Optimal Deterrence, Corporate Attribution and the Illegality Defence

Abstract

Complex considerations arise from this unresolved issue: where a company infringes competition law or another regulatory statute and seeks to recover the penalty by suing its delinquent insiders for breach of duties, should courts allow or prevent recovery where the statute imposes liability only on the company? This article examines this issue and makes two key arguments. First, it advances a refined concept of optimal deterrence, and argues that courts should recognise the limits of judicial law-making and not deprive the company of its well-established right to sue under company and agency law. Second, this article demonstrates for the first time how courts should address the illegality defence in the corporate regulatory context using competition law as an illustration. Our proposal based on the refined concept of optimal deterrence avoids the problems arising from the balancing of conflicting and incommensurable policies.