BACKGROUND: INSTITUTE OF DIRECTORS (IOD)

  The IoD is a non party-political organisation of individual members, whose aim is to help directors to fulfil their leadership responsibilities in businesses and other important organisations, also including the public and voluntary sectors. The majority of the membership is drawn from right across the business spectrum—from start-up companies and small or medium-sized enterprises, to directors from 75% of The Times Top 1000 Companies. There are some 54 000 IoD members, in organisations that collectively employ over 10 million people.

IOD COMMENTS: THE NEED FOR REFORM

  1.  The IoD has consistently expressed support for the principle of reform of the law relating to corporate manslaughter, since it was first publicly announced by the Government. For example, the IoD was quoted in a Home Office news release of 23 May 2000:

"We fully accept the need for tightening the law on this issue . . . We are happy to support these proposals which are a step in the right direction."

  2.  The IoD subsequently responded by letter to a Home Office consultation exercise on the topic, on 1 September 2000, and sent written comments on an associated initial regulatory impact assessment on 28 September 2002. After that there was a number of discussions between IoD Policy Unit staff and Home Office officials. This culminated at an IoD seminar held on 2 June 2005 at the IoD's premises 116 Pall Mall, London, at which two members of the bill team were present to address and explain the reform proposals to a gathering of IoD members and others. The IoD is grateful for the opportunity of having had continued contact over the period of development of the proposals and thereafter.

  3.  The IoD has long recognised the need for reform of the law, to enable convictions to be secured where the "identification" principle has proved inadequate, but where there have been very serious failings in the direction of the organisation in relation to the safety of employees and others, and the outcome of those failings is death.

IOD COMMENTS ON THE GOVERNMENT'S MARCH 2005 PROPOSALS: GENERAL POINTS

  4.  In the following reference is made to parts of the March 2005 publication (Cm 6497). Referring to the Foreword by the Home Secretary (on page 5 of the Home Office publication), we agree with the statement that the current law neither commands public confidence nor "provides offences that are clear and effective". What we wrote in September 2000 submission to the Home Office is still valid:

"The IoD acknowledges that the current state of the law on involuntary manslaughter is unsatisfactory. Public confidence in parts of the business community has been damaged as a result of some tragic and heavily publicised accidents. These accidents include the Herald of Free Enterprise (1987), the Marchioness (1989) and Lyme Bay Canoeing (1993) disasters and underground/rail accidents including the Kings Cross fire (1987), and the Clapham Junction (1988), Southall (1997) and . . . the Paddington Station (1999) disasters. Because of the current state of the law, which requires the presence of a "controlling mind", it has proved extremely difficult, if not impossible, to bring the directors to book for the flagrant breaches of health and safety which have been clearly occurred in some companies."

  5.  Referring again to the Foreword (p 5), we very much welcome the Government's intention "not . . . to propose legislation that would increase regulatory burdens, stifle entrepreneurial activity or create a risk averse culture". The members of the IoD and enterprises in general have no desire for an increase in regulation, as the IoD has commented on many occasions.

  6.  The IoD also welcomes the intention not to set new standards, but to link the reform proposals to existing health and safety law (p 5). The IoD promotes high standards among its members, who are leaders in their organisations. For example, the IoD has worked with the Health and Safety Executive to promote the importance of leadership in health and safety performance, and in promulgating examples of good practice in health and safety performance.

  7.  It is surmised that the long delay between the year 2000 proposals and the current 2005 Draft Bill was at least in part due to trying to include Crown and other public bodies within the scope of new legislation. The IoD would not want a situation where organisations carrying out analogous activity in the public and independent sectors (for example in healthcare) would be treated differently under a new law. Therefore the idea that there is proposed to be no general Crown immunity (p 5) is also welcome.

  8.  The IoD welcomes the intention that, as a "corporate offence tackling the specific problem of holding organisations to account", the offence would apply to the corporate body itself (p 7, paragraph 5 of the Home Office document). The deterrent of potential action against the corporate body would be entirely consistent within the range of reputational and corporate responsibility issues that are routinely faced by organisations, and which would be an appropriate "driver for ensuring safe working practices" (p 7, paragraph 6 of the document).

  9.  We concur with the Home Office view that "large companies with complex management structures have proved difficult to prosecute for manslaughter under the current law" (paragraph 9, p 8 of the document). The existing law means that manslaughter in cases of work-related deaths has been easier to prosecute successfully in small enterprises. The new proposals should lead to a more equitable treatment of incorporated enterprises of all sizes, even though there would still not be a level playing field because proving causation will still be easier in relation to small organisations, if only because the structures are simpler.

