barclays Acquittals and the Identification Doctrine; is it now time to implement Irish Law Reform Commission proposals?

Three senior Barclays executives were recently acquitted after a second trial at the Old Bailey. The defendants had faced charges of fraud, conspiracy, and unlawful financial assistance. The proceedings have taken a number of years, the first trial resulted in no verdict, and after the recent three month second trial the jury acquitted after only a few hours of deliberation.

The prosecution arose from the 2008 financial crisis when Barclays was unique from other UK banks in not seeking state aid, raising £11 billion funds from private investors, one of which was the state of Qatar.  Qatar sought higher fees than other funders, and this case revolved around the arrangements which were made to secure those funds by way of agreements for Qatar to provide services. The Serious Fraud Office, (“SFO”), alleged that the true amounts involved were not disclosed in the public market subscription documents, and that the agreements were not for genuine services, as the amounts involved were side commissions.

Press and legal commentary has revolved around a number of issues, including the case being described as the only UK prosecution of senior bank executives arising from the financial crisis. Commentators criticise the SFO for bringing the case and pressing on with it. The recent trial followed the Barclays corporate entity’s discharge from the proceedings in 2018 and the acquittal of former Barclays CEO John Varley in 2019, half way through the first trial.

The identification doctrine

A major ground for discussion in the UK is the difficulty of securing convictions against corporate bodies under the current identification “controlling mind” doctrine. Both the current and former directors of the SFO, Lisa Osofsky and David Green, have called for a reform of fraud law to incorporate more of a UK Bribery Act strict liability “failure to prevent fraud” type of corporate offence, which puts the burden on the corporate entity to prevent wrongdoing.  Lisa Osofsky has described the current regime as follows;

“We have a very antiquated system… In fraud cases I’ve got to have the controlling mind of a company before I can get a corporate in the dock. That’s a standard from the 1800s, when Mom and Pop ran companies. That’s not at all reflective of today’s world.” 

The position in Ireland

Ireland has also been giving consideration to this issue, which is of crucial importance to international and Irish companies and firms dealing with risk management reflecting Ireland’s modern corruption law and mandatory reporting regime.

In October 2018, the Irish Law Reform Commission published its Report on Regulatory Powers and Corporate Offences. The Report considered the current law in Ireland concerning the attribution of criminal liability for corporate crime and made a number of recommendations for its reform. It noted that there is uncertainty in Ireland about the correct test to apply to determine the criminal liability of corporate bodies and that this uncertainty may have contributed to a lack of prosecutions in Ireland of corporate bodies for subjective fault based offences in particular, which include offences that would be used to target commercial or economic wrongdoing, such as theft, fraud and bribery offences.¹

It recommended that the long-established but often criticised common law identification doctrine should be replaced. The identification doctrine attributes liability to a corporate body by requiring that the fault and conduct elements of the offence must be identified in a single natural person who operates high within its managerial structure, and is taken to have acted as the corporate body in committing the offence. The Commission noted that this model has been subject to significant criticism as it works best in cases where it is needed least (small businesses where a single person can often be identified as the key decision-maker) and works worst in cases where it is needed most (large businesses where decision-making is necessarily delegated to many persons).

The Commission recommended a new test to reflect the reality of how modern corporate bodies, especially large ones, actually operate; that is, by delegating corporate policy-making not just to one senior manager but to many managers. This new test of attribution should involve a ‘tracking’ approach, which requires that the fault element of the secondary offender, whether a single senior manager or more than one senior manager, should track that of the principal offender, the corporate body. It said that the precise calibration of this model would depend on the nature of the fault element of an offence; that is, whether it was a subjective fault offence, an objective fault offence, or a no-fault offence.

The Commission also concluded that the complicity of managerial agents in corporate offending was at risk of under-criminalisation in certain circumstances and recommended the introduction of a new statutory scheme to target the complicity of certain managerial agents, who exercise a defined level of control or authority over the conduct of the corporate body and its agents. Where that control and authority operates in a manner that culpably contributes to corporate offending, this new scheme allows for the imposition of derivative criminal liability.

In February 2019, the Oireachtas (Irish Parliament) Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach discussed the Report and its recommendations. The recommendations await implementation though recent experiences in the UK may give renewed impetus to reform in this jurisdiction.

How can we help?

Our Investigations and White Collar Crime Team have significant experience in advising clients on a variety of issues in and around corporate criminal liability and would be pleased to provide further information. Alternatively, your usual contact in McCann FitzGerald would be happy to assist.