Clifford Chance - Corporate criminal liability report

Corporate Criminal LiabilityMarch 2015

Global contacts ........................................................ 3

Introduction............................................................... 4

Americas ................................................................... 9

United States......................................................... 10

Europe and the Middle East .................................... 13

Belgium ................................................................. 14

Czech Republic ..................................................... 17

France ................................................................... 19

Germany................................................................ 21

Italy ........................................................................ 23

Luxembourg .......................................................... 26

Poland ................................................................... 28

Romania ................................................................ 30

Russia.................................................................... 32

Slovakia ................................................................. 34

Spain ..................................................................... 36

The Netherlands .................................................... 39

UAE ....................................................................... 42

UK ......................................................................... 44

Asia Pacific ............................................................... 48

Australia................................................................. 49

Hong Kong ............................................................ 52

India....................................................................... 55

Indonesia ............................................................... 58

Japan .................................................................... 60

Mainland China...................................................... 62

Singapore .............................................................. 64

Corporate crime ....................................................... 67

Heat map ................................................................... 69

Worldwide contact information .............................. 71

contents

3Corporate Criminal LiabilityMarch 2015

© Clifford Chance, March 2015

Australia:Diana Chang +612 8922 8003Jerrem Ng +612 8922 8069Kirsten Scott +618 9262 5517

Belgium:Sébastien Ryelandt +32 2 533 5988

China:Wendy Wysong +85 22 8263 460Yu Bing +86 21 2320 7372Richard Sharpe +85 22 8262 427Montse Ferrer +85 22 8263 562

Czech Republic:Alex Cook +420 222 555 212Michal Jasek +420 222 555 229Ludvik Ruzicka +420 222 555 255

France:Thomas Baudesson +33 1 44 05 54 43Charles-Henri Boeringer +33 1 44 05 24 64

Germany:Heiner Hugger +49 697199 1283Beatrix Elsner +49 697199 1455

Hong Kong:Wendy Wysong +852 2826 3460Yu Bing +862 1232 07372Richard Sharpe +852 2826 2427Montse Ferrer +852 2826 3562

India:Aarna Law www.aarnalaw.com

Indonesia:Linda Widyati +62 21 2988 8301Dinasti Brian Harahap +62 21 2988 8317

Italy:Antonio Golino +39 028063 4509Jean-Paule Castagno +39 028063 4317Pasquale Grella +39 028063 4289

Luxembourg:Claude Eischen +352 48 50 50 268Hannes Westendorf +352 48 50 50 473

Japan:Michelle Mizutani +81 3 5561 6646

The Netherlands:Jereon Ouwehand +31 20 7119 130Joost Tonino +31 20 7119 236

Poland:Marcin Ciemiński +48 22 429 95 15Bartosz Krużewski +48 22 429 95 14Paweł Pogorzelski +48 22 429 95 08

Romania:Daniel Badea +40 21 66 66 101Bianca Alecu +40 21 66 66 127

Russia:Timur Aitkulov +7 495 725 6415

Singapore:Kabir Singh +65 6410 2273Janice Goh +65 6661 2021Elan Krishna +65 6506 2785Vinita Varghese +65 6410 2227

Slovakia:Michal Jendzelovsky +420 222 555 274

Spain:Bernardo del Rosal +34 91 590 75 66

UAE:Graham Lovett +971 4 362 0625James Abbott +971 4 362 0608Payam Beheshti +971 4 362 0631

UK:Roger Best +44 20 7006 1640Martin Saunders +44 20 7006 8630Judith Seddon +44 20 7006 4820Luke Tolaini +44 20 7006 4666Patricia Barratt +44 20 7006 8853Chris Stott +44 20 7006 4231

USA:David DiBari +1 202 912 5098Chris Morvillo +1 212 878 3437Ed O’Callaghan +1 212 878 3439David Raskin +1 212 878 3438Wendy Wysong +1 202 912 5030Megan Gordon +1 202 912 5021Polly Snyder +1 202 912 5025

Global contacts

www.aarnalaw.com

The survey looks at whether there is aconcept of corporate criminal liability in anumber of different jurisdictions. Weconsider the underlying principles of suchliability, the relationship with individualofficers’ liability, whether there are anyspecific defences, or mitigating factors,and the type and level of penalties.

What our survey shows is not only thatcorporate liability either has existed forsome time, or has been introduced, inmost jurisdictions enabling courts tosanction corporate entities for their criminalacts; but that there is also a general trendin most countries towards prosecutingcorporate entities for the criminalmisconduct of their officers and employeesand for higher penalties. In those countrieswhere there is no criminal liability per se,there is either quasi-criminal liability orconsideration is being given to theintroduction of corporate criminal liability. Inthe United States, where corporatecriminal liability has been a feature ofUS law since the nineteenth century, thecriminal prosecution of corporations cameto an abrupt halt following the criminalprosecution of Arthur Andersen in 2002,the conviction of which (subsequentlyoverturned) resulted in its collapse and joblosses for thousands of innocentemployees. However, more recently,prosecutors have been less willing toaccept the prospect of collateralconsequences as justification for notpursuing criminal chargesagainst corporations.

European contextBefore looking more closely at corporatecriminal liability across Europe, it isinstructive to consider the context in

which Member States are operating.Whilst national security remains theresponsibility of each Member State,judicial cooperation in criminal mattersacross Europe has become an essentialelement in ensuring the effectiveoperation of each Member State’scriminal justice system. Based on theprinciple of mutual recognition ofjudgments and judicial decisions byEU countries, this was introduced by theMaastricht Treaty in 1992. Because legaland judicial systems vary from oneEU country to another, the establishmentof cooperation between the differentcountries’ authorities has been a keyfeature of the EU legal landscape over thepast decade or so. Of particularrelevance is the Convention on MutualAssistance in Criminal Matters 2000which strengthened cooperation betweenjudicial, police and customs authorities.The first instrument to be adopted on thebasis of the principle of mutualrecognition of judicial decisions was theEuropean Arrest Warrant (“EAW”) whichcame into operation in January 2004 andwhich has become a key tool in the fightagainst cross-border crime. An EAW maybe issued by a national judicial authority ifthe person whose return is sought isaccused of an offence for which themaximum period of the penalty is at leastone year in prison or if he or she hasbeen sentenced to a prison term of atleast four months.

The role of the EU increased further withthe introduction of the Lisbon Treaty,which came into effect on1 December 2009, which provides for anew legal framework for criminallegislation concerning, for example,

minimum rules regarding the definition ofcriminal offences for so-called ‘Eurocrimes’, including offences such asterrorism, money laundering, corruption,computer crime and organised crime;common minimum rules on the definitionof criminal offences and sanctions if theyare essential for ensuring theeffectiveness of a harmonised EU policy;and minimum criminal sanctions forinsider dealing and market manipulation.In this latter area, current sanctionregimes do not always use the samedefinition which is considered to detractfrom the effectiveness of policing what isoften a cross-border offence. As aconsequence, a new regulation onmarket abuse and a new directive oncriminal sanctions for market abuse werepublished on 12 June 2014 (although thelatter will not be implemented in allMember States with the UK having optedout). Member States have two years totranspose the Directive on criminalsanctions for market abuse into theirnational law. The new rules on marketabuse update and strengthen theexisting framework and, for example,explicitly ban the manipulation ofbenchmarks (such as LIBOR). TheDirective on criminal sanctions for marketabuse requires all Member States toprovide for harmonised criminal offencesof insider dealing and marketmanipulation, and to impose penaltieswhich are effective anddissuasive – including maximum sanctionlevels of at least four years’ imprisonmentfor market manipulation, insider dealingand recommending or inducing anotherperson to engage in insider dealing andtwo years for the unlawful disclosure ofinside information. Member States will

4 Corporate Criminal LiabilityMarch 2015

Introduction


This survey of corporate criminal liability seeks, on a jurisdiction-by-jurisdiction basis,to answer some common questions on a subject which features with increasinglyregularity on boardroom and prosecutors’ agendas.



have to make sure that such behaviour,including the manipulation ofbenchmarks, is a criminal offence,punishable with effective sanctionseverywhere in Europe. Significantly in thecontext of corporate liability, the directiveextends liability to legal persons butliability would not attach to legal personsin circumstances where they had in placeeffective arrangements to ensure that noperson in possession of insideinformation relevant to the transactioncould have transmitted that information.

A new conceptIn all European jurisdictions where theconcept of corporate, or quasi-corporate,criminal liability exists, it is, with theexception of the UK and the Netherlands,a relatively new concept. Those countriesapart, France was the first Europeancountry to introduce the concept ofcorporate criminal liability in 1994,followed by Belgium in 1999, Italy in2001, Poland in 2003, Romania in 2006and Luxembourg and Spain in 2010. Inthe Czech Republic, an act creatingcorporate criminal liability was introducedon 1 January 2012. In Germany, hithertoit has been thought that imposingcorporate criminal liability would offendagainst the basic principles of theGerman Criminal Code. However, in late2013 the Government of NorthRhine-Westphalia proposed a draft lawon corporate criminal liability, althoughtime will tell whether it is enacted. InRussia, a draft law on corporate criminalliability was put before the RussianFederation Council at the end of June2014 and is finding broad support atGovernment level. Even in the UK wherecriminal liability for corporate entities hasexisted for decades, many offencesfocussing on corporate criminal liabilityhave been created in recent years (andprosecutors continue to lobby for furtherextensions to the application of this

concept). In the Netherlands, until 1976only charges for fiscal offences could bebrought against corporate entities.

Rest of world contextOur study of a sample of emerging andestablished economies outside Europehighlights significant variations betweenarrangements in different jurisdictions,both in terms of the mechanisms bywhich corporate entities may faceexposure to the criminal law and themagnitude of the risk of such exposurecrystallising. In some instances, thesedifferences are based on the way inwhich historical connections betweenjurisdictions have shaped thedevelopment of the concept and continueto influence its application today.

For instance, the concept of corporateliability under the criminal law is relativelynascent in India, where the courtsconfirmed in a landmark case in 2005that corporate entities may suffer bothcivil and criminal liability, and Indonesia,where some statutes provide for patchypotential liability. In these jurisdictions,significant uncertainties will remain untilearly cases and prosecutorialexperiments are followed up with moreconcrete legislative developments and/orrobust jurisprudence.

In other jurisdictions surveyed (namelyAustralia, Hong Kong, Singapore and theUS), the concept is much betterestablished. There are substantialdifferences between these jurisdictions inthe way in which and the extent to whichcorporate entities are prosecuted. Inrelative terms, the highest levels ofinvestigative and prosecutorial activity areto be found in the US and Australia,although in both jurisdictions, prosecutorsare seeking to send deterrent messagesby increasingly and actively pursuingindividuals in addition to corporates.

In Hong Kong and Singapore theinfluence of English law is clear. In thesejurisdictions, numbers of cases involvingcorporate defendants have beenrelatively low. Largely as the result ofsimilar difficulties with attributingindividuals’ conduct to corporate entitiesas have historically beset UKprosecutors, authorities there haveadopted the approach of targeting theirresources on the pursuit of individualsrather than corporates.

Basis of corporate liabilityThe basis or proposed basis of liability forcorporate entities within those countrieswhere liability exists (or is proposed) restson the premise that the acts of certainemployees can be attributed to acorporate entity. The category ofemployees which can trigger corporateliability is limited in some jurisdictions tothose with management responsibilitiesand the act must generally occur withinthe scope of their employment activities.The act must also generally be done inthe interests of or for the benefit of thecorporate entity.

Systems and controlsOne feature running through the legalframework in many of the jurisdictions isa focus on whether the corporate entityhad proper systems and controls toprevent the offence from occurring. Suchsystems and controls can either operateto: (i) show there was no intent to commitan offence on the part of a corporate,(ii) provide a defence, (iii) be a mitigatingfactor upon sentence or (iv) impact ondecisions to prosecute and on penalties.

In relation to intent, in Luxembourg, forexample, whilst there are no defencesexpressly set out in the applicablelegislation, all offences require proof ofintent leaving it open to a corporateentity to advance arguments that it had

appropriate systems and controls inplace and so could not have intendedthe offence.

In many jurisdictions, corporate entitieswill have a defence if they show they hadproper systems and controls in place toprevent an offence from being committed.

In Belgium, except for offences of strictliability, a corporate entity can avoidcriminal liability altogether by proving thatit exercised proper due diligence in thehiring or supervising of the person thatcommitted the offence and that theoffence was not the consequence ofdefective internal systems and controls;whilst in Germany, a corporate entity’sowner or representatives can be heldliable (within the regulatory context) if theyfail to take adequate supervisorymeasures to prevent a breach of duty byan employee, but it is a defence for theowner and the representatives to showthat they had taken adequatepreventative measures. In Italy, thecorporate entity has an affirmativedefence if it can show that it had in placeand effectively implemented adequatemanagement systems and controls.Likewise, in Spain, corporate entities willnot be criminally liable if they enforceappropriate supervision policies over theiremployees. In Poland the corporate entityis only liable if it failed to exercise duediligence in hiring or supervising theoffender or if the corporate entity’srepresentatives failed to exercise duediligence in preventing the commission ofan offence; and in Romania, thecorporate is only liable if the commissionof the offence is due to the latter’s lack ofsupervision or control. In Russia (albeitunder the Administrative Offences Code)an organisation is guilty if it cannot provethat it took all possible and reasonablesteps to prevent the offence and complywith the law.

In some jurisdictions, measures taken by acorporate entity to prevent the commissionof offences may be mitigating factors uponsentence. For example, in Italy a fineimposed on a corporate entity will bereduced by 50% if, prior to trial, acorporate has adopted necessary andpreventative internal systems and controls.

Even where it is not an express defenceor it is not taken into account expresslyas a mitigating factor, the adequacy of acorporate entity’s processes, proceduresand compliance culture is likely to berelevant both to regulators, prosecutorsand courts in determining whether toprosecute and, if prosecuted, in decidingwhat penalty to apply. In Australia, duediligence in ensuring compliance with thelaw is often available to corporations as adefence; where it is not a defence it maybe a relevant factor in determining

whether fault has been established. InFrance, whilst there is no specific defenceprovided by law based on adequatecompliance procedures, the fact that acompany has implemented strongcompliance policies may be taken intoaccount either to demonstrate that therewas no mens rea or when assessing theamount of the penalty.

The emphasis placed on anorganisation’s compliance culture and itssystems and controls by applicablelegislation, and more broadly byprosecuting authorities and courts,demonstrates the importance of havingsuch systems in place at the corporatelevel. In the UK, the concept of adequateprocedures has risen high up thecorporate agenda as a result of theBribery Act 2010. Corporate entitieswithout adequate procedures are liable to





be prosecuted for the offence of failure toprevent bribery by their employees, orindeed by anyone performing services foror on behalf of the corporate entity.

In the US robust compliance programmesmay help corporations avoid prosecution,though they are not formally a defence tocriminal prosecution – however, a robustcompliance programme is likely tofacilitate other mitigating circumstances,such as self-reporting of violations, thatwill help a corporation avoid prosecution.

PenaltiesThe level of penalties varies acrossjurisdictions, but there are certaincommon trends. The most commonpenalty imposed on corporate entities arefines which have been on an upwardtrajectory in recent years across manyjurisdictions. Several jurisdictions, such asFrance and Spain, envisage thedissolution of the corporate entity incertain cases. Another common featureof sentencing regimes is a ban fromparticipating in public procurementtenders although there is no formalscheme for mandatory debarment frompublic procurement processes forcorporations convicted of criminaloffences in Hong Kong.

In Australia, law reform commissions haverecommended introducing sentencingprovisions targeted specifically atcorporations but there has not been anyindication that such recommendations willbe implemented in the near future.However, there is an appetite for higherpenalties. The Australian Securities andInvestments Commission has recentlycalled for the penalties available to it tobe increased.

In the US, in determining a corporation’spenalty in the federal system, judges referto several statutory factors enumerated in

18 U.S.C. 3553(a) and Chapter 8 of theFederal Sentencing Guidelines (“theSentencing Guidelines”). The crux ofthe Sentencing Guidelines is that theypunish according to the corporation’sculpability and the seriousness of thecrime, and reward corporations forself-disclosure, cooperation, restitution,and preventative measures. While therehave not been trials, prosecutors havebegun to insist on corporate guilty pleasin lieu of more lenient settlements and thesettlements themselves have requiredenormous fines on companies foundlacking adequately robust complianceprogrammes or internal controls.

In The Netherlands, the last couple ofyears have seen the Public ProsecutionOffice demonstrate a much greaterwillingness to impose very substantialfines, against a concern not to fall behindactions by foreign authorities.

In the UK, in respect of certain offences,the Sentencing Council’s DefinitiveGuideline for Fraud, Bribery and MoneyLaundering Offences (“the Guideline”)came into force on 1 October 2014. TheGuideline contains a ten-step process tobe followed by the criminal courts whensentencing corporations for fraud, briberyand money laundering offences. Giventhe paucity of corporate prosecutions inthe UK, there is no meaningful precedentfor the sentencing of corporates. ThisGuideline therefore draws upon a varietyof sources including regulatory and civilpenalty regimes applied by UKenforcement authorities; sentencingguidelines for corporate manslaughter aswell as civil and criminal penaltiesimposed in other jurisdictions, inparticular the US. The Guideline will alsobe a reference point for fines imposedunder the terms of a DeferredProsecution Agreement (“DPA”). A DPA isa new tool available to UK prosecutors

since February 2014 as a way of dealingwith alleged economic criminal conductby a corporate entity, one term of whichwill almost always include a financialpenalty – but can also includecompensation to victims, the impositionof a monitor and/or disgorgement ofprofits, among other things. Any financialpenalty imposed under a DPA must bebroadly comparable to a fine that thecourt would have imposed upon acorporate entity following a guilty plea.

The concept of DPAs comes from theUS, where they are an established andfrequently used method of concludinginvestigations involving corporate entities.The US also has available to itNon-Prosecution Agreements (“NPAs”).DOJ turned to these tools followingArthur Andersen’s collapse to imposesubstantial financial penalties andcompliance reforms on companieswithout the collateral consequencesassociated with criminal charges. DPAsentail a criminal charge publicly beingfiled with the court, albeit in deferredstatus, whereas NPAs do not require acharge, deferred or otherwise.

DPAs have been introduced in someEuropean jurisdictions (for example in theCzech Republic), and in some othersthere are concepts akin to DPAs – suchas criminal settlement in Belgium. Insome European countries there can be aresolution short of prosecution in certaincircumstances not dissimilar to thosewhich must exist under the UK DPAregime. For instance, in Germany, thedraft proposal by the State of NorthRhine-Westphalia contains a provisionstipulating that the competent court canrefrain from imposing any penalty at all onthe corporate concerned if certainrequirements are met, one of which isthat the entity has self-reported. Similarly,in Romania, where corruption offences

arise, criminal liability can be avoidedaltogether if the corporate entityself-reports before an investigation hasstarted. In other countries, cooperationwill be considered a mitigating factorwhen it comes to sentencing.

MitigationIn many jurisdictions a corporate canmitigate the consequences of any liabilityby cooperating with the authorities. It isno surprise that, in an era of increasinglyscarce resources, prosecutors andregulators alike are willing to reducepotential penalties, sometimesdramatically, in exchange for cooperationby the corporate entity.

Perhaps best known is the approach inthe US where voluntary disclosure ofviolations is one of several factorsconsidered by federal prosecutors indeciding whether to bring chargesagainst a corporation.

In the UK “considerable weight” will begiven to a “genuinely proactive approach”adopted by the corporate in bringing theoffending to the notice of the prosecutingauthorities when a decision is taken as towhether or not to prosecute.1

Prosecutors and judicial authorities in anumber of jurisdictions recognise thatassistance provided by corporate entitiesleading to the identification and

prosecution of individuals within themresponsible for wrongdoing is a powerfulmitigating factor which, in appropriatecases, merits meaningful reductions inpenalties sought or imposed.

In many jurisdictions it is still too early tojudge how effectively prosecutors willmake use of the legislation at theirdisposal. Nevertheless, the signs are thatthe trend is towards greater, not less,scrutiny of the conduct of corporateentities and their officers.



1 Deferred Prosecution Agreements Code of Practice, published by the UK’s Serious Fraud Office and Crown Prosecution Service, paragraph 2.82 (i).

Americas

IntroductionCorporate criminal liability has been afeature of United States law since thenineteenth century. In the early part of thecentury, corporations could be held liableonly for strict liability crimes (i.e., thosethat impose liability regardless ofculpability). This trend started to changein 1890, when Congress passed theSherman Antitrust Act, explicitly providinga statutory basis for corporate criminalliability. By the early twentieth century,courts also applied the civil doctrine ofrespondeat superior to hold corporationsliable for intent-based crimes committedby their agents and employees.

Criminal prosecution of corporationsbecame more commonplace by the turnof the twenty-first century. That practice,however, came to a rather abrupt halt inthe wake of the notorious criminalprosecution of Arthur Andersen inconnection with the Enron accountingfraud scandal. Arthur Andersen fought thecriminal charges and lost at trial, with theresulting conviction resulting in the demiseof the well-established company and joblosses for thousands of innocentemployees. These collateral consequencesof the conviction — resounding all themore sharply when the conviction waslater reversed for legal error by the U.S.Supreme Court — chilled prosecutors’inclination to pursue criminal cases againstcorporations, a reluctance that persistedeven through the beginning of thefinancial crisis.

The pendulum has since swung back theother way. Prosecutors are soundlyrejecting the theory that any company orinstitution is “too big to jail” and havebecome less willing to accept the adventof collateral consequences as justificationfor not pursuing criminal charges againstcorporations. While there have not beentrials, prosecutors have begun to insist on

corporate guilty pleas in lieu of morelenient settlements and the settlementsthemselves have required enormous fineson companies found lacking adequatelyrobust compliance programs or internalcontrols. The theories under which suchcharges may be pursued arediscussed below.

LiabilityIn what circumstances can acorporate entity incur criminal orquasi-criminal liability?Under principles of respondeat superior, acorporation is vicariously criminally liablefor the illegal acts of any of its agents(including employees and contractpersonnel) so long as those actions werewithin the scope of their duties and wereintended, even only in part, to benefit thecorporation. An act is considered “withinthe scope of an agent’s employment” if theindividual commits the act as part of hisgeneral line of work and with at least thepartial intent to benefit the corporation.The corporation need not receive an actualbenefit. A corporation may be liable forthese offences even if it directs its agentnot to commit the offence.

In contrast with federal law, in manystates, a corporation is liable only for theacts of senior level management officials,and not for those of junior employees.

Some courts have also allowed forprosecution where the prosecutor couldnot identify the specific agent whocommitted the crime, if the prosecutor canshow that someone within the corporationmust have committed the offence. Similarly,where no single employee has the requisiteintent or knowledge to satisfy a scienterelement, courts have recognised a“collective knowledge doctrine,” whichimputes the collective intent andknowledge to the corporation when severalemployees collectively knew enough to

satisfy the intent or knowledge. Somecourts, however, have limited the collectiveknowledge doctrine to circumstanceswhere the company was flagrantlyindifferent to the offences being committed.

Additionally, some statutes impose criminalliability for corporations beyond respondeatsuperior, particularly in the fields ofenvironmental law and antitrust violations.

What offences can a corporatenot commit?Corporations can commit any offence thatan individual could commit, provided theoffence meets the standards laid outabove, and as long as the U.S. Congresshas not specifically exempted corporationsfrom liability in an applicable statute.

Are there any specific defencesavailable?While there are not specific defencesavailable to corporations, corporationshave some (but not all) of the sameconstitutional rights as an individualfacing a criminal investigation orprosecution. Any violation of these rightswould provide a defence to thecorporation. As with individuals, ex postfacto laws are unconstitutional as appliedto corporations. An ex post facto law isone that makes conduct criminalretroactively, while it was innocent at thetime of the conduct, or that increases thepunishment for a crime after the conduct.Furthermore, corporations have a FirstAmendment right to freedom of speechwhen it comes to political speech and thegovernment cannot place content-basedrestrictions on a corporation’s truthfulspeech in the context of lawfulcommercial activity. Corporations alsohave a Fourth Amendment right to befree from unreasonable searches andseizures. In certain highly regulatedsectors, however, corporations may, bythe nature of their business, be subject to



United States



reasonable warrantless inspections orinquiries. Additionally, corporations haveFifth and Fourteenth Amendment rights todue process and a Fifth Amendment rightto be free from double jeopardy, or therepeated prosecution for the same crime.However, corporations cannot assert theprivilege against self incrimination or theright to a grand jury indictment.Furthermore, corporations also have SixthAmendment rights to assistance ofcounsel, notice of charges, public trials,speedy trials, and trials by jury, and to callwitness and confront witnesses againstthem. Finally, corporations have an EighthAmendment right to be free fromexcessive fines that are grosslydisproportionate to the crime committed.

Robust compliance programs may alsohelp corporations avoid prosecution,though they are not formally a defence tocriminal prosecution. However, having arobust compliance program is likely tofacilitate other mitigating circumstances,such as self-reporting of violations, thatwill help a corporation avoid prosecution,as discussed further below.

What is the relationship between theliability of the corporate entity and itsdirectors and officers?Generally, corporate liability does notinsulate the directors, officers, or agents ofthe corporation from individual liability.Courts have stated explicitly that without aclear intent from the U.S. Congress, boththe corporation and the individual can befound liable for the crime. There areseveral crimes for which officers anddirectors may be liable even if they did notcommit the underlying crime themselves,including conspiracy, procurement, aidingand abetting, misprision, accessory afterthe fact, and obstruction of justice.

Additionally, both the corporation and itsdirectors or officers may be liable for

inchoate crimes, such as a conspiracybetween two or more directors orofficers. However, an officer or director ofthe corporation cannot be convicted ofconspiring solely with the corporation.Furthermore, under Pinkerton v. UnitedStates, a director or officer who was notaware of the criminal act may be liablecriminally for the foreseeable offencescommitted by one of his co-conspiratorsin furtherance of a common scheme.

