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In November 2007, the Sentencing Advisory Panel (SAP) published a consultation document recommending that companies found guilty of corporate manslaughter should be fined up to 10 percent of annual turnover.

Following the recent closure of the consultation and with the legislation only one month away from implementation, however, regulatory law experts at international law firm Eversheds are arguing that the SAP’s proposals have several major flaws, which could lead to increased confusion for businesses. 

Level of financial penalty 

On 6 April 2008, the Corporate Manslaughter (Corporate Homicide in Scotland) Act will come into force. 

The SAP consultation was designed to provide guidelines on the level of financial penalty imposed on a company convicted of manslaughter, based on a tariff system ranging from 2.5 per cent to 10 per cent of average annual turnover.

Eversheds is arguing that the suggested approach is fundamentally flawed, however, and goes against recent Court of Appeal recommendations.

Kevin Elliott, regulatory partner at Eversheds, explains that the SAP’s proposals cover two areas – penalties for corporate manslaughter and also for offences under the Health and Safety at Work Act (HSWA) involving death. 

Both have slightly different recommendations in terms of the level of financial penalty, but the core principle is the same – the company should be fined a percentage of turnover.

Confusion for business 

“The approach is wholly inappropriate for a number of reasons, however, and with the implementation of the legislation now only six weeks away, it means an extra level of confusion for businesses,” Elliott adds.

He says that the issue of sentencing for offences under the HSWA has repeatedly been looked at by the Court of Appeal, which has clearly stated that no tariff can be applied in health and safety cases and that each case should be considered individually.

Elliott believes that the suggestion that sentencing can act as a deterrent is completely inappropriate.

“The mere possibility that a serious incident could occur is enough of a deterrent for most businesses, who would not intentionally go out to commit the offence,” he concludes.

The SAP’s proposals are designed to increase financial penalties for businesses, arguing that existing fines are not high enough.

Recent fines for offences under HSWA involving death have increased considerably, for example, the £15 million fine against Transco in 2005.

Turnover not appropriate place to start 

Elliott says that the SAP’s proposals are entirely contrary to current judicial thinking. He is also convinced that the idea of linking the level of fine to turnover is unsuitable for several additional reasons. 

He gives the example of high turnover, but low margin businesses such as those in the retail, food and construction sectors, where he believes turnover is not the appropriate place to start. 

“Also, while we agree that fines for significant health and safety breaches should be high enough to reflect the offence, surely the point is not to seriously jeopardise the economic viability of many businesses which are ostensibly very well run, including in the area of health and safety management,” he adds.

Elliott says that it should not be the aim of sentencing to put companies out of business, but thinks that these proposals could well do that.

While he calls it correct that the offence of corporate manslaughter should be considered more serious than a breach of the HSWA involving death, he warns that each case should be considered on an individual level, as recommended by the Court of Appeal.

Eversheds points out that fines of the scale outlined in the proposals could restrict capital available for future safety investments and adds that this cannot be an attractive consequence.

“It is impossible to predict the full impact of the Corporate Manslaughter Act. The issues surrounding sentencing need to be addressed as soon as possible, however, to give businesses enough time to ensure they are fully compliant with the new law,” Elliott concludes.

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Related links

• Eversheds
• Health and Safety Executive