Where there’s a (directing mind and) will, there’s a way (to prosecute a corporate)

The issue of corporate criminal liability was in the news again this summer when the Court of Appeal handed down judgment in R v Alstom Network UK Ltd.[1] The court decided that it is not generally unfair to try a corporate in the absence of its directing mind and will (“DMW”): “The presence or absence of a DMW may well be relevant; but, without being at all prescriptive, it can only be in a very rare case that the absence of a DMW would itself be determinative of the question whether a corporate defendant could receive a fair trial.”

Whilst this decision is not itself surprising, it opens the door to a swathe of questions as to how the SFO can or should approach the prosecution of a corporate when one or more of its DMWs is absent from the trial.

The paradox exposed by this case is this. Under the identification principle of corporate criminal liability, a corporate’s guilt is contingent entirely on the guilt of its DMWs. The DMW is effectively indivisible from the corporate; his or her actions and state of mind are ascribed to the corporate. But as a matter of practical reality, and indeed as a matter of law, the DMW and the corporate remain separate entities.

It is this paradox which led to the issue on appeal. Alstom Network UK Ltd (“Alstom”) faced an indictment alleging conspiracy to bribe, of which it could only be convicted if its DMWs (Mr Kaelin and Mr Lainé) were found to be parties to the alleged conspiracy. Mr Kaelin lives in Switzerland, could not be extradited and declined to attend to assist either prosecution or defence. Mr Lainé had not been charged by the SFO for what the court described as “case management reasons”. As a result, the defence argued that Alstom could not receive a fair trial. An individual defendant would be entitled to be present and put forward his defence at his or her trial; if he or she was involuntarily absent, the trial would not proceed. A corporate defendant, it was argued, should be entitled to the same protection, so absent the DMWs on whose acts or omissions the corporate’s guilt was premised, a fair trial of the corporate would be impossible. The court rejected this argument, finding that “the fact that the DMW is absent from the trial does not mean that the company is absent”.

The absence of the DMWs from the trial did not mean that the jury was entirely ignorant as to their accounts. Mr Kaelin had been interviewed by Swiss police, and a summary of this interview was admitted in evidence. Extracts of Mr Lainé’s evidence from a previous trial in England were also admitted. Both had given exculpatory accounts. What was missing were their accounts of broader matters relevant to the SFO’s case against Alstom in the current trial, which, had the DMWs been present, they could have chosen to give in oral evidence. The court’s focus was therefore on fairness in the context of evidential difficulties faced by the defence as a result of the absent DMWs.

The unanswered question that arises from this case is what limitations and opportunities an absent DMW presents for the prosecution. The starting point is an earlier Court of Appeal judgment arising out of the same prosecution[2], which made clear that “the evidence of the directing minds is admissible as direct evidence against the company”. No question of admitting the evidence as hearsay arises; the evidence is admissible against the corporate as it would be against the individual. Attributing the words of the DMW to the corporate is straightforward where, for example, the DMW sent emails which the prosecutor alleges are evidence of the commission of an offence by both the DMW and the corporate. But what about an interview under caution with a DMW? The DMW’s answers in an interview under caution would, according to the logic of the two Court of Appeal judgments, be admissible against the corporate as well as against the DMW, even if the DMW is not present at the trial of the corporate (indeed, as noted above, Mr Kaelin’s interview with the Swiss police was held to be admissible against Alstom).

If a DMW’s answers during an interview under caution are admissible against the corporate, so too must any failure to answer questions, if the DMW exercises their right to silence. In the usual course of events, when an individual fails to mention during an interview under caution something which he or she later relies on at trial, and it was reasonable to have mentioned it during the interview, a jury is likely to be told that they can draw an adverse inference against the individual. Applying the reasoning of the Court of Appeal, an adverse inference could also be drawn against the corporate when its DMW exercises his or her right to silence in an interview under caution and fails to mention something which the corporate later relies on in its defence at trial.

Whilst this result represents the rigorous application of the identification principle, it is legally problematic. Most individuals who exercise their right to silence in an interview under caution do so on legal advice. A DMW who is interviewed under caution may well have been advised by lawyers representing him or her as an individual but may not have received advice from those representing the corporate. Such individuals may not even be cognisant of their status as a DMW or that this is a capacity in which they are being questioned. In a trial of an individual, answers given in an interview under caution are only admissible, or an adverse inference can only be drawn, against a suspect who was properly cautioned, i.e. who understood the risks they were personally running when they decided to answer (or not answer) questions. It is arguably inconsistent with that principle for a DMW’s account in an interview under caution to be admissible against a corporate, or for adverse inferences to be drawn against a corporate if its DMW exercised his or her right to silence, unless the DMW was cautioned expressly in his or her capacity as a DMW. Moreover, it is arguably unfair for an individual to be forced to effectively wear “two hats” whilst being interviewed. As an individual suspect the best course of action may be to remain silent, whilst as a DMW the corporate’s best interests may be served if the DMW provides a full account (or vice versa).

There is no SFO guidance addressing this issue. Indeed, the only relevant published guidance from any prosecutorial agency in the UK is that of the Health and Safety Executive (“HSE”), which states that investigators must make it “completely clear, when cautioning at the start of each interview, in what capacity the person is being interviewed”, i.e. as an individual or on behalf of the corporate.[3] Absent any such guidance from the SFO and others, the burden is on the legal representatives of both the DMW and the corporate to seek to avoid this potential minefield. They could do so by, for example, seeking clarification in advance of the interview as to the capacity in which the individual is being interviewed and/or insisting on two separate interviews (one with the individual as a suspect and one with the individual as a DMW for the corporate suspect). This clarification will likely be difficult to obtain in circumstances where the SFO pounces with no prior warning, arresting and interviewing senior executives of a corporate during a dawn raid. But absent of such clarification, the Court of Appeal judgments in Alstom enable the prosecution to argue that an interview under caution of a DMW should always be admissible against the corporate.

Issues of this nature also arise in relation to an individual compelled to attend an interview with the SFO as a witness under s.2 Criminal Justice Act 1987. If an individual is questioned under these compulsory powers, his or her answers are not generally admissible as evidence against them in a criminal trial, if the SFO shifts from treating them as a witness to treating them as a suspect. But where the individual is a DMW, would a corporate defendant be afforded the same protection? Put another way, is the compelled testimony of a DMW admissible against the corporate at trial?

The specific wording of the legislation[4] limits the use of a compelled statement made by a person in evidence “against him”. A literal reading of this wording would suggest that the use immunity only protects the compelled DMW and does not extend to the corporate. This reading accords with the emphasis placed by the Court of Appeal on treating the DMW and the corporate as separate legal entities. If this reading is right, the answers given by the DMW in the compelled interview would be admissible against the corporate at trial. The alternative reading is that, as the identification doctrine presupposes the indivisibility of the DMW and the corporate, the compelled testimony of the DMW should be as inadmissible against the corporate as it is against the DMW.

This is an invidious situation for the corporate. Compulsion to answer questions is on its face a breach of the privilege against self-incrimination, one of the constituent rights protected by Article 6 of the European Convention of Human Rights (the right to a fair trial). A corporate defendant is as entitled to fair trial protections as an individual defendant. Whilst the SFO’s s.2 powers deprive the interviewee of the right not to incriminate oneself, this derogation from Article 6 is permissible because the individual is protected at trial by the restriction on the use of his or her compelled testimony in evidence. Where the recipient of a s.2 notice is a DMW, the corporate is arguably not only deprived of the privilege against self-incrimination (like the DMW) but is also deprived of the use immunity (unlike the DMW). To our knowledge, whether this dual burden constitutes a breach of Article 6 has not been explored in any case law.

This state of affairs again puts the onus on the legal representatives of the corporate to seek to avoid the potential unfairness. Regardless of whether the witness is interviewed in his or her capacity as an individual or as a DMW of the corporate, the corporate may be well-advised to seek an undertaking that the SFO will not use the product of the interview against the corporate. If no such clarification is forthcoming, the admissibility of the interview against the corporate will remain unclear, an outcome which is likely to assist the prosecution, who can argue that the use immunity in the s.2 regime protects only the individual, and not the corporate, even where the individual is the corporate’s DMW.

The above discussion reveals that not only is the SFO entitled to prosecute a corporate in the absence of its DMW, but that it may also be advantageous to do so. The SFO can potentially exploit the practical indivisibility of the DMW and the corporate. Lawyers representing both corporates and senior individuals with the potential to be DMWs should consider taking steps in advance of interviews under caution and compelled interviews to clarify the position and ensure that the corporate is not disadvantaged by a trial which is proceeding in the absence of the DMW, but with the interview of the DMW being used against it.

[1] [2019] EWCA Crim 1318

[2] [2016] EWCA Crim 1469

[3] See paras 10-14 of http://www.hse.gov.uk/enforce/enforcementguide/investigation/witness-questioning.htm

[4] s2(8) Criminal Justice Act 1987