Corporate directors or officers may also beliable when they have instructed anotheremployee to commit a federal offence forprocurement, or for aiding and abettinganother in the commission of a federaloffence. To aid and abet another, theofficer or director would have to know ofand facilitate the other’s misconduct.Furthermore, a director or officer could beliable for their conduct after the crime hasbeen committed. A director or officermight be liable for misprision if they knewof the commission of a federal felony byanother employee and actively tried toconceal the crime. Furthermore, a directoror officer could be liable as an accessoryafter the fact for assisting another inavoiding the consequences of their federaloffence. “Misprision” and “accessory” afterthe fact charges can also lead to specificstatutory charges for obstruction of justice.

ProcedureWho is responsible for investigatingand prosecuting offences committedby corporate entities?On the federal level, the U.S. Departmentof Justice (“DOJ”) is responsible forprosecuting offences by corporateentities. Administrative bodies, such asthe U.S. Securities and ExchangeCommission, can bring civil charges.Individual states, through their attorneygeneral offices, may bring criminal or civilcharges against corporations. Notably,New York State has taken an active role

in prosecuting financial crimes and otherwhite collar matters. However, theparagraphs below focus on federal law.

PunishmentCorporate entitiesCorporations face the same punishmentsas individuals after conviction, exceptthat, naturally, corporations cannot besentenced to prison time or death.However, corporations can be fined, puton probation, required to pay restitution,required to perform community service,barred from engaging in certaincommercial activity, required to establishcompliance programs, or ordered tofollow any other condition that the judgebelieves addresses the harm caused orthreat of future harm, or have theirproperty confiscated.

In determining a corporation’s sentencein the federal system, judges refer toseveral statutory factors enumerated in18 U.S.C. 3553(a) and Chapter 8 of theFederal Sentencing Guidelines (“theSentencing Guidelines”). The crux ofthe Sentencing Guidelines is that theypunish according to the corporation’sculpability and the seriousness of thecrime, and reward corporations forself-disclosure, cooperation, restitution,and preventative measures.

What factors are taken intoconsideration in determiningthe penalty?Among the factors considered by afederal judge in determining acorporation’s penalty, the most significantis the nature and seriousness of themisconduct in question. The SentencingGuidelines provide a sliding scale finerange based on the gravity andcircumstances of the offence, amongother factors. In determining where in therange the fine should be set, the judgelooks to factors such as the quality of the

corporation’s compliance program andwhether the corporation would gain awindfall despite the fine. Other factorsinclude the organization’s substantialassistance to authorities in prosecutingcrimes committed by individuals, whetherthe offence resulted in death or bodilyinjury, whether the offence constituted athreat to national security or theenvironment, whether the organizationbribed any public officials in connectionwith the offence, and whether thecorporation agreed to pay remedial coststhat greatly exceed the gain theorganization received, among others.

Is there a mechanism for entities todisclose violations in exchange forlesser penalties?Voluntary disclosure of violations can helpa corporation at several points in thecriminal process, including seekingleniency through a settlement or otherwisemitigating penalties. Voluntary disclosureof violations is one of several factorsconsidered by federal prosecutors indeciding whether to bring charges againsta corporation. In determining whether topursue a criminal charge against acorporation, prosecutors are guided by aset of internal criteria called the “Principlesof Federal Prosecution of BusinessOrganizations.” Sometimes referred to asthe “Filip Factors,” these publicallyavailable criteria include such factors as:

the pervasiveness of the wrongdoingwithin the corporation,

the corporation’s history of similarmisconduct,

the corporation’s timely and voluntarydisclosure of wrongdoing and itswillingness to cooperate in theinvestigation of its agents,

the existence and effectiveness ofthe corporation’s pre-existingcompliance program,

the corporation’s remedial actions,

collateral consequences,

the adequacy of the prosecution ofindividuals responsible for thecorporation’s malfeasance, and

the adequacy of remedies such as civilor regulatory enforcement actions.

What types settlements are availableto a corporation in criminal matter?Alternatives to a criminal trial include a guiltyplea, a deferred prosecution agreement(“DPA”), a non-prosecution agreement(“NPA”), or civil or regulatory sanctions.

DPAs and NPAs are dispute resolutionmechanisms that avoid indictment. DOJturned to these tools in abundance in thewake of Arthur Andersen to imposesubstantial financial penalties andcompliance reforms on companies withoutthe collateral consequences associatedwith criminal charges. The key differencebetween NPAs and DPAs is that DPAsentail a criminal charge publicly filed withthe court, albeit in deferred status,whereas NPAs do not require a charge,deferred or otherwise. NPAs are privateagreements that become public only bythe agreement’s terms. There is no judicialinvolvement in a resolution by NPA; DPAsettlements require court approval.

Otherwise, NPAs and DPAs are similar.They both include: (i) an admission in theagreement to misconduct described in anaccompanying statement of facts;(ii) requirements to implement variousmeasures during the term of theagreement, including (among otherthings) payment of a fine, continuedcooperation with DOJ and otherauthorities, and enhanced internalcontrols to remediate the wrongdoing;and (iii) a release from criminalprosecution for any crimes described inthe statement of facts, so long as the

agreement is not breached. A DPAincludes DOJ’s commitment to deferprosecution of the charge filed with thecourt during the term of the agreementand, absent breach, to dismiss thecharge entirely at the term’s close.

In considering whether to apply civil orregulatory sanctions instead of criminalprosecution, prosecutors consider severalfactors including the interest of theregulatory body, their ability andwillingness to take over the investigation,and the sanction likely to be imposed onthe corporation by the regulatory body.

Current positionRecently, DOJ has announced severalinitiatives concerning corporate liability.Firstly, DOJ has placed greater emphasison corporations cooperating in theprosecution of individuals to receivecooperation credit sufficient to avoidprosecution. To obtain full cooperationcredit, the corporation must actpromptly to identify responsibleindividuals and to procure and produceevidence against them.

Furthermore, DOJ emphasised the value ofbringing charges against individuals ratherthan corporations. According to the DOJ,this promotes fairness to other employeesand stockholders, while still maintainingaccountability and appropriate deterrence.DOJ also emphasised the need toincentivise whistle-blowers and cooperatingwitnesses to come forward and cooperate.

The best way for corporations to avoidcriminal prosecution in the United Statesis to implement robust internalcompliance programs, to be sure toreport any violations in a timely manner,and to cooperate fully should a federalinvestigation of the responsible agentfollow self-reporting.



Europe and the Middle East

IntroductionTraditionally, legal entities were notcriminally liable under Belgian law. In thecase of an offence committed by acorporate, only those persons who wereresponsible for the corporate and whohad the duty to prevent the offence couldbe punished.

The situation changed radically with theadoption of the law of 4 May 1999, whichcame into force on 2 July 1999, on thecriminal liability of legal entities. This lawenables corporate entities to beprosecuted, with some limited exceptions.

Under Belgian law, corporate entities aremainly exposed to the risk of criminalinvestigation or prosecution in the fields ofenvironmental law and regulation, labourlaw, road traffic offences, consumerprotection, aggravated tax fraud, marketmanipulation and money laundering.

LiabilityIn what circumstances can acorporate entity incur criminal orquasi-criminal liability?A corporate entity can incur criminal liabilityeither where a criminal offence iscommitted on its behalf or when anoffence is intrinsically linked to its activities.

This is interpreted broadly. For example, acorporate could be criminally liable if oneof its truck drivers caused an accident asa result of a violation of the highway code.

However, a corporate entity may not beconvicted for the criminal acts of itsemployees committed outside the scopeof their professional activities.

What offences can a corporatenot commit?A corporate entity can commit any offence,except those for which only physicalpersons could be held liable (e.g. bigamy).

Are there any specific defencesavailable?With the exception of strict liabilityoffences, a corporate entity can avoidcriminal liability by proving that it did nothave any criminal intent, that it hasexercised proper due diligence in thehiring or supervising of the person whocommitted the offence and that theoffence was not the consequence ofdefective internal systems and controls.

What is the relationship between theliability of the corporate entity and itsdirectors and officers?There is no need to identify the physicalperson who committed the offence onbehalf of the corporate entity in order toprosecute the corporate entity.

When a criminal offence, which iscommitted on behalf of a corporate entityor which is intrinsically linked to theactivities of the corporate entity, isattributable to one or more physicalperson(s), both the corporate entity andthe physical person(s) may be prosecutedat the same time.

In principle, the corporate entity is liablefor the civil consequences of theoffences committed by its directors,managers and employees.

For specific offences, such as theviolation of the highway code, thecorporate legal entity is jointly andseverally liable vis-à-vis the Belgian Statefor the fines imposed on its directors,managers and employees.

There is an exception to this principle ofconcurrent liability which applies when anunintentional offence has beencommitted. In that case, only the person(corporate entity or physical person) whohas committed the most serious faultmay be prosecuted. This rule is very

controversial and creates conflict ofinterest issues in circumstances where acompany is prosecuted for anunintentional offence (strict liability) at thesame time as its directors or managers.

ProcedureWho is responsible for investigatingand prosecuting offences committedby corporate entities?The public prosecutor (Procureur duRoi/Procureur des Konings) (“PP”) is incharge of prosecuting criminal offencescommitted by corporate entities.

Most investigations will be carried out bythe PP, with the assistance of the police.However, more complex investigationsrequiring, for example, powers of searchand seizure and/or powers of arrest anddetention must be carried out by aninvestigating magistrate (juged’instruction/onderzoeksrechter).

Criminal proceedings against corporateentities are, like proceedings againstphysical persons, conducted inaccordance with the Belgian Code ofCriminal Procedure. At the end of theinvestigation and upon requisitions fromthe public prosecutor, the CouncilChamber (chambre duconseil/raadkamer) will decide whetherthere are sufficient grounds to bring thesuspect(s) before the criminal courts ornot. The criminal court of first instance(tribunal correctionnel/correctionelerechtbank) is competent to adjudicate thecase at first instance. The judgment canbe appealed before the Court of Appeal(Cour d’appel/Hof van beroep). Issues oflaw can then be appealed before theSupreme Court (Cour de cassation/Hofvan cassatie).


Belgium




PunishmentCorporate entitiesThe penalties that corporate entities canface are determined by the BelgianCriminal Code. In cases whereimprisonment is the proposed penalty fora particular offence, this is automaticallyconverted into a fine. The level of the fineis determined according to a formulabased on the number of months’imprisonment imposed.

The level of the fines may have adeterrent effect on small corporateentities. Experience suggests that largecorporate entities are more concernedabout the reputational risk and theconsequential civil liability that can resultfrom a conviction.

For specific offences, such as marketabuse or insider trading, the defendantmay be required, in addition to thepenalty, to pay an amount of two or threetimes the profit made from the offence.

Corporate entities can also faceconfiscation of assets, prohibition fromconducting a specific activity and/orpublic censure. The corporate entity mayalso be dissolved if it is found that it wasset up for the purpose of committingcriminal offences.

Additionally, corporate entities which havebeen convicted of specific criminal offencesmay be prohibited from participating inpublic procurement tenders.

What factors are taken intoconsideration in determiningthe penalty?There is a maximum and a minimumpenalty for each specific offence. Thecourt will determine the penalty withinthese limits, taking into account variousaggravating or mitigating factors.Aggravating factors taken into account

include the harm which the offencecaused, whether the offence wasplanned, the profit generated and anyprevious offending.

Mitigating factors include co-operationduring the investigation, early acceptanceof guilt as well as the compensation of thevictim(s). It remains very difficult howeverto measure the precise impact of each ofthese factors on the court’s decision.

Is there a mechanism for entities todisclose violations in exchange forlesser penalties?The Belgian Criminal Code does notcontain any leniency provisions.However, voluntary disclosure of acriminal offence will generally beconsidered a mitigating factor.

The law of 4 April 2011, which came intoforce on 16 May 2011, does provide theopportunity to reach an amicablesettlement between the entity and the PPat every stage of the proceedings,whereby they agree to discontinue theprosecution in exchange for payment ofa fine by the suspect. The initiative canbe taken solely by the PP and only for alimited number of criminal offences. Thefine cannot exceed the maximumamount provided by the law and shouldbe in proportion to the gravity of thecrime. In the event that the suspect andthe victim agree upon a settlement, thePP will take note in an official statementand the court will subsequentlydetermine on the discontinuance of thecriminal proceedings.

Can the PP settle acriminal matter (transactionpénale/strafrechtelijke transactie)?The PP can settle a criminal matter for afinancial penalty (including compensatingvictims where appropriate) for bothindividuals and corporates where s/he

considers that the offence does notdeserve a penalty of imprisonmentexceeding two years. This is regardless ofthe maximum penalty prescribed by law,so that it is the judgement of the PP thatmatters. The PP need not explain why heconsiders two years to be sufficient. Inpractice, this means that the PP is free tosettle cases when s/he believes it isappropriate. However, a settlement is notalways possible, for instance where theoffence involves customs and exciseduties or when the offence has causedsevere physical injuries. Further, thepotential victim(s) must be indemnified.The victim does not need to be fullyindemnified if the quantum is disputedbut must be compensated to the extentnot disputed. Where tax or social lawauthorities are among the victims, theymust approve the settlement. Othervictims can submit their comments to thePP but cannot veto the settlement. Asettlement can be reached at any stageof the proceedings until a final decisionon the merits is rendered.

The amount of the financial penalty is atthe discretion of the PP. However, theamount to be paid cannot exceed themaximum penalty as prescribed by law(and penalties of imprisonment areconverted into an amount in EUR).

The settlement must only be approved bya court where proceedings have beentransferred to an investigating magistrate(juge d’instruction/onderzoeksrechter) ordeferred to the criminal court; otherwiseno court approval is required, however itsrole is limited to verification that the abovementioned conditions have been met.

Two laws of 14 April and 11 July 2011have introduced into Belgian law anextended possibility of settlement incriminal matters. Pursuant to these newlaws, a settlement can now be proposed

by the PP to physical persons or legalentities, if he or she considers that thefacts should be sanctioned with a term ofimprisonment exceeding two years(though not exceeding 15 to 20 years’imprisonment), provided that the facts donot imply a severe infringement of thephysical integrity of a person. A settlementis possible notwithstanding a pendingcriminal investigation or pending criminalproceedings, as long as no final decisionhas been rendered and provided that thesuspect is willing to indemnify thedamages. For a tax or social securityoffence, a settlement is only possible if thesuspect has paid the tax or social securitycontributions due. The laws contain

specific guidelines as to, inter alia, the finewhich can be proposed, the delays for theexecution of the settlement, the hand-overof seized assets, the treatment of civildamages claims and the ultimatediscontinuation of the criminal action.

Current positionSince the adoption of the law of 4 May1999 a significant number of corporateentities have faced criminal investigationsand/or prosecutions. Public prosecutorshave not hesitated to use the broadpowers conferred under the law toprosecute legal entities and someprosecutors have been very aggressive intheir approach.

As a result, criminal prosecution is nowseen as a real risk by the vast majority ofcorporate entities in Belgium, and thishas undoubtedly had an impact oncorporate consciousness.

Criminal settlement is becoming morecommon, especially in complex financialmatters. This is principally because theBelgian authorities lack the resources todeal with these matters within areasonable period of time, such that inmany complex matters, the defendantsare acquitted after relying on technicaldefences relating to time-limitation.





IntroductionThe existence of corporate criminalliability is a relatively new phenomenon inthe Czech Republic. The Act on CriminalLiability of Corporations andProceedings Against Them (the “Act”)only came into force on 1 January 2012.The Act was introduced to meet theCzech Republic’s internationalcommitments and as part of the Czechgovernment’s anti-corruption strategy.

A corporate entity (including a foreigncorporate entity) can be held liable underthe Act if it is registered in the CzechRepublic, conducts its business in theCzech Republic through an enterprise orbranch or otherwise, or has assets in theCzech Republic. Czech corporate entitiescan also be punished under the Act forcriminal offences committed abroad.

There have been two minor amendmentsto the Act since it came into force. Thefirst amendment implemented certainchanges in connection with newlegislation on international judicialcooperation in criminal matters and is notspecific to corporate criminal liability. Asof 1 January 2014, the Act stipulates thata legal entity which is based in the CzechRepublic is considered a Czech citizen ora person with permanent residence in theCzech Republic, for the purposes of theAct on International Judicial Cooperationin Criminal Matters. The sections of theAct dealing with international judicialcooperation in criminal matters wererepealed when the Act on InternationalJudicial Cooperation in Criminal Mattersbecame applicable.

The second amendment, which becameeffective on 1 August 2014, extended thelist of criminal offences recognized by theAct. Corporate entities may now beprosecuted for e.g. profiteering, theabuse of a child for the production of

pornography, or for the participation inpornographic performances. Further,deferred prosecution agreements(“DPAs”) were introduced into the Czechlegal system with effect from1 September 2012. The rules on DPAshave been incorporated into the Code ofCriminal Procedure and are applicable,inter alia, in proceedings concerning thecriminal liability of corporations andshould help to simplify criminalproceedings. A DPA may be proposed bya public prosecutor (upon the petition ofthe accused or ex officio) and must beapproved by a criminal court in a publichearing. The negotiations may be initiatedprovided that there is sufficient evidenceto justify the conclusion that a criminaloffence has been committed by theaccused. A DPA may only be concludedin the presence of the defence counsel,and the public prosecutor is required totake the victim’s interests intoconsideration. The DPA itself shallcontain, among other things, adeclaration that the accused committedthe act in question and it shall alsospecify the punishment to be imposed (orwaiver of punishment if permissible) aswell as the extent and manner ofcompensation for material or non-materialdamage, or disgorgement (if agreed).

LiabilityIn what circumstances can acorporate entity incur criminal orquasi-criminal liability?A corporate entity is held criminally liableif the offence was committed:

on its behalf, in its interests or withinthe scope of its activities; and

by: (i) its statutory body or otherpersons acting on its behalf(e.g. under a power of attorney);(ii) persons performing managing orsupervisory activities within thecorporate entity; (iii) persons

exercising decisive influence over themanagement of the corporate entity;or (iv) its employees while carryingout their tasks, subject to furtherqualifications set out in the Act(e.g. where due supervision wasnot exercised).

What offences can a corporate entitynot commit?A corporate entity can only commit alimited number of criminal offences(approximately 82 overall) which areenumerated in the Act, most notablyoffences related to money laundering,corruption, interference with justice, fraud,fraudulent accounting, rigging of tenders,environmental offences, organised crime,human trafficking, computer crimes andvarious tax-related offences.

Are there any specific defencesavailable?The Act does not provide for any specificdefences. However, the Act provides forthe application of the Czech CriminalCode and the Czech Code of CriminalProcedure where the Act does not set outspecific rules and the nature of the matterpermits. For example, the defence of“mistake of fact” which exists under theCzech Criminal Code could be applicable.

What is the relationship between theliability of the corporate entity and itsdirectors and officers?If a corporate entity is convicted, the Actdoes not provide that secondary liabilitywill automatically attach to the directors ifthey knew of or were negligent regardingthe facts which led to the conviction ofthe corporate entity. However, thecriminal liability of a corporate entity doesnot preclude the (additional) criminalliability of its directors and officers andthey are at riks of individual prosecutionunder the Criminal Code if their conductconstitutes an offence.

Czech Republic

ProcedureWho is responsible for investigatingand prosecuting offences committedby corporate entities?The police and the public prosecutorwould be responsible for investigatingand prosecuting offences committed bycorporate entities (as is the case foroffences committed by individuals).

PunishmentCorporate entitiesThe most serious penalty envisaged isthe dissolution of the corporate entityitself if its activities wholly orpredominantly consisted of thecommission of criminal offences. Thispenalty can only be imposed againstcorporate entities with a registered officein the Czech Republic.

Other penalties contained in the Actinclude: (i) the forfeiture of (all) property;(ii) monetary penalties; (iii) the forfeitureand/or confiscation of assets; (iv) theprohibition of activities; (v) theprohibition of performance under publicprocurement contracts, participation inconcession procedures or tenders; (vi)the prohibition on accepting grants andsubsidies and; (vii) the publicationof judgments.

The Act does not provide for anymitigating/aggravating factors, howeverrelevant provisions of the Criminal Codeare applicable, such as:

mitigating factors: if it is a firstoffence, committed in circumstancesthat were beyond the control of theoffender; or if only minor damageresulted; and

aggravating factors: if it is a repeatoffence or if it was committeddeliberately or with premeditation.

IndividualsThe criminal liability of corporate entitiesdoes not have any impact on the existingcriminal liability of individuals under theCzech Criminal Code. The punishment ofindividuals will continue to be regulatedby the Czech Criminal Code alone.

However, some offences may only becommitted by an offender “vested with aspecial capacity, status or quality”. In suchcases, the offender does not need to havethis special capacity, status or quality himor herself provided that the corporateentity on whose behalf the offender actshad this special capacity, status or quality.

What factors are taken intoconsideration when determiningthe penalty?In determining the type and severity of thepenalty, similar principles apply under theAct as those which apply to individualsunder the Criminal Code. A court will takeinto account factors such as:

the nature and seriousness of theoffence committed;

the financial circumstances of thecorporate entity and the nature of itsexisting activities;

the corporate entity’s conduct after thecriminal conduct, in particular its effortsat making good any damage ormitigating any other detrimental effects;

the effects and consequences thatmight be expected from the penaltywith regard to the corporate entity’sfuture activities; and

the effects that the penalty might haveon third parties, in particular thosepersons harmed through the criminaloffence. In the case of corporateentities, the court would have toconsider the effect on creditors withno connection to the offence itself.

Is there a mechanism for corporateentities to disclose violations inexchange for lesser penalties?The Act provides for “effective remorse”,which means that the criminal liabilitywould expire if the offender voluntarily:

prevented or rectified the detrimentaleffects of its criminal offence; or

reported its criminal offence at atime when the detrimental effects ofthe criminal offence could stillbe prevented.

However, effective remorse is notapplicable to corruption-related offences.

Current positionThe Act enables the punishment ofcriminal conduct that previously could notbe sanctioned due to the difficulty inidentifying the individual(s) responsible incircumstances where decisions are takenby a corporate entity. It also helps toprevent situations where individuals areheld criminally liable whilst the corporateentity escapes liability and continues itscriminal conduct. The level of penaltiescontemplated under the Act can severelyaffect the continued operation andprofitability of corporate entities.

Since its enactment, there have beenapproximately 30 convictions underthe Act.

The most severe sentences haveincluded the dissolution of a corporateentity and the prohibition of businessactivities for a period of 10 years. DPAshave not been used with any greatfrequency so far. However, since it is nowpossible to prosecute corporates underthe Act, and as DPAs become a greaterfeature of the international prosecutoriallandscape, we anticipate that the use ofDPAs for corporate offending in theCzech Republic will increase.





IntroductionThe Penal Code of 1994 introduced theconcept of corporate criminal liability inFrench law. Initially applicable to a limitednumber of offences, the principle hasbeen extended to all offences as from31 December 2005 (Law No 2004-204 of9 March 2004).

LiabilityIn what circumstances can acorporate entity incur criminal orquasi-criminal liability?With the exception of the State and,under certain conditions, the local publicauthorities, a corporate entity may becriminally liable for the offences committedon its behalf by its legal representatives.

A corporate entity may also be convictedfor the criminal acts of its employeesacting on behalf of the company throughan express power of attorney (délégationde pouvoir), where the corporate entity hasvalidly delegated certain powers to them.

However, recent case law has suggestedthat a corporate entity may be convictedon the basis of negligence resulting fromcareless and/or defective organisation ofthe company, even if the fault cannot beattributed to a representative or anemployee to whom the corporate entityhas delegated functions.

What offences can a corporate entitynot commit?In theory, a corporate entity can commitany offence except for offences which, bytheir very nature, can only be committedby natural persons. A corporate entitycan commit offences for whichimprisonment is the only penalty providedby law. In such cases, the company maybe fined up to EUR 1 million.

Are there any specific defencesavailable?There is no specific defence provided bylaw, such as the one based on theimplementation of anti-corruptionadequate procedures set out by theUK Bribery Act. However, the fact that acompany has implemented strongcompliance policies may be taken intoaccount either to demonstrate that therewas no mens rea or when assessing theamount of the penalty.

More generally, a corporate entity will notbe convicted if it is able to demonstratethat the offence was not committed on itsbehalf. For example, a corporate entitycannot be indicted or convicted ofoffences committed by its representativesif they acted in their own interest, ratherthan on the company’s behalf.

However, the court may infer that theoffence was committed on behalf of thecompany if it was committed in thecourse of the usual corporate businessand for its benefit.

What is the relationship between theliability of the corporate entity and itsdirectors and officers?The criminal liability of a corporate entityfor an offence does not preclude that ofany natural person who may be aperpetrator or accomplice to the sameact but does not automatically result inliability for its directors or officers.

Both individuals and corporate entitiescan be convicted on the basis of thesame facts. The decision to prosecute anindividual or a corporate entity rests withthe Public Prosecutor. For instance, theCEO of a company may be heldcriminally liable for the same offence asthe company, if committed with hisconsent, assistance or neglect.

In practice, despite an increasing numberof prosecutions brought againstcorporate entities, individuals are still theprimary target of prosecutors.

ProcedureWho is responsible for investigatingand prosecuting offences committedby corporate entities?The public prosecutor is in charge ofprosecuting and investigating offencescommitted by corporate entities. In somecomplex matters, an investigatingmagistrate will be appointed to carry outthe investigation.

French regulatory bodies are not entitledto prosecute and investigate criminaloffences. For example, the FrenchAuthority of Financial Markets (Autoritédes Marchés Financiers) only focuses onregulatory breaches giving rise toadministrative liability when dealing withcorporate entities or individuals. If aregulatory body becomes aware ofpossible criminal offences during thecourse of an investigation, it has a duty toreport them to the public prosecutor.

PunishmentCorporatesThe maximum fine applicable to acorporate entity is five times the fineapplicable to individuals. For example, acorporate can be fined up toEUR 1,875,000 for misuse of companyassets as compared with a fine up toEUR 375,000 for individuals.

Where expressly provided by law, thefollowing additional penalties maybe imposed:

dissolution, where the corporate entitywas created to commit a felony; or,where the felony or misdemeanorcarries a sentence of imprisonment of

France

three years or more, where thecorporate entity was diverted from itsobjectives in order to commit the crime;

prohibition to exercise, directly orindirectly, one or more social orprofessional activities, eitherpermanently or for a maximum periodof five years;

placement under judicial supervisionfor a maximum period of five years;

permanent closure or closure for upto five years of one or more of thepremises of the company that wereused to commit the offencesin question;

disqualification from public tenders,either permanently or for a maximumperiod of five years;

prohibition on making a public appealfor funds, either permanently or for amaximum period of five years;

prohibition on drawing cheques, exceptthose allowing for the withdrawal offunds by the drawer from the draweeor certified cheques, and the prohibitionon using payment cards, for amaximum period of five years;

confiscation of the object which wasused or intended to be used for thecommission of the offence, or of theassets which are the product of it; and

publication of the judgment.

