363: Do employers have a duty to protect employees from criminal conviction?

While an employee’s duties are legal in the UK, they may be illegal in other countries. In these instances, employers are not necessarily required to protect their employees from prosecution abroad.

In Benyatov v Credit Suisse Securities (Europe) Ltd, the High Court has ruled that there is no general duty of care to protect employees from criminal conviction in the performance of their duties, and no implied contractual duty to indemnify them for future loss of earnings.

Mr Benyatov was employed as a senior investment banker for Credit Suisse. Whilst working for the bank on a utility privatisation in Romania, he was prosecuted and convicted of crimes under Romanian law. Credit Suisse agreed that Mr Benyatov’s conduct was in line with international banking standards and that he was not guilty of wrongdoing. As a consequence, the bank spent considerable sums assisting him in his defence as well as an ongoing appeal to the European Court of Human Rights. However, following Mr Benyatov’s conviction, he was unable to practise as a banker and was eventually made redundant. He subsequently moved to the USA in order to avoid a European arrest warrant.

Mr Benyatov issued proceedings alleging that Credit Suisse had a duty of care not to expose him to a risk of criminal conviction, and that there was an implied contractual indemnity to protect him from future loss of earnings arising from the performance of his duties. He claimed loss of career earnings amounting to £66 million.

The High Court has now dismissed his claims. On the facts, it was not fair, just or reasonable to impose a duty of care on Credit Suisse not to expose Mr Benyatov to criminal conviction. Romania was not considered a high-risk country during the relevant period; the particular transaction was not considered a high-risk transaction; there had been no red flags alerting the bank to the need for special vigilance; and it was not standard procedure to assess political risks for Romania. In addition, although there is an implied contractual duty to indemnify employees for payments or liabilities incurred in the course of their employment, the High Court held that this does not extend to future loss of earnings.

Although this will be a welcome decision for employers, it is important to note that cases will be decided on their precise facts. When deciding whether a duty of care exists, courts will consider the foreseeability of harm and whether, in all the circumstances, it is fair and reasonable to impose a duty on the employer. Particularly given the current political and economic situation, employers are advised to update risk assessment processes for high risk jurisdictions and to take into account the risks to individual employees as well as the organisation as a whole. In some circumstances, it may be reasonable to take enhanced measures such as engaging specialist local agencies to advise on the specific business and security risks.