Corporate criminal liability. A review of law and practice across the globe

Linklaters 3

Contents

Introduction 4 Acknowledgements 6

Jurisdiction by jurisdiction analysis Australia 8 12 16 20 26 30 34 36 40 42 Mongolia 46 The 50 Papua New Guinea 54 People’s Republic of 58 60 64 68 72 South 76 80 84 88 92 96 Contacts 100 4 A review of law and practice across the globe

Introduction A review of law and practice relating to corporate criminal liability in 24 jurisdictions across Europe, Africa, the Americas and Asia-Pacific

Obviously, the implementation of effective In our globalised world, companies compliance programmes is a must for operating internationally may be any corporation or bank. However, no particularly concerned to know whether compliance programme can be perfect corporate criminal liability rules in a and crimes committed by persons certain jurisdiction extend to foreign connected with the company will continue companies not incorporated there but to happen. As pressure from prosecution conducting business there. Very few of authorities increases, it is becoming even the jurisdictions considered in our review more important for in-house counsel have explicit legal provisions dealing of international companies to be aware with the liability of foreign companies. of the impact of criminal conduct in all Usually, no differentiation at all is made parts of the world where the company is between national and foreign companies doing business – not the least in order when it comes to holding a company to fine-tune and reinforce the company’s criminally liable since, generally speaking, compliance programme and to be able it will be the fact that the criminal offence to have an informed discussion with was committed at least in part in the local advisors. respective country and not fully abroad that will be determinative. This major comparative review considers the position of the concept of corporate Unsurprisingly, monetary fines are the criminal liability in 24 jurisdictions, with main form of sanction imposed on the chapters provided by 18 companies. However, most jurisdictions offices being enhanced by chapters from also provide for other forms of sanction, our contributor firms: Allens, Lefosse such as disgorgement of profits, Advogados, Widyawan & Partners and publication of the judgment, exclusion Webber Wentzel. from public tenders, temporary operating bans, revocation of licences or, as a last Of all the jurisdictions we considered, resort, the dissolution of the company. only Germany, Italy, Poland, Russia and And while monetary fines are the most Sweden did not recognise the concept common sanction, there are no uniform of criminal liability for companies. rules on the amounts to be imposed. Nonetheless, all of them provide for Whereas some countries provide for a measures by which companies can maximum fine by law, for example Poland be sanctioned if criminal offences are and Sweden, in others, such as the committed by individuals associated with People‘s Republic of China and the them, although the legal prerequisites United Kingdom, there is no maximum for such sanctions may be different. limit. In yet others, such as Brazil, the calculation of the fine may be tied to Generally speaking, the acts and omissions annual turnover of the company. of individuals are the link by which a company may be held (criminally) liable. While companies are increasingly In most jurisdictions the group of individuals sanctioned for misconduct, the existence for whose acts and omissions a company of an effective compliance system is can be held liable is not limited to the gaining in importance, both when it comes legal representatives and people with to determining the amount of any fine managerial functions, but may extend to to be imposed and at an earlier stage, ordinary employees or even third parties, when the decision is to be made whether as is true for the United Kingdom under a company should be prosecuted at all. the UK Bribery Act. However, not every However, only very few of the jurisdictions jurisdiction requires the identification we considered, for example Spain, of an individual to find a company liable explicitly provide for provisions regarding for wrongdoing. the relevance of an effective compliance system when it comes to corporate criminal liability. Linklaters 5

Future developments to be expected >>what kind of sanctions can be imposed in this area of law vary from country on companies? to country. In some jurisdictions it is expected that prosecution authorities >>what is the relevance of an effective will take an increasingly tough stance compliance system? against companies, which may result >>how are criminal proceedings against in a growing number of proceedings. companies conducted in practice? In Germany, for example, there are discussions about the introduction of >>likely future scope and development? Generally speaking, corporate criminal liability and in Sweden, an increase in the amount of fines is We have recently published a related the acts and under contemplation. However, in some publication, Taking stock. A review of omissions of countries, major legal changes have anti-bribery and corruption law and come into force only recently, such as the enforcement across the globe, which individuals are introduction of corporate criminal liability provides a global picture of the fight the link by which generally in Spain and Luxembourg, so against corruption in 25 jurisdictions. that implementation in practice remains The publication is available from our a company may be to be seen. client knowledge portal, or by emailing held (criminally) Edwina Larsen-Jones. An understanding of these global trends liable. and the position with respect to the This comparative review is intended concept of corporate criminal liability in to highlight issues rather than provide different jurisdictions is key to managing comprehensive advice. If you have any corporate risk. Therefore, Linklaters’ particular questions about corporate review of corporate criminal liability will criminal liability and the risks companies be of particular interest to businesses can face, please contact me or the with international operations. It provides Linklaters LLP lawyers with whom at-a-glance answers to twelve questions: you work.

