Corporate crime in the spotlight

Posted: 25/07/2012

Mark Lee, head of Penningtons’ travel law team, considers the relevance of the Corporate Manslaughter Act 2007 for the travel industry of 2012 in Travel Trade Gazette:

The Corporate Manslaughter and Corporate Homicide Act was pushed through five years ago to address serious management failings like those which led to the deaths of 193 people in the Zeebrugge ferry disaster of 1987.

The sinking of the Costa Concordia in January suggests there are still lessons to be learned.

The Act only relates to incidents causing death that occur in the UK but there are a few important anomalies that UK cruise companies must take note of. These companies can be prosecuted if a fatality is caused within the territorial seas adjacent to the UK or if the fatality occurs on a ship registered in the UK.

It’s worth noting that the Act is concerned with corporate liability rather than individual culpability.

Primarily, it is UK inbound operators that need concern themselves with the Act. They can be held criminally liable if a fatality occurs and the conduct of senior managers is found to have fallen ‘far below what could reasonably be expected in the circumstances’. Their duty of care extends to ‘someone for whose safety the organisation is responsible’ and in connection with ‘the supply by the organisation of goods or services’, which covers holidaymakers as well as employees.

Heavy fines

Although there have not been a significant number of reported cases since 2007, this is partly explained by the time it takes to pursue a case to court. The first conviction involved a small company called Cotswold Geotechnical, found liable for the death of a junior geologist and fined £385,000 (equivalent to 250% of its turnover).

The ruling was a clear message that the courts will hand down heavy fines even if it means putting companies out of business. The Act also empowers the court to order that the conviction be published; the sort of negative publicity that can be hugely damaging.

It is probable that UK bed banks and business travel management firms also fall within the scope of the Act, though it is unlikely that these would be guilty of a gross breach of duty unless the ‘attitudes, policies, systems or accepted practices’ within that organisation encouraged or produced tolerance to serious management failure.

The threshold for establishing gross breach of duty is high because a jury must consider whether an organisation failed to comply with health and safety legislation relating to the alleged breach; how serious that failure was; and how much of a risk of death it posed.

It is paramount, however, that senior managers of any company ensure health and safety policies reflect issued guidance and do not encourage or tolerate any failures to comply. While the Health and Safety at Work Act 1974 is not included within the Corporate Manslaughter Act, it is clearly relevant in establishing a gross breach of duty.