IndividualsPossible legal consequences for a legalrepresentative, director, or employee ofa corporate entity to whom powershave been delegated includeimprisonment, fines and a prohibition onexercising a commercial professionand/or on managing or controlling acommercial company.

What factors are taken intoconsideration when determiningthe penalty?When imposing a sentence on a corporateentity, courts take into account, amongother factors: the circumstances of theoffence; the amount of profit realised; theharm caused; and the financialcircumstances of the corporate entity.

The court must take into considerationaggravating factors, such as if the offencewas repeated or planned.

If the corporate entity co-operates withthe prosecutor or with the investigatingjudge, the court can take suchco-operation into consideration. However,there is no official sentencing guideline inrelation to co-operation of the offender orself-reporting.

Is there a mechanism for entities todisclose violations in exchange forlesser penalties?The French Code of Criminal Procedureallows a defendant to “negotiate” hispenalty with the Public Prosecutor (inorder to try to obtain a lesser penalty),provided that he first admits his guilt. Insuch circumstances, once the facts areadmitted, the Public Prosecutor proposesa penalty to the defendant in thepresence of his lawyer. If agreed by thedefendant, the “deal” is then submitted tothe President of the Criminal Court forapproval. However, in practice, thisprocedural option, which is designed forsimple/undisputed cases where thepenalty is foreseeable, is rarely used bycorporate entities.

Current positionFrench Courts tended, until recently, toconsider that it was not necessary toidentify the body or representativethrough whom the legal entity had

committed an offence. The fact that thenegligence/fault was part of the businessoperations/organisation of the corporateentity was considered sufficient to triggerthe legal entity’s criminal liability.

The Supreme Court seems to haverecently returned to a stricter position,imposing a requirement to demonstratethe involvement of a representative in thecriminal conduct. This involvement couldresult from a direct participation to thecriminal conduct or, in certaincircumstances, from a lack ofcare/control or negligence.

In 2004, a plea bargaining process wasintroduced (comparution surreconnaissance préalable de culpabilité).Under this process, the defendant admitshis guilt for a lesser penalty and there isno public trial. Where the penalty isagreed between the parties, it is thensubmitted to the President of the CriminalCourt for approval through a judgment,which is registered in the criminal record.

Until recently, this process had only beenused by prosecutors for minor offencessuch as car traffic offences. In the lastcouple of years, some investigatingmagistrates have started to use thisprocedural option to settle complexfinancial matters involving legal entitiesand it is now officially encouraged bypublic prosecutors.

Pursant to a law enacted on 6 December2013, a new prosecutor specialising infinancial matters was created. This newprosecutor has, so far, been very active ininvestigating corporate and financialinstitutions and a number of major casesare ongoing. Judges have also recentlydemonstrated their capacity to imposemuch higher fines on companies than inthe past.





IntroductionThe question of whether German lawshould be amended to include criminalliability for corporate entities has longbeen debated. Corporate scandals andlarge fines levied against corporateentities by foreign authorities keep thisdebate alive, despite repeatedcontentions that such liability isincompatible with the essence of Germancriminal law.

The advocates of criminal liability forcorporate entities consider that regulatorysanctions, typically in the form of fines, areinadequate. In addition they point to thevarious initiatives in the European Unionwhich require Member States to establishsanctions against corporate entities, andthe corresponding growing coverage ofcorporate liability and sanctions, mainly inthe United Kingdom, France and theNetherlands, as well as outside Europe,especially in the United States.

Opponents to the idea that corporatecriminal liability should be introduced inGermany argue that the German penalcode is based on the notion of individualculpability, and therefore corporateentities may not be held criminally liableas they lack the capacity to act in thecriminal law sense.

In September 2013, the Government ofNorth Rhine-Westphalia proposed a newlaw creating criminal liability for corporateentities (Verbandsstrafengesetz). The newdraft law stipulates that offencescommitted by an entity’sofficers/executives are not only to beattributed to the individual but also to theentity on whose behalf the individual acts.The attribution of criminal liability wouldeven apply to offences committed abroadwhere an entity is headquartered inGermany. The North Rhine-Westphalia

draft law provides for a wide range ofdifferent penalties, and includes (notnecessarily cumulatively) a fine of up to10% of the entity’s annual total revenue,exclusion from government aid, exclusionfrom public procurement, the prohibitionof further (commercial) activity or awarning with the threat of furthersanctions. A court can refrain fromimposing a penalty in circumstanceswhere no substantial damage wascaused or any damage has largely beenremediated and/or the entityself-reported, voluntarily disclosing crucialinformation to assist the discovery of theoffending and providing evidencenecessary to prove the entity’swrongdoing. The current intention is tointroduce the draft bill before Parliament(the Bundesrat) so that the legislativeprocess can begin. Whilst the overallpolitical climate might be favourable toreform, the draft law raises numerousconstitutional and doctrinal concernswhich are likely to be the cause of livelyparliamentary debate. It is difficult topredict the outcome of the process,whether the bill will be passed into lawand if so, to what extent it may be thesubject of further amendment.

Nevertheless, the imposition of regulatoryfines and the siphoning off of economicbenefits are tools used frequently aspractical solutions to sanction corporateentities for wrongdoing.

LiabilityIn what circumstances can acorporate entity incur criminal orquasi-criminal liability?As German criminal law only applies tonatural persons, a legal entity cannotcommit a criminal offence under Germanlaw. However, criminal or regulatorysanctions (namely forfeiture orders orregulatory fines) may be imposed on the

entity itself because of criminal orregulatory offences committed by itsofficers or employees. Such regulatorysanction can be imposed irrespective ofwhether fines or imprisonment are alsoimposed on individuals.

Whilst the imposition of a forfeiture order ora regulatory fine does not necessarilyrequire any prior conviction of an individual,it does require some finding of wrongdoing.

A regulatory fine (Geldbuße) of up toEUR 1 million can be imposed on acorporate entity if the prosecutionauthorities and courts find that a seniorexecutive or an employee of the entitycommitted a criminal or regulatoryoffence and thereby either enriched orviolated specific legal obligations of suchentity. The fine can be increased if thealleged offence led to economic benefitof more than EUR 1 million.

Alternatively, a court can make a forfeitureorder (Verfallsanordnung) against acorporate entity if the court finds that theentity was enriched by a criminal orregulatory offence committed by anindividual (most likely by an officer oremployee of the entity). Such forfeitureorders siphon off the gross proceeds(Brutto-Erlangtes) of the criminal orregulatory offence (without deducting anyrelated expenses incurred) and cantherefore result in significant amounts.

What offences can a corporate entitynot commit?As explained above, a corporate entitycannot commit any criminal offence.

Are there any specific defencesavailable?Whilst there are no specific defences, theimposition of a regulatory fine on acorporate entity is discretionary and the

Germany

court could refrain from imposing a fine ifit considered that the company hadtaken adequate measures to preventsuch breaches.

What is the relationship between theliability of the corporate entity and itsdirectors and officers?There must be a finding of wrongdoing byofficers or employees of a corporateentity for forfeiture orders and regulatoryfines to be imposed.

ProcedureWho is responsible for investigatingand prosecuting offences committedby corporate entities?Forfeiture orders and regulatory fines areimposed on a corporate entity by thecompetent prosecuting authorities andcriminal courts. Regulatory fines can alsobe imposed by supervisory authorities.

PunishmentCorporate entitiesA regulatory fine can amount to EUR 10million and can be increased further ifdeemed necessary to account for theprofits made from the alleged offence.

A forfeiture order siphons off the grossproceeds of the criminal or regulatoryoffence meaning that anything “gained”through criminal acts can be subject toforfeiture without deducting any relatedexpenses incurred. In corruption casesthe “contract value” will be forfieted, butnot the generated turnover, according tothe Federal Supreme Court’s decision inthe so called “Cologne Waste Scandal”.

Other potential sanctions include entriesin black lists and procurement bans inrelation to tenders of public authorities.

A regulatory fine and the name of thesanctioned entity will be entered into theGerman Federal Commercial Register

(Gewerbezentralregister) unless theamount of the regulatory fine does notexceed EUR 200. However, the entry intothe register can only be accessed bypublic authorities and the corporate entityitself. The entry must be deleted afterthree years if the regulatory fine is lessthan EUR 300 and after five years if theregulatory fine exceeds EUR 300.

There is a growing willingness to imposeregulatory fines on corporate entities anda clear trend for prosecuting authorities toextend their activities in this arena (see,for instance, the recent and currentregulatory proceedings againstwell-known financial institutions andindustrial companies such as UBS AG,Credit Suisse, Siemens AG or MAN AG).

IndividualsApart from potential sanctions againstindividual offenders, the corporate entity’sowner or representatives can also be heldliable if they have failed to take adequatesupervisory measures which would haveprevented a breach of duty by anemployee. This will apply if the breach ofthe duty imposed on the owner ispunishable with a criminal penalty orregulatory fine.

It is a defence for the owner and therepresentatives to show that they tookadequate measures to prevent suchbreaches. These include adequateselection of staff, organisation andprocesses, guidelines and training,monitoring and controls and responsiveaction to the misconduct of employees.

What factors are taken intoconsideration when determiningthe penalty?There are different factors influencing thepenalty, such as the severity andquantum of damages, to what extent thecorporate entity has co-operated during

the investigation, whether it hasgenerated any profits from its offendingand whether it is a first offence. It shouldbe noted that there are no sentencingguidelines as to the appropriate level ofpenalty in each case.

Is there a mechanism for entities todisclose violations in exchange forlesser penalties?As mentioned above, disclosure andcooperation may be mitigating factors.

Current positionIn the recent past, regulatory proceedingshave been initiated against variousGerman companies arising fromcorruption charges, in particular:

in 2007 Siemens AG received aregulatory fine of EUR 201 million;

in 2009 MAN AG received aregulatory fine of EUR 151 million;

in 2011 Credit Suisse received aregulatory fine of EUR 150 million;

in 2012 Ferrostaal AG received aregulatory fine of EUR 140 million; and

in 2014 UBS AG received a regulatoryfine of EUR 300 million.

As noted above, the draft law oncorporate criminal liability for the State ofNorth Rhine-Westphalia is going to bedebated in the German Parliament in thenear future. It will be interesting to seewhether the opponents to the billsucceed in halting the march of legislationcreating corporate criminal liability.





IntroductionAdministrative vicarious liability forcorporate entities for crimes committedby their employees was first introduced inItaly by Decreto Legistativo no. 231 of2001 (“Law 231”). Previously, vicariousliability was covered exclusively by thelaw of tort.

LiabilityIn what circumstances can acorporate entity incur criminal orquasi-criminal liability?For a corporate entity to be held liableunder Law 231, the offence must havebeen committed (at least in part, if notexclusively) in the interest or for the benefitof such corporate entity. Conversely, thecorporate entity is not liable if theemployee has acted exclusively in their ora third party’s interest.

What offences can a corporatenot commit?Under Law 231 a corporate can be heldliable only in relation to specific crimes(the “Relevant Offences”) listed underarticles 24 et seq. In addition,responsibility may arise if the employeeaids and abets the commission of suchcrimes. Finally, the corporate can be heldliable – albeit exposed to lower penalties– even in the event that the relevantoffence is merely attempted by theemployee. The Relevant Offences includethe following:

fraud for the purpose of receivingpublic funding or subsidies, fraudagainst the Italian Government,municipalities or government agencies,computer fraud against the ItalianGovernment or a Government entity;

cyber crimes and breach ofdata protection;

criminal conspiracy;

extortion and corruption;

counterfeit of cash, treasury bonds orstamp duties;

trade fraud;

corporate offences (including: falsefinancial statements and obstructionof regulators);

terrorism;

market abuse;

manslaughter and breaches of healthand safety legislation;

slavery, exploitation of prostitution andpornography offences;

money laundering:

copyright offences;

obstruction of justice offices;

environmental offences;

use of illegal immigrant workers; and

private corruption.

Are there any specific defencesavailable?Law 231 provides for different defencesdepending on the position of the allegedoffender within the corporate.

Where an offence is committed by thecorporate entity’s directors or officers, thecorporate entity cannot be heldvicariously liable if it can prove that:

its management body had adoptedand “effectively” implemented,“management and organisationalcontrol protocols that were adequatefor the prevention of the offence thatwas committed”. These protocolsmust be adequate to: (a) identifythose areas of activity where RelevantOffences could be committed;(b) establish training andimplementation protocols; (c) identifyways of managing financial resourcesin a manner that will prevent the

commission of the Relevant Offences;(d) ensure that there is adequateinternal communication; and(e) introduce an adequate system ofsanction for failure to observe therelevant controls;

an internal body, the “SurveillanceCommittee” had been set up tooversee the above-mentionedcontrols (to which independentpowers of initiative and control hadbeen entrusted);

the individual Directors/Officerscommitted the offences byfraudulently avoiding internalcontrols; and

the Surveillance Committee had notfailed to exercise adequate controls.

Where an offence is committed by thecorporate entity’s supervised employees,the corporate entity can only be heldvicariously liable if it can be shown thatthe commission of the Relevant Offencewas made possible by the failure toobserve the internal control protocols.However, if it can be shown that prior tothe commission of the Relevant Offence,the corporate entity had adopted andeffectively implemented a system oforganisation, management and controlthat was adequate for the purpose ofavoiding the commission of suchRelevant Offence, it will not be held liable.The “effective implementation” of thesystem is evidenced by: (a) carrying outperiodic reviews of the same, in particularin the event that a Relevant Offence iscommitted by a Supervised Employee orfollowing changes to the overall structureof the corporate; and (b) adopting adisciplinary process suitable tosanctioning any failure to observe theinternal controls.

Italy

What is the relationship between theliability of the corporate entity and itsdirectors and officers?Pursuant to Section 8 of Law 231, acorporate entity can be held liable even if:

the individual who committed thecrime has not been specificallyidentified (as long as it is proved thata Relevant Offence has beencommitted by someone workingwithin the entity);

the alleged offender is not indictable; or

the offence is “extinct” (for example, ifthe offence is time-barred).

A finding against a corporate entitycannot be used to determine the liabilityof an individual. However, in proceedingsbrought against an individual, a court has

discretion to introduce the conviction of acorporate entity, if relevant, as evidenceof the findings of those facts.

ProcedureWho is responsible for investigatingand prosecuting offences committedby corporate entities?In Italy there is not a specific judicial bodyexclusively dedicated to prosecutingcorporate entities.

From a procedural standpoint, proceedingsfor vicarious liability against a corporateentity are automatically merged with thecriminal proceedings for the underlyingcrimes, except where the underlyingoffences are summary only (and subject toa few other exceptions). The corporateentity is subject to criminal procedure rules

applicable to defendants under the Codeof Criminal Procedure, with some minordistinctions under Law 2312.

In Italy where, prima facie, an offence hasbeen committed, criminal prosecutionis mandatory.

PunishmentCorporate entitiesThe maximum penalty differs for eachoffence. The highest fine is EUR 1.549million. If the offence is market abuse, thisamount may be increased to up to tentimes the profit of the offence, if the latteris material.

The court will also impose a finesufficiently large to have an impact on thecorporate entity.

In addition to pecuniary penalties,corporate entities can be sentenced to:

suspension of licencesand authorisations;

prohibitions from carrying out abusiness activity, from obtaininggovernment contracts and fromadvertising products;

exclusion from or termination offunding, special terms, orwelfare payments;

disgorgement of profits (if needed,even disgorgement of other propertiesuntil the profits value is reached); and

publicising the sentence.

Judicial practice has shown that if theindividual who committed the Relevant



2 The main distinctions are the following:- similarly to the registration of suspects in the relevant register held by the court, a corporation that is the subject of an investigation by the prosecutor will be registered

as a vicariously liable entity in a separate register;- a formal notice of investigation served on a corporate entity, addressed to the legal representative of the corporation, will include an order to indicate an address for

service of process in connection with the proceedings; and- in order to be able to exercise its right of defence in the criminal proceedings against its employees, a corporation must file a representation notice under Article 39,

Paragraph 2 of Law 231, by which, among other things, it appoints counsel.



Offence is found liable, it is highlyprobable that the corporate will also befound guilty. Defences provided by Law231 have only been deemed applicabletwice since the introduction of the law.

IndividualsThe liability of individuals is completelyindependent of the corporate entity’sliability and is determined under the Italianlaw and according to the applicable rules.

What factors are taken intoconsideration when determiningthe penalty?A judge will take into account the gravityof the offence, the degree of involvementof the corporate entity and the measures,if any, adopted to mitigate theconsequences of the offence or toprevent its reoccurrence. In particular, thefine may be reduced by 50% if, prior totrial, the corporate entity has fully

compensated any victims or has taken allnecessary steps to mitigate theconsequences of the offending and if ithas adopted necessary and preventativeinternal systems and controls.

Is there a mechanism for corporateentities to disclose violations inexchange for lesser penalties?There is no such a mechanism underItalian law.

Current positionItaly has seen a positive trend in theeffective application of Law 231; thenumber of lawsuits filed against corporateentities is increasing, especially againstsmall companies and in the South of Italy.

Recently, the list of Relevant Offenceswas extended to include, among others,the offence of self-laundering.

Finally, the Supreme Court has recentlyconfirmed that, under the provisions ofLaw 231, employers may be found liablefor crimes committed by their employees,even where no employee is beingprosecuted. Prior to this ruling, it hadbeen a matter of some debate amongacademics and practitioners as towhether liability could attach to anemployer where the specific employee(s)who committed the relevant offence hadnot been identified.

New Guidelines from Confindustria (theItalian Employers’ Union) concerning theimplementation of “management andorganisational control protocols” havebeen approved.

IntroductionThe existence of corporate criminalliability is a recent phenomenon inLuxembourg. Legislation was introducedon 3 March 2010 on the criminal liabilityof legal persons (the “Law”).3 Itsadoption, which represents a significantchange to the principles of theLuxembourg legal system, was influencedboth by international considerations suchas reports from the Financial Action TaskForce and by a deliberate effort of theLuxembourg legislator.4 The Law appliesto all corporate entities (including publiclegal entities) with the exception of theState and the local government entities.5

LiabilityIn what circumstances can acorporate entity incur criminal orquasi-criminal liability?In general, a corporate entity may be heldliable if a crime or an offence has beencommitted in its name and its interest byone of its statutory bodies or by one ormore of its directors, whether de jure orde facto.

A “statutory body” is defined as one ormore physical or legal persons whichhave specific function in the organisationof the corporate entity, in accordancewith the relevant law governing that entity.This can be a function of administration,direction, representation or control.

What offences can a corporate entitynot commit?Luxembourg has a three-tier system ofoffences, which in descending order ofgravity are called: (i) crimes (“crimes”);(ii) offences (“délits”); and(iii) contraventions (“contraventions”).Corporate entities are not liable for the

commission of contraventions, whichhave been specifically omitted fromthe Law.

There is no limitation on the crimes andoffences which a corporate entity is ableto commit. Indeed, the Law was draftedby adding corporate entities as potentialperpetrators to the Criminal Code in orderto render the Criminal Code applicable tothem, subject to certain conditionsspecific to corporate entities and with theexception of contraventions. However,there are certain crimes and offenceswhich, by their very nature, can only becommitted by natural persons.

Are there any specific defencesavailable?There are no defences expressly set outin the Law on which only corporateentities might rely. However, all offencesfor which corporate entities are potentiallyliable require the prosecution to provewilful fault (“dol general”) and so acorporate entity could advance specificarguments in its defence (such as havingappropriate procedures in place,exercising adequate surveillance over itsemployees, and so forth) that a physicalperson could not.

What is the relationship between theliability of the corporate entity and itsdirectors and officers?The Law applies the principle ofcumulative liability of corporate entitiesand physical persons. The logic behindthis principle is to attribute criminal liabilityto a corporate entity for an offence thathas, due to the nature of the offence,been committed by one or more physicalpersons. The aim of this provision is toprevent physical persons using the

corporate entity as a shield for their owncriminal liability. Note that the criminalliability of the corporate entity is in nocase automatic, and will always need tobe specifically ruled upon by the court.

ProcedureWho is responsible for investigatingand prosecuting offences committedby corporate entities?There are no bodies with a specific remitto prosecute corporate entities althoughcertain divisions of the state prosecutionservice (e.g. the financial informationdivision) may in practice be morefrequently involved in the prosecution ofcorporate entities than other divisions.

PunishmentCorporate entitiesFines range from a minimum of EUR 500to a maximum of EUR 750,000 in mattersrelated to crimes, or to a maximum ofdouble the fine applicable to physicalpersons in matters related to offences. Inmatters related to offences, in the case ofspecific offences for which the law onlyprovides a punishment of imprisonment,the Law envisages a ‘conversion’ system,involving a maximum possible fine forlegal entities of EUR 180,000.

The above amounts are multiplied by fivefor certain crimes and offences expresslylisted by the Law (e.g. money laundering,acts of terrorism or financing of terrorism,drug trafficking, corruption).

For instance, in the case of moneylaundering, the maximum fine for physicalpersons is EUR 1.25 million. Byapplication of the above rules ofcalculation, the maximum fine for legalentities is EUR 12.5 million.


Luxembourg


3 Loi du 3 mars 2010 introduisant la responsabilité pénale des personnes morales dans le Code pénal et dans le Code d’instruction criminelle et modifiant le Code pénal, leCode d’instruction criminelle et certaines autres dispositions législatives. Mémorial A – N°36, 11 March 2011, p. 641.

4 See, in this respect, J.-L. Schiltz, Les personnes morales désormais pénalement responsables, JTL n° 11, 15 October 2010, p. 157 et seq.5 “communes”.



The Law also envisages the possiblespecial sanctions of confiscation,prohibition from public procurementcontracts and dissolution, subject tocertain conditions.

IndividualsIndividuals may be liable according toapplicable and relevant legislation,including, without limitation, theprovisions of the Criminal Code, companylaw and other specific legal provisions.

What factors are taken intoconsideration when determiningthe penalty?Generally, Luxembourg criminal law usesthe threshold of the Court’s “intimateconviction” when assessing the culpabilityof any person charged with an offence.According to scholarly opinion, the“intimate conviction” is the “profoundopinion to which the judge comes in hissoul and conscience and which is thecriteria and foundation of the sovereign

power of appreciation of the judgedealing with the facts of the case”.

For corporate entities, specific anddistinct provisions apply in the case of theoffence being repeated after priorconviction: a fixed multiplier is applied tothe fines mentioned above.

Is there a mechanism for entities todisclose violations in exchange forlesser penalties?The Law does not provide for such amechanism. Generally speaking,cooperation of the perpetrator and tryingto redress the damage caused aremitigating factors which the court willconsider. There is no equivalent conceptunder Luxembourg law of a deferredprosecution agreement; indeed, enteringinto an agreement with the publicprosecutor or with the courts (and thus“negotiating” as to whether or not thecompany should be convicted) isimpossible under Luxembourg law. Only

the public prosecutor has the discretionto start criminal proceedings against acompany (the so-called principle of“opportunité des poursuites”) and once itdecides to start these proceedings, thecompany cannot stop them.

Current positionAs the corporate criminal liability conceptwas introduced recently in Luxembourg, ithas rarely been used and is therefore stilllargely untested in practice. There havebeen so far no significant cases. The Lawhas however been extensively discussedin the Luxembourg legal community andthe general feeling is that the publicprosecution service will utilise the law to avery large extent.

IntroductionCorporate criminal liability in Poland isregulated by the Act on the Liability ofCollective Entities for Acts ProhibitedUnder Penalty (the “Liability Act”), whichcame into force in 2003. It generallyapplies to all corporate entities, exceptthe State Treasury, local governmententities and associations thereof.

LiabilityIn what circumstances can acorporate entity incur criminal orquasi-criminal liability?In general, under the Liability Act, acorporate entity may be liable if aspecified offence is committed by aspecific person and his/her conduct hasresulted or may have resulted in a benefitfor the corporate entity.

A corporate entity may be held liable foroffences committed by:

a person acting on behalf of thecorporate entity or in its interest andwithin the scope of his/her powers orduty to represent it, a person whomakes decisions on behalf of the entityor who exercises internal control, or,exceeds his/her powers or fails toperform his/her duty (a “Manager”);

a person given permission to act bya Manager;

a person acting on behalf of thecorporate entity or in its interest with theconsent or knowledge of a Manager; or

a person being “an entrepreneur” (asole trader) who is involved in abusiness relationship with thecorporate entity.

The entity will face liability for actions ofthe above-mentioned persons only if:

the entity’s bodies or representativesfailed to exercise due diligence inpreventing the commission of an

offence by the Managers or anentrepreneur; or

it has failed to exercise due diligencein hiring or supervising a person givenpermission to act by the Manager ora person acting with his/her consentor knowledge.

The liability of the entity is secondary tothe liability of the person who committedthe offence, i.e. the entity can be heldcriminally liable only after the person whocommitted the offence has been foundguilty and sentenced by a court of law.

Under the provisions of the Liability Act,the lack of criminal liability of a corporateentity does not exclude the possibility ofcivil liability for the damage caused or theadministrative liability of the entity.

What offences can a corporateentity commit?The Liability Act lists the offences forwhich a corporate entity may face criminalliability. It refers to specific offencesregulated in the Polish Criminal Codewhich are generally directed to individuals.The list is constantly being expanded andcurrently includes, inter alia:

offences against economic turnover,e.g. money laundering;

offences against trading in money andsecurities, e.g. currency counterfeitingor the counterfeiting of officialsecurity paper;

offences against the protection ofinformation, e.g. the obtaining orremoving information by anunauthorised person;

offences against the reliability ofdocuments, e.g. the counterfeiting ofdocuments or use of such documents;

offences against property, e.g. fraud,receipt of stolen property;

offences against the environment, e.g.the polluting of water, air or soil;

bribery and corruption;

certain fiscal offences; and

offences of a terrorist nature.