>>can companies be criminally liable for wrongdoing?

>>for what kind of wrongdoing can a Robert Henrici, Partner company be held criminally liable?

>>how far does criminal liability extend?

>>does criminal liability extend to foreign companies?

>>is the company legally obliged to disclose criminal offences to the competent prosecution authorities?

>>are the prosecution authorities legally obliged to conduct a criminal investigation into corporate wrongdoing?

>>what is the position of the defendant company in criminal proceedings?

>>is the company legally obliged to co-operate with the prosecution authorities in the proceedings? Law stated as at September 2016 6 A review of law and practice across the globe

Acknowledgements Thank you to our contributors

This Review has been developed by lawyers from 18 of Linklaters’ global offices, working in collaboration with expert local Allens is a leading Australian independent partnership, operating in law firms. Our special thanks goes to alliance with Linklaters LLP. our contributor firms for providing the following chapters:

> Allens

Australia; Mongolia; Papua New Guinea Lefosse Advogados is a leading independent operating in Brazil > Lefosse Advogados Brazil

> Widyawan & Partners Indonesia Linklaters and Widyawan & Partners have a formal association in Indonesia and work closely together to provide clients with a market-leading > Webber Wentzel international and Indonesian law capability. South Africa

Their involvement and support are greatly appreciated.

Webber Wentzel is a leading full-service African law firm operating in alliance with Linklaters LLP. Linklaters 7 8 A review of law and practice across the globe

Australia

Can companies be criminally liable Under the Code, the physical element for wrongdoing? of an offence will be attributed to a body corporate where it is committed by an Criminal liability of corporate legal persons employee, agent or officer acting within has been recognised in Australia for over the actual or apparent scope of his or her a century. Principles governing corporate employment (section 12.2 of the Code). criminal liability mainly derive from the The fault element of intention, knowledge common law. However, Chapter 2, Part 2.5, or recklessness will be attributed to a Division 12 of the Criminal Code (“Code”), company if the “company expressly, tacitly Schedule 2 to the Criminal Code Act or impliedly authorises or permits the 1995 (Cth) provides a statutory framework commission of an offence” (section 12.3 for corporate criminal responsibility at the of the Code). A company may expressly, federal level. Each State and Territory tacitly or impliedly authorise or permit also has its own anti-bribery laws. For the the commission of an offence where it is most part in Australia, private sector proved that: bribery is covered in State and Territory criminal codes, which have uncertain (i) the corporation’s board of directors extraterritorial application. intentionally or knowingly carried out the relevant conduct or expressly, For what kind of wrongdoing can a tacitly or impliedly authorised or permitted the commission of company be held criminally liable? the offence; A company may be subject to criminal (ii) a high managerial agent of the liability for any offence unless the corporation intentionally or knowingly definition or subject matter of the offence engaged in the relevant conduct indicates the contrary. For example, a or expressly, tacitly or impliedly body corporate may be found guilty of authorised or permitted the any offence in the Code, including one commission of the offence; punishable by imprisonment. In relation to white collar crime, notable criminal (iii) a corporate culture existed within offences that companies can be held the body corporate that directed, criminally liable for include bribery of encouraged, tolerated or led to non- foreign public officials, bribery of a compliance with the offence provision; Commonwealth public official, money or laundering, contravening sanctions laws and false accounting offences. (iv) the body corporate failed to create and maintain a corporate culture Criminal liability usually only results where that required compliance with the both the physical element and the fault relevant provision. element (such as intention, knowledge, recklessness or negligence) of the offence “Corporate culture” is defined in the are satisfied. For instance, the offence Code to mean an attitude, policy, rule of bribery of a foreign public official or practice existing in the corporation requires both conduct and intention. generally or in the part of the corporation There is an exception from satisfaction of where the relevant offence was the fault element for offences of strict or committed. This notion of corporate absolute liability. For instance, the offence culture underlines the value of robust of contravening a sanctions law for a policies and compliance programmes. body corporate is one of strict liability so that there is no need to prove the fault element. Linklaters 9