IOD COMMENTS ON THE GOVERNMENT'S MARCH 2005 PROPOSALS: SOME SPECIFIC POINTS

The offence

  10.  The IoD believes that the concept of management failure at a serious level is appropriate. It is essential that in adopting this approach it is clear that the law is not seeking to target any individual(s) within an organisation, but that the failure derives from organisational direction, policies and practices even if those are manifested in the actions of individuals.

  11.  It seems sensible to take as a starting point the current offence of gross negligence manslaughter and the applicability of a duty of care at common law: including those owed to employees, service users etc. [para. 17 of the Home Office document, pp 9-10, and as specified in clause 4(1) of the draft Bill, ibid, p 26]. It is appropriate that the offence requires there to be a duty of care owed to the deceased and also that the failure complained of amounts to a "gross breach" of that duty of care.

The scope of the offence

  12.  The approach that the new offence should apply in the same circumstances as the current offence of gross negligence manslaughter is the appropriate one. The change in the law is intended to close gaps in the application of that law, not to create a wider offence. Equally, it would be inappropriate if the offence were drafted to have a lesser scope.

  13.  The IoD welcomes the move away from blanket Crown immunity. It is appropriate that public sector bodies providing services are subject to the same regulatory regime as those in the private or voluntary sectors providing similar services. Equally, if a service, a "core public function", is to be excluded from the scope of the legislation, we agree that the same treatment should apply whether the service is carried out by a public, private or voluntary body. We believe that the scope of "core public functions" and the remaining areas of immunity should be kept under regular review.

  14.  While accepting that there are areas of public activity where for policy reasons it is determined that it is not appropriate for corporate manslaughter legislation to be the appropriate way of holding Government or public bodies to account, the IoD is not convinced by the argument set out in paragraph 18 that the "range of accountability mechanisms" to which they are subject provides a convincing argument. Companies and others are also subject to a range of accountability mechanisms: civil courts, shareholders, customers or financial institutions who can effectively withdraw the company's "licence to operate" even where there has been no prosecution. These are at least as potent as the measures available to investigate failings by public bodies.

  15.  It is not clear that some of the proposed exclusions from public sector liability should remain so excluded. The specific example cited—that of deaths of prisoners in custody (Home Office document, paragraph 22, p 11)—surely does not differ from deaths of people in the care of health or social services, which it is not proposed to be excluded from the scope of a new offence, notwithstanding the remarks in the Home Office document in paragraph 24 on page 11.

  16.  Since application to a public body is effected by inclusion in the Schedule to the Bill, where a new organisation is created that carries on a Crown function, it should be the norm that the statute establishing that body will include a provision applying the provisions of the corporate manslaughter legislation.

  17.  It does, however, appear reasonable to exclude the making of public policy decisions [Home Office document, paragraph 23, p 11 and draft bill, clause 4(2), ibid, pp 26-27]. It is inevitable that in the course of making decisions about allocation of scarce resources that trade-offs have to be made across the activity of an organisation. It would be wholly unrealistic to expect decision-makers to disproportionately allocate resources to one area of activity, without taking account of other policy aims and objectives. Indeed, were such a focus to develop it would not help tackle the risk-averse culture which many bodies, including the IoD and the Prime Minister, have advocated so doing with an eye to the success of the country within a global economy. Were a new offence to include reference to such allocative decision-making it could lead to a plethora of fruitless and ultimately unresolvable arguments as to which particular piece of policy-making (or indeed of the decision-making process itself) led to a death associated with an enterprise's activities. In making this point note that we are not suggesting that due procedures of corporate governance be ignored in an organisation's decision-making and accountability.

Management failure by senior managers

  18.  The definition of the appropriate level of failure to give rise to the offence is at the heart of the legislation. If this is not right the legislation will fail to be effective. The definition must be such that it achieves a better balance than the current law in the ability successfully to prosecute organisations of whatever size. We have pondered over whether it would be more appropriate to de-personalise the definition and refer to the level of the organisation at which the failure occurs, rather than to a "senior manager". On balance we consider that the approach in the Draft Bill is appropriate. It is particularly important to be able to "sub-divide" the organisation, both to limit the ability of organisations to avoid liability by means of management structures, and to facilitate distinguishing between organisational failings and individual culpability.

Gross breach and statutory criteria

  19.  The IoD believes that the concept of "conduct falling far below …" is appropriate. We do not subscribe to the view that this is too imprecise. It will be subject to judicial direction to juries and its interpretation will develop with case law precedent over time. This should be regarded as an advantage rather than as a failing.

