Just as sour

What is in a name? Well, a lot when corporate manslaughter becomes an indictment rather than breaches of health and safety laws resulting in death. In implementing the Corporate Manslaughter and Corporate Homicide Act 2007 on 6 April, the government has provided a sop to trade unions and victims - and issued a mild threat to corporations.

The million-dollar question is whether the Act will save lives. Negative, according to Richard Tovell, head of the health and safety practice at Greenwoods Solicitors, who challenges the assumption behind tighter health and safety laws that "accidents are caused by people who don't care because they think the consequences are insignificant. The truth is people do care, they just don't believe an accident is likely to happen in their workplace".

He believes that a proliferation of corporate manslaughter prosecutions will "debase the public's perception of the term", and argues the multi-million pound fines imposed for breaches of the Health and Safety at Work Act 1974 s2, are already a powerful deterrent. "It's difficult to see how re-branding the crime as manslaughter will change anything long term."

Victor Rae-Reeves, a partner at Clyde and Co, agrees: "The Act will appease public, union and political pressure to prosecute - particularly in the event of large disasters - but from a legal defence perspective, it makes little difference whichever label is applied."

The legislation will apply in the UK to all companies - in Scotland the offence will be known as corporate homicide - including non-UK companies operating in the UK. The government expects the number of prosecutions to increase from one or two to between 10 and 13 a year. Presumably, this estimate is based on inside knowledge of prosecutions not brought under the existing common law of involuntary manslaughter by gross negligence, because of difficulties in identifying who took safety-critical decisions in large organisations.

Legal changes

The new offence contains elements that will make this more achievable, says Magnus Burroughs, an associate at Lovells. He explains that an organisation could be found guilty if the way its activities are managed or organised cause a person's death and amount to a gross breach of a relevant duty of care. To amount to a gross breach, the conduct must fall far below what could reasonably have been expected of the organisation in the circumstances, and the contribution of senior management to the breach must be regarded as substantial.

Enforcement and investigation will be by the police, which will lead to an investigation if a criminal offence is suspected - except under health and safety law. The police will work in partnership with others like the Health and Safety Executive and local authorities. This will lead to more comprehensive investigations, says Gary Gallen, head of the corporate investigation and governance unit at law firm Andrew Jackson, who notes that the police are better equipped, resourced and trained to interrogate and investigate than the HSE.

It follows that cases of corporate manslaughter will be prosecuted by the Crown Prosecution Service in England and Wales and the Procurator Fiscal in Scotland. Paul Wade, senior partner at Simpson and Marwick in Glasgow, who represented Transco in the first corporate culpable homicide prosecution and subsequent prosecution under the Health and Safety at Work Act 1974, observes that while the title of the Act is different in Scotland, the effect is the same. "It is based on English law, but I think that is a good thing because a death could result in Scotland from a decision of a board based in London, and it would not be satisfactory to have different laws applying."

So are commentators convinced this Act will prove to be the powerful deterrent the government argues it will be? Andrew Fletcher, acting head of commercial motor at Groupama Insurances, responds: "When announced, the proposed changes were probably greeted in many quarters with some disappointment. First impressions do suggest that ultimate sanctions have been diluted, however the damage to an organisation's reputation these prosecutions may bring should not be underestimated."

The original plan to have a separate offence for directors was dropped, but are some people still concerned by the lack of a requirement to have health and safety addressed at board level? Mr Burroughs explains the original proposals implied directors would have specified legal duties in relation to health and safety, but the Act does not follow this through - despite trade unions clamouring for it. "One reason for wanting specific duties is so the finger can be pointed at an individual to imprison."

David Walton, head of the regulatory team at Keoghs, adds that the public's call for change has also not been heeded. In fact, board members might even be able to circumvent the new Act, he says. "Directors in larger organisations will still be able to put a barrier between them and the man on the shop floor."

Even so, pushing the responsibility down the line could surely be tricky given that, as the Ministry of Justice commentary states, "inappropriate delegation of health and safety matters will leave organisations vulnerable to corporate manslaughter/homicide charges".

Contractual obligations

Nonetheless, corporate lawyers will be advising organisations to have written procedures in place to show where contractual responsibilities lie, and large companies and public authorities will want to create paper trails effectively establishing safety responsibilities at low managerial levels to prevent any failures being attributed to senior managers. Phil Grace, liability risk manager at Norwich Union, remarks that directors will make sure there is clear blue water between them and the incident, and is not convinced the Act will make a huge difference. "Given the relatively few workplace fatalities in a year, we would not want it to divert people from the real work of preventing more common accidents."

The Act addresses the difficulties in the existing law when identifying an individual who is the controlling mind of an organisation by allowing for the negligence of several individuals to be aggregated to show the company was grossly negligent - a more realistic reflection of corporate decision-making. Therefore, it is not increasing liability for individual directors or managers as the prospect of individual liability under the Act is specifically excluded; although the default position for individuals remains via health and safety laws and the common law of manslaughter.

This raises the issue of how relevant many directors' and officers' insurance policies are vis-a-vis this new law. Nigel Pearson, UK and Ireland executive protection underwriting manager at Chubb, agrees that most D&O policies would not respond, although there are different types of policies depending on the size of company and it depends on how claim is brought.

The prospect of dual or subsequent action cannot be ruled out. And if the prosecution believes a director is close enough they will pursue that individual under common law - meaning the company is caught under the Act and the directors under existing law, remarks Peter James, a partner at Plexus Law.

Certainly, the Act contains provisions apparently designed to facilitate subsequent prosecutions, which might include individual managers criticised in the corporate manslaughter trial. Mr Pearson notes that brokers have a responsibility to get the right cover for their clients and "ensure that D&O written for the small end of the market does not cover only directors and officers but also the company itself". However, they can only do that if D&O insurers offer the cover. He comments: "The whole market is thinking about what to do. There are policies out there covering bits and pieces but none directed at this." He adds that Chubb will make a statement on the issue next month.

Potential conflicts of interest will need to be addressed because, as Callum Taylor, management liability underwriting manager at Hiscox, remarks: "The police will interview everyone. The needs of the directors will be different to those of the company, so they will need access to individual legal support."

In his view, however, they may be unlikely to get that from typical employers and public liability insurers because although there is a debate within the insurance industry about whether this kind of policy could have an extension to cover actions against the company, "the extension for health and safety is at the insurer's agreement," he says.

Mr Grace adds that his company will change its wording so that it clearly states that the defence costs of prosecution under the Act, as opposed to just health and safety prosecutions, are covered. But many insurers are burying their heads in the sand with regard to providing cover for corporate manslaughter, according to Mr Taylor, who states that Hiscox's management liability policy has an entity add-on, with cover for both individuals and the company.

Given that investigators will have to discern what the corporate ethos is - as well as looking at whether the management processes are real, as opposed to a smokescreen to protect the board - it could be some time before the true impact of this piece of law can be understood. Mr James remarks: "Until a few cases go to the Court of Appeal, we won't know how juries will cope with it," and although guidelines have made things as clear as they can be, there will still be arguments about what is senior management, and what is an acceptable way to run the company.

Gerard Forlin, a barrister at 2-3 Gray's Inn Square, thinks prosecutions will be reserved for big cases, although: "There will be a massive increase in investigations because the test makes it substantially easier for the prosecutors, and if they don't investigate families will seek judicial review."

Douglas Dale, risk control liability manager at Axa, believes that test cases are likely to happen around occupational road risk. "There are issues surrounding whether people are driving in the course of employment, and the first thing the police ask if there is a road accident is whether the driver is working." Where an employer is charged with the death of an employee, the existence of a relevant duty of care will almost always be straightforward, but some scenarios could involve a number of organisations with overlapping duties, leading to cases with multiple defendants.

Under the Act juries will assess compliance with health and safety regulations and a company's general health and safety culture can also be assessed separately from the incident. Mr James comments that allowing the jury to look at anything they consider relevant, like previous convictions, which give insight into the corporate culture, is quite novel.

Courage of your convictions

Andrew Manners, a partner with Hugh James, believes this will make it easier to secure a conviction, but "the main impact will be more investigations, and they can be wider". He remarks of the new law: "It is almost a strict liability offence, which means previous cases where convictions might not have resulted could now succeed."

Organisations found guilty of the new offence will be liable to a fine, a remedial order and a publicity order - although the publicity sanction orders will not come into effect until the Sentencing Guidelines Council has issued guidance on how courts should use it. The idea is to allow courts to force convicted organisations to publish details of their offence and penalties at their expense. A sentencing consultation has been issued suggesting fines of between 5% and 10% of the company's average annual turnover, but trade unions and victims will want a real person to pay the price, rather than the company's shareholders.

As to whether this is a clever bit of window dressing, Mr Rae-Reeves concludes: "It is always open to the prosecution to prosecute under the Health and Safety at Work Act, which applies to the deaths of employees as well as third parties such as members of the public or passengers on a train. Therefore, the only difference is that instead of a Health and Safety at Work Act charge, the label of 'manslaughter' can now be used with the same consequence of very large fines being potentially awarded. That is not to say that corporations will not find charges of manslaughter very troubling, and potentially very damaging from a PR point of view. However, in material terms, it will make limited difference."