Under the Code, where it is necessary the primary offence) where the conduct to establish the negligence of a body constituting the ancillary offence occurred corporate, the conduct of any number wholly outside Australia but the conduct of its employees, agents or officers can constituting the primary offence occurred be aggregated. Negligence may be wholly or partly within Australia (section evidenced by the fact that the prohibited 14.1 of the Code). conduct was substantially attributable to inadequate corporate management, Is the company legally obliged to control or supervision of the conduct of one or more of its employees, agents or officers disclose criminal offences to the or a failure to provide adequate systems competent prosecution authorities? If improper for conveying relevant information to the Although it is not an offence under the conduct has relevant persons in the body corporate. Code if the company fails to report a suspicion or knowledge of an offence, been identified, How far does criminal liability in general, if improper conduct has been it is usually in extend? identified, it is usually in the interests of the company to disclose and then the interests of The general principle at common law is co-operate. that a corporation is “personally” liable the company to for the mental state and conduct of a In relation to knowledge of potential future disclose and “directing mind” (the board of directors, criminal conduct, the company may be managing director or another person found guilty of an ancillary offence, such then co-operate. to whom a function of the board had as complicity, if it is shown that knowledge been fully delegated) acting on the existed prior to commission of the offence. corporation’s behalf. The Code provides that a person who aids, abets, counsels or procures the In addition, where an employee or agent commission of a principal offence by acting within the actual or apparent another person is taken to have committed scope of his or her employment commits that offence (section 11.2 of the Code). the physical element of the offence, a company may be held criminally liable if it had expressly, tacitly or impliedly Are the prosecution authorities authorised or permitted the commission legally obliged to conduct a of the offence. The term “agent” is not criminal investigation into defined. However, it may be interpreted corporate wrongdoing? broadly to include individuals who are held out by the company to have its authority The Australian Federal Police (“AFP”), ‘to act in some way’. the body responsible for investigating potential or actual criminal conduct regulated by the Code such as bribery, Does criminal liability extend to exercises discretion in the way in which foreign companies? it engages with the Commonwealth Department of Public Prosecutions (“DPP”), Criminal liability will extend to a foreign the prosecuting body. Although the AFP company in circumstances where the is not legally obliged to investigate criminal necessary nexus is established. The Code wrongdoing, it is very likely to do so where applies on the basis of nationality or sufficient evidence of criminality exists territory. As a result, for a foreign company and it is in the public interest to investigate. to be subject to the Code, the conduct Decisions on whether to prosecute are constituting the alleged offence, or a result made by the DPP using similar criteria. of that conduct, must occur wholly or partly within Australia. A foreign company would also be subject to the Code were it found to have engaged in an ancillary offence (for instance aiding and abetting 10 A review of law and practice across the globe

What is the position of the Where a company is the subject of regulator Penalties under the Proceeds of Crime defendant company in interest, it is free to co-operate with the Act 2002 (Cth) may also apply. This Act criminal proceedings? relevant authorities on a voluntary basis. establishes a scheme for confiscating More often than not, a company gains the ‘proceeds’ of crime. As a company is an artificial entity, there significant legal and commercial benefits will be a number of differences between from co-operating with the investigation Moreover, serious offences may lead to a criminal proceeding involving a natural of a regulator. a company being wound up (section 461 person and one involving a body corporate. of the Corporations Act 2001 (Cth)). For example, a corporation cannot give, The AFP does not have a formal leniency Sanctions other than criminal punishment or be required to give, evidence as policy and is not subject to any statutory can be imposed on the company depending a witness except through its officers. or governmental guidelines that require on the nature of the offence. For example, Furthermore, a corporation does not have it to exercise leniency on the basis of certain government contracting agencies the benefit of the privilege against self- corporate co-operation, though we have special rules in their contracting incrimination. Therefore, a corporation understand that is under consideration. processes for companies convicted must comply with a lawful order or However, in our experience, the AFP looks of foreign bribery. The Department of requirement to produce documents or favourably upon co-operative investigation Finance has indicated that if a company information even though to do so might targets. Also, the DPP’s Prosecution Policy were convicted of an offence relating to tend to incriminate the corporation. expressly takes co-operation into account the foreign bribery provisions, this would However, there is no need to convict an when considering whether to prosecute, be sufficient grounds for an agency individual perpetrator in order to be able to the charges to be laid, mode of trial and to consider refusing to award a public prosecute the company and the criminal related issues. Co-operation will also procurement contact to that company. action against the company is usually minimise the risk of the AFP exercising its powers of compulsion, for instance by conducted as a separate proceeding. Other consequences include civil litigation issuing warrants for search and seizure brought by shareholders, reputational of evidence, which can be invasive and damage and investigations costs. Is the company legally obliged to resource intensive for the target company co-operate with the prosecution and its personnel. authorities in the proceedings? What is the relevance of an effective There is no “one-size-fits-all” approach to What kind of sanctions can be compliance system? responding to a regulatory investigation imposed on companies? Prosecuting authorities are very likely to as the company must be responsive take into account whether a company Fines are the main form of criminal to the particular circumstances of the can prove that it has sufficient control sanctions imposed on companies. investigation, including: mechanisms in place to prevent wrong- For instance, for bribery of foreign doing when considering what action public officials and Commonwealth >>the nature of the allegations made by to take. The impact of a robust and public officials, the penalty is a fine not the regulator; appropriately tailored compliance system exceeding AUD$18 million, three times can be significant. >>the intensity of the investigations by the value of the benefit obtained, or if the regulators; that value cannot be determined, up to For offences such as bribery, where the 10% of annual turnover during the requisite fault element is one of intention, >>the stage at which the investigations 12 months preceding the offence, knowledge or recklessness, adequate are at; and whichever is greater (sections 70.2 and compliance structures are likely to weigh 141.1 of the Code). Furthermore, for >>any indication that court proceedings against a finding that the company money laundering, the range of penalties are being contemplated. expressly, tacitly or impliedly authorised or that may be imposed for such an offence permitted the commission of an offence. As noted above, a corporation must depends upon the relevant circumstances, Conversely, inadequate compliance comply with a lawful order or requirement the fault element standard to be applied structures may go towards a finding that to produce documents or information even and the value of the money or property the company expressly, tacitly or impliedly though to do so might tend to incriminate involved. As an example, where the money authorised or permitted the commission the corporation. being dealt with is the proceeds of crime of an offence. Further, it is a defence to and is worth AUD$1 million or more, a offences such as contravening a sanctions company may be liable for a fine of up to law, if the company can prove that it took AUD$270,000. reasonable precautions and exercised due diligence to avoid contravening the Linklaters 11

