Thursday, March 3, 2011

All Companies In The Supply Chain Should Be Aware Of Corporate Manslaughter Legislation

First Conviction Emphasises the Likely Penalties
Shipping News Feature

UK – Further to the first conviction of a company under the new corporate manslaughter legislation all companies trading in Britain, particularly those within the logistics sector dealing with potentially dangerous physical risks such as freight warehouses and shipping container terminals, ports etc. should be aware of the scope of the legislation – and the consequences for those organisations found guilty of transgression.

The Corporate Manslaughter and Corporate Homicide Act was given Royal assent on 26 July 2007. The offence came into force on 6 April 2008 and is called corporate manslaughter in England, Wales and Northern Ireland, and corporate homicide in Scotland.

The offence is concerned with corporate liability and does not apply to directors or other individuals who have a senior role in the company or organisation. However, existing health and safety offences and gross negligence manslaughter will continue to apply to individuals. Prosecutions against individuals will continue to be taken where there is sufficient evidence and it is in the public interest to do so.

We are obliged to health and safety law specialist Guy Bastable of BCL Burton Copeland who sets out the implications for directors. On 15 February 2011, Cotswold Geotechnical was convicted of corporate manslaughter following the death of an employee and was fined £385,000, which amounted to 115% of its turnover for the year of the accident, to be payable over ten years. This was notwithstanding the fact that the sentencing judge considered that the fine and payment plan might well cause the company’s liquidation.

The Act removes the necessity under the old law to identify and establish the guilt of a “directing mind”, a senior individual who could be said to embody the company in his actions and decisions. Instead, the Act concentrates on the way in which the organisation’s activities are managed or organised, commonly referred to as a “management failure”, and whether that caused the death and was a gross breach of a relevant duty of care.

This first successful prosecution has done little to clarify the position of companies in future cases given the small size of the guilty organisation and the fact it had only one responsible director, in cases of serious breach, very large organisations can expect fines in the millions.In 2010, the Sentencing Guidelines Council issued its definitive guidelines for sentencing organisations for corporate manslaughter or health and safety offences that cause death. The guidelines specify that fines for organisations found guilty of corporate manslaughter may be millions of pounds and should seldom be below £500,000. For health and safety offences that cause death, fines from £100,000 up to hundreds of thousands of pounds should be imposed.

In addition although, as in this case, the Court has the option of spreading payments by instalments, the guidelines specify in the case of a large organisation, the fine should be payable within 28 days. The message is clear for UK companies, ensure you adhere to all the recommendations of the Health & Safety Executive, or ignore them at your peril. The Corporate Manslaughter Act and its amendments can be seen in full HERE.