In Canada, Prime Minister Justin Trudeau and his federal Liberal government have been ensnared in a now long-running scandal arising from much publicized allegations that the government, including the Prime Minister himself, improperly attempted to interfere in the ongoing criminal case against SNC-Lavalin, an engineering company based in Quebec — where Liberal support is conveniently the strongest.
Aside from the political fallout for Prime Minister Trudeau and his Liberal government, the SNC-Lavalin scandal has brought attention to the typically little-discussed nuances of Canadian corporate criminal liability, an area of law arising from UK precedent and its focus on the “corporate identification doctrine.”
The corporate identification doctrine has long been the mechanism by which courts in Canada and the UK attribute criminal responsibility to corporations for the misdeeds of individuals working for the corporations. In short, the corporate identification doctrine provides that a corporation may be convicted of a criminal offense, but only when its wrongful acts or intentions are directly attributable to, or the result of the actions of, its “controlling” or “directing” mind (or, in Canada, a “senior officer”). The identification doctrine contrasts with the current United States approach of respondeat superior, which renders corporations responsible for any employees’ actions done in the scope of their employment and at least in part for the benefit of the corporation.
While the corporate identification doctrine has long-proven effective, it has recently been the subject of critiques that label the doctrine as overly hierarchical and out of touch with the more diffuse and complicated ways in which complex modern corporations make decisions. These critiques have been amplified by the attention paid to the increased power and influence of corporate citizens, and the desire to ensure that corporate conduct remains competitive but also adequately policed.
It appears that such critiques are beginning to gain traction. In the UK, parliamentary committees have recently called for change, noting that smaller corporations are disproportionately prosecuted relative to larger, multi-national corporations, where decision-making power is diversified and there is uncertainty as to who represents the “directing mind and will” in “byzantine” corporate structures. The House of Commons Treasury Committee heard blunt testimony that “corporate criminal liability framework is simply not fit for its purpose.”
Having done so, the House of Commons Treasury Committee outlined two possible alternative options to the historical corporate identification doctrine based on the recommendations of the UK Serious Fraud Office. The first option involves the creation of a new principle of attribution for corporate liability wherein a corporation would be guilty of a substantive offense if a person associated with the corporation commits an offense intending (a) to obtain or retain business for the corporation, (b) to obtain or retain a business advantage for the corporation, or (c) to otherwise benefit the corporation.
The second option involves the introduction of an offense for the “failure to prevent economic crime.” Such an offense may arise where the corporate fails to prevent some form of economic crime such as fraud or corruption, or where the corporation fails to have adequate procedures in place for such prevention. The “failure to prevent” model is currently used for England’s bribery and tax evasion offenses, and there have been high-level calls for this approach to be taken in respect of all economic crime. The House Committee then called on the UK Parliament to commit to some form of regulatory change, suggesting that change may soon be coming in the UK.
Despite its more expansive view of corporation criminal liability, calls for reform of the corporate liability regime have also recently emerged in the United States. Most notably, Massachusetts Senator and Democratic Presidential-hopeful Elizabeth Warren proposed the Corporate Executive Accountability Act, which broadly aligns with the aforementioned failure to prevent model. Under Senator Warren’s proposal, corporate executives of companies with over $1 billion in revenue could be held criminally accountable for their negligence or failure to prevent violations of law at their companies.
It remains to be seen whether Canada will similarly re-evaluate its corporate liability doctrine. The pressure to do so may be rising in light of the widespread attention paid to the SNC-Lavalin scandal and as Canadians continue to watch closely the developments in the UK and the United States.
Lincoln Caylor, pictured above right, is a litigator at Bennett Jones LLP in Toronto and focuses on on cross-border financial crime disputes. He is recognized by peers and clients as the top asset-recovery lawyer in Canada. He is co-founder of The International Academy of Financial Crime Litigators.