The Attribution Game—Corporate Fault and Attribution of Criminal Responsibility

On 31 August 2020, the Australian Law Reform Commission’s Final Report on Corporate Criminal Responsibility was tabled in the Australian Parliament. The ALRC made 20 recommendations to strengthen and simplify Australia’s federal corporate criminal responsibility regime, including recommendations to improve the principles for attribution of criminal responsibility to corporations.

A prominent theme in the Report is that both theoretical and practical difficulties in applying the criminal law to corporations remain. These manifest in debates about attribution. This post considers the links between attribution methods and the theoretical foundations of corporate criminal law, and explains how the ALRC’s recommendations relating to attribution methods conceptualise corporate fault.

The ALRC’s recent work may provide a useful comparative perspective for participants in the upcoming law reform debate in the UK, given that the Law Commission of England and Wales has now announced a project on Corporate Criminal Liability.

Difficulties in applying criminal law to corporations

Historically, it was said that a corporation could not be guilty of a crime. The criminal law’s initial focus was on the culpability of individuals, as reflected not only in their physical actions but in their ‘state of mind’.  Eventually, criminal law was extended to corporations. Much of the difficulty surrounding the criminal responsibility of corporations stems from the fact that a corporation is an artificial entity created by law, not a natural person. What does it mean for the corporation to have the ‘guilty mind’ necessary to commit traditional criminal offences? I have argued elsewhere that the question whether a corporation can be criminally responsible is more a question of the capacity the law ascribes to a corporation as a juristic entity, rather than one about whether the law treats a corporation as an entity at all.

At the same time, it is clear that corporations are comprised of, and act through, individuals. However, they can also act or make decisions that are distinct from those of any one individual. Decision-making in large multinational corporations is necessarily diffuse, for example. Principles of attribution are necessary to attribute the acts and states of minds of an individual, or individuals, to a corporation in order to establish its criminal responsibility. These do not produce a perfect fit. Attribution methods are critical to how we conceptualise corporate fault. Different models embrace different conceptions of corporate fault.

The attribution landscape in Australia

At the federal level in Australia, corporate attribution is complex and varied. The default method of attribution is the holistic statutory model contained in Part 2.5 of the Criminal Code (Cth). It attributes to the corporation a physical element committed by an employee, agent, or officer, acting within the actual or apparent scope of his or her employment, or within his or her actual or apparent authority (s 12.2). As to fault elements—for fault elements of intention, knowledge, and recklessness—it focuses on whether the corporation authorised or permitted the commission of the offence. This may be proved through the board of directors, a high managerial agent, or, innovatively, through corporate culture (s 12.3).

Although intended to be the default method, the majority of federal legislation excludes Part 2.5.  Most statutes contain an attribution method based upon what the ALRC has termed ‘the TPA Model’, which originated in s 84 of the Trade Practices 1974 (Cth) (now the Competition and Consumer Act 2010 (Cth)). This method of attribution deems the states of mind and conduct of a director, employee, or agent to be those of the company—it is a statutory expansion of identification theory. While the TPA Model predominates, it has not been legislated in a consistent form.

Options for reform

The ALRC recommended that there should be a single legislative method of attribution, unless a bespoke approach is necessary in the particular context. It adopted six principles for determining a suitable single legislative method of attribution. In addition, the ALRC recommended the following specific reforms to corporate attribution principles.

Attribution of physical elements

The ALRC recommended that a physical element of an offence should be taken to be committed by a body corporate if committed by:

1. an officer, employee, or agent of the body corporate, acting within actual or apparent authority; or
2. any person acting at the direction, or with the agreement or consent (express or implied), of an officer, employee, or agent of the body corporate, acting within actual or apparent authority.

Attribution of states of mind

The ALRC recommended two options for attribution of states of mind. According to Option 1 the ‘authorisation or permission’ of a physical element of an offence is able to be proved through:

1. the board of directors;
2. an officer, employee, or agent of the body corporate, acting within actual or apparent authority; or
3. corporate culture.

This approach widens the model from that in the existing Part 2.5, by permitting the states of minds of an ‘officer, employee, or agent’ to be considered, rather than only those of a ‘high managerial agent’. The ‘high managerial agent’ concept has been criticised as too narrow in the context of contemporary corporations. In addition, the ALRC recommended the removal of the ability to prove corporate fault on the basis of an absence of a culture of compliance.

Option 2, on the other hand, draws upon the TPA Model. Under it, to establish the corporation’s state of mind it is sufficient to show that:

1. one or more officers, employees, or agents of the body corporate, acting within actual or apparent authority, engaged in the relevant conduct, and had the relevant state of mind; or
2. one or more officers, employees, or agents of the body corporate, acting within actual or apparent authority, directed, agreed to, or consented to the relevant conduct, and had the relevant state of mind.

Option 2 focuses on the ‘officer, employee, or agent’ concept also used in Option 1, but its use is quite different. In Option 1, the ‘officer, employee, or agent’ concept is used as a means of proving authorisation or permission. In Option 2, the state of mind of the relevant officer, employee, or agent is equated to that of the corporation. In reality, Option 2 is broader. At the same time, it lacks the option to prove authorisation or permission through the board of directors or through corporate culture, as in Option 1. There is a need to prove that the relevant individual had the ‘guilty mind’.

Under Option 2, and also under Option 1 where the prosecution seeks to prove ‘authorisation or permission’ through an ‘officer, employee, or agent’, the recommended models include a defence of ‘reasonable precautions’. This is critical, as a corporation should not be guilty simply because an individual working for the corporation had the requisite state of mind. Some failure by the corporation itself is necessary. Otherwise, the model does not establish corporate fault.

Conclusion

Both options proposed by the ALRC conceptualise the fault of a corporation in different ways—by enabling the states of mind of different corporate actors to be ascribed to the corporation.

The UK does not have the proliferation of statutory attribution methods that presently exist at a federal level in Australian law. Instead, English law adheres to the common law identification theory that also operates at common law in Australia. While conceptually elegant, basic identification theory carries significant limitations. The attribution recommendations made by the ALRC provide two different conceptualisations of corporate fault that better reflect the realities of contemporary corporations. It may be that the greater sophistication of these statutory models is an attractive alternative to basic identification theory, as has been the case at federal level in Australia.

The original version of this post, written for an Australian audience, can be viewed here.
Samuel Walpole is an Adjunct Fellow at the University of Queensland and a Legal Consultant to the Australian Law Reform Commission. He was previously an associate at the Federal Court of Australia and Supreme Court of Queensland and studied as an Oxford-Hackney Scholar at Wadham College, Oxford. The views expressed in this post reflect solely the personal views of the author.