law: section 16(7) of the Autonomous Sanctions Act 2011 (Cth). Regulators look at substance over form when determining whether to prosecute and the courts do the same when determining liability.

How are criminal proceedings against companies conducted in practice? We consider that Generally, the direction of proceedings there will be an against companies is managed by the prosecuting agency at the federal or increasingly active state level. It is becoming increasingly investigative common practice for companies to negotiate outcomes with police and and enforcement prosecution agencies. environment in Australia in Likely future scope and development? relation to white We consider that there will be an collar crime. increasingly active investigative and enforcement environment in Australia in relation to white collar crime, including bribery, serious and complex fraud and corruption. On 31 July 2014, the AFP launched the Fraud and Anti-Corruption Centre (“FAC Centre”), a new ‘multi- agency’ initiative designed to strengthen law enforcement capability and provide a co-ordinated approach to federal investigations and prosecutions. The creation of the FAC Centre allows for unprecedented information-sharing between government bodies and has been described as marking ‘a new era in the approach to dealing with fraud and corruption at a federal level’. The AFP claims to have around 30 investigations on foot. 12 A review of law and practice across the globe

Belgium

Can companies be criminally liable Whilst the conduct part of the offence will, for wrongdoing? in principle, be performed by a physical person, its attribution to the legal entity Criminal liability of companies was depends on the fulfilment of at least introduced in Belgium by the law of one of the three alternative criteria set 4 May 1999 concerning the introduction out in Article 5 of the Code of Criminal of criminal liability of legal entities. Law. According to Article 5, a legal entity The central provision is to be found in is criminally liable for offences that are Article 5 of the Code of Criminal Law. either intrinsically linked to the carrying on of its business or the promotion of its Article 5 interests, or that would appear from the “A legal entity is criminally liable for circumstances to have been committed offences that are either intrinsically for its benefit. Case law suggests that linked to the realisation of its purpose these three criteria are frequently loosely, or the promotion of its interests, or that, jointly or interchangeably applied so that as it would appear from the precise attribution of the conduct component is circumstances, have been committed quite easily established. However, for the for its account. attribution of the fault component and the allocation of guilt, the legislator did not When the legal entity is held liable on the provide for any criteria. sole basis of the actions of an identified physical person, only the one who has Although a legal entity necessarily operates There is no committed the most serious fault can be through individuals and the attribution requirement convicted. If the identified physical person of criminal liability therefore has to result has committed the fault knowingly and from these persons’ conduct, there is to identify willingly, he may be convicted together no requirement to identify a particular a particular with the liable legal entity.” individual as responsible for committing a criminally punishable act or omission. individual as For what kind of wrongdoing can a responsible company be held criminally liable? Does criminal liability extend to for committing In theory, legal entities may incur criminal foreign companies? a criminally liability in the same way as individuals Jurisdiction is asserted against foreign since the legislator did not wish to introduce companies in the same way as it is punishable act a limiting list of offences. However, due to asserted against foreign individuals. or omission. the fact that legal entities obviously lack Foreign companies can be prosecuted in physical status, the attribution of criminal Belgium if any of the constitutive elements liability for some offences is more difficult of the offence was committed in Belgium to conceive (e.g. for bigamy or rape). (for example, the forged document Nonetheless, legal entities may be held was drafted in Belgium, the bribe was criminally liable for such kinds of offences paid in Belgium, etc.), or if they are an if these offences are committed in an accomplice to other indictees over whom organised manner within that legal entity. jurisdiction can be asserted.

