Principles of the Law, Compliance and Enforcement for Organizations Is Approved

Principles of the Law, Compliance and Enforcement for Organizations Is Approved

PHILADELPHIA: At today’s 2021 Annual Meeting, members of The American Law Institute voted to approve Tentative Draft No. 2 of Principles of the Law, Compliance and Enforcement for Organizations. Today’s vote marks the completion of this project.

This is the first time that The American Law Institute has produced Principles on this area of the law. Work began in 2015 under the leadership of Reporter Geoffrey P. Miller of New York University School of Law and Associate Reporters Jennifer H. Arlen of New York University School of Law, James A. Fanto of Brooklyn Law School, and Claire A. Hill of University of Minnesota Law School.

“The basis of this project comes out of the 1990s, 2000s and 2010s, where we had an enormous growth in fines and criminal prosecutions of organizations for various misconduct and misdeeds,” said Reporter Geoffrey Miller. “This caused a very powerful set of discussions and set many legal minds thinking about, what is a way to both enforce the law against organizations’ misconduct, but also to encourage organizations to enforce the law on themselves, through the processes of compliance.”

This subject matter is one that combines legal and ethical standards. It deals with both externally imposed norms, such as laws and regulations, and internally imposed norms, such as corporate codes of ethics. And it is developed through discretionary actions of regulators and prosecutors and through settlements of enforcement proceedings that do not carry the force of generally binding law. Accordingly, the best course is to set out best-practice standards that may or may not draw on underlying legal norms. The Principles seeks to provide best practices for a variety of public and private entities, but its main audience is large, publicly traded corporations.

“We saw that there was basically a challenge with the role of lawyers because lawyers are very involved in this process, but not always in a strictly legal role,” said Reporter Miller. “They play a role that’s more holistic and involves non-legal and legal aspects, but it challenges the basic idea of what it means to be a lawyer. There’s also three new professions that have grown up: internal compliance, risk management, and internal audit, which had been around, but it’s been professionalized.”

“It is very exciting to see the completion of this important project,” said ALI Director Richard L. Revesz. “For this extremely significant accomplishment, I am very grateful to Professors Miller, Arlen, Fanto, and Hill, and to the very dedicated Advisers and Members Consultative Group. I believe these Principles will provide important guidance to organizations in this complex area of law.”

With the approval of the draft, the project Reporters will now prepare the Institute’s official text for publication. Until the official text is published, this and previous Tentative Drafts approved by ALI’s membership are the official position of ALI, and may be cited as such.

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The American Law Institute is the leading independent organization in the United States producing scholarly work to clarify, modernize, and improve the law. The ALI drafts, discusses, revises, and publishes Restatements of the Law, Model Codes, and Principles of Law that are enormously influential in the courts and legislatures, as well as in legal scholarship and education.

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