Are there any specific defencesavailable?Proving that due diligence wasconducted in the hiring or supervision ofan alleged offender (being a person givenpermission to act by the Manager or aperson acting with his/her consent orknowledge) prevents the corporate entityfrom being held liable.

In the case of offences committed byManagers or entrepreneurs, it would needto be proved that the entity’s bodies orrepresentatives exercised due diligence inpreventing the commission of an offence.

What is the relationship between theliability of the corporate entity and itsdirectors and officers?The criminal liability of a manager, officer ordirector as determined in a court sentencemay result in the criminal liability of an entity(if the other conditions for liabilitymentioned above are fulfilled). At the sametime, an entity’s liability for an offence doesnot automatically determine the personalliability of its managers, officers or directors.

However, if a corporate entity is held liablefor a fiscal offence, the officers or directorsthereof may be held accountable on thebasis of auxiliary liability. In order to incursuch liability, it is sufficient that a director orofficer be negligent in fulfilling his/her duties.

ProcedureWho is responsible for investigatingand prosecuting offences committedby corporate entities?The Polish Code of Criminal Procedurerefers to the criminal liability of corporate



Poland



entities and therefore public prosecutors areresponsible for prosecuting such offences.

Criminal proceedings against corporateentities are conducted in accordance withthe Polish Code of Criminal Procedurewith several changes resulting from theLiability Act. The proceedings arecommenced on the motion of a publicprosecutor or the injured party. Thedistrict court is competent to adjudicatethe case in the first instance. The districtcourt’s judgment may be appealed.

PunishmentCorporate entitiesThe penalty for offences committed bycorporate entities is a fine ranging fromPLN 1,000 to PLN 5,000,000 (approx.EUR 250 to EUR 1,250,000). However,the fine may not exceed 3% of theentity’s revenue earned in the financialyear in which the offence was committed.

The court may also order the forfeiture ofany object or benefit which derived fromthe offence.

Moreover, the court is competent toprohibit the corporate entity from carryingout promotions and advertising,benefiting from grants, subsidies orassistance from internationalorganisations or bidding for publiccontracts. It can also decide to publicisethe judgment. All the above-mentionedbans may be imposed for a period of oneyear to five years. Furthermore, if theperson has been convicted of offencesrelating to hiring illegal immigrants, thecourt may prohibit the entity fromobtaining public funds and order theentity to repay to the State Treasury thepublic funds obtained by the entity in the12 months preceding the conviction.

The level of enforcement of this regulationis quite low and it has rarely been used in

practice. According to statistics publishedby the Polish Ministry of Justice, from2005 to the end of the first half of 2014only 182 corporate entities wereprosecuted under the Liability Act. Inaddition, up until 2012, fines wereimposed on only 44 of them (the highestof which was PLN 12,000 – approx.EUR 3,000). Furthermore, the courts havenot yet prohibited entities from bidding forpublic contracts.

IndividualsAs mentioned above, directors andofficers only face liability for their actionsand inactions insofar as they constituteoffences under Polish criminal law whichrequires some mental element (intent,recklessness or negligence).

What factors are taken intoconsideration when determiningthe penalty?Under the Liability Act, when consideringthe sentence to be imposed on acorporate entity, the court must take intoaccount in particular the level of benefitobtained from the offence, the corporateentity’s financial situation, and the socialaspects of the punishment and its influenceon the further functioning of the entity.

This is not an exhaustive list of factors andthe court has discretion to consider otherissues on a case by case basis. Forexample, attempts to redress the damageor co-operation in uncovering criminal actsmay be regarded as mitigating factors.

Is there a mechanism for corporateentities to disclose violations inexchange for lesser penalties?The Liability Act does not contain anyspecific provisions concerning therequirements which entities must fulfil inorder to seek leniency in Poland. Deferredprosecution agreements are notenvisaged in the Liability Act. However, as

the courts generally have discretion whenconsidering the sentence to be imposed,a corporate entity may receive favourabletreatment if it has attempted to redressthe damage or has cooperated inuncovering criminal acts.

Current positionThe Polish Liability Act has rarely beenused until now and is therefore still largelyuntested in practice. Its provisions wereconsidered by the Polish ConstitutionalTribunal and amended in 2005 by theParliament in accordance with a Tribunaldecision, which meant it was impossible toprosecute corporate entities for offencescommitted by members of the board. Thecriminal liability of an entity is secondary tothe criminal liability of an individual actingon its behalf, and therefore prolongedcriminal proceedings to establish theliability of an individual tend to discouragecourts from considering the liability ofcorporate entities.

However, because of the tendency inPoland towards the creation of strictercriminal law, it is very probable thatprovisions of the Liability Act will be usedmore frequently in future. This follows fromthe amendments made to the Liability Actin 2011, which repealed theabove-mentioned change that corporateentities may not be prosecuted for offencescommitted by its board members, and thegrowing number of prosecutions under theLiability Act since then. In recent pressreleases the Polish anti-corruptionauthorities (the Central Anti-CorruptionBureau) indicated that in light of currenttender corruption investigations they wantto make use of the Liability Act’s provisionson penalties and a ban on taking part inpublic tenders. To this end, the CentralAnti-Corruption Bureau is now workingtogether with the Public Prosecutor’sGeneral Office on improving theenforcement of the Liability Act.

IntroductionThe criminal liability of corporate entitiesis a relatively new concept in Romaniancriminal law. It was only in 2006 (Law 278of 4 July) that the Criminal Code of 1968was modified to include provisions inthis respect.

The Romanian legislator has recentlyadopted a new criminal code (the“Criminal Code”) which came into forceon 1 February 2014. The Criminal Codeapplies to all legal entities, except for theState, public authorities and publicinstitutions which carry out purely public(rather than private) activities.

LiabilityIn what circumstances can acorporate entity incur criminal orquasi-criminal liability?Generally, corporate entities can be heldcriminally liable for offences committed inrelation to their statutory scope of activity,in their interest or on their behalf.

The rules for distinguishing betweenholding liable only the corporate entity’sdirectors and officers and holding liableboth the directors/officers and thecorporate itself are not currentlyclearly regulated.

However, a corporate entity may be heldcriminally liable if, through its individual orcollective management body, it wasaware of, encouraged or consented tothe commission of an offence by anindividual in relation to the corporateentity’s statutory scope of activity. If theoffence is one of negligence, thecorporate entity is only liable if thecommission of the offence is due to thelatter’s lack of supervision or control.

Holding a corporate entity criminallyliable does not preclude its civil oradministrative liability.

What offences can a corporateentity commit?The law does not expressly specifywhich offences a corporate entity can orcannot commit. In theory, corporateentities may be held liable for all criminaloffences provided under Romanianlegislation, except for offences which bytheir very nature may only be committedby individuals. There are offencesincorporated into the Criminal Code thataim to apply to corporate entities,exempli gratia: abuse of trust in order todefraud the creditors, public auctionmisrepresentation, conductingfraudulent financial operations, assetmanipulation to defraud the creditors.However, the offence must have beencommitted on behalf of the corporateentity for it to be liable.

Are there any specific defencesavailable?Provided the offence was committedagainst the corporate entity’s will andwithout any negligence on the part of thecorporate entity, the corporate entityshould not be liable. Each case will bedetermined on its own facts.

What is the relationship between theliability of the corporate entity and itsdirectors and officers?Directors and officers can be held liableas co-participants of the offence,alongside the corporate entity.

ProcedureWho is responsible for investigatingand prosecuting offences committedby corporate entities?There is no criminal investigation bodyset up expressly for prosecutingcorporate entities. The publicprosecutor is responsible for theinvestigation of offences committed bycorporate entities.

Likewise, criminal proceedings againstcorporate entities are conducted inaccordance with the Romanian CriminalProcedure Code.

PunishmentCorporate entitiesThe Criminal Code introduced a finingsystem, based on the “fine per day”concept. The value of the fine per dayranges between RON 100 (approx.EUR 24) and RON 5,000 (approx.EUR 1,200), while the number of days offine ranges from 30 to 600 (i.e. a generalmaximum fine of RON 3,000,000 (approx.EUR 720,000). A court will establish thenumber of days based on the generalcriteria for determining the penalty, whilethe fine per day is based on the corporateentity’s turnover. If the corporate entityaimed to gain patrimonial advantagesthrough the criminal offences, then thecourt may increase the special limits of thefine up to a third but without surpassingthe maximum fine provided by law.

Besides the fine, courts may apply one orseveral of the auxiliary penalties, althoughtheir application is mandatory if providedby the law for specific offences. Auxiliarypenalties include the dissolution of thecorporate entity, suspension of thecorporate entity’s activity (or of one of itsactivities) for a period ranging from threemonths to three years, closing downsome of the corporate entitie’s workingunits for a period ranging from threemonths to three years, debarment frompublic procurement for a period rangingfrom three months to three years and/orpublicising the conviction.

The court may also confiscate theproceeds of the crime, unless such areused for compensating the victim(s).

Also, during the criminal investigation, ifreasonable doubt exists to justify


Romania




reasonable suspicion that the legal entityhas committed a criminal offence andonly in order to provide a smoothoperation of the criminal trial, one of thefollowing steps may be taken: a) forbidthe initiation or, as the case may be,suspension of the procedure to dissolvethe legal entity or liquidate it; b) forbid theinitiation or, as the case may be,suspension of the legal entity’s merger,division or reduction in nominal capital,that began prior to the criminalinvestigation or during it; c) forbid assetdisposal operations that are likely todiminish the legal entity’s assets or causeits insolvency; d) forbid the signing ofcertain legal acts, as established by thejudicial body; and e) forbid activities of thesame nature as those on the occasion ofwhich the offence was committed.

The level of enforcement has started togrow during the last year and hassignificantly increased at the beginning ofthis year

IndividualsDirectors and officers may also be heldliable alongside the corporate entity itself,for offences committed by the latter, aslong as their personal actions aredeemed to be offences under the criminallegislation. Besides criminal liability,directors and officers may also face civilor administrative liability.

What factors are taken intoconsideration when determiningthe penalty?When determining the penalty, the courtsconsider factors such as thecircumstances and manner of committingthe criminal offence, as well as the meansemployed; the state of danger createdagainst the protected value; the natureand seriousness of the harm caused or ofother consequences of the criminaloffence; the reason for committing the

criminal offence and the envisagedpurpose; the prior criminal history of theperpetrator and its conduct aftercommitting the criminal offence andduring the criminal trial. The courts arebound to consider all thesecircumstances when determining penalty.

Is there a mechanism for corporateentities to disclose violations inexchange for lesser penalties?Romanian legislation provides thepossibility to reduce, or even avoid,criminal penalties. Such provisions relateto specific offences, not to the person ofthe offender (i.e. persons or entities),such as:

Compensation to the victim, duringthe investigation and before the firstcourt hearing (among otherscorruption, money laundering andother limited provided offences), willgenerate a discount of a third;

for bribery offences the corporate isnot liable if it self-reports the offencebefore the criminal investigation bodyis vested with the case;

for tax evasion offences, there is a50% discount if the offender makes

the payment before the firstcourt hearing;

for money laundering offences, thereis also a 50% discount if the offenderdiscloses information and facilitatesthe prosecution of other participantsduring the criminal investigation; and

The Criminal Procedure Codeprovides that in cases where theoffender pleads guilty and accepts theprosecution case, the penalty limitsare reduced (i) by one third where thesanction is prison and (ii) by onequarter where the sanction is a fine.

Current positionIn the past prosecution authorities havetended to focus their efforts on theinvestigation of corporate entities’ officersand directors rather than on thecorporate entities themselves. Followingthe introduction of the new criminal code,this has begun to change and there is anincreased focus on investigating andprosecuting corporate entities. TheRomanian National Anti-CorruptionDepartment has said that the number ofcoporate entities prosecuted for criminaloffences doubled in 2014.

IntroductionThe Criminal Code of the RussianFederation (“RF”) does not establishcriminal liability for corporate entities butthis issue is being extensively debated inRussia at the moment.

A draft law on amendments creatingcriminal corporate liability was put forwardby the RF Investigative Committee in 2011but was left to languish and eventuallyabandoned altogether.

In 2014 the question of corporate criminalliability arose again in connection with the“deoffshorization” of the country’seconomy announced by the RFPresident. For that process to take place,a number of new mechanisms will needto be incorporated into Russian law.Those investigating tax evasion andmoney-laundering need to know who theforeign beneficial owners of Russianbusinesses are and they also needaccess to significant assets, which are, inthis context, usually owned by legalentities, rather than individuals.Establishing criminal liability for legalentities would also be useful in corruptioninvestigations. For these reasons, theInvestigative Committee has nowproposed a revised corporate criminalliability draft law.

This draft law reflects the approach takenby international law to transnationalorganised crime and corruption. Itintroduces the concept of a legal entity’sinvolvement in a crime and provides thata legal entity would be criminally liable ifthe officers/executives acting on itsbehalf commit a crime or use the legalentity to commit a crime or conceal acrime or its consequences. It provides fora wide range of penalties, including fines,the prohibition of further (commercial)activity, license revocation andcompulsory liquidation.

The draft law was submitted to the RFFederation Council at the end of June2014 and is finding broad supportamongst the RF Government.

LiabilityUnder what circumstances can acorporate entity incur criminal orquasi-criminal liability?Currently under Russian criminal law, onlyindividuals can be prosecuted.

Legal entities can be liable under the RFAdministrative Offences Code if crimesare committed by their management oremployees. Specifically, a legal entity issubject to administrative liability forproviding, offering or promising unlawfulremuneration, for which the penalty is anadministrative fine plus confiscation ofthe money, securities or other assetsconstituting the unlawful remuneration(Article 19.28 of the RF AdministrativeOffences Code). Criminal proceedings

against an individual and administrativeproceedings against an organisation canbe based on the same facts and heardin parallel.

What offences can a corporate entitynot commit?Under the current law, legal entitiescannot commit any crimes.

Are there any specific defencesavailable?If an organisation is charged with anadministrative offence, it may be adefence to show that it has taken allpossible and reasonable measures toprevent the offence and comply withrelevant statutory requirements (underArticle 2.1 of the RF AdministrativeOffences Code, an organisation is guiltyif it cannot prove that it took all possibleand reasonable steps to prevent theoffence and comply with the law).


Russia




What is the relationship between theliability of the corporate entity andthat of its directors and officers?In practice, Russia’s law-enforcementagencies tend to initiate an investigationof an organisation when one of itsmanagers or employees has beenconvicted of a crime.

ProcedureIf a legal entity commits an administrativeoffence it will be investigated by thecompetent Russian authority.

PunishmentCorporate entitiesPenalties that can be imposed againsta legal entity under the RFAdministrative Offences Code includethe forfeiture of money, securities andother property obtained throughunlawful activity, administrative fines andadministrative suspension.

If a legal entity is found guilty of unlawfulremuneration, the maximum possibleadministrative penalty is a fine of100 times the value of the bribe (but at

least 100 million roubles (approx.EUR 1.5 million)), plus confiscation of themoney, securities or other assets thatconstituted the unlawful remuneration.

IndividualsThe most common penalties forindividuals are imprisonment and fines.

What factors are taken intoconsideration when determiningthe penalty?A number of factors are taken intoaccount for the purposes of determiningthe penalty.

The continuation of an unlawful activitynotwithstanding a request from thecompetent authority to desist and therepeated commissioning of the similaroffence within a single year are examplesof aggravating circumstances.

Mitigating factors include the preventionof the offence’s harmful consequences,the voluntary reimbursement of damagesand cooperation during the investigation.

Is there a mechanism wherebyentities can disclose violations inexchange for lesser penalties?Disclosure and cooperation can bemitigating factors.

Current PositionAt the moment, the most recent draftlaw creating criminal liability for legalentities is being considered by thecompetent authorities.

The idea of criminal liability for legalentities is the focus of such great interestbecause the current “quasi-criminal”liability for offences similar to crimes hasnot proved to be very effective. Inparticular, recently the authorities haveonly rarely imposed administrative finesfor unlawful remuneration and then onlyat the lowest possible level.

IntroductionThe concept of quasi-criminal liability oflegal entities was introduced into theSlovak legal system on 1 September2010 by an amendment to the SlovakCriminal Code. In general, any corporateentity may be subject to quasi-criminalliability provisions except for, inter alia,states, municipalities, legal entities inpossession of state or EU property, andinternational public law organizations.

LiabilityIn what circumstances can acorporate entity incur criminal orquasi-criminal liability?Corporate entities may not be heldcriminally liable. However, if an individualcommits an offence in close connectionwith the business of the corporate6 (forwhich the individual may separately beprosecuted), the corporate may bepenalised through the imposition of“protective measures”, namely confiscationof money or assets of the corporate.

A corporate entity may incur suchquasi-criminal liability if a criminal offenceis committed (or attempted) by anindividual. This is dependent on a numberof factors, namely:

Whether the individual had authorityto act on behalf of the corporateentity (e.g. as the statutory body ofthe corporate entity or under a powerof attorney);

Whether the individual had authorityto make decisions on behalf of thecorporate entity (e.g. as a manager ofthe entity);

Whether the individual had“supervisory authority” within acorporate entity (e.g. as a member ofthe supervisory board of the entity oran internal technical controller); or

Whether the offence was committedas a result of a lack of supervision oras a result of a lack of due care withinthe corporate entity (i.e. attributable toa particular person within thestructure of the entity in charge ofexercising supervision and due care).

These “protective measures” may beimposed irrespective of whether theoffender has been identified in thecriminal proceedings. In order forprotective measures to be imposed on acorporate entity, it must be shown thatthe relevant criminal offence has beencommitted in close connection with thebusiness activity of the corporate entity.Protective measures may also beimposed on a legal successor of acorporate entity.

What offences can a corporateentity commit?A corporate entity may incurquasi-criminal liability in connection withany criminal offence committed (orattempted) by an individual acting in closeconnection with its business.

Are there any specific defencesavailable?The Slovak Criminal Code does notprovide for any specific defences inconnection with the quasi-criminal liabilityof corporate entities. However, as one ofthe decisive factors for imposition of aprotective measure on a corporate entityis whether the offence was committed asa result of a failure to supervise orexercise due care, a potential defencefor corporate entity may be to showthat due care and supervision were infact exercised.

In addition, as the protective measure ofconfiscation of property constitutes aserious and damaging intervention in the

rights of corporate entities, the SlovakCriminal Code allows it only in exceptionalcases. As a result, the confiscation ofproperty would not be imposed if theprotection of society would be achievablewithout it. In such a case, however, theconfiscation of money would be imposed.

What is the relationship between theliability of the corporate entity and itsdirectors and officers?Protective measures may be imposedwhether or not the person whocommitted an offence in close connectionwith the business of the corporate entityhas been identified in the criminalproceedings or not. Similarly, imposing aprotective measure on a corporate entitydoes not preclude the criminal liability ofits directors and officers.

ProcedureWho is responsible for investigatingand prosecuting offences committedby corporate entities?Generally, public prosecutors and courtsare in charge of enforcing quasi-criminalliability rules. However, certain seriouscriminal offences for which a corporatemight incur quasi-criminal liabilityfall within the jurisdiction of theSpecialised Criminal Court andspecialised public prosecutors.

PunishmentCorporate entitiesUnder the Slovak Criminal Code, thefollowing protective measures may beimposed on corporate entities:

confiscation of money – the courtmay confiscate up to EUR 1.6million from a corporate if anindividual officially acting on itsbehalf and in close connection withits business commits (or attempts tocommit) or participates in any


Slovakia


6 The term “close connection with the business of the corporate” comprises commission (or attempt) of an offence by an individual as described further in the text.



criminal offence set out in the SlovakCriminal Code.

confiscation of property – the courtis obliged to confiscate the propertyof a corporate entity which acquiredproperty as a result of certain criminaloffences set out in the Slovak CriminalCode (e.g. certain serious criminaloffences of corruption, tax evasion,legalization of proceeds from criminalactivities, terrorism, etc.) committed(or attempted) or participated in by anindividual officially acting on its behalfand in close connection with itsbusiness. The corporate entity whoseproperty is to be confiscated isdeclared bankrupt as a matter ofSlovak insolvency law. The property ofthe estate, however, remainsunaffected by the confiscation andcreditors’ claims will have priority overthe confiscation.

IndividualsIndividuals can be held criminally liable foran offence committed in close connectionwith the business of a corporate entityregardless of whether a protectivemeasure is imposed upon the corporateentity or not.

A wide range of sanctions may beimposed on individuals found guilty of acriminal offence, such as imprisonment(life imprisonment in the most seriouscases), monetary penalties, prohibition ofactivities (e.g. conducting business),forced labour, confiscation of things,confiscation of property, etc.

What factors are taken intoconsideration when determiningthe penalty?Confiscation of money – whendeciding on the sum to be confiscated,the court takes into account the gravity ofthe criminal offence committed, thescope of such offence, the benefitgained, the damage caused, thecircumstances surrounding thecommission of such offence and theconsequences of the penalty imposed forthe corporate.

Confiscation of property – whendeciding on whether or not to confiscateproperty, the court considers whether,based on the gravity of the criminaloffence committed, the scope of suchoffence, the benefit gained from suchoffence, the damage caused, thecircumstances surrounding thecommission of such offence, theconsequences of the penalty imposedand the importance of the public interest,the protection of society could beachievable without such confiscation.

Is there a mechanism for entities todisclose violations in exchange forlesser penalties?Slovak law does not explicitly provide forany such mechanism.

Current positionThe concept of quasi-criminal liability ofcorporate entities has not yet been testedin the Slovak courts. Given the absenceof case law it is difficult to predict with

any certainty how the Slovak courts willconstrue and apply the relevantprovisions of the Slovak Criminal Code orwhat penalties may be expected. Ittherefore remains to be seen what impactthe quasi-criminal liability of corporateentities will have.

In order to introduce an effectivemechanism of sanctioning legal entitiesarising from different internationaldocuments (mainly the OECDConvention on Combating Bribery ofForeign Public Officials in InternationalBusiness Transactions) the SlovakMinistry of Justice published a bill on thecriminal liability of legal entities (the “Bill”)at the end of 2013. The Bill is currently inthe legislative process and aims tointroduce direct criminal liability of legalentities for a limited number ofcriminal offences enumerated in the Bill(in particular criminal offences againstproperty and economic criminal offences).The proposed effective date is set to1 July 2015. It is proposed that legalentities would incur criminal liability undersimilar circumstances as outlined abovewith respect to the existing concept ofquasi-criminal liability. The Bill does notprovide for any specific defences inconnection with the criminal liability oflegal entities. The sanctions wouldinclude fines, confiscation of assets orproperty, debarment from publicprocurement (for up to ten years) and banon economic activities (for up to ten yearsor an indefinite period of time).

IntroductionOrganic Law 5/2010 of 22 June(“LO 5/2010”) establishes, for the firsttime in the Spanish Criminal Code(Código Penal) (“CP”), an expressregulation for the criminal liability ofcorporate entities for crimes committedon their behalf by their representatives, defacto and de jure administrators,employees and/or contracted workers.

The law has been recently extended bythe Organic Law 7/2012 of 27 December2012 (“LO 7/2012”). Originally the CPwas limited in its application, and notapplicable, for example, to the State, tothe territorial and institutional publicadministrations, to political parties andtrade unions, to organisations underpublic international law, or to any othersthat exercise public powers ofsovereignty, administration, or in the caseof State mercantile companies thatimplement public policies or provideservices of general economic interest.Since the passing of LO 7/2012,however, political parties and trade unionsare subject to the general regime ofcriminal accountability and can also beheld liable, although the other restrictionsconcerning the application of the law toother state bodies still apply.

LiabilityIn what circumstances can acorporate entity incur criminal orquasi-criminal liability?To establish corporate criminal liability, theoffence must have been committed for oron behalf of a corporate entity and for itsbenefit by any of the following individuals:

the representatives and de facto andde jure administrators of thecorporate entity; or

contracted workers and/or employeesof the corporate entity, when theoffence was committed while carrying

out corporate activities and as a resultof the corporate not having exerciseddue supervision in all thecircumstances of the case.

Corporate entities are only liable forcrimes expressly applicable to themunder corporate law, including:

discovery and disclosure of secrets;

fraud and punishable insolvency;

crimes related to intellectual andindustrial property, the marketand consumers;

tax fraud and money laundering;

urban planning offences and crimesagainst the environment; and

corruption offences.

Which offences can a corporateentity commit?As indicated above, corporate entitiescan only commit those offences whichexpressly apply to them.

Are there any specific defencesavailable?LO 5/2010 requires that, in order for acorporate entity to be criminally liablefor offences committed by itsemployees and/or contracted workers,the former must have been able tocommit the offence due to lack ofsupervision in accordance with thespecific circumstances of the case.Therefore, corporate entities will not becriminally liable if they enforceappropriate supervision policies overtheir employees. This is a question offact that must be assessed on acase-by-case basis.

Furthermore, LO 5/2010 provides that theestablishment of enforceable measures toprevent and discover crimes, which maybe committed in the future with the

corporate entity’s means or under itssupervision, can mitigate the corporateentity’s criminal liability.

On 4 October 2013, a Bill of the CP waspublished at the Parliament Gazette,which for the first time, and in a veryclear way, sets out grounds forexemption from criminal liability for legalpersons if the corporate entity can showthat it possesses and effectivelyimplements a crime prevention orcompliance programme. This Bill willbe finally approved by the end ofMarch 2015 and enter into force inJuly 2015. In the case of offencescommitted by administrators orrepresentatives, the grounds forexemption from criminal liability will applyif the person proves:

First, that prior to the commission ofthe offence, the management bodyadopted and effectively enforcedorganisation and managementmodels that included suitablemonitoring and control measures toprevent similar offences – inother words, effectivecompliance programmes;

Second, that the supervision of thefunctioning and fulfilment of theprevention model implemented wasentrusted to a body with independentpowers of decision and control,although in companies which are“smaller” this function may beperformed by the managementbody; and

Third, that there was no omission ordeficient performance of the functionsof monitoring and control on the partof the compliance body. If thesecircumstances can only be partiallyproven, this may be taken intoaccount for the purposes of mitigatingthe penalty.