How far does criminal liability A parent company incorporated in extend? Country X could be held criminally liable in Country Y when employees of the Due to its lack of physical status, a company company’s subsidiary in Country Y commit can only be criminally liable for an offence a criminal offence, if the judge decides if three components can be attributed that the parent company was responsible to the company: (i) the conduct forming for deciding upon the corruption scheme, the offence (i.e. the act or omission); for example. (ii) the fault element (i.e. negligence or intention); and (iii) the apportioning There exist some special rules extending of guilt (i.e. whether the person is to be jurisdiction, for example in bribery matters. reproached for the offence committed). Linklaters 13

Is the company legally obliged to What is the position of the In addition, other sanctions for companies, disclose criminal offences to the defendant company in such as dissolution, prohibition on competent prosecution authorities? criminal proceedings? undertaking corporate activities, closure of the relevant company unit, confiscation Companies are not obliged to self-report Legal entities may invoke the same rights of assets and publication or distribution criminal conduct to the prosecuting as individuals against whom criminal of the verdict, may apply. The sanction authorities, although there are some self- investigations and proceedings are of dissolution may only be ordered if reporting obligations applying to banks brought, including the right to a fair trial. the legal entity was intentionally set up and financial institutions in cases of for conducting the offences or if it was market abuse. There is no prohibition on bringing intentionally diverted from its objective proceedings separately against a to conduct such activities. There is no While Article 30 of the Code of Criminal legal entity. general maximum sanction applicable to Procedure imposes an obligation on companies. However, bribery is subject to anyone – regardless of whether it is a Is the company legally obliged to potential fines of up to EUR 1,200,000 for physical or a legal entity – who witnesses co-operate with the prosecution private bribery and up to EUR 2,400,000 an attack on public safety or someone’s for public bribery. The existence of life or property to report this to the Public authorities in the proceedings? compliance schemes and prevention Prosecutor, a failure to report is not of Companies may invoke the right not mechanisms may have a beneficial impact itself criminally sanctioned. to incriminate themselves, both if they in terms of reducing the punishment are criminally prosecuted and in other which is ultimately imposed on a Are the prosecution authorities (administrative) proceedings of a criminal company, as a mitigating circumstance. legally obliged to conduct a nature, or which may result in penalties akin to criminal sanctions. Article 5 of the Code of Criminal Law criminal investigation into provides that punishment for an offence corporate wrongdoing? Although not expressly provided for under may be imposed on only one of the Belgian criminal law, a company may company or the individual responsible for Belgian law gives discretion to the find its co-operation efforts taken into the most serious conduct. A legal entity Public Prosecutor to decide whether it is account when a prosecutor is considering may therefore avoid punishment if the appropriate to prosecute a case or not. mitigating circumstances. However, case criminal judge rules that the individual The Public Prosecutor may therefore law provides numerous examples of responsible for the actual conduct decide not to prosecute even after a companies being sanctioned despite full has committed the more serious fault. complaint has been brought. However, co operation. In proceedings belonging to However, if the identified individual had he may reverse his decision as long as the broad sphere of administrative law, a intentionally committed the offence, the the prosecution is not statute-barred. reduction of the punishment might also be judge may still impose punishment on The Public Prosecutor is by no means available in the event of due co operation both the legal entity and the physical required to prosecute both the legal (e.g. the notion of leniency in the context person (and this frequently happens entity and the physical person who is of competition law). in practice). responsible for committing the factual Breaches of other administrative act or omission. Nevertheless, the injured What kind of sanctions can be laws (such as legislation on market party may file a formal complaint which imposed on companies? abuse, environmental legislation, public will eventually oblige the investigating procurement legislation and tax legislation) judge to conduct an investigation. Typically, criminal provisions do not may also carry quasi-criminal sanctions. mention sanctions specifically for legal Examples include administrative fines, entities. Instead, at least for the two most tax increases, exclusion from public serious types of offences, crimes and tenders and the like. misdemeanours, the criminal sanctions provided for individuals will apply, with prisons sentences being converted into fines by a specified mechanism, where necessary. 14 A review of law and practice across the globe