  20.  Given this approach, we are not convinced that the "statutory criteria" are necessarily helpful. While health and safety legislation and guidance are factors to be taken into account, their specific mention could lead wider aspects of risk evaluation and management to be ignored. In relation to the specific items listed those in Clauses 2(a) and 2(b)(i) and (ii) cause no particular harm, but could simply come within the normal scope of judicial direction. It might be preferable to omit the specific reference to "health and safety legislation" and leave it as "legislation". Duty of care arises not only from health and safety law but also from other legislation, for example product safety legislation and environmental legislation. Our main concern is with Clause 2(b)(iii). If interpreted narrowly to mean financial profit and regarded because of its endorsement by statute as a prerequisite condition for conviction this could of itself effectively exclude all Crown bodies and a wide variety of other organisations such as National Health Service trusts from liability. At the very least the word profit should be changed, possibly to something on the lines of "benefit financial or otherwise". Our preference would be for the provision to be deleted.

  21.  As mentioned in paragraph 5 above the intention to not create new duties, but to make links with existing standards of health and safety legislation, is welcome. However as a body of case law develops it may help clarify any distinction between the new offence and existing health and safety law.

APPLICATION

Corporations

  22.  The law should apply in a manner such that the manner in which corporations structure their organisations does not permit them to avoid liability. The definition of the "relevant duty of care" will mean that many parent companies will not be liable in respect of the death of employees, since these will be employed at subsidiary level. However, this is not entirely negative in effect since it will in many cases be easier to prove the necessary senior management failure in the subsidiary company.

Unincorporated bodies

  23.  The area of omission that now causes us most concern is that of unincorporated bodies. We would have preferred the draft Bill to adopt the 2000 consultation paper approach of liability attaching to "undertakings". As mentioned under "Scope" the reform of the law is intended to close gaps in the applicability of the current law of gross negligence manslaughter. We are not convinced that there is a fundamental difference between including types of organisation to which that law does not apply than in ensuring that the law can be applied equally across the range of a type of organisation to which the present law does apply. If the law were to apply to unincorporated bodies, it would be for those bodies to determine whether their structure and constitution provided an appropriate level of protection for individuals whom they did not wish to be subject to potential loss.

  24.  We consider that there are grounds for considering application of a new law to unincorporated bodies. Many of these employ people. Their operations are not, as far as their customers, employees or users of their services are concerned, distinguishable in kind from those of incorporated bodies. Their legal form is usually invisible and inconsequential as far as their operations are concerned. Other laws apply to unincorporated bodies, such as the Disability Discrimination Act 1995. Therefore we do not accept the proposition (Home Office document, paragraph 43, p 16) that incorporated bodies should not be included.

Individuals

  25.  The IoD fully supports the approach to individual liability.

OTHER ISSUES

Causation

  26.  The IoD fully supports the approach to causation.

Sanctions

  27.  We agree that the basic sanction should be a financial penalty, and that the fines should be very substantial in all cases.

  28.  We are not, however, convinced by the arguments that fining a Crown body serves little purpose. The same arguments about ability to continue to provide services apply to many other organisations that will be subject to fines under the Bill. Although there may be recycling of money back to HM Treasury when a fine is imposed on a public body, there should not be a presumption that the money is then recycled back to the Crown body that suffered the penalty. As with any other organisation it should have to meet the fine by effecting other savings. One problem that is being sought to be addressed by the legislation is the feeling that such a serious failing as causing death renders the perpetrator subject to nothing more than a slap on the wrist. It would be wrong if this were perpetuated for Crown bodies.

  29.  We welcome the ability for the courts to impose remedial orders. These should include the ability to impose specified training requirements on senior managers.

  30.  Another area that might be considered is community service type orders. Although the offence is directed at the organisation, not the individual, those identified as being part of the senior management failing could be required to participate in such schemes.

Extent

  31.  Although leading to lacunae in the application of the law, the IoD recognises the difficulties in extending the territorial extent of the legislation. One area that might be considered for possible extension would be where the employment was normally based in the United Kingdom or where the service was contracted for in England or Wales and subject to English law.

Investigation and prosecution

  32.  The IoD fully supports the approach to investigation and prosecution.

Scotland and Northern Ireland

  33.  It is hoped that directly comparable legislation will be brought forward at an early date in Scotland and Northern Ireland.

Regulatory impact assessment

  34.  We do not have numerical estimates for a cost-benefit analysis of the Home Office proposals. Therefore we cannot provide these for the regulatory impact assessment of the Government's draft bill. The supposition that any extra costs would lie with organisations that did not already have adequate health and safety management arrangements (paragraph 22 on page 7 of Corporate Manslaughter: A Regulatory Impact Assessment of the Government's Draft Bill) seems reasonable.

  35.  The IoD is willing to take part in the planned Parliamentary pre-legislative scrutiny referred to in paragraph 64 on page 21 of the Home Office document.

17 June 2005