ALRC Report on Corporate Criminal Responsibility Tabled in Federal Parliament

Tuesday 1 September 2020 @ 3.35 p.m. | Corporate & Regulatory | Crime | Legal Research

On 31 August 2020, Attorney-General Christian Porter tabled the Australian Law Reform Commission’s final report on Australia’s corporate criminal responsibility regime (“the Report”) in the Federal Parliament. The Report was commissioned in order to review the current legislation on both its current effectiveness as a deterrent against corporate crime and its future ability to maintain protections for consumers.

The Australian Law Reform Commission (“ALRC”) was commissioned to do this review on 10 April 2019. The Report was submitted to the Attorney-General on 29 April 2020, prior to its publication at tabling. The Report contained 20 recommendations for reform by the ALRC.

The Report was commissioned at a time of renewed focus on consumer protection against corporate wrongdoings. It follows the release of the Final Report of the Australian Securities and Investments Commission Enforcement Taskforce (“the ASIC Report”) in December 2017, and the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (“the Financial Services Royal Commission) in February 2019. Both the ASIC Report and the Financial Services Royal Commission were considered in the Report.

The recommendations of the ASIC Report prior to its publication were discussed in an earlier Timebase article. The Financial Services Royal Commission and its interim report were also discussed in an earlier Timebase article.

The ALRC Report

One of the main issues that the ALRC considered in its Report is the current corporate criminal liability regime. Part 2.5 of the Criminal Code Act 1995 (“the Criminal Code”), in particular, sets out the statutory framework for attributing criminal responsibility to corporate bodies for offences. Under the Criminal Code, in order to establish responsibility, both physical and fault elements must be established. However, the ALRC notes that in establishing the fault element, a high managerial agent within the corporation must be shown to have the necessary state of mind. This test can be disproportionately more difficult to apply to large corporations rather than in smaller corporations, resulting in inequality between different size corporations.

Furthermore, Part 2.5 of the Criminal Code is not the only way to attribute criminal liability to corporations. For example, financial services are principally regulated by Chapter 7 of the Corporations Act 2001 (Cth) (“the Corporations Act”). Section 769B of the Corporations Act provides for its own model of corporate criminal attribution in regards to financial service offences.

Recommendations 5 to 7 of the Report suggests reforms that would address these concerns. Recommendation 5 suggests that statutory provisions that exclude the application of Part 2.5 of the Criminal Code be repealed, unless the alternative method of attribution is shown to be necessary in those circumstances. Recommendations 6 and 7 suggest amendments to the method of establishing the physical and fault elements of Part 2.5 of the Criminal Code in order to clarify what needs to be established. Recommendation 7 also suggests the introduction of a defence for corporations which have taken reasonable precautions.

Broadly, in its Report the ALRC found that corporations were not adequately held to account for serious corporate misconduct as there was no principled limit on the type of misconduct that was to be treated as criminal. If corporations were found to be committing corporate misconduct, the ALRC also found that the consequences were inadequate, with civil penalties seen as less effective and treated as simply a cost of doing business.

Some of the other recommendations made by the ALRC include:

  • Developing national principles and policies for the collection, maintenance, and dissemination of criminal justice data (recommendation 1)
  • No longer using infringement notices as an enforcement response for corporate criminal offences (recommendation 3)
  • Introduction of new criminal offence provisions for corporations will require a public explanation from the government as to why it is appropriate and necessary (recommendation 4)
  • New criminal laws are needed in order to address systematic misconduct and behaviour that result in multiple contraventions of civil penalty provisions (recommendation 8)
  • Developing a national debarment regime (recommendation 15)

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