Spain




The compliance programmes must meetthe following requirements:

(a) Identify the activities in relation towhich the offences that should beprevented may be committed(risk assessment);

(b) Establish the protocols or proceduresfor forming the intentions of the legalperson, for decision making and theexecution of the same in this regard(code of ethics or corporate conduct);

(c) Have appropriate systems for themanagement of financial resources toprevent the commission of theoffences that should be prevented(due diligence);

(d) Impose the obligation to inform ofpossible risks and breaches to thebody responsible for overseeing thefunctioning of the complianceprogramme (whistle blowing);

(e) Establish a disciplinary system that dulypenalises any breach of the measuresthat the system establishes; and

(f) Proceed with a regular review of theprogramme to ensure that it remainseffective and to allow for changes inthe organisation, the control structureor in the activities performed(monitoring and review).

In the case of offences committed byemployees, the exemption from liabilitywill apply if, prior to the commission ofthe offence, the legal person adoptedand effectively enforced a system oforganisation, management and controlappropriate for the prevention of offencesof the kind that were committed, with theabove-mentioned requirements beingapplicable to said system.

Accordingly, it is highly advisable forcorporate entities to establish internallyenforceable measures to prevent and/or

discover crimes. Such measures shouldbe reflected in a corporate compliancemanual which should describe, amongother aspects, the entity’s risk-mapping,taking into account its activities andorganisational structure, the internalpolicies and procedures relating to suchrisks, the internal channels of upward ordownward communication and theestablishment of a supervisorycommittee, to name a few.

What is the relationship between theliability of the corporate entity and itsdirectors and officers?The CP does not establish anyconsequences for directors or officers ofa corporate entity found guilty in acriminal case. However, in somecircumstances, such directors or officersmight be found guilty of the sameoffences committed by the company, if

the relevant court considers that theywere aware of the criminal conduct andthey did not try to prevent it. UnderSpanish law, most crimes can only becommitted with consent or wilfulmisconduct. However, for some offences,such as money laundering, negligence isenough. As a general rule, consentand/or connivance is needed to considerindividual omissions as an offence butnegligence could be considered enoughin very exceptional cases.

ProcedureWho is responsible for investigatingand prosecuting offences committedby corporate entities?The ability to prosecute offences in Spainis limited to the Investigating Courts(Juzgados de Instrucción). However, thepolice, the prosecution office, otherregulatory bodies and individuals in

general can report to the InvestigatingCourts any conduct that they mightconsider to be a crime and can actas complainants.

PenaltiesCorporate entitiesLO 5/2010 establishes several penaltieswhich may be imposed on a corporateentity, such as:

monetary fines (calculated accordingto the damage caused or therevenue obtained);

dissolution of the legal entity;

suspension of activities for a term ofup to five years;

closure of the premises andestablishments for a term of up tofive years;

prohibition from carrying out in thefuture any activities which led to thecrime being committed, favoured orconcealed. This prohibition may betemporary or indefinite. If temporary,the term cannot exceed 15 years;

disqualification from obtainingsubsidies and public aid, fromentering into agreements with thepublic sector and from obtaining taxor social security benefits andincentives for a term of up to15 years; and

legal intervention for a term of up tofive years.

Furthermore, the imposition of criminalliability on a corporate entity is compatiblewith (i) the criminal liability which may beimposed on the individual who committedthe offence, (ii) any civil liability for the lossand damage that the offence may havecaused to the victims, and (iii) any othertype of civil or administrative liability whichmay be imposed on the corporate entityor the individual.

IndividualsPossible consequences for individuals ofthe company include disqualification,fines and imprisonment.

What factors are taken intoconsideration when determiningthe penalty?As a general principle, in considering theseriousness of any offence, the courtmust consider the company’s culpabilityin committing the offence and any harmwhich the offence caused.

Depending on the penalty to be imposed,the court might take into considerationother factors, such as: the suitability ofthe penalty in preventing future crimes,the social and economic consequencesof the penalty, the position within thecompany of the individual who actuallycommitted the crime, prior offending and

whether the company was used as aninstrument for crime.

Furthermore, LO 5/2010 provides that theestablishment of enforceable measures toprevent and/or discover the crimes whichmay be committed in the future with thecorporate entity’s means or under itssupervision shall be mitigating factors inconsideration of a corporate’s culpability.

Is there a mechanism for entities todisclose violations in exchange forlesser penalties?Co-operation and early acceptance ofguilt are always mitigating factors insentencing; as is the voluntarycompensation of victims.

Current positionCorporate criminal liability was introducedvery recently. Although it is too soon toforesee what the consequences of thisnew law will be, there have so far beenno significant prosecutions. However,complaints against corporate entities(mainly banks and savings banks) filed byindividuals have become more frequent inrecent months.

As a consequence of the amendment ofthe CP, most Spanish companies areadapting their corporate complianceprogrammes in an attempt to preventliability that could result from the potentialcommission of relevant crimes.





IntroductionThe Netherlands have a long tradition ofholding corporate entities to account forcriminal offences.

For the better part of the twentiethcentury, entities could only beprosecuted for economic and fiscaloffences. Since 1976, however, as ageneral rule in the Dutch Criminal Code,every criminal offence can be committedby a legal entity and can be prosecutedto the same extent as natural persons.As a result, legal persons can beprosecuted as perpetrators oraccomplices, or be liable for incitementto commit an offence or aiding andabetting. Furthermore, personssupervising the unlawful conduct of thelegal entity or persons ordering themisconduct of the legal entity are liable,alongside the perpetrators themselves.Although most criminal prosecutions areinstigated against natural persons, agrowing number of corporate entitieshave been prosecuted in the last twentyyears, and especially since 2012 agrowing number of large settlementshave been concluded with legal entities.

From 1 July 2009 these criminal lawrules have been introduced in alladministrative punitive procedures, sothat corporate entities and the naturalpersons who have control over suchconduct can also be administrativelyfined for certain offences.

LiabilityIn what circumstances can acorporate entity incur criminal orquasi-criminal liability?In a landmark ruling of 21 October 2003(Zijpe-arrest) the Supreme Court held thatan offence can be attributed to a legalentity depending on the circumstancesof the case and whether such attributionis reasonable.

A corporate entity can be held liable for allkinds of offences provided the offencecan be reasonably attributed to the entity,for example if the offence has beencommitted within the working environmentof the corporate entity. Factors relevant tosuch attribution include, but are notlimited to, the following:

the conduct constituting theoffence falls within the scope of thecorporate entity;

the corporate entity benefitted fromthe offence;

the offence was committed by anemployee of, or a person working onbehalf of, the corporate entity; and

the corporate entity could haveprevented the conduct but did not doso and “accepted” it. Not takingreasonable care to prevent suchconduct can also constituteacceptance of the conduct.

What offences can a corporate entitynot commit?In principle, all offences can be attributedto a corporate entity. Even physicalcrimes like molestation could beattributed to a corporate entity, althoughin general prosecution is limited toeconomic, fiscal, environmental offencesand fraud and corruption based offences.

Are there any specific defencesavailable?All defences open to natural persons canbe relied upon by corporate entities.There are no specific defences availableto corporate entities, beyond arguing thatan offence should not be attributed to it.In particular, a valid argument againstattribution of individual offending could bethat the corporate entity took reasonablecare to prevent the prohibited conduct.Reasonable care could be demonstratedby the implementation of a robustcompliance system.

In the Netherlands, jurisdiction is notautomatically given for foreignsubsidiaries of Dutch companies. It isgenerally assumed that a parentcompany cannot be held liable merelybecause of its major shareholding andformal legal structure. But the sameattribution criteria for liability of legalentities in general could also be used toattribute criminal conduct by a (foreign)subsidiary to its Dutch parent company.

What is the relationship between theliability of the corporate entity and itsdirectors and officers?In general, all natural personsconnected to an offence can beprosecuted separately including theperpetrators, any accomplices andanyone who may be liable for incitementto commit the offence or aiding andabetting and so on.

Besides the potential offendersmentioned above, directors andmanagers of a corporate entity can beprosecuted if an offence attributable toa corporate entity (see the paragraph onliability above) can also be attributed tothem. This will be the case if there isevidence that they directed or orderedthe conduct of the legal entity inquestion. For instance, a director ormanager could be held accountable forneglecting to take proper measures toprevent such misconduct, despite beingreasonably required to do so.

There must be some level of knowledgeand responsibility to act and therefore thedirector or manager must be aware ofsuch conduct taking place or haveappreciated the risk that such conductwould occur. Liability for offences cannotbe imposed solely by virtue of a person’srole within the corporate entity and havinga direct (management) line is notnecessary to impose liability.

The Netherlands

ProcedureWho is responsible for investigatingand prosecuting offences committedby corporate entities?In the Netherlands, all criminalinvestigations are conducted under thecontrol of the Public Prosecution Office.In particular, the Public Prosecution Officeresponsible for economic andenvironmental crimes and fraud will oftenprosecute corporate entities. ThisFunctioneel Parket is located in fourregions in the Netherlands.

All cases investigated by specialinvestigation services responsible forinvestigating, such as the fiscalinvestigation service, the environmentalinvestigation service, social securityinvestigation service etc., will beprosecuted by het Functioneel Parket.However, other fraud offences such asembezzlement, corruption or moneylaundering can also be prosecuted byeach regional department of the PublicProsecution Office, the National PublicProsecution Office (mainly responsible forsevere crimes, terrorist crimes etc.) andbe investigated by each investigationservice, such as the police, nationalpolice etc.

For administrative punitive enforcementactions it depends on the relevant set ofregulations, and which regulator isauthorised to impose a fine. For financialcrimes, these are the financial regulators,the AFM and DNB. For consumer andcompetition issues the Authority forConsumers and Markets, for health careissues the Health Care Authority etc.

PunishmentCorporate entitiesThe maximum fines in the Dutch criminallaw system are defined according tocategory of offence. In general, themaximum fines for corporate entities are

one category higher than they would befor natural persons. The overall maximumis EUR 810,000 per offence, which canaccumulate indefinitely where there are anumber of individual offences. If thoughthis maximum is not deemed to beappropriate the the maximum fine thatcan be imposed on a legal entity can runto up to 10% of the legal entity’s annualturnover in the previous year. For fiscaloffences the maximum fine is 100% ofthe evaded taxes if that is higher than themaximum fines as described in general.

In administrative procedures, themaximum fine depends on which lawsare applicable. For financial offences thefines are probably the highest, beingEUR 4,000,000 for first offenders and

EUR 8,000,000 for repeat offenders orhigher if the profits derived from theoffence merit a higher fine. In cartelcases, the maximum fine is 10% of therelevant turnover.

There are no circumstances specificallytaken into account for corporate entities.

As with all offenders, corporate entitiescan face forfeiture. Furthermore specialmeasures can also be imposed, in caseof certain economic crimes,such asclosing the business activities of thecorporate entity for a maximum periodof one year. Another measure is placinga corporate entity into temporaryadministration for a maximum ofthree years.





Dissolution of the corporate entity is aseparate civil procedure that can bestarted by the Public Prosecution Office.However, this is not considered to be asanction because it is a measureintended to avoid future wrongdoing; it isnot part of the criminal prosecution assuch and is rarely sought by the PublicProsecution Office.

The Public Prosecution Office tends totarget individuals responsible for theconduct within the corporate entity. Thesame approach applies to regulators inadministrative law.

IndividualsThe maximum fine which may beimposed on an individual is generallyEUR 81,000 or EUR 810,000 inparticularly large cases. The fines willobviously vary depending on the offence.In administrative procedures the samemaximum fines apply as for legal entities.There is no formal distinction between acorporate entity and a natural person interms of fines but as the amount of eachfine is also determined by the financialmeans of an offender, natural persons areusually fined (much) lower amounts thancorporate entities.

What factors are taken intoconsideration when determiningthe penalty?In criminal and administrative cases all thecircumstances of the offence, includingthe financial circumstances of theoffender, should be taken into account indetermining the level of the fine.

Is there a mechanism for entities todisclose violations in exchange forlesser penalties?Only in administrative law cartel casesdoes a leniency system exist. In criminallaw there is no such system. However, ingeneral, voluntary disclosure could leadto a more favourable treatment, includingno prosecution at all or lower penaltiesand the possibility of a settlement out ofcourt. However, there are no generalrules governing voluntary disclosurewhich could provide any assurance tolegal entities as to the consequences ofsuch disclosure.

Current positionAfter the landmark case of October 2003(see reference in the paragraph onliability above), in general, the actualattribution of offences to corporateentities is readily accepted by the courts.

In administrative law, the level of finesimposed has increased considerably overthe last few years. Also the range ofadministrative offences for which finescan be imposed has expanded greatly.These levels of fines have been thesubject of recent challenge.

In general, the prosecution of corporateentities is more frequently used to set anexample and emphasise the importanceof having adequate compliance systemsin place to prevent violations. Having arobust compliance system is thereforegaining importance, including outsidethe more regulated business sectors likethe financial sector and the chemicalsector. Recent settlements have shownthat the Public Prosecution Office is nolonger reticient in imposing verysubstantial fines, which come closer insize to settlements in the US. Recentsettlements of EUR 70 million in a LIBORmanipulation case and USD 240 million ina foreign corruption case can beconsidered ground breaking and have setthe bar much higher for entities seekinga settlement.

IntroductionA corporate entity may be subject tocriminal liability in the UAE for a widerange of offences, as it may be criminallyliable for any proscribed act committedfor its account or in its name by itsrepresentatives, directors or agents.

The chapter below explores corporatecriminal liability under the federal law ofthe UAE as well as the law of Dubai. It isimportant to note that Dubai has its owncriminal code (which does not apply inthe other Emirates of the UAE) so theremight be slight variations that apply inDubai as stated below.

LiabilityIn what circumstances can acorporate entity incur criminal orquasi-criminal liability?Under Article 65 of Federal Law No. 3 of1987 concerning the Promulgation of thePenal Code (the “Federal Penal Code”),a corporate (which is a “judicial person”for the purposes of the Federal PenalCode) is responsible for any criminal actcommitted on its account or in its nameby its representatives, directors or agents.

Accordingly, if an employee, director orother representative of the corporatecommits a crime whilst acting on itsaccount or in its name, then thecorporate may be criminally liable for thesame offence.

Similarly, under Article 23 of the DubaiPenal Law for 1970 (the “Dubai PenalCode”), a corporate (which is a “juristicauthority” for the purposes of the DubaiPenal Code) may be punished with afine for any crime, whether committedalone or with any other person as if theyare a natural person. The provision

states that the juristic authority shall beconsidered to have committed a crime ifpersons representing the corporatecommit, or permit or incite thecommitting of, a crime.

Accordingly, an employee, director orother representative of the corporate whocommit crimes whilst acting on thecorporate’s account or in its name mayattract criminally liability to the corporateunder the Dubai Penal Code.

Additionally, if a corporate entitiy has apresence in the Dubai InternationalFinancial Centre (the “DIFC”) (an offshorefreezone that has its own civil andcommercial laws), then it may be subjectto regulatory sanctions.

What offences can a corporate entitynot commit?In theory, there is no limit on the offencesfor which a corporate may be liable.

Are there any specific defencesavailable?There are no general defences thatexempt corporations from criminal liabilityin respect of UAE or Dubai laws, such asa general defence based on thecorporate taking all reasonable steps toprevent the commission of the offence.

There are, however, specific defencesthat may apply depending upon theparticular offence for which the corporateis charged.

What is the relationship between theliability of the corporate entity andthat of its directors and officers?A corporate can only become liable if itsdirectors, representatives or agents havecommitted a crime whilst acting on thecorporate’s account or in its name.

ProcedureWho is responsible for investigatingand prosecuting offences committedby corporate entities?The police in the relevant emirate areresponsible for investigating criminaloffences. Prosecution is conductedby the public prosecutor in therelevant emirate.

In respect of any regulatory offencescommitted under DIFC law, the DubaiFinancial Services Authority (the “DFSA”)would be the authority responsible forinvestigating any alleged breaches. Itwould also be the authority that wouldissue regulatory sanctions as a result ofsuch investigations.

PunishmentCorporate entitiesPursuant to Article 65 of the Federal PenalCode, the penalties that may be imposedon a corporate entity include fines,confiscations and criminal measures.

If the law imposing criminal liabilityspecifies a principal punishment otherthan a fine (for example, imprisonment)then, in the case of a corporate, thepunishment is to be restricted to a finenot exceeding AED 50,000 under theFederal Penal Code. Similarly, pursuant toArticle 23 of the Dubai Penal Code, acorporate may be liable for fines in placeof the penalty of imprisonment whererelevant, although no specific amount ismentioned in the Dubai Penal Code.

Anything used or which was due to beused for a crime or misdemeanour maybe ordered by the Court to beconfiscated, without prejudice to therights of any bona fide third party.7


UAE


7 Article 82 of the Federal Penal Code and Article 55 of the Dubai Penal Code.


Criminal measures are classified underArticle 109 of the Federal Penal Code aseither measures restrictive of liberty ordepriving of rights or material measures.Relevantly, these include:

the closing of an establishment and aprohibition on carrying out a specificjob; and

deprivation of the right to exercise aprofession or commercial activity forwhich it is required to obtain a licencefrom public official authorities.

Under the Dubai Penal Code,8 criminalmeasures such as suspending thecompany from operating apply if thecrime was committed intentionally, andwhere the crime deserves imprisonment.Such suspension could be for a periodnot exceeding two years, which the courtshall judge. A more stringent penaltyapplies in the form of dissolving thecompany for any of the following reasons:

when the corporate does notcomply with the legal principlesof establishment;

if the purpose of establishmentviolates laws or this was the aim ofestablishment; or

if the corporate is suspended byvirtue of a concluded suspensionresolution that does not pass for morethan five years.9

Note that any violation of the suspensionor dissolution order by an individual issubject to a penalty of imprisonment for aperiod not exceeding six months or witha fine not exceeding 1,000 riayls.10

IndividualsPossible consequences for the directorsor officers of the corporate includedisqualification, fines and imprisonment.

What factors are taken intoconsideration when determiningthe penalty?It is within the discretion of the judges in thecriminal courts to determine the appropriatepenalty, subject to any provisions availablein the Federal Penal Code or the DubaiPenal Code that stipulate the punishment.

In terms of regulatory sanctions imposedby the DFSA against corporates under itsauthority, a penalty guidance section isincluded in the DFSA’s Regulatory Policyand Process sourcebook. All relevantfacts and circumstances are taken intoconsideration when determining apenalty. Some of the factors that theDFSA takes into consideration include:the DFSA’s objectives; the deterrent effectof the penalty; the nature, seriousnessand impact of the breach; the benefitgained; the conduct of the person orentity after the breach; the difficulty indetecting and investigating the breach;the disciplinary record and compliancehistory; action taken by the DFSA inprevious, similar cases; and action takenby other domestic or internationalregulatory authorities. When determiningthe appropriate level of a financial penalty,the DFSA’s penalty-setting regime isbased on three principles: disgorgement(a firm or individual should not benefitfrom any contravention), discipline (a firmor individual should be penalised forwrongdoing) and deterrence (any penaltyimposed should deter the firm orindividual who committed thecontravention and others from committingfurther or similar contraventions).

Is there a mechanism for entities todisclose violations in exchange forlesser penalties?There is no such mechanism in either thefederal law of the UAE or Dubai criminal

law. In respect of entities under theauthority of the DFSA, the DFSAallows for enforceable undertakings,which are written promises to do orrefrain from doing a specified act oracts, to be given by an entity. These maybe provided to the DFSA at any time,either before, during or after aninvestigation, the making of a decision orthe commencement of litigation orproceedings in court. Enforceableundertakings are an alternativemechanism for regulating contraventionsof the law and may, amongst otherthings, include remedial actions that arenot otherwise available under a noticeof decision.

Current positionWe are not aware of any proposedchanges to the manner in whichcorporate entities may be subject tocriminal liability under UAE law butregulatory sanctions have been theprimary method of holding corporates toaccount. In the DIFC, the DFSA has beendiligent to some extent in pursing entitiesfor breaches of the regulatory laws. Therehave been a number of instances wherethe DFSA has brought action againstDIFC authorised individuals or authorisedfirms that have been subject to DFSAinvestigation or that have breached DIFClaws or rules. Examples of suchregulatory sanctions include thewithdrawal of a licence of an authorisedfirm, the fining of directors for failing todisclose material information to the DFSA,fining a former senior executive of anauthorised firm for providing falseinformation and fining an authorised firmfor market abuse.

8 Article 57 of the Dubai Penal Code.9 Article 58 of the Dubai Penal Code.10 Article 59 of the Dubai Penal Code.


IntroductionThere are many offences in the UKtargeted at corporate entities andconcerned with the regulation ofbusiness activity.

The most recent examples of statutesfocused on holding corporate entitiesliable under the criminal law have beenthe Corporate Manslaughter andCorporate Homicide Act 2007(“CMCHA”) and the Bribery Act 2010(“Bribery Act”). A small number ofprosecutions of corporate entities underthe former have been concluded. Nocorporate prosecutions for offencesunder the Bribery Act have yet beenconcluded, although the Serious FraudOffice (“SFO”) is pursuing a number ofinvestigations which may yield suchprosecutions before long. Both actsfocus attention on the managementsystems and controls of a corporateentity. In particular the Bribery Act,section 7 of which imposes liability on acorporate for failure to prevent an act ofbribery unless the corporate entity candemonstrate that it had adequateprocedures to prevent such anoffence occurring, is a considerablechange in the approach towardscorporate criminal liability. An importantfeature of the Bribery Act is itsextra-territorial reach and its applicationto non-UK companies. A foreigncompany which carries on any “part ofa business” in the UK could beprosecuted under the Bribery Act forfailing to prevent bribery committed byany of its employees, agents or otherrepresentatives, even if the briberytakes place outside the UK and involvesnon-UK persons.

LiabilityIn what circumstances can acorporate entity incur criminal orquasi-criminal liability?Two main techniques have beendeveloped for attributing to a corporatethe acts and states of minds of theindividuals it employs.

The first is by use of what is known asthe “identification principle” whereby,subject to some limited exceptions, acorporate may be indicted and convictedfor the criminal acts of the directors andmanagers who represent the directingmind and will and who control what itdoes. This concept has developed overdecades. In the case of an offenceinvolving proof of a mental element (mensrea), such as many corruption offences, itis possible to combine proof of the actitself (the actus reus), on the part of anemployee or representative of thecompany who would not form part of thecontrolling mind with proof of mens reaon the part of a person who does formpart of the controlling mind.

The second technique of vicarious liabilitywas used from as early as the nineteenthcentury. Although, generally speaking, acorporate entity may not be convicted forthe criminal acts of its inferior employeesor agents, there are some exceptions, themost important of which concernsstatutory offences that impose anabsolute duty on the employer, evenwhere the employer has not authorised orconsented to the criminal act.

Wherever a duty is imposed by statute insuch a way that a breach of the dutyamounts to a disobedience of the law,then, if there is nothing in the statuteeither expressly or impliedly to the

contrary, a breach of the statute is anoffence for which a corporate may beindicted, whether or not the statute refersin terms to corporations.11

There are some recent statutes which haveoffences specifically directed at companies.As described above, the Bribery Actimposes liability, in certain circumstances,on a corporate which fails to prevent an actof bribery on its behalf. Similarly, acorporate is guilty of the offence ofcorporate manslaughter if the way in whichits activities are managed or organisedcauses a person’s death and amounts to agross breach of a relevant duty of careowed by the organisation to the deceased.

The trend towards increased criminalliability for corporates and their seniorexecutives has continued since theenactment of these statutes and with thesubsequent passage of legislationcriminalising the manipulation ofbenchmark rates and conduct leading tothe failure of a bank.

What offences can a corporate entitynot commit?A corporate entity can commit mostoffences except those for whichimprisonment is the only penalty (such astreason or murder), and those which bytheir nature can only be committed byphysical persons.

Are there any specific defencesavailable?Defences are generally set out in therelevant and applicable legislation.

However, many regulatory offences whichaffect corporate entities are offences ofstrict liability or offences which imposestrict liability subject to concepts such as“reasonable practicability”. For example


UK


11 The word “person” in a statute, in the absence of a contrary intention, extends to corporations.



the Health and Safety at Work etc Act1974 imposes strict liability on anemployer whenever there is a failure toensure his employees’ health, safety andwelfare at work. Similarly, every employermust conduct his undertaking in such away as to ensure, so far as is reasonablypracticable, that persons not in hisemployment who may be affected by itare not exposed to risks to their healthand safety. This creates absolute liability,subject to the defence of reasonablepracticability and cannot be delegated.

A corporate entity may be liable for failureto take reasonable precautions at storemanagement level, notwithstanding thatall reasonable precautions to avoid risk ofinjury to employees have been taken atsenior management or head office level.12

The Bribery Act also imposes strictliability on corporate entities subject tothe defence of having adequateprocedures in place to prevent bribery.

What is the relationship between theliability of the corporate entity andthat of its directors and officers?Certain statutes provide that, where acorporate has committed an offence, itsofficers are in certain circumstances13 tobe deemed guilty of that offence.

ProcedureWho is responsible for investigatingand prosecuting offences committedby corporate entities?The ability to prosecute offences in theUK is not restricted to prosecutingauthorities and a number of different

authorities and regulatory bodies mayinvestigate and prosecute offencescommitted by corporate entities. Forexample, it is becoming increasinglycommon for the Financial ConductAuthority (“FCA”) to use its powers tobring criminal prosecutions, albeit so farthe most high profile prosecutions havebeen against individuals rather thancorporate entities.

Where a corporate faces a criminalcharge, it may enter in writing by itsrepresentative a plea of guilty or notguilty. If no plea is entered, the court shallorder a plea of not guilty to be enteredand the trial shall proceed as though thecorporate had entered a plea of not guilty.

PunishmentCorporate entitiesPenalties may include fines, compensationorders, debarment from publicprocurement processes14 and/orconfiscation orders. Indeed, where there isevidence that an offender has benefitedfinancially from the offending, the courtmust, in accordance with the Proceeds ofCrime Act 2002, consider whether tomake a confiscation order. In cases wherecorporate entities are not prosecuted, acivil recovery order can be imposed ifunlawful conduct of some description isproved, or, more usually, accepted.15 Civilrecovery orders do not have the sameconsequences (for example in terms ofdebarment from public procurement)as convictions.

