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Coronavirus law and corporate liability

  • United Kingdom
  • Financial services disputes and investigations
  • Litigation and dispute management

08-04-2020

The past weeks have seen several pieces of key UK legislation enacted with almost unprecedented speed, as the government and Parliament sought to deal with the rapidly escalating coronavirus pandemic.

The Coronavirus Act 2020 received Royal Assent on 25 March 2020 only six days after a Bill was introduced, despite the statute containing more than 100 main sections and 29 comprehensive schedules. The Act introduced a broad range of provisions, many of which impact the criminal court system as well as a multitude of other parts of life in the UK including national security, police surveillance, food supply and, naturally, the protection of public health.

The Act created a number of new powers and criminal offences relating to ‘potentially infectious’ individuals, and also resulted in some confusion. On 28 March a woman was arrested in Newcastle, ostensibly for breach of the Act, after she refused to explain to police officers who she was and why she was at the railway station. Two days later, the woman was convicted and fined, in her absence, by a magistrates’ court. Her conviction has now been set aside, after police admitted the woman had been charged incorrectly.

This lack of clarity among the public and indeed the police – understandable considering the speed at which the Act was passed and the complexity of its provisions – will also be felt by companies attempting to get to grips with new areas of corporate liability.

In terms of the Act, this will mainly be relevant to companies connected to the food supply chain. Those companies can be required to supply certain information (relating to disruption or risk of disruption) to a relevant authority, or face a financial penalty of up to a maximum of 1% of qualifying turnover. The relevant authority also has the right to publish details of any penalty imposed. A penalty can only be imposed following service of a written notice, to which the company has 14 days to respond with written representations, and there is a right of appeal (to the First-tier Tribunal in England and Wales).

Adding a further layer of complexity to the Act, and bringing more extensive corporate liability implications for companies in England, are the Health Protection (Coronavirus, Restrictions) (England) Regulations 2020 (SI 2020/350) (the “Regulations”) which came into force on 26 March 2020 ‘in response to the serious and imminent threat to public health’ posed by coronavirus. No drafts of the Regulations were placed before or approved by Parliament, the Secretary of State Matt Hancock instead making use of his powers under the Public Health (Control of Disease) Act 1984.

The Regulations are the source of the stringent rules which are now well known to the general public – for example, those restricting movements outside of the home or limiting gatherings in public places. They also contain perhaps the most sweeping power implemented by the Regulations – the closure of businesses. Parts 1 and 2 of Schedule 2 set out a number of categories of business which must either close in full or part, or cease certain operations (in particular selling food or drink for on-premises consumption), while the Regulations are in force.

Part 3 of Schedule 2 lists businesses which are allowed to continue operations (subject to caveats). Therefore, in general, companies which offer goods for sale or for hire in a shop and are not listed in Part 3 must cease their physical operations, other than where they are providing services in response to remote orders. The Regulations also set out rules relating to hotels and other accommodation providers, places of worship, community centres, crematoria and burial grounds.

The drafting of the Regulations makes it clear that responsibility for compliance lies with the owner, proprietor or manager of a company, as the people ‘responsible for carrying on the business’. Police officers and designated local authority enforcement officers are granted the power to give a prohibition notice to anyone who they believe is contravening a business closure or restriction requirement.

It is a criminal offence to contravene the business closure or restriction requirements set out in the Regulations, or directions given in a prohibition notice. The defence in all cases is one of ‘reasonable excuse’, although no guidance is provided in this case on what may constitute a valid reasonable excuse.

Theoretically, any of these offences may be committed by a company (in which case directors and officers may also be found liable where they have consented, connived or been negligent in relation to the commission of the offence). However, the Regulations do not provide for any particular method of attributing corporate liability. There is no explicit mention of vicarious liability, as commonly found under health and safety legislation; neither has the draftsperson set out a ‘failure to prevent’ construct as found in section 7 of the Bribery Act 2010 and sections 45 and 46 of the Criminal Finances Act 2017. Any corporate prosecution would likely need to be founded on the so-called identification principle – where the offence can be attributed to someone who was the ‘directing mind and will of the company’ at the time. This has always been a difficult hurdle to overcome in relation to larger corporates, and following the High Court decision in SFO v Barclays (delivered in November 2018 but under reporting restrictions until 28 February 2020) the bar has been set even higher, and may only be overcome in practice in relation to only the smallest companies.

The Regulations remain in force for up to six months, or sooner if the Secretary of State deems appropriate, although they must be reviewed every 21 days. The first review of the Regulations is due by 16 April 2020 and companies will be keen to learn of the outcome of this review.

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