Navigating corporate criminal liability regimes – risks and challenges

Introduction

The landscape of corporate criminal liability, including core questions of when and how liability accrues, varies significantly between jurisdictions and across offences. Multinational companies with global exposure should therefore be aware of the differences between legal regimes and ensure that risks posed in this regard are properly understood and appropriately mitigated. In this article, we consider the dichotomies in regimes where bribery offences are concerned, in the light of a recent public sector corruption case development in Singapore.

In Singapore, the establishment of corporate criminal liability at common law generally requires the application of legal rules of attribution. The actions of an employee or agent of a company can only be attributed to the company where such person is the “living embodiment” of the company or where the acts were performed “as part of a delegated function of management” (the Tom-Reck test).¹ The challenges of satisfying such a test were highlighted in a recent high-profile prosecution of the Singapore branch of a Chinese engineering firm in respect of alleged bribery of a Singapore senior public official from the land transport department.

Singapore’s reliance on this common law test stands in marked contrast to jurisdictions such as the United Kingdom (UK) and Australia², which statutorily impose liability on commercial organisations for failure to prevent bribery committed by associated persons, including employees. The UK has, further, moved to replace its common law identification doctrine with a statutory test under which an organisation will be criminally liable when part or all of a specified economic crime is committed in the UK by a senior manager.

Acquittal of company on charges of corruption perpetrated by senior employees

The recent case concerned allegations that two senior employees of the engineering firm had given S$220,000 in bribes to a senior transport official in 2018 and 2019 through the extension of loans on three occasions. One of the employees was the general manager of the engineering firm, and the other was its commercial manager who reported to him. The engineering firm was charged with three offences of corruption under the Singapore Prevention of Corruption Act 1960 (SG PCA).

The Prosecution argued that liability for such corrupt acts should be imposed on the engineering firm as it had purportedly, through a system of rewards and penalties linked to the results of tenders, encouraged the corrupt behaviour of its senior employees. The Prosecution additionally asserted that the engineering firm had inadequate financial controls over corporate funds, and that its management had not effectively enforced the firm’s anti-corruption policies, thereby allowing the acts to occur.

The Defence argued that the general manager was not the “living embodiment” of the engineering firm and was also not its “directing mind and will”. The engineering firm further maintained that the offences had been committed by the employees for their personal benefit and their corrupt acts could not be attributed to the firm itself.

At the conclusion of the trial, the engineering firm was acquitted on all charges. The District Judge (DJ) found that the general manager was not performing a “delegated function of management” in bribing the senior transport official. The DJ further found that the offences were committed without authorisation from the engineering firm, and that the majority of the funds used for the bribes had been fraudulently obtained from the engineering firm. Accordingly, the engineering firm was found not liable for its employees’ corrupt acts.

English and Australian perspectives – offences of failure to prevent bribery

The recent case illustrates the relatively limited scope of corporate criminal liability in Singapore for offences of bribery committed by employees. The corrupt acts were carried out by senior employees of the company – including its general manager – yet the Court nevertheless found that the Tom-Reck test was not fulfilled. It is clear that a high bar would have to be met in order for liability to be attributed to the company – a challenge that is exacerbated by the numerous levels of management and decentralised decision-making typically seen in large corporations.

By contrast, the legal regimes in the UK and, recently, Australia arguably make it more straightforward for the authorities to pursue corporations for acts of bribery committed by their employees, amongst others.

United Kingdom

Section 7 of the UK Bribery Act 2010 (UK Bribery Act) imposes liability on relevant commercial organisations for failing to prevent bribery committed by an associated person (which would include, amongst others, an employee or agent). This is so where the associated person committed bribery intending to obtain or retain business, or an advantage in the conduct of business, for the organisation. The only defence to liability is where an organisation has “adequate procedures” in place to prevent associated persons from engaging in bribery.³ It would immediately be apparent that companies subject to the UK Bribery Act would face greater exposure to corporate criminal liability, in contrast to the SG PCA which still requires the application of common law principles of attribution.

In this regard, it should be noted that the UK has recently taken significant steps to reform its corporate criminal liability regime. Further to the Economic Crime and Corporate Transparency Act 2023, which received Royal Assent in October 2023, the common law identification doctrine (whereby only the actions of a company’s “directing mind and will” may be attributed to the company) has been replaced by a statutory “senior managers” test. Under the new test, a corporation will be found criminally liable where a senior manager who was acting within the actual or apparent scope of their authority commits a specified economic crime offence.⁴ A new failure to prevent fraud offence has also been introduced. These developments may lead to more corporate prosecutions, and companies should take steps to mitigate the risks posed in this regard. Learn more about these significant developments from our London team here and here.

Australia

An indictable offence for corporations that fail to prevent foreign bribery was introduced by Australia’s Crimes Legislation Amendment (Combatting Foreign Bribery) Bill 2023, which was passed on 29 February 2024. Under the new legislation, a company will be liable where an associate (which includes an employee, supplier or agent) engages in bribery of a foreign public official for the profit or gain of the company. Similar to the UK Bribery Act, the only defence to liability is where the company has implemented adequate procedures to prevent bribery. This development is covered in detail by our Australia team here.

Australia’s Criminal Code also provides that a corporation commits the crime of bribery of a foreign official where its agent engages in bribery and it has failed to create a culture of compliance. A corporation that has exercised due diligence to prevent the offence does not have the mental element to commit the crime. This also provides a lower standard for a corporation to commit an offence than in Singapore.

Key takeaways

On the facts of the recent Singapore case, it is likely that the engineering firm would have been held liable for its employees’ conduct had the UK or Australia legal regimes been applicable, particularly had the engineering firm faced difficulties in demonstrating that it had in place adequate procedures to prevent bribery. This illustrates the risks faced by companies operating in or with exposure to multiple jurisdictions, and highlights the importance of an effective compliance programme, which must include sufficient internal controls, policies and procedures.

Even in the Singapore context, where there is presently no offence of failure to prevent bribery, a strong compliance programme would be crucial in supporting a company’s argument that liability for employees’ misconduct should not be attributed to it. In the present case, the Court highlighted that the engineering firm did not authorise the employees’ corrupt acts – a finding which was likely underpinned by the fact that the monies used for the bribes had been fraudulently obtained from the engineering firm. Absent such fraud, a company would have to take greater steps to show that it did not expressly or implicitly authorise such misconduct, an endeavour which would undoubtedly be aided by robust internal policies and procedures.

Special thanks to Xin Yi Wan, Legal Executive for her contributions to this article.