What is the relevance of an effective How are criminal proceedings Likely future scope and compliance system? against companies conducted development? A company may try to avoid being found in practice? Article 5 of the Code of Criminal Law criminally liable for an offence by focusing Proceedings conducted against has been widely criticised, and may be on preventing wrongdoing within its companies are conducted in exactly the modified in the future. organisation. It would appear from same manner as proceedings against reported cases that companies are often individuals with the exception that, in Furthermore, whereas a legal entity may convicted on the basis of faults in their some cases, the court may require that currently be attributed with criminal management, internal structure and the company be represented in the liability for the acts or omissions of an governance. Such faults may consist of procedure by a special representative. individual, even if they are unidentified, inefficient delegation (e.g. attribution of case law suggests that the focus is shifting responsibilities to incompetent persons or It is also quite common practice for an more onto the wrongful acts or omissions provision of insufficient resources to the allegedly criminally liable company to of leading individuals within the company responsible person), poor communication conclude a settlement with the Public when attributing the fault element of an lines, shortcomings in environmental or Prosecutor or the regulator in order to offence to that company. This might imply safety policy, insufficient training of staff bring an end to the criminal prosecution the beginning of a shift towards a theory or unreasonable budgetary restrictions. or administrative procedure. However, of identification (as known in the UK), the settlement amounts proposed by according to which the fault of the legal The presence of compliance schemes the Public Prosecutor tend to equate to entity may be based upon the mindset of or other prevention mechanisms may the maximum applicable fine and are leading individuals who can be identified convince the criminal judge to agree to generally not negotiable. Companies may with that legal entity. prosecute only the individual and not the also try to include settlement of claims company itself because the individual will against the individuals responsible for the For the time being, the ability to settle have breached clearly identified internal conduct (e.g. the company’s CEO) within a proceeding has been suspended due rules. In this respect, the sector in which the scope of the settlement agreement. to the annulment of some of the relevant the company operates and the nature of Although expensive, this option is often legal provisions by the Constitutional its activities is likely to be factored into preferred by companies because it Court. A new law, compatible with the analysis of whether a more or less avoids the publicity that is inherent to a the Constitution, is expected to be stringent standard of diligence needs to criminal trial. introduced soon. be applied. Furthermore, compliance In addition, the ability to enter into a plea schemes and internal rules should be bargain with the prosecutor has now been effectively applied and not remain a mere introduced into Belgian law. Under this formality if the company wants them to procedure the defendant admits that it have any beneficial impact. has committed an offence and receives Companies will be less exposed to a lower sentence than that it could have attribution of criminal liability where the faced at trial. The agreement must be unlawful conduct occurs only occasionally reviewed and homologated by the court. within the organisation. The more systematic or structural such conduct becomes, the more likely a company will be held liable, certainly once a company has become aware of the occurrence of the previous wrongdoing or has been made aware of it by the criminal authorities. A company may then be held liable for a fault in following up or even be attributed with an intention to continue the wrongdoing. It will therefore be key for companies to develop effective detection mechanisms and ensure any allegations of wrongdoing are adequately followed up. Linklaters 15 16 A review of law and practice across the globe