There has been a steady increase in thelevel of fines over recent years; fines can

now be so high that they put a corporateentity out of business. The SentencingGuideline issued by the SentencingGuideline Council in respect of corporatemanslaughter said that whilst the questionas to “whether the fine will have the effectof putting the defendant out of businesswill be relevant, in some bad cases thismay be an acceptable consequence.” On11 May 2011 the Court of Appeal refusedan application for leave to appeal againsta sentence imposed in the first statutorycorporate manslaughter case which hadput the company out of business. TheCourt of Appeal held that the fineimposed was appropriate and that to limita fine to the level which the company wascapable of paying would have resulted ina “ludicrous” penalty.

In his ruling in the leading case ofInnospec16 Lord Justice Thomas (as hewas then) stated that he expected paritybetween the US and the UK where thefacts allowed; that “a fine comparable tothat imposed in the US would have beenthe starting point” and that “it would [...]have been possible to impose a fine thatwould have resulted in the immediateinsolvency of the company”.17 The caseconcerned a UK company, Innospec Ltd,which pleaded guilty to conspiracy tocorrupt in relation to contracts secured inIndonesia and which was also facingcharges in the US in relation to corruptionin Iraq.

Since then, and following theappointment in April 2012 of David GreenQC CB as Director of the SFO, thestance of the SFO in particular towards

12 Gateway Foodmarkets Ltd [1997] 3 All ER 78, [1997] 2 Cr App Rep 40, CA.13 Generally where consent or connivance, or neglect can be shown e.g. Financial Services and Markets Act 2000, s 400.14 On 26 February 2015 new Public Contracts Regulations came into effect which cap the period of debarment at five years and allow blacklisted companies to bid for

public contracts if have self-cleansed which includes demonstrating that they have "taken concrete technical, organisational and personnel measures that are appropriateto prevent further criminal offences or misconduct." (Public Contracts Regulations 2015, Regulation 57(15)(c))

15 Most recently, on 13 January 2012, the SFO announced that it had, for the first time, obtained a civil recovery order against a shareholder of a company involved inhistoric bribery, in which it was accepted that the SFO could trace property obtained through unlawful conduct into the shareholder’s hands.

16 (2010) Crim LR 66517 See http://www.sfo.gov.uk/press-room/latest-press-releases/press-releases-2010/innospec-judgment.aspx

http://www.sfo.gov.uk/press-room/latest-press-releases/press-releases-2010/innospec-judgment.aspx

corporate wrongdoing has toughenedand the Director and others at the SFOhave been clear that their task, first andforemost, is the prosecution of seriousand complex fraud and bribery.

From 24 February 2014, certainprosecutors have been able to enter intodeferred prosecution agreements(“DPAs”) with cooperating corporates.DPAs are agreements betweenprosecutors and corporate defendantsthat proceedings for alleged offences ofeconomic crime will be stayed andeventually discontinued provided thecorporate complies with certain conditions(which will usually include the impositionof a substantial financial penalty and will,in many cases, also involve other remedialmeasures and/or the appointment of amonitor). Whether a DPA is appropriate isdecided by reference to relatively detailedprosecutorial guidance and its proposedterms are the product of negotiationsbetween the prosecutor and thecooperating corporate, although the DPAitself requires the approval of the Court.Whilst no DPA has yet been concludedwith any cooperating corporatedefendant, the SFO has publicly statedthat it has a number under consideration.Nevertheless, the SFO has also statedthat a DPA is not a “short-cut to corporateprosecutions”, that they will not beappropriate in every case and that theSFO remains, first and foremost, aprosecution agency.18

IndividualsPossible consequences for the directorsor officers of the company includedisqualification, fines, and imprisonment.

Directors and other senior officers mayalso be vulnerable to civil claims andregulatory action for their action orinaction; for example, for a failure tomaintain “adequate procedures” underthe Bribery Act, leading toquantifiable losses.

Directors or senior officers could alsopotentially be liable for assisting orencouraging19 (or the common lawoffence aiding and abetting) or conspiringto commit crime20 which would also leavethem open to civil claims andregulatory action.

What factors are taken intoconsideration when determiningthe penalty?In considering the seriousness of anyoffence, the court must consider thecorporate entity’s culpability in committingthe offence and any harm which theoffence caused, was intended to causeor might, foreseeably, have been caused.

From 1 October 2014, sentencing ofcorporate offenders has been governedby a new Definitive Guideline for Fraud,Bribery and Money Laundering Offencesissued by the Sentencing Council. It setsout a ten-step process for judges tofollow when deciding on the appropriatepenalties to impose on corporatesfollowing conviction. The quantum of thepunitive element of financial penalties isdetermined by reference to multipliers ofbetween 20 and 400 per cent of a figurerepresenting the financial “harm” causedby the particular offending in question.Higher levels of “culpability”,characterised by, for example,

orchestrated or sustained wrongdoing,lead to the application of higher“multiplier” figures. The Guideline is clearthat fines will be high: “The fine must besubstantial enough to have a realeconomic impact which will bring hometo both management and shareholdersthe need to operate within the law.Whether the fine will have the effect ofputting the offender out of business willbe relevant; in some bad cases this maybe an acceptable consequence.”

The corporate entity’s level of cooperationwith the prosecuting and regulatoryauthorities is also a factor in assessingthe course of action taken by a regulator21

and the level of penalty appropriatewhere there has been corporatecriminal offending.

Is there a mechanism for entities todisclose violations in exchange forlesser penalties?Cooperation and early acceptance of guiltare always mitigating factors insentencing. Offenders can receive up to athird off their sentence for an early plea ofguilty22 and can also be given immunity orreduced sentences for cooperating withthe prosecuting authorities in certainlimited circumstances.23

Under guidance issued by theCompetition and Markets Authority(“CMA”) (formerly the Office of FairTrading, or “OFT”) a business which hasparticipated in a cartel may receive totalor partial immunity from fines if it comesforward with information about the cartel,provided certain conditions for leniencyare met. Subject to certain conditions,



18 Speech entitled “Enforcing the UK Bribery Act – The UK Serious Fraud Office’s Perspective” by Stuart Alford QC, Joint Head of Fraud at the Serious Fraud Office, dated17 November 2014.

19 Serious Crime Act 2007, s 44-4620 Criminal Law Act 1977, s 1A21 For example, the FCA has stated that one factor it will consider in making a decision as to whether to pursue criminal proceedings or regulatory proceedings for market

abuse includes whether the person is being or has been cooperative with the FCA in taking corrective measures.22 Sentencing Guideline Council: Reduction in Sentence for a Guilty Plea (2007)23 Serious Organised Crime and Police Act 2005, s 71-73



the first cartel member to report andprovide evidence of a cartel will begranted total immunity, including immunityfrom criminal prosecution for any of itscooperating current or former employeesor directors and protection from directordisqualification proceedings for all of itscooperating directors.24

In addition, as noted above, self-reportingis one factor in the decision whether toinvite a corporate into DPA negotiations.Prosecutorial guidance suggests thatwhilst self-reporting will not guarantee aDPA instead of immediate prosecution, adeferred prosecution may be deemedappropriate as a means of disposal ofcriminal investigations involvingcorporates if there is full cooperation. Thiswill in practice mean self-reporting earlyand the subsequent disclosure ofdocuments. In some circumstances itmay necessitate the waiver of privilegeover relevant documents and/or theprovision of active assistance such asgiving evidence against individuals inlinked proceedings.

Current positionDespite the increase in the number ofcriminal offences which are targeted atcorporate entities, many of these offencescreated are not being used or are beingused very little. So far, there have onlybeen a small number of convictions

under the Bribery Act in relation toindividuals; the corporate offence forfailure to prevent bribery has yet tobe tested.

Nonetheless, legislation such as theBribery Act, and, in particular, the section7 corporate offence have been givenconsiderable prominence by prosecutingbodies, which has not been lost on thecorporate consciousness. It is fair to saythat there is an increasing focus byprosecuting and regulatory agencies onbringing corporate entities to account fortheir actions.

More recently, David Green has called foran extension of the principle contained insection 7 of the Bribery Act to otherfinancial crimes which would significantlyincrease the SFO’s reach in criminalisingcorporates for failure to prevent fraud andother financial crime; such potentialexposure is in turn likely to increase theattraction and use of DPAs. Althoughthere is considerable scepticism that thisrepresents an appropriate extension ofthe criminal law, nevertheless it appearsthat there is the political will for thischange – in December 2014 the UKGovernment published its “UKAnti-Corruption Plan” which set-out theactions that the Government intended totake to tackle corruption in the UK. Oneaction point listed is for the Ministry of

Justice to “examine the case for a newoffence of a corporate failure to preventeconomic crime and the rule onestablishing corporate criminal liabilitymore widely.”25 The timescale for this isJune 2015. There is cross party supportfor an extension of the law, particularlyfollowing allegations that HSBC helped itsclients with Swiss accounts avoid orevade tax – and that British authoritiesfailed to take appropriate action.26 Ittherefore seems that there is a significantlikelihood that the law will be extended inthis area. When and how that happensremains to be seen particularly given theforthcoming general election in theUK. Whilst there is some support in thecurrent Government for the SFO (thecurrent Solicitor General for England andWales having recently stated27 that theGovernment is “committed” to the Roskillmodel for serious fraud – that is themodel on which the SFO, uniquely in theUK, is based28) there is clear uncertaintysurrounding the SFO’s future with“persistent reports that the homesecretary, Theresa May, would be happyto see the fraud-buster wound up androlled into the National Crime Agency”.29

24 In 2007 British Airways admitted collusion with Virgin Atlantic over the price of long-haul passenger fuel surcharges and a penalty of £121.5m was imposed by the OFT.Virgin Atlantic avoided any penalty as it qualified for full immunity under the OFT’s leniency policy and its employees were not prosecuted. In addition to the investigationinto British Airway’s corporate conduct under civil competition law, the OFT also commenced criminal proceedings under the Enterprise Act 2002 into whether any BritishAirway executives dishonestly fixed the levels of the surcharges. The prosecution subsequently collapsed following the disclosure of evidence, which only emerged afterthe start of the trial.

25 UK Anti-Corruption Plan, December 2014, action 36.26 In March 2015, the Government announced that it is to establish a strict liability offence for offshore tax evasion including a criminal offence for corporates which fail to

prevent tax evasion on their watch.27 Global Law Summit, 23-25 February 2015, Panel Session “Bribery and Corruption” on 25 February 2015.28 The model by which the SFO operates was recommended by Lord Roskill in 1986. He recommended that serious and complex fraud be investigated and prosecuted by

a multi-disciplinary office combining forensic investigators, accountants, lawyers, computer specialists, counsel working together from the start of a case, right throughinvestigation and prosecution.

29 Sunday Times, “Who you going to call — if you don’t keep the fraudbusters?”, dated 01 March 2015.

Asia Pacific



IntroductionCorporate liability under Australia’scriminal legal system can arise in manyways and there are few offences whichcannot be committed by a corporateentity. Depending on the type of offence –for example, whether it relates to financialmarkets, anti-competitive conduct,bribery, customs or tax – an Australiancorporation may be subject toinvestigation and prosecution by a rangeof different authorities, each operatingpursuant to distinct statutory regimes.The procedure for a criminal investigationand prosecution of a corporation as wellas the subsequent penalties to which itmay be exposed where it has committedan offence, will also vary accordingly.

LiabilityIn what circumstances can acorporate entity incur criminal orquasi-criminal liability?A corporation may be convicted byvicarious liability or by attribution to it of thestate of mind of an employee or agent.

Vicarious liability is where a statute imposesliability on an employer for the actions of itsemployees or agents. The statutes may notexpressly refer to corporations, as the word“person” in a statute includes a bodycorporate. In these circumstances, acorporate entity will become liable so longas the employee or agent is acting withinthe scope of employment or agency andhad the relevant state of mind. Liability willbe imposed regardless of whether theemployee occupies a senior or juniorposition. Statutes in Australia under which acorporation may be found vicariously liableof a criminal offence include the Proceedsof Crime Act 1987 (Cth) and theCompetition and Consumer Act 2010 (Cth).

Vicarious liability is often, but not always,imposed for absolute or strict liabilityoffences, where a corporation can be

convicted without the need to prove aguilty mind or simply if it is unable torebut the appearance of an honest orreasonable mistake or unable to showthat it acted reasonably to prevent theharm. For example, environmentaloffences commonly involve vicarious andstrict or absolute liability. Nevertheless,there are instances where vicariousliability has been imposed for offenceswhich have a mental element, such as anintent to defraud the Revenue undercustoms legislation.

By contrast, the relevant state of mind ofa natural person (generally seniormanagement of a company) may bedirectly attributed to a company by wayof the “identification principle”. In thesecircumstances, the criminal conduct istreated as being that of the companyitself and, as such, this form of corporatecriminal liability may apply to more seriousoffences such as homicide.

What offences cannot be committedby a corporate entity?A corporation cannot be made liable foran offence for which the only penalty isimprisonment unless statute hasexpressly provided that a corporation canalso be guilty of such offence. InAustralia, such statutes usually providefor the conversion of a term ofimprisonment into a fine. Arguably thereare also certain crimes which can only becommitted by natural persons and not bycorporations. However, case law indifferent jurisdictions may take differentviews. For example, unlike in the UK, theauthorities in Australia say thatcorporations cannot commit perjury.

Are there any specific defencesavailable?Specific defences are set out in therelevant and applicable legislation. Inmany instances, due diligence in ensuring

compliance with the law is available tocorporations as a defence. Even wherethe statute does not provide for such adefence, due diligence may also be arelevant factor in giving rise to areasonable doubt as to whether asubjective fault element has beenestablished. However, in the case ofno-fault offences, the defence would needto be made expressly available understatute. The Commonwealth CriminalCode, for example, makes this defenceavailable for strict liability offences but notfor an absolute liability offence.

What is the relationship between theliability of the corporate entity andthat of its directors and officers?An officer or agent may be liable as anaccessory in relation to an offencecommitted by a corporation. Conversely,where the law imposes criminal liability ona director or officer as principal, it mayalso be possible for the corporation to befound vicariously liable as a principal orliable as an aider and abettor. Accessorialliability is generally established by provingknowledge on the part of the director orofficer. The statute may also reverse theonus of proof so that, where acorporation is convicted of the offence,the director or officer is also deemed tohave contravened the law unless theyprove that they had no knowledge of thecontravention or used due diligence toprevent it.

The Federal and State Governments in2009 agreed to adhere to a set ofprinciples proposed by the MinisterialCouncil for Corporations as the basis forimposing personal liability for corporatefault going forward. In addition tooutlining the threshold circumstances inwhich personal criminal liability should beimposed on a director for the misconductof a corporation, the principles also statethat liability should only be imposed on

Australia



directors where they have encouraged orassisted the commission of the offence orhave been negligent or reckless in relationto it; directors may also in someinstances be required to prove that theyhave taken reasonable steps to preventthe offence. Legal reform in recent yearshas occurred in line with these principles.

ProcedureWho is responsible for investigatingand prosecuting offences committedby corporate entities?A number of different regulatory bodiesmay investigate and prosecute offencescommitted by corporations, including theAustralian Federal Police (“AFP”), AustralianSecurities and Investments Commission(“ASIC”), the Australian Competition andConsumer Commission (“ACCC”), theAustralian Tax Office (“ATO”) and theAustralian Crime Commission (“ACC”).

The ACC is a Commonwealth body thataims to prevent serious and organised crimeand which has a mandate to investigate anymatter deemed federally relevant criminalactivity. The ACC works closely with manyother authorities, including the AFP, variousState police forces, and regulatory bodies.While the Commonwealth Director of PublicProsecutions (“CDPP”) or the relevant stateDirector of Public Prosecutions (together, the“DPPs”) do not have formal investigativefunctions, they may provide advice andassistance on an informal basis duringinvestigations and they may also decide toprosecute following an investigation by oneof the aforementioned agencies.

The prosecution policies of the DPPs setout the guidelines for determining whenprosecution should be pursued.Guidelines and memoranda ofunderstanding also exist between theagencies and DPPs to establishcooperative relationships and clarify areasof overlap in power and duties.

PunishmentCorporationsFines are commonly imposed oncorporations as an alternative toimprisonment. Legislation often sets amaximum fine as the greater of a specificamount or a multiple of the benefitobtained by the corporation andattributable to the offence or a percentageof the annual turnover of the corporation.The maximum penalty for foreign bribery ofa public official or cartel conduct is thegreater of A$11 M or A$10 M(respectively), three times the value ofbenefits obtained (if calculable) or 10% ofthe previous 12 months’ turnover of thecompany, including relatedcorporate bodies. There have beensubstantial increases in the maximumpenalty cap in recent years. Minor offencesmay also attract “on the spot” fines, thepayment of which precludes furthercriminal proceedings.

The Proceeds of Crime Act 2002provides a scheme to trace, restrain andconfiscate the proceeds of crime againstCommonwealth Law. In somecircumstances, it can also be used toconfiscate the proceeds of crime againstforeign law or the proceeds of crimeagainst State law.

Other forms of punishment includerestraint of trade orders, adverse publicityorders, community service or remedialorders, injunctions or orders directing thecompany to establish a compliance oreducation program or revise certaininternal operations.

Although not technically a criminal penalty,if ASIC concludes that it would be in theinterests of the public, members, orcreditors that the company be wound up,the Court may also make such an order.

While ASIC accepts enforceableundertakings as an alternative to civil

proceedings it will not acceptundertakings in place of commencingcriminal proceedings.

IndividualsDirectors or officers of a company who arefound guilty of committing an offence maybe sentenced to a period of imprisonmentand/or subject to a fine. Further, a personis automatically disqualified from managingcorporations if he or she is convicted ofcertain offences. Civil liability and penaltiesmay also be available against an individual.

What factors are taken intoconsideration when determiningthe penalty?The fundamental principle which informssentencing is that the penalty should beof a severity appropriate to theseriousness of the offence. Therefore, thedegree of culpability of the corporationand the seniority of the officers involvedare relevant to determining the penalty.

Other factors which Australian courts takeinto consideration when sentencing acorporation are largely the same as thoseapplicable to sentencing of individuals.Such considerations include any priorcriminal history, the degree of harmcaused, whether any steps were taken toremedy the harm and prevent futureoccurrences, early guilty plea, cooperationwith authorities and the degree to whichthe corporation has demonstratedremorse. Law reform commissions haverecommended introducing sentencingprovisions targeted specifically atcorporations but there has not been anyindication that such recommendations willbe implemented in the near future.

Is there a mechanism for entities todisclose violations in exchange forlesser penalties?Immunity from prosecution may be grantedto a corporation that first exposes seriouscartel offences and fully cooperates with



the ACCC and the CDPP. Relatedcorporations may also seek derivativeimmunity. Where the criteria set out in theACCC Immunity and Cooperation Policy forCartel Conduct have been met, the CDPPwill provide a letter of comfort and prior tothe commencement of a prosecution, theCDPP will provide a written undertakinggranting criminal immunity. While similarimmunity policies in relation to cartelconduct can also be found in otherjurisdictions around the world, it is onlyavailable in the very limited circumstancesdetailed in the relevant competitionregulator’s policy.

In Australia, cooperation policies generallydo not provide for immunity. ASIC’senforcement policy states that earlynotification of a violation or cooperationwith an investigation may be relevant toASIC’s consideration of what type ofaction to pursue, including whether to refera matter to the CDPP. Additionally, ASICmay provide a letter of comfort informing acooperating entity that it is not the subjectof an investigation. The Prosecution Policyof the Commonwealth, which sets out theguidelines followed by the CDPP in itsprosecutions, lists cooperation as arelevant consideration when decidingwhether or not to agree to a chargenegotiation proposal. Past and futurecooperation is expressed in legislation as amitigating factor in determining sentencing.

Current positionAs a result of the multi-layered anddispersed nature of this area of law inAustralia, the landscape of corporatecriminal liability is fragmentary andconstantly changing.

We have outlined above a wide range ofareas in which corporations arevulnerable to criminal liability. However,the extent to which regulators havepursued criminal remedies varies. It has

to date been more common for theACCC to pursue civil, quasi-criminalremedies rather than refer matters to theCDPP. In the years 2013 and 2014 todate, the CDPP did not receive any briefsfrom the ACCC in relation to allegedcartel conduct. Yet, in the year 2012-13,the ACCC reported the largest penaltiesobtained for cartel conduct in Australia,being orders for a total of $98.5 M inpenalties from 13 airlines in respect ofcollusion on fuel surcharges for air cargoservices. The current ACCC chairman,Rod Sims, has commented that anumber of investigations are beingconducted and cases would be referredto the CDPP if serious cartel conduct isuncovered. Australian competition lawsare currently undergoing acomprehensive review and in its draftreport the Harper Review Panelrecommended a simplification of criminalsanctions in this area. On the other endof the spectrum, between 2012 and2014, ASIC reported obtaining 1402enforcement outcomes of which 989were criminal. It is unclear whatproportion of these representsprosecutions against corporations,however we are not aware of apreference for ASIC to focus onindividuals or organisations in itsenforcement activities. ASIC has calledfor the penalties available to it to beincreased and in a 2014 Senate report,the Economics Reference Committeerecommended that criminal and civilpenalties available to ASIC be revisited.

In the foreign bribery arena, the OECDhas expressed concerns over theeffectiveness of the enforcement offoreign bribery legislation in Australia. Forexample, the AFP faced criticism for notpursuing enforcement action over theAustralian Wheat Board scandal, whichinvolved covert kickbacks-for-wheatcontracts. In 2011, two Australian

companies – Securency International PtyLtd and Note Printing Australia Limited –were charged with conspiracy to bribeforeign public officials in the firstAustralian prosecution under foreignbribery legislation. There are suppressionorders in place in relation to theseproceedings. In addition the prosecutionof several individuals who were senioremployees of these companies continue.

In February 2015 the AFP announced ithad charged two directors of anAustralian company with conspiracy tobribe a foreign public official and moneylaundering offences, which was onlyAustralia’s second foreign bribery case toreach the courts. The AFP and ASIC arecurrently conducting an investigation intoLeighton Holdings Limited in relation toforeign bribery allegations In March 2015,Labor Senator Sam Dastyari announcedthat he would be moving a motion in theFederal Senate to establish an inquiry intoforeign corrupt practices, the practice offacilitation payments to foreign officialsand the role of the AFP and otheragencies to properly investigate thesematters. The large Australian corporationshe named in the context of the proposedinquiry were BHP and Leighton Holdings.

The ATO pursues both individuals andcorporations. However, criminal liability ismainly attributed to individuals directlyinvolved. Recently Project Wickenby, across-agency taskforce targetinginternational tax evasion, has with thecooperation of ASIC involved extensiveinvestigations into Australian companies.Of the 44 convictions to date, 8 havebeen of directors. Similarly, the ACCmainly pursues groups or individuals, notcorporations. The ACC reports regularlyon the arrests that result from itsinvestigations and 2013-2014 the ACCreported that its work had resulted in40 people being convicted that year.

IntroductionThere are a number of offences in HongKong targeted at corporate entities andconcerned with the regulation of businessactivity. Most notable amongst these arethe Companies Ordinance30 (which dealswith failures to perform administrativesteps in relation to the operation ofcompanies), the Securities and FuturesOrdinance31 (which regulates misconductin financial markets), the TradeDescriptions Ordinance32 (whichcriminalises various acts of consumermisselling), and the Theft Ordinance33 (inparticular those provisions dealing withfalse accounting).

It is noteworthy that, unlike in someother jurisdictions, there is no specificstatutory offence of corporatemanslaughter in Hong Kong. In October2012, 39 people died when a ferrycollided with another boat and sank.Whilst the two vessels’ captains wereeach charged with 39 counts ofmanslaughter, their respectiveemployers, Hongkong Electric andHongkong and Kowloon Ferrysubsidiary Island Ferry Company, werenot charged, but were fined HK$4,500and HK$5,000 respectively for criminalbreaches of marine safety rules. Whilst itwould have been possible to haveattempted to charge the respectivecompanies with manslaughter under thecommon law rules (see below), suchprosecutions are notoriously difficult.Such prosecutions under the commonlaw have taken place in Hong Kong34,but are extremely rare.

LiabilityIn what circumstances can acorporate entity incur criminal orquasi-criminal liability?Under section 3 of the Interpretationand General Clauses Ordinances35, theterm “person” in any statute is definedas including any public body and anybody of persons, corporate orunincorporated. Accordingly, wherever aduty is imposed by statute in such away that a breach of the duty amountsto a disobedience of the law, then, ifthere is nothing in the ordinance eitherexpressly or impliedly to the contrary, abreach of the ordinance is an offencefor which a corporate may be liable,whether or not the statute refers interms to corporations.

The law of Hong Kong has followed thecommon law of England and Wales inascribing corporate liability for criminality,and has developed two main techniquesfor attributing to a corporate the actsand states of minds of the individualsit employs.

The first is by use of what is known asthe “identification principle” whereby,subject to some limited exceptions, acorporation may be indicted andconvicted for the criminal acts of thedirectors and managers who representits directing mind and will, and whocontrol what it does. Following theleading English authority of TescoSupermarkets Ltd. V. Nattrass36, theHong Kong Court of Appeal in R v LeeTsat-pin37 held that:

“[I]n order to attach liability to a limitedcompany for the act of an officer of thatcompany the officer who committed theoffence must be a person who was incontrol of the company so that hiscriminal act could be identified as that ofthe company.”

The second technique of vicariousliability was used from as early as thenineteenth century. Although, generallyspeaking, a corporate entity may not beconvicted for the criminal acts of itsinferior employees or agents, there aresome exceptions, the most important ofwhich concerns statutory offences thatimpose an absolute duty on theemployer, even where the employer hasnot necessarily authorised or consentedto the act (see for example offencesrelating to misleading consumers underthe Trade Descriptions Ordinance).

What offences can a corporate entitynot commit?A corporate entity can technically commitmost offences except those for whichimprisonment is the only penalty (such asmurder), and those which by their naturecan only be committed by physicalpersons in their personal capacity andnot acting as an agent for the corporation(such as rape or bigamy).

Unlike in other jurisdictions, HongKong’s anti-bribery and corruptionlegislation, the Prevention of BriberyOrdinance,38 has no specifically draftedcorporate offence.


Hong Kong


30 Cap 32.31 Cap 571.32 Cap 362.33 Cap 210.34 In 1995, Ajax Engineers and Surveyors Ltd pleaded guilty to charges of manslaughter arising out of the deaths of 12 workers on a site, caused by the collapse of a lift.35 Cap 1.36 [1972] AC 153 (HL)37 CACC000315/1985 (Li VP)38 Cap 201.




Many regulatory offences which affectcorporate entities are offences of strictliability or offences which impose strictliability subject to concepts such as“reasonable excuse”.39 For example, theTrade Descriptions Ordinance imposesstrict liability on a corporation not tomislead consumers with the descriptionsof its goods, subject to a defence thatthis occurred by “mistake...default ofanother…accident or some other causebeyond [its] control”, in circumstanceswhen “all reasonable precautions and…alldue diligence” had been taken to avoidthis. This defence was specifically draftedas an incentive for corporations toimplement compliance systems with stafftraining, which could then be pointed toin the event of a breach.

What is the relationship between theliability of the corporate entity andthat of its directors and officers?Certain statutes provide that, where acorporate has committed an offence, itsofficers are in certain circumstances40 tobe deemed guilty of that offence.

ProcedureWho is responsible for investigatingand prosecuting offences committedby corporate entities?A variety of agencies within Hong Kongmay initiate and conduct prosecutions,beyond the main criminal prosecutor, theDepartment of Justice.41 The Securities

and Futures Commission, for examplehas the power to prosecute less seriouscriminal breaches of the Securities andFutures Ordinance, although more seriouscases, in the higher courts, will beprosecuted by the Department of Justice.

Where a corporate faces a criminalcharge, it may enter in writing by itsrepresentative a plea of guilty or notguilty. If no plea is entered, the court shallorder a plea of not guilty to be enteredand the trial shall proceed as though thecorporate had entered a plea of not guilty.

PunishmentCorporate entitiesPenalties may include fines, andcompensation or forfeiture orders.Unlike in other jurisdictions, there is noformal scheme of mandatorydebarment from public procurementprocesses for corporations convicted ofcriminal offences.

IndividualsPossible consequences for the directorsor officers of the company includedisqualification, fines, and imprisonment.

39 See for example, s114(8) Securities and Futures Ordinance, in relation to the offence of carrying out a regulated business activity without a licence.40 Generally where consent, connivance, or neglect can be shown e.g. Trade Descriptions Ordinance (Cap 362) (s.20(1)). Certain more serious offences require the higher

standard of consent, connivance or recklessness (the Securities and Futures Ordinance (s.390)), or consent or connivance alone (such as the Weapons of MassDestruction Ordinance (Cap 526), the Biological Weapons Ordinance (Cap 491) and the Theft Ordinance (Cap 210)).

41 In relation to the Trade Descriptions Ordinance, for example, the Office for the Communications Authority has the power to prosecute matters relating to thetelecommunications industry, and Customs and Excise has jurisdiction over all other breaches.

Directors and other senior officers may alsobe vulnerable to civil claims and regulatoryaction for their action or inaction.

Directors or senior officers could alsopotentially be liable for aiding andabetting or conspiring to commit crime42

which would also leave them open to civilclaims and regulatory action.

What factors are taken intoconsideration when determiningthe penalty?In considering the seriousness of anyoffence, the court must consider thecorporate entity’s culpability in committingthe offence and any harm which theoffence caused, was intended to causeor might, foreseeably, have been caused.

Unlike in other jurisdictions, thereare no specific guidelines forsentencing corporations.

Is there a mechanism for entities todisclose violations in exchange forlesser penalties?Cooperation and early acceptance ofguilt are always mitigating factors insentencing. Offenders can receive up toa third off their sentence for an early pleaof guilty.43

Under the Trade Descriptions Ordinancea scheme of Undertakings operates,under which a corporation may volunteerits guilt, and agree to abide by variousconditions, in exchange fornon-prosecution. In relation to breachesof the Securities and Futures Ordinance,as the Securities and FuturesCommission has a discretion as towhether to deal with matters by way ofcriminal prosecution or regulatory breach,self-reporting by corporations is aneffective way of mitigating the risk ofcriminal prosecution.

Current positionDespite the availability of criminal offenceswhich are targeted at corporate entities,many of these offences are not beingused or are being used very little. Asregards the criminal prosecution ofcompanies for offences under theSecurities and Futures Ordinance, forexample, the SFC has generally adoptedan approach of prosecuting individualscriminally, whilst dealing with thecompany in the regulatory sphere.

The exception to this may be the TradeDescriptions Ordinance, which came intoforce on 19 July 2013, and has alreadyseen a number of corporationsprosecuted. It is anticipated that thiswill continue.



42 Crimes Ordinance (Cap 200), s159A43 Secretary for Justice v Chau Wan Fun [2006] 3 HKLRD 577



IntroductionIndian law imposes both civil as well ascriminal liability on corporations. Criminalliability was earlier not associated withcorporates due to the absence of mensrea and Indian Courts were of the viewthat corporations could not be criminallyprosecuted. However, the SupremeCourt in the case of Standard CharteredBank and Ors. v Directorate ofEnforcement [(2005) 4 SCC 530] heldthat corporations are liable for criminaloffenses and can be prosecuted andpunished, at least with fines. Thisdecision is settled the position of lawregarding the criminal liability ofa corporation.

The Companies Act 2013 (“CompaniesAct”) has enlarged corporate governancerequirements. It has also expanded thedefinition of “officer in default”. TheCompanies Act has also amplified thecircumstances under which, if theobligations cast on the corporation underthe Act are not complied with, thecompany and/or its officer in defaultcould either be fined or imprisoned.

There are other prevalent statutes suchas the Environment Protection Act1986, the Industrial Disputes Act 1947,Water (Prevention and Control Pollution)Act 1974 which lay down circumstancesunder which companies could beprosecuted. Under these statutes, whena “person” committing an offence is acompany, or other body corporate,every officer or person concerned withor in charge of the management shall,unless he proves that the offence wascommitted without his knowledge orconsent, be deemed to be guilty ofsuch offence.

LiabilityIn what circumstances can acorporate entity incur criminal orquasi-criminal liability?The decision of the Supreme Court ofIndia in the Standard Chartered case(referred to above) holds thatcorporations are liable for criminaloffenses and can be prosecuted andpunished, at least with fines, andoverrules all prior decisions to thecontrary. Corporations could beconvicted of criminal offences and acorporation would be criminally liableeven if the recommended punishment forsuch an offence is imprisonment alone.The definition of ‘person’ in the IndianPenal Code 1860 (“IPC”), the principallaw governing criminal law in India,includes a company or a body corporate.Many other statutes in India such as theIncome Tax Act 1961 and the ForeignExchange Management Act 1999 alsoinclude corporations in their definition ofthe word ‘person’.

One of the circumstances under which acorporate entity could incur criminalliability is when the company is liable forthe acts of its employees, agents or anyother person responsible for the affairs ofthe company. In other words, thecompany would be vicariously liable forthe actions of its employees and agentsin the ordinary course of business.

Another circumstance in which acorporation could be held criminally liableis for the criminal acts of its directors orother key managerial personnel who arein charge of the day-to-day affairs of thecorporate entity and are its directingminds. In such cases, the corporationswould be directly liable for the acts ofsuch directing minds.

Under the Companies Act, criminal aswell as civil liability can arise againstcorporations for non-compliance withrequirements under the Act such as (i)filings of annual returns, financialstatements, registration of charges, etc.;(ii) failure to comply with pre-requisites tobe followed in respect of the purchasingby a company of its own securities, loansand investments by companies, etc.; (iii)and for violations such as misstatementsin prospectuses, and investments ofcompany to be held in its own name etc.

The Companies Act has also introducedthe concept of fraud (section 447) whichis defined as any act or concealment oromission or abuse of position in relationto the affairs of a company, committedwith an intent to injure the interests of acompany or its shareholders or creditorsor any other person, whether or not thereis wrongful gain or loss. Punishment forfraud shall include imprisonment for thepersons associated with the fraudand fine.

Persons or officers in default shall also beliable for action under section 447 in thefollowing circumstances:

(i) Furnishing false or incorrectparticulars in relation to theregistration of a company[Section 7(5)];

(ii) Misstatements in prospectus[Section 34];

(iii) Fraudulently inducing persons toinvest money [Section 36];

(iv) Depository or depository participanttransfers shares with an intention todefraud a person [Section 56 (7)]

(v) The auditor of the company shall beliable if it has conducted in afraudulent manner [Section 140];

India

(vi) Where business of a company hasbeen or is being carried on forafraudulent or unlawful purpose[Section 206];

(vii) Furnishing false statements,mutilation, destruction of documents[Section 229];

(viii)Application for removal of name withan intent to defraud creditors[Section 251];44

(ix) Fraudulent conduct of business[Section 339];45

(x) Making a false statement[Section 448];

(xi) Intentionally giving false evidence[Section 449].

Furthermore, the criminal intent of acorporation can be derived from thepersons who guide the business of thecompany such as the managing director,the board of directors, or any otherperson who has been authorised by thecompany to take decisions on behalf ofthe company.

What offences can a corporate entitynot commit?Under the IPC, the offences which acorporate entity cannot commit aremurder, bigamy and sedition.

Are there any specific defencesavailable?The statutes generally provide fordefences wherever applicable. Forinstance, under section 34 of theCompanies Act, which provides forcriminal liability in case of a misstatementin a prospectus, if a person proves that

such statement or omission wasimmaterial or that he had reasonablegrounds to believe, and did up to thetime of issue of the prospectus believe,that the statement was true or theinclusion or omission was necessary, thepenal provisions provided under thesection would not be applicable. Similarlysection 33646 which relates to offences byofficers of companies in liquidation, itshall be a good defence if the accusedproves that he had no intent to defraudor to conceal the true state of affairs ofthe company or to defeat the law.

Generally it is seen from other statutes aswell that a good defence would be thatthe offence was committed withoutknowledge or consent.

What is the relationship between theliability of the corporate entity andthat of its directors and officers?The statutes generally provide that officerswho are in charge of the day-to-dayoperations of the company would beliable. The Companies Act defines theofficers who shall be deemed to be indefault of the provisions of the Act.

The liability of the corporate entity and thedirectors and officers is limited. In certaincases the corporate veil of the companycan be lifted. Under section 213(b)47 ofthe Companies Act, the corporate veilcan be lifted if it is proved that thebusiness was carried out with theintention to defraud the creditors.Directors, managers and officers of thecompany will be personally liable forfraudulent conduct of the business asprovided under section 339.48

ProcedureWho is responsible for investigatingand prosecuting offences committedby corporate entities?Various authorities are empowered toinvestigate and prosecute offencescommitted by corporate entities.

Under Chapter XIV of the Companies Act2013, the Registrar of Companies hasthe power to investigate the matters ofthe company.

Some of the other investigationauthorities are the jurisdictional policeauthorities, the Central Bureau ofInvestigation (“CBI”) and the SeriousFraud Investigation Office.

PunishmentCorporate entitiesCorporate entities can be punished withfines and other penalties. In the StandardChartered Bank case, the Bank wasprosecuted for the alleged violation ofcertain provisions of the ForeignExchange Regulation Act 1973. TheSupreme Court did not follow the literaland strict interpretation rule required forpenal statutes. Rather it held that thecorporation could be prosecuted andpunished with fines, regardless of themandatory punishment required underthe statute.

Since the decision of the StandardChartered Bank case, courts havegenerally taken the view that companiesare not exempt from prosecution merelybecause the prosecution is in respect ofoffences for which punishment prescribedis mandatory imprisonment.



44 Yet to be notified by the Ministry of Law & Justice, Government of India45 Yet to be notified by the Ministry of Law & Justice, Government of India46 Yet to be notified by the Ministry of Law & Justice, Government of India 47 Yet to be notified by the Ministry of Law & Justice, Government of India48 Yet to be notified by the Ministry of Law & Justice, Government of India



IndividualsIndividuals such as the directors andofficers can be punished withimprisonment or a fine or both. Directors,key management personnel and seniorofficers could be liable fornon-compliance of regulatoryrequirements, aiding and abetting crimesand for falsifying records, financialstatements etc. Directors could also beliable for regulatory action if a directorincluding a nominee/independent directorwas aware of a default or wrongdoing bythe company either by participation inboard meetings or receiving the minutesof the meeting and not objecting to,default or wrongdoing. Consent orwillingness by the directors shall alsomake them liable for prosecution.

What factors are taken intoconsideration when determiningthe penalty?In most cases, the statute itself providesfor the minimum or maximum penalty tobe imposed upon the accused. TheCriminal Procedure Code 1973 provideswide discretionary powers to the judgeonce the conviction of the offender isdetermined. The offender/accused andhis counsel is also given an opportunity toaddress the court for the purposes ofmitigation. The judge is required to statethe factors which have been taken intoconsideration in determining the penalty.

Generally, the court in determining thepenalty considers the: (i) seriousness ofthe offence; (ii) prior digressions, if any; (iii)the intent with which the offence wascommitted; and (iv) likelihood of theoffence being repeated by the offender.

The Competition Commission of India(“CCI”), in its assessment of abuse ofdominance in the case of BelaireOwners’ Association v DLF Limited,imposed a penalty of 6.3 billion rupees

on DLF Limited for having abused itsdominance. The CCI took into accountvarious factors other than market share,such as statements issued by DLFLimited in the public domain relating toits dominance in the market, in its redherring prospectus, annual report, etc,vast amounts of fixed assets andcapital, turnover, brand value, strategicrelationships, wide sales network, etc.The CCI has also imposed a penalty of17.73 billion rupees on Coal IndiaLimited and its subsidiariesin Maharashtra State Power GenerationLimited v Coal India Limited and Othersfor abuse of its dominant position in themarket. It is relevant to note here thatthe Competition Act 2002, undersection 19(4), lays down the factorsbased on which the CCI is required toassess dominance of a corporate entityin the market.

Is there a mechanism for entities todisclose violations in exchange forlesser penalties?For certain offences under the IndianPenal Code, plea bargaining can beused. Plea bargaining was introduced inthe Code of Criminal Procedure by theCriminal Law (Amendment) Act 2005 (Act2 of 2006) through Chapter XXIA to theCode having sections 265 A to 265 Lwhich came into effect on 5th July 2006.Chapter XXI A, allows plea bargaining tobe availed for offences that are penalisedby imprisonment below seven years [sec.265-A CrPC].

Plea bargaining is not available forthe following:

if the accused has been previouslyconvicted of a similar offence by anycourt;

for offences which might affect thesocio-economic conditions of thecountry; or

for an offence committed against awoman or a child below fourteenyears of age.

Current positionThe laws relating to corporate criminalliability are insufficient; though theCompanies Act 2013 has increased theliability on corporations, its has not yetbeen used against a corporate.Corporate governance in the CompaniesAct is given more importance so thatcorporate fraud is not carried out in thecompany. The audit committee has alsobeen given a greater regulatory duty tolook into matters of corporate fraud.Currently the main practice is to imposefines on corporate entities; in the caseof a director or any officer in defaultthen both fine and imprisonment canbe imposed.

In Iradium India telecom ltd v. Motorolaincorporated and Ors [AIR 2011 SC] thecourt held that a corporation is virtually inthe same position as any individual andmay be convicted under common law aswell as in respect of statutory offencesincluding those requiring mens rea. TheSupreme Court in Iridium appears tohave crystallized the law, laying emphasison the theory through which the intentionof the directing mind and will of acompany is attributed to the company,and confirming that a corporation can beheld liable for crimes of intent. Thejudgment further clarifies that a companyis not immune from any prosecution foroffences for which a sentence ofmandatory imprisonment its prescribed,as the sentence can be substituted witha fine.

IntroductionThe Indonesian Criminal Code does notspecifically establish criminal liability forcorporate entities. Under the IndonesianCriminal Code, the principle is that onlyindividuals can commit criminal offences.

A number of laws in Indonesia, namelythe Environmental Law, the AntiCorruption Law and the Anti MoneyLaundering Law have introducedcorporate criminal liability for specificoffences. In most cases, despite the clearlanguage used in these laws, lawenforcement agencies have beenreluctant to bring charges againstcorporate entities and focus their effortsmore on bringing charges againstindividuals who are involved orresponsible for the criminal acts.

LiabilityIn what circumstances can acorporate entity incur criminal orquasi-criminal liability?Depending on the relevant and applicablelaws, generally, a corporate entity canincur criminal liability when the criminaloffence is committed on its behalf orcommitted by an employee or a personwho has a relationship with the corporateentity acting within the scope of thecorporate entity’s activities.

Specific examples under theEnvironmental Law, the Anti CorruptionLaw, and the Anti Money Laundering Laware as follows.

The Environmental LawThe Environmental Law provides that ifa criminal offence is committed by, foror on behalf of a corporate entity, thecriminal charges and sanctions can beimposed on (i) the corporate entity,and/or (ii) the person who gave theorder to commit such criminal offenceor the person who acted as the leader

in committing such criminal offence. Ifthe criminal offence is committed by anemployee, or an individual based on arelationship with the corporate entity,the criminal sanctions will be imposedon the individual who gave the order orthe leader.

The Anti Corruption LawThe Anti Corruption Law provides that acriminal act of corruption is taken to becommitted by a corporate entity if thecriminal offence is committed by anemployee or other individual based onthe relationship with the corporate entity,acting alone or together, within the scopeof the corporate entity’s activities.

The Anti Money Laundering LawThe Anti Money Laundering Lawprovides that a corporate entity can becriminally liable for money launderingcrimes if: (i) committed or ordered bythe management of the corporate entity;(ii) committed in the framework of the

purpose and objective of the corporateentity; (iii) committed in accordance withduties and functions of the person whocommitted the offence or the personwho gave the order; or (iv) committedfor the purpose of benefitting thecorporate entity.

What offences can a corporate entitynot commit?Indonesian laws do not specifically setout offences that a corporate entitycannot commit. However, as mentionedabove, offences based on theIndonesian Criminal Code can only becommitted by individuals.

Are there any specific defencesavailable?All defences available to individuals canbe relied upon by corporate entities.There are no specific defences availableto corporate entities, beyond arguing thatan offence should not be attributed to it,but to the individuals instead.


Indonesia




What is the relationship between theliability of the corporate entity andthat of its directors and officers?In general, all individuals connected to anoffence can be prosecuted separatelyincluding the perpetrators, anyaccomplices and anyone who may beliable for incitement to commit the offenceor aiding, abetting and so on.

Specifically under the Environmental Law,if the corporate entity is liable, then theBoard of Directors will be liable and thecriminal sanctions will be imposed on theBoard of Directors since the Board ofDirectors will be deemed to haveauthority over the perpetrators or to have“assented to” the offence. The meaningof “assented to” the offence would coverapproving or allowing the commission ofthe offence, insufficient supervision,and/or having the policies which makethe commission of the offence possible.

ProcedureWho is responsible for investigatingand prosecuting offences committedby corporate entities?In Indonesia, there is no specific judicialbody dedicated to investigating andprosecuting corporate entities.

In general, criminal investigations areconducted by the National Police of theRepublic of Indonesia. However,investigations can also be conducted bythe internal investigators of certainauthorities, such as for environmental,competition, tax, corruption and financialsector offences.

Prosecution of criminal offences isconducted by Public Prosecutors (Jaksa).

PunishmentCorporate entitiesPunishment differs for each offence underthe relevant and applicable law. Forexample, under the Anti MoneyLaundering Law, a corporate entity canbe fined a maximum of Rp100 billion, aswell as subject to the following sanctions,announcement (publicising) of the courtdecision, freezing of part or all activities,revocation of business licence,dissolution, seizure of assets, andtakeover of the corporate entity by theState. Under the Anti Corruption Law, acorporate entity can be fined themaximum fine for individuals plus onethird of the maximum fine.

Under the Environmental Law, acorporate entity, in addition to fines, canalso be subject to restoring theenvironment in the event of environmentaldamage arising from the offence, as wellas freezing or revocation of theenvironmental permit.

IndividualsPunishment differs for each specificoffence under the relevant law and theIndonesian Criminal Code. Under theIndonesian Criminal Code, individualsmay be subject to the death penalty,imprisonment, fines, revocation ofcertain rights, seizure of certain assetsand announcement (publicising) ofcourt decision(s).

What factors are taken intoconsideration when determiningthe penalty?There are no sentencing guidelines inrelation to cooperation of offenders.The relevant court has discretion to

consider mitigating or aggravatingfactors. Cooperation by the offenderscan be taken into consideration as amitigating factor.

Is there a mechanism for entities todisclose violations in exchange forlesser penalties?There is no mechanism for entities todisclose violations in exchange forlesser penalties.

Current positionAs mentioned above, the currentIndonesian Criminal Code does notspecifically recognise offences committedby corporate entities. It has beensuggested that the future revision to theIndonesian Criminal Code should includea provision on corporate criminal liability(as has been reflected in the latest bill).However, since the incumbentGovernment and Parliament have onlyrecently taken office (October 2014),progress of the bill amending the CriminalCode (including the corporate criminalliability provision) is uncertain.

While the Environmental Law, the AntiCorruption Law, and the Anti MoneyLaundering Law permit the bringing ofcharges against corporate entities, lawenforcement agencies in most casesremain reluctant to invoke the relevantprovisions against corporate entities asopposed to individuals.

IntroductionHistorically, only individual persons couldbe criminally liable under Japanese law.The Japanese Criminal Code, which isthe key criminal statute in Japan, doesnot expressly provide for the criminalliability of a corporate entity.

However as the scope of activities ofcorporate entities has been rapidlyexpanding, there has been a growingneed to regulate the actions of suchentities. Therefore, separately from theCriminal Code, many provisionsprescribing criminal liability for corporateentities (approximately 570 provisions asat 2012) have been enacted in variousspecific pieces of legislation applicable inthe areas of company law,anti-monopoly law, employment law,anti-bribery law, corporate taxation lawand so on.

LiabilityIn what circumstances can acorporate entity incur criminal orquasi-criminal liability?A corporate entity can incur criminalliability only when there is a specificstatutory provision expressly imposingsuch liability on it and where a director,officer or employee has been found tohave committed the offence in question inconnection with the corporate entity’sactivities or assets (e.g. Article 975 of theCompanies Act, Article 22 of the UnfairCompetition Prevention Act). A corporateentity may not be convicted for thecriminal acts of its directors, officers oremployees committed outside the scopeof the entity’s activities.

What offences can a corporate entitynot commit?Japanese law does not specifically setout offences that a corporate entitycannot commit. There has beentheoretical contention over whether a

corporate entity generally has the abilityto commit an offence but to date, thereare no established court precedents inrelation to this issue.

However, as mentioned above, there arespecific statutory provisions imposingcriminal liability on corporate entities.

Are there any specific defencesavailable?All defences available to individuals canbe relied upon by corporate entities.

Moreover, in the event that the offencewas committed without any negligence(including, but not limited to, negligencein connection with appointment andsupervision of a director, officer oremployee) on the part of the corporateentity, the corporate entity cannot beheld liable. Accordingly, a corporateentity may rely on the defence that ittook all reasonable measures to preventthe offence (e.g. by providing in-housetraining), although in practice it hasbeen very rare for such a defenceto succeed.

What is the relationship between theliability of the corporate entity andthat of its directors and officers?As discussed above, all of the currentstatutory provisions creating criminalliability for a corporate entity require that adirector, officer or employee of thecorporate entity to have been found guiltyof having committed the relevant criminaloffence in order for the corporate entity tobe found criminally liable.

ProcedureWho is responsible for investigatingand prosecuting offences committedby corporate entities?There is no specific judicial bodydedicated to investigating andprosecuting corporate entities. ThePolice, the Public Prosecutor’s Officeand (if authorised by specific law) anyrelevant regulatory body have the powerto conduct investigations. However, theability to prosecute a party for anoffence is limited to the PublicProsecutor’s Office.

Japan





PunishmentCorporate entitiesPenalties on corporate entities take theform of fines only. The maximum penaltydiffers for each offence and fines forcorporate entities are usually higher thanthose for individuals who commited thesame crime.

For example, while the maximumstatutory fine on corporate entitiesfor securities-related fraud is JPY700 million (Article 207 of the FinancialInstruments and Exchange Act), the finefor an individual for the same offence isJPY 10 million (although, the individualmay also be subject to imprisonment forup to 10 years).

There has been an increasing trend forlegislation to prescribe ever higher finesfor corporate entities. For instance, theJapanese Cabinet decided in March 2015to introduce a draft bill to Parliament toincrease the maximum penalty for unfairobtainment and abuse of trade secretsfrom JPY 300 million to JPY 1 billion.

IndividualsThe most common penalties forindividuals are imprisonment or fines orboth. Civil liability and penalties may alsobe available against an individual.

What factors are taken intoconsideration when determiningthe penalty?A number of factors are taken intoaccount for the purposes of determiningthe penalty.

The continuation of an unlawful activitynotwithstanding a request from thecompetent authority to desist and therepeated committing of the same orsimilar offence within a single year areexamples of aggravating circumstances.

Mitigating factors include the preventionof the offence’s harmful consequences,the voluntary reimbursement of damagesand cooperation during investigation.

Is there a mechanism for entities todisclose violations in exchange forlesser penalties?Japanese law does not provide for anysuch mechanism. However, there ispresently a draft bill before Parliamentthat may provide lower penalties forcorporate entities in exchange fordisclosures concerning certain offencescommitted by a third party. Nevertheless,in general, voluntary disclosure may leadto a more favourable outcome, includingno prosecution at all or a lower penalty.

Current positionNotably, on 3 July 2013, the TokyoDistrict Court sentenced OlympusCorporation to a fine of JPY 700 miillionin total in connection with its filing ofannual securities reports with falsestatements. Moreover, as describedabove, there has been an increasingtrend for legislation to prescribe higherand highter fines for corporate entities.

Under such circumstances, criminalprosecution is now seen as a real risk bythe vast majority of corporate entities inJapan and this has undoubtedly had animpact on corporate consciousness.

The best way for corporations to avoidcriminal prosecution in Japan is toimplement robust internal complianceprogrammes to prevent or catch violativeconduct early and to help with providingthe company with a defence tocriminal prosecution.

IntroductionIn the People’s Republic of China(“PRC”), a corporation may be heldliable only for crimes that specificallyprovide for corporate criminal liability.Such crimes are considered “entityoffences” under Article 30 of theCriminal Law. Article 30 sets forth whattypes of organizations can be chargedwith entity offenses, includingcorporations, enterprises, state-ownednon-profit entities (e.g., public hospitalsand universities), governmentauthorities, and social organisations.They can be either legal or non-legalentities. Thus, to determine whether acrime can be committed by acorporation, one refers to the relevantsection under the Criminal Law to findout whether it specifies entities aspotential offenders. Entity offenses areprimarily included in the Criminal LawChapters of Damaging the Order of theSocialist Market Economy andCorruption and Bribery

Recently, one multinational company hasbeen subject to the largest criminal fine inhistory by PRC authorities, nearly USD500 million in one case.

LiabilityIn what circumstances can acorporate entity incur criminal orquasi-criminal liability?Chinese law is unclear about whatconstitutes an entity offence, asopposed to a personal or individualoffence. Legal authorities on this issueare very limited and not definitive. Acorporation might be held liable basedon a collective decision made by themanagement of the entity. In practice, acorporation can be liable for crimescommitted by its officers, employees, oragents if a decision is made on behalf ofthe entity, for the benefit of the entity, orif the entity gains illegal income.

What offences can a corporate entitynot commit?A corporate entity cannot be chargedwith any crime that is not specificallyprovided as an entity offense under theCriminal Law. Examples for which acorporate entity cannot be chargedinclude homicide or manslaughter.

Are there any specific defencesavailable?The relevant defences, if any, areprovided under each of the provisionsrelating to the specific entity offences.There is no statutory provision that setsforth a general defense to entityoffences. In accordance with a judicialinterpretation issued by the SupremePeople’s Court in 1999, however, anoffence should not be regarded as anentity offence if 1) the entity isestablished for the purpose ofcommitting criminal offences or itsprimary activities are criminal activitiesor 2) the illegal gains obtained by theentity from the criminal activities areallocated to the individuals who actuallycarry out the criminal activities.

What is the relationship between theliability of the corporate entity andthat of its directors and officers?For crimes designated as entity offenses,both the relevant individuals and entitiesmust be penalized together, unlessotherwise provided in respect of anyspecific crime under the law. An entity issubject to criminal fines and/orconfiscation of illegal profits. In addition,any individual who is theperson-in-charge of the entity or directlyresponsible for the criminal offence of theentity is subject to separate criminalpenalties as provided by the law. Whethera director or officer shall be criminallyliable for a criminal offence commited bythe corporate depends on whetherhe/she falls into either of the above two

roles. The head of the entity or its internaldepartment that commits the criminaloffece is likely to be regarded as theperson-in-charge. A person who directlycarries out the criminal activity wouldlikely be regarded as a person directlyresponsible for the offence.

ProcedureWho is responsible for investigatingand prosecuting offences committedby corporate entities?Investigations for most crimes areconducted at the local, provincial, andcentral levels by various agencies withinthe PRC police force, headed by theMinistry of Public Security. However, forcrimes involving government officials,government entities, or state secrets,such as bribery of government officials orleaking state secrets, public prosecutors,the Procuraterate, conduct theinvestigation, as well as the prosecution.

PunishmentCorporate entitiesCorporate entities are subject tocriminal fines and confiscation of illegalprofits, but not any penalties restrictingpersonal freedom such as criminaldetention or imprisonment.

IndividualsAn individual charged and convicted of acriminal offense would be subject to anytype of criminal penalties provided bythe Criminal Law, such as fines,confiscation of illegal profits, criminaldetention, imprisonment or even thedeath penalty.

What factors are taken intoconsideration when determiningthe penalty?To determine a penalty, the specificfacts, the merits, the nature of theoffence, and the degree of social harmcaused by the crime are the four

Mainland China


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elements to be considered.Self-surrender before any of the judicialauthorities discovers the offence,reporting another’s criminal offence, orproviding important evidence orinformation that leads to a successfulcriminal investigation of another’scriminal offence may be considered forleniencies, including a penalty belowtheminimum penalty required by the law ora penalty in the lower range of therequired penalties. Repeated offenceswill be subject to more severe penaltieswithin the discretionary range, exceptfor negligence.

Is there a mechanism for entities todisclose violations in exchange forlesser penalties?Yes, if the disclosure is made before thepolice or the prosecutor discovers theviolation. Under this circumstance, thepenalty can be reduced or appliedlightly. If the offence is minor, the penaltymay be exempted.

Current positionThe interpretation of an entity offence isunclear, especially in the area where acriminal offence can be committed byeither an entity or an individual, e.g. the

crime of giving bribes to a governmentofficial or entity. Generally speaking, forthe same type of criminal activities, thepenalty imposed on an individual for anindividual offence would be less than thatimposed on the same individual if theoffence is regarded as an entity offence.Therefore, a conflict of interest may easilyarise when determining whether it is theindividual manager or the company whocommits the offence.

IntroductionThere are many offences, civil andcriminal, in Singapore targeted atcorporate entities and concerned with theregulation of business activity.

An example of a statute which holdscorporate entities liable under the criminallaw is the Securities and Futures Act (Cap289, 2006 Rev Ed) (“SFA”) which providesthat corporations may be liable for insiderdealing activities carried out by theiremployees via attributed liability or if thecorporation fails to prevent or detect thecontravention committed by its employee.49

Given that Singapore’s criminal lawregime is largely based on English lawand the Indian Penal Code, reference ismade below to English and Indianauthorities at various points.

LiabilityIn what circumstances can acorporate entity incur criminal orquasi-criminal liability?Two main techniques have beendeveloped for attributing to a corporateentity the acts and states of minds of theindividuals it employs.

The first is by use of what is known asthe “identification principle”. As is thecase in the UK, under this principle,subject to some limited exceptions, acorporate entity may be indicted andconvicted for the criminal acts of thedirectors and managers who represent

the directing mind and will and whocontrol what it does.50 This concept hasdeveloped over decades.

The second technique of vicarious liabilitywas used from as early as the nineteenthcentury.51 Although, generally speaking, acorporate entity may not be convicted forthe criminal acts of its employees oragents,52 there are some exceptions, themost important of which concernsstatutory offences that impose anabsolute duty on the employer, evenwhere the employer has not authorised orconsented to the act.53 An example is theSFA discussed above.54

Wherever a duty is imposed by statute insuch a way that a breach of the dutyamounts to a disobedience of the law,then, if there is nothing in the statute eitherexpressly or impliedly to the contrary, abreach of the statute is an offence forwhich a corporate entity may be indicted,whether or not the statute refers in termsto corporations. This is because theInterpretation Act (Cap 1, 1997 Rev Ed)expressly states that a “person” and“party” includes “any company orassociation or body of persons, corporateof unincorporate”, unless the relevant Actexpressly provides otherwise. Singapore’smain criminal statute, the Penal Code (Cap224, 2008 Rev Ed) also bears this out.Section 2 states “Every person shall beliable to punishment under this Code”while section 11 states that “The word‘person’ includes any company or

association or body of persons, whetherincorporated or not.”

There are various statutes which containoffences specifically directed atcompanies. For example, criminal liabilitycan arise against companies under theCompanies Act (Cap 50, 2006 Rev Ed),for various offences such as making afalse and misleading statements as to theamount of its capital.55

What offences can a corporate entitynot commit?A corporate entity can commit mostoffences except those for whichimprisonment is the only penalty56 orthose which by their nature can only becommitted by natural persons (such asbigamy and rape).57

In Singapore, a corporate entity cancommit certain offences which areincapable of being committed by acorporate entity under English law. Forexample, a company cannot be heldliable under English law for conspiracy ifthe only two alleged conspirators are a“one-man” company and the sameperson acting in his individual capacity asa director of the company.58 In contrast,the Singapore courts have held that it ispossible for a company and itscontrolling director to commit the tort ofconspiracy to injure a third party byunlawful means notwithstanding that thedirector may be the “directing mind andwill” of the company.59

Singapore

49 Sections 213 to 231 of the SFA (insider trading provisions)50 Tom-Reck Security Services Pte Ltd v Public Prosecutor [2001] 1 SLR(R) 327; Meridian Global Funds Asia Ltd v Securities Commission [1995] 2 AC 500. See also Airtrust(Singapore) Pte Ltd v Kao Chai-Chau Linda and another suit [2014] 2 SLR 673 for more on the “controlling mind” doctrine

51 Skandinaviska Enskilda Banken AB (Publ), Singapore Branch v Asia Pacific Breweries (Singapore) Pte Ltd and another and another appeal [2011] 3 SLR 540(“Skandinaviska”); and Hin Hup Bus Service (a firm) v Tay Chwee Hiang and another [2006] 4 SLR(R) 723

52 Skandinaviska at paragraph 100; Walter Woon on Company Law (Sweet & Maxwell 2005, 3rd Ed) at paragraph 3.94 (“Woon”)53 Yeo, Morgan and Chan, Criminal Law in Malaysia and Singapore (LexisNexis 2012, 2nd Ed) at paragraph 37.6 (“Yeo et al”)54 Sections 213 to 231 of the SFA (insider trading provisions)55 Section 401 of the CA56 Girdharilal v Lalchand AIR 1970 Raj 145; Yeo et al at paragraph 37.857 State of Maharashtra v Syndicate Transport Co Ltd AIR 1964 Bom 195, citing R v ICR Haulage Ltd [1944] KB 55158 R v McDonnell [1966] 1 QB 233.59 Nagase Singapore Pte Ltd v Ching Kai Huat [2008] 1 SLR(R) 80, Lim Leong Huat v Chip Hup Hup Kee Construction Pte Ltd [2009] 2 SLR(R) 318


64





For instance, under the SFA, thecorporate entity has defences against theoffence of insider trading if itcommunicated the relevant informationpursuant to a legal requirement60 or if itcan prove parity of information withthe counterparty.61

What is the relationship between theliability of the corporate entity andthat of its directors and officers?There are two types of statutes whichprovide that, where a corporate hascommitted an offence, its officers are, incertain circumstances, to be deemedguilty of that offence.

The first type requires the prosecution toprove that the offence is committed withthe consent or connivance or beattributable to the neglect on the part ofthe relevant officer, as seen in section 331of the SFA.62

The second formulation requires theofficer to disprove his complicity, that isproof by the accused that the offencewas committed without his consent orconnivance and that he exercised all suchdiligence to prevent the commission ofthe offence as he ought to haveexercised, having regard to the nature ofhis functions in that capacity and to all

the circumstances; for example, seesection 48 of the Workplace Safety andHealth Act.63

ProcedureWho is responsible for investigatingand prosecuting offences committedby corporate entities?There is no one agency responsible forthe investigation of offences committedby corporate entities. The principalinvestigating agencies are:

The Singapore Police Force: If criminalproceedings are deemed likely, thematter will be referred to theSingapore Police Force or theCommercial Affairs Departmentpursuant to the Police Force Act(Cap 235, 2006 Rev Ed);

The Corrupt Practices InvestigationBureau is responsible forcorruption-related offences under thePrevention of Corruption Act (Cap241, 1993 Rev Ed);

The Competition Commission ofSingapore investigates allegations of acompany’s anti-competitive behaviourunder the Competition Act (Cap 50B,2006 Rev Ed); and

The Monetary Authority of Singapore(“MAS”) may commence inspectionsor investigations if it is of the view thata bank has contravened theprovisions of the Banking Act(Cap 19, 1999 Rev Ed).

The main prosecution authority inSingapore is the Attorney-General’sChambers. Notwithstanding this, variousauthorities and regulatory bodies mayprosecute offences committed bycorporate entities. For instance, the MAStakes enforcement actions againstbreaches of the SFA, the FinancialAdvisers Act64 and the Insurance Act.65

Another example would be the LegalServices Department of the Ministry ofManpower which prosecutes offenders oflegislation within the Ministry’s purview,such as the Immigration Act66, theEmployment Act67 and the Work InjuryCompensation Act.68

PunishmentCorporate entitiesPenalties generally take the form of fines.It has been observed that, whencorporate activity causes harm, thepreference of the state prosecutorappears to be to proceed on the basis ofa regulatory offence instead of a moreserious Penal Code offence, or toproceed against the individualsconcerned instead of the corporationbehind them.69 For instance, when anunderground train tunnel beingconstructed at Singapore’s NichollHighway collapsed in 2004, resulting infour deaths, proceedings were takenagainst the main contractor company andthree of its senior executives forcontravening the Factories Act,70 andanother individual under the BuildingControl Act.71

60 Section 225 of the SFA61 Section 231 of the SFA62 See Madhavan Peter v Public Prosecutor and other appeals [2012] 4 SLR 613 where the accused’s conviction under section 331 of the SFA was eventually set aside.63 Cap 354A, 2009 Rev Ed.64 Cap 110, 2007 Rev Ed.65 Cap 142, 2002 Rev Ed.66 Cap 133, 2008 Rev Ed.67 Cap 91, 2009 Rev Ed.68 Cap 354, 2009 Rev Ed.69 Yeo, Morgan and Chan, Criminal Law in Malaysia and Singapore (LexisNexis 2012, 2nd Ed) at paragraph 37.170 Cap 104, 1998 Rev Ed. N.B.: The Factories Act has since been repealed and replaced by the Workplace Safety and Health Act (Cap 354A, 2009 Rev Ed)71 Cap 29, 1999 Rev Ed.

72 Section 333, SFA73 Lim Kopi Pte Ltd v Public Prosecutor [2010] 2 SLR 41374 Angliss Singapore Pte Ltd v Public Prosecutor [2006] 4 SLR(R) 65375 Criminal Procedure Code; Section 41 of the Monetary Authority of Singapore Act; Section 69 of the Banking Act


66


In light of corporate entities beingincapable of receiving physicalpunishment such as imprisonment andcaning, various statutes differentiate thepunishment meted out to naturalpersons and corporations. For example,under the SFA,72 a natural person maybe fined up to S$250,000 or sent to jailfor up to seven years. A corporation maybe fined up to twice the maximumamount prescribed for the relevantoffence (i.e. S$500,000).

IndividualsIndividuals such as the directors andofficers of a corporate entity can bepunished with imprisonment or fine or both.

Different statutes provide for specificpunishment for the offences coveredunder that statute. For instance, if anatural person is convicted under section50 of the WSHA, he is liable to a fine notexceeding $200,000, imprisonment of upto two years or both.

What factors are taken intoconsideration when determiningthe penalty?Various factors are taken intoconsideration when determining the penaltyto be meted out to a corporate entity,depending on the offence in question andthe overarching circumstances.

In general, the High Court of Singaporehas articulated a non-exhaustive list offactors to be considered vis-à-vis acorporate offender:73

Degree of contravention ofthe statute;

The intention or motivation ofthe statute;

The steps taken by the companyupon discovery of the breach andthe degree of remorse shown bythe company;

Whether the company was merely analter ego of its directors; and

Whether the company was a smallfamily business, of which theimposition of a heavy fine wouldbe oppressive.

Is there a mechanism for entities todisclose violations in exchange forlesser penalties?Co-operation and early acceptance ofguilt are mitigating factors in sentencing,whereby offenders can receive reducedsentences.74 On occasion, theprosecuting authorities may decide not toprefer charges on compassionate orsome other grounds, based on theaccused’s written representations.

Alternatively, the prosecuting authoritymay compound certain offences whichare prescribed as compoundable suchthat the charge is considered settledwithout conviction being entered.75

Current positionFinancial institutions are subject torelatively stringent scrutiny in Singapore.The powers of investigating andprosecuting authorities are steadilyincreasing and legislation isincreasingly being drafted to cater forspecific offences.

By way of example, the SFA is currentlybeing amended to bring the regulationof benchmark setting activities into thepurview of the MAS. Other proposedamendments include (a) the setting upof a licensing regime for theadministrator of a designatedbenchmark, (b) the extension of theMAS’s supervisory and investigativepowers pertaining to financialbenchmarks, and (c) the creation of newoffences and sanctions relating to themanipulation or attempted manipulationof financial benchmarks.



Our aim, across our international network of offices, is to combine first class local expertise with theability to provide a cross-border team that can manage complex multi-jurisdictional projects.

Our criminal expertise centres on financial and economic crime and extends to many othertypes of corporate crime, such as corruption. We have particular experience of acting for banksand corporations in cross-border investigations into breaches of securities law, mis-selling,market abuse, money laundering, compliance failings and economic sanctions contraventions.

We have represented leading clients in proceedings involving law enforcement agencies,regulators, and other investigators in the US, the EU, the Middle East and Asia, and the teamincludes former regulators and prosecutors from many different agencies.

The team is at its best working alongside our internationally based network of experts oncross-border investigations involving multiple-authorities who may be responding to events withcriminal, regulatory and administrative actions against the world’s largest companies.Combined, we bring together expertise in bribery and corruption, fraud, economic sanctions,cartels and anti-money laundering, an expert internal forensic accounting function, andspecialist support lawyers. We also have expertise in criminal investigations and proceduresincluding Mutual Legal Assistance.

Corporate crime

Frequently called upon by corporate clients to advise on some of the most significant SFOinvestigations of recent times. Impressive capacity to handle large-scale, multi-jurisdictionalmatters... ‘They’re phenomenal. They have very experienced practitioners in charge who know howcompanies work.’”

Chambers UK 2015: Financial Crime: Corporates (Band 1)

The corporate crime and investigation team here is complemented by the strength of thefirm’s civil fraud practice and its transactional prowess, which sees the firm advise high-profilecorporate clients on corruption, Bribery Act compliance and the conduct of internationalinvestigations, as well as representing those being investigated. The firm’s global footprint lends thework a distinctly international flavour, especially in terms of its extensive sanctions work.”

Chambers UK 2013: Corporate Crime & Investigations: UK-wide

““

Notes


68


2

Indonesia

3 US

2 Australia

1

Singapore

3 Japan 3 China

1 Russia

2

India

1 UAE

The Netherlands

2

Hong Kong

Belgium

3 2

Romania

Spain

3

2

Germany

3

Italy

2

Luxembourg

Poland 2

2

2

Slovakia

2

3 3

UK

France

Czech Republic

Corporate Criminal Liability exists

Quasi Criminal/ Administrative liability exists

No Liability Exists

2 Some interest

1 No or little interest

3 Very enthusiastic

Key:



Source: Clifford Chance reviewed the corporate criminal liability landscape in 22 major markets and ranked them according to their level of corporate criminal liability and their enthusiasm for enforcing it.

Heat mapTo accompany our recently published Corporate Criminal Liability report we have drawn together some of the high level trends. We have ranked the various jurisdictions on thebasis of whether or not corporate criminal liability exists and the enforcement enthusiasm of the authorities.



Australia: An Australian corporation may be subject to investigation and prosecution by a range of differentauthorities, each operating pursuant to distinct statutory regimes, as a result of which the landscape ofcorporate criminal liability is fragmentary and constantly changing. Although the trend is still to pursueindividuals rather than corporates, there are current high profile corporate investigations such as theinvestigations by the Australian Federal Police and the Australian Securities and Investments Commissioninto allegations of foreign bribery involving Leighton Holdings Limited.

China: While corporate criminal liability is a longstandingconcept under PRC law, the high criminal fines beingimposed on corporations is a newer phenomenon. Thedistinction between corporate and individual liability isblurred so that companies need to have strong corporategovernance policies to avoid this risk.

Hong Kong: Whilst corporates may be held criminally liable for most offences, the Hong Kongauthorities tend to target individuals for criminal prosecution, whereas corporates will face greaterregulatory enforcement action. Unlike in some other jurisdictions, there is no specific statutory offence ofcorporate manslaughter which meant that following the ferry disaster in October 2012 when 39 peopledied, although the two vessels’ captains were prosecuted, their respective employers were not, but wereinstead fined for criminal breaches of marine safety rules.

India: Corporate criminal liability is a relatively new concept inIndian law (established by a Supreme Court decision in 2005). TheSupreme Court has recently confirmed that a corporate is invirtually the same position as an individual in terms of prosecutionand can be convicted for most common law and statutoryoffences. Nevertheless criminal enforcement remains focussed onindividuals, although there is a growing emphasis on goodcorporate governance under the Companies Act.

Indonesia: Currently under the Indonesian criminal code onlyindividuals can be prosecuted although corporate criminal liabilityexists for certain specific offences including bribery and moneylaundering. Despite this, law enforcement agencies have beenreluctant to bring charges against corporate entities and insteadfocus their efforts on bringing charges against culpable individuals.There is currently a draft bill before Parliament to amend the codeto establish corporate criminal liability more broadly.

Japan: Corporates can only incur criminal liability pursuant to specific statutorylanguage expressly imposing such liability and where a director, officer or employeehas been found to have committed the offence in question in connection with thecorporate entity’s activities or assets. The trend is increasingly high maximum fines tobe set out in legislation for corporates. Criminal prosecution is now seen as a realrisk by the vast majority of corporate entities in Japan. In July 2013 Olympus, one ofJapan’s most well known corporates, was convicted of submitting false statementsin its annual securities filings.

Singapore: Corporate criminalliability operates in a similar way to theUK. Financial institutions are subject toincreasing scrutiny in Singapore.Legislation is being amended to createnew offences and sanctions createdrelating to the manipulation or attemptedmanipulation of financial benchmarks.

Belgium: Since the adoption of legislation in 1999 enablingcorporate entities to be prosecuted a significant number ofcorporate entities have faced criminal investigations and/orprosecutions and public prosecutors have enthusiastically usedtheir powers to prosecute. Criminal prosecution is now seen as areal risk by the vast majority of corporate entities in Belgium.

Czech Republic: In 2012 legislation was introduced enabling the prosecution of corporates as part of the Czechgovernment’s anti-corruption strategy and its international commitments. Since its enactment, there have beenapproximately 30 convictions and some severe sentences imposed – including dissolution and, in another case, prohibitionof business activities for a period of 10 years. Also in 2012 DPAs were introduced although have not been used with anygreat frequency so far. As DPAs become a greater feature of the international prosecutorial landscape, it is likely that theuse of DPAs for corporate offending in the Czech Republic will increase.

France: The principle of corporate criminal liability in France was introducedin 1994 since when the number of prosecutions and convictions ofcorporates has grown significantly, in particular more recently. The level offines on corporates is also increasing. In December 2013 a new prosecutor’soffice was created dedicated to financial crime which has recently been veryactive in investigating corporate and financial institutions.

Germany: Currently corporates cannotbe held criminally liable in Germanyalthough whether German law should beamended to include criminal liability forcorporate entities is the subject ofincreasing debate. There is a draft law oncorporate criminal liability for the State ofNorth Rhine-Westphalia due to bedebated in the German Parliament in thenear future.

Italy: Law 231 enables a corporate to be prosecuted if an offence has been committed for its benefit by anemployee, even if that employee is not prosecuted. It is a defence for a corporate to show that it had adequatemanagement and organisational control protocols for the prevention of the offence committed. Italy has seen apositive trend in this area with the number of prosecutions of corporates increasing.

One of the most high profile recent cases before the Italian Supreme Court related to the Thyssenkrupp fire in whichseven employees died. The company was convicted for failing to implement adequate management andorganisational control protocols for the prevention of the offence and fined 1 million Euros, banned from bidding forgovernment contracts and from advertising products for six months. It had to disgorge profits of € 800.000,00 andpublicise the sentence.

Luxembourg: Corporate criminalliability was only introduced intoLuxembourg law in 2010 and islargely untested in practice. However,the Luxembourg legal communityexpects that public prosecutors willutilise the new law.

Poland: Corporate criminal liability was introduced in Poland in2003. Unlike Italy, a corporate can only be held criminally liableafter the person who committed the offence on its behalf hasbeen convicted. It is a defence for a corporate to prove that duediligence was conducted in the hiring or supervision of thealleged offender. There has been a growing number of corporateprosecutions and recently the Polish anti-corruption authoritieshave indicated that they want to start taking tougher actionagainst corporates including banning those guilty of corruptionfrom taking part in public tenders.

Romania: Although corporate criminal liability is arelatively new concept in Romania, having only beenintroduced in 2006, the number of corporate prosecutionsdoubled in 2014. Most of the pending cases involvecompanies affiliated (directly or indirectly) to high rankingofficials, ministers, politicians and influential businesspeople. A corporate which self-reports an offence ofbribery before an investigation has started can avoidprosecution altogether.

Slovakia: The Slovak Ministry ofJustice published a bill on corporatecriminal liability which is set toreplace the currently applicablequasi-criminal liability regime forcertain, mainly economic, criminaloffences. The bill is currently in thelegislative process, the proposedeffective date is 1 July 2015.

Spain: Corporate criminalliability was introduced in Spainin 2010. New legislation is dueto come into force in July 2015which will provide a defence toa corporate if it can show thatit has an has implemented acrime prevention orcompliance programme.

The Netherlands: After years of steadily growingenforcement actions against corporates, the paceof the authorities in prosecuting and reachingsubstantive settlements with corporates haspicked up dramatically over the last two years.The Prosecution Office has surrendered its lastreserves to use its full power to reachunprecedented settlements with well knownDutch ompanies.

UK: Historically few prosecutions have been brought against corporates inthe UK (other than small companies) given the legal challenges of having toestablish culpability of a senior director. However, this is changing: recentlegislation, including the Bribery Act 2010, has changed the basis ofcorporate criminal liability for certain offences; the Serious Fraud Office isspecifically targeting corporates; and the UK Government is currentlyconsidering the case for a new offence of corporate failure to preventeconomic crime and the rule on establishing corporate criminal liabilitymore widely.

Russia: Currently corporates cannot be criminally liable in Russia but can be liable under theRF Administrative Offences Code if crimes are committed by their management or employees.The question of criminal liability for corporates is currently of great interest in Russia becausethe current “quasi-criminal” administrative liability has proved quite ineffective.

UAE: Whilst corporate criminal liability exists, it isregulatory sanctions which are most frequentlyimposed against authorised firms by the DubaiFinancial Services Authority.

United States: The aggressive pursuit of corporates continues unabated in the US. US prosecutors, including the USAttorney General, have made repeated public statements that no entity or institution is “too big to jail”. Furthermore, theDepartment of Justice recently emphasised that if a company wants full cooperation credit they need to secure for thegovernment the evidence sufficient to prosecute individuals, including their senior most executives.



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