Brazil

Can companies be criminally liable However, the Anti-Corruption Law provides for wrongdoing? for the strict liability (civil and administrative) of a legal entity for unlawful acts performed In Brazil, only individuals and not by its employees, managers, agents or companies can be held criminally liable intermediaries, generating illegal benefits for wrongdoing. Unlike common law to the legal entity. jurisdictions, civil law systems, with a few exceptions, generally do not apply criminal Parent companies, subsidiaries, other liability to legal (as opposed to natural) affiliates and consortiums are jointly and persons. Civil law typically considers severally liable for payment of fines and companies to be abstract intangible indemnification of damages resulting from entities that have no capacity to meet the unlawful acts. Corporate successors are mens rea (intent) required to establish also liable, although their liability will be criminal responsibility. As such, even if a limited to the transferred net equity in the legal entity is the ultimate beneficiary event of mergers or spin-offs. of a corrupt activity, such as bribery, it cannot be held criminally liable in Brazil. Does criminal liability extend to Therefore, only the directors, management, employees or agents of a company can foreign companies? be held criminally liable for their actions Even if a foreign legal entity is the on behalf of the company. ultimate beneficiary of a corrupt activity in Brazil, it cannot be held criminally Exceptionally, however, companies may liable under the Brazilian Anti-Corruption be subject to criminal prosecution or Law since criminal liability applies only to liability in the case of a few specific individuals. The foreign company shall, There is no environmental crimes. however, be subject to administrative and civil sanctions as provided for legal obligation In any event, despite the fact that under the Brazilian Anti-Corruption companies are not subject to criminal under Brazilian Law (as explained further below) if liability under Brazilian Law, they can their employees, managers, agents or law ... to report be prosecuted under administrative, intermediaries commit an unlawful act civil and antitrust law. criminal offences while acting on behalf of the company. to the competent For what kind of wrongdoing can a Is the company legally obliged to prosecution company be held criminally liable? authorities. disclose criminal offences to the As explained above, companies are subject competent prosecution authorities? to criminal prosecution or liability only in the case of certain environmental crimes. There is no legal obligation under Brazilian law, neither on individuals nor on However, companies may be subject to companies, to report criminal offences to heavy administrative sanctions in cases of the competent prosecution authorities. bribery, corruption, bid-rigging, collusion, boycotts and other anticompetitive Are the prosecution authorities conducts, pursuant to the Anti Corruption Law, the Public Procurement Law and the legally obliged to conduct a Antitrust Laws, among others. criminal investigation into corporate wrongdoing? How far does criminal liability Prosecution authorities, including the extend? Police Department and the Prosecutor Office, are under the duty to investigate Since companies cannot be held allegations which fall within their criminally liable in Brazil, criminal liability jurisdictions, provided that there is of managers or employees does not enough evidence of wrongdoing to justify extend to the company. a legal action. Even when the allegations Linklaters 17

are not supported by enough evidence What kind of sanctions can be What is the relevance of an effective of unlawful conduct, the authorities are imposed on companies? compliance system under a duty to engage in preliminary inquiries to obtain further documents The penalties set forth in the Anti- Under the Anti-Corruption Law, the and information. Corruption Law are harsh and divided existence and enforcement of compliance into administrative and judicial (only civil, programmes such as audits, codes of not criminal) sanctions. ethics and incentives for reporting of What is the position of the irregularities may provide for a reduction defendant company in Administrative sanctions include of penalties of up to 1% to 4% of the criminal proceedings? (i) publication of the condemnatory amount of fines imposed on the convicted decision in the local press of the place company. In this regard, Decree No. A company is generally only subject where the violation happened for a period 8,420/2015 (“Federal Anti-Corruption to administrative proceedings. In an of at least 30 days, with expenses to be Regulation”), which regulates the Anti- administrative proceeding, a defendant paid by the legal entity and (ii) a fine Corruption Law, defines the parameters for company has the same rights as other in the amount of 0.1% to 20% of the a compliance programme to be acceptable individuals involved in the alleged wrong- gross revenue of the legal entity in the for the purpose of reducing the amount doing. However, the Anti-Corruption Law fiscal year prior to the initiation of the of fines; these parameters are in line provides that legal entities will be strictly investigative administrative proceedings, with international best practices on the liable for the conduct, which means that excluding taxes. If it is not possible to matter following standards and precedents no proof of negligence or wilful action or establish the value of the gross revenue created by international treaties, statutes inaction will be necessary to establish of the legal entity, the fine amount and soft law (for example, guidelines liability, whereas the same is not true with may range from BRL 6,000 (roughly published by international institutions regard to individuals. Thus, individuals USD 2,500) to BRL 60,000,000 such as Transparency International). involved in related wrongdoing are subject (roughly USD 25,000,000). to sanctions set out in Brazil’s Criminal According to the Federal Anti-Corruption Code and other Brazilian laws (e.g. the Judicial sanctions include (a) loss of assets, Regulation, a compliance programme Public Procurement Law) and, unlike rights or valuables representing, directly or must be structured, applied and updated companies, are entitled to constitutional indirectly, the advantage or benefit gained in accordance with the features and guarantees inherent in criminal law, such from the violation, (b) partial suspension actual risks of the activities carried out as the principles of culpability and the or banning of activities, (c) compulsory by each legal entity, which must take presumption of innocence. dissolution of the legal entity and actual measures to ensure that the (d) prohibition on receiving incentives, programme is continuously improved Is the company legally obliged to subsidies, grants, donations or loans and adapted in order to remain effective. from public agencies or entities and from The general framework and structure of co-operate with the prosecution public financial institutions or institutions authorities in the proceedings? an effective compliance programme controlled by the Government, for a should encompass: (i) clarity, transparency There is no legal obligation to co-operate period from one to five years. and effective engagement of the highest with the prosecution authorities. ranking officer of the corporate entity Finally, the Anti-Corruption Law created However, voluntary co-operation during in question, in the enforcement of the National Registry of Punished an investigation may result in reduction compliance practices and procedures Companies (Cadastro Nacional de of fines. (i.e. top-level commitment); (ii) effective Empresas Punidas), a blacklisting and confidential communication channels database that makes public all Moreover, pursuant to the Anti-Corruption for whistle-blowers; and (iii) effective administrative and civil sanctions Law, companies will be given credit in control mechanisms for the prevention imposed under the Anti-Corruption Law. terms of ultimate calculation of sanctions or detection of acts of corruption. for self-disclosure and co-operation, This blacklisting database co-exists with which are new concepts for Brazilian the National Registry of Corrupt and anti-corruption enforcement. In addition, Blacklisted Companies (Cadastro Nacional companies that co-operate, enter into de Empresas Inidôneas e Suspensas), leniency agreements and fulfil the which makes public sanctions that restrict related legal requirements (which include the right of a legal entity to participate in admissions of wrongdoing) can have a public bidding proceeding or to execute their fines reduced by up to two-thirds of government agreements pursuant to the the total and will be exempt from certain Public Procurement Law and other laws judicial and administrative sanctions. applicable to bidding proceedings. 18 A review of law and practice across the globe Linklaters 19

How are criminal proceedings Likely future scope and against companies conducted development? in practice? The Anti-Corruption Law is very recent Companies may The Federal Anti-Corruption Regulation and therefore only a few cases have execute leniency sets forth the rules for investigation, been brought under it so far. However, prosecution and judgment of administrative Brazilian authorities are increasingly agreements with proceedings to be filed against companies focusing on enforcing anti-bribery laws the authorities in that violate the Anti-Corruption Law by and regulations against both executives means of the Sanctioning Administrative and companies, either under the Criminal order to obtain a Procedure (Processo Administrativo de Code or under the Anti-Corruption Law. reduction of fines Responsabilização (“PAR”)). For instance, Brazilian authorities have been investigating a massive domestic and exemption from Such PAR must be concluded within corruption case involving the state-owned 180 days and the final report will then oil company, Petrobras, in a case known certain sanctions. be submitted to the competent authority as “Operation Car Wash”. After months for judgment and imposition of of investigation, in Brazil in December administrative sanctions, namely fines 2014, Brazilian prosecutors charged 36 and/or publication of the administrative individuals in connection with an alleged decision. If the unlawful act covered by scheme to overbill Petrobras, provide the Anti-Corruption Law also constitutes kickbacks to Petrobras employees to a violation under the Public Procurement obtain contracts and to funnel money to Law or any other laws related to public political parties. In addition, prosecutors bids and contracts, the company’s charged executives of several of Brazil’s administrative liability will be investigated major construction companies, as well under the same PAR. as two former Petrobras executives, in connection with this scheme. As explained before, companies may execute leniency agreements with Although most of the allegedly corrupt the authorities in order to obtain a conduct relating to Operation Car Wash reduction of fines and exemption from predated the entering into effect of the certain sanctions. Anti-Corruption Law, the development of the investigations launched and criminal and civil proceedings filed against the individuals and corporations involved are influencing and setting the threshold for compliance controls, not only within the Brazilian jurisdiction but also in relation to all entities doing business in Brazil. 20 A review of law and practice across the globe

France

Can companies be criminally liable How far does criminal liability for wrongdoing? extend? The Criminal Code of 1994 (“Code”) A company may be criminally liable for introduced the concept of corporate offences committed on its behalf by its criminal liability into French law. Under organs, including a de facto manager, Article 121-2 of the Code, “legal persons, or representatives. The notion of with the exception of the State, are “representative” has a specific meaning criminally liable for the offences and should not be confused with legal committed for their account by their representatives. It includes individuals who organs or representatives”. have been granted the right to represent the company in certain situations by a Hence, a company will be criminally judicial decision (including provisional liable if: administrators of a company named by a court or a company liquidator) and also (i) an organ – i.e. all persons invested, persons who have been delegated powers either individually or collectively by the management of the company, such by legislation or the articles of as employees. The French Supreme Court association as a legal person with (Cour de cassation) has held that criminal powers of management, but also liability for a legal person can even be de facto managers (i.e. someone triggered by a third party who is not an who is deemed to be manager of the employee, where that person is authorised company on the basis of his behaviour) to carry out material acts in the company’s or a representative of the company, name and on its behalf. commits an offence; and (ii) the offence is committed “on behalf” Does criminal liability extend to of the company (i.e. it is an act which foreign companies? is linked to the company’s organisation, functioning or compliance with its Foreign companies, such as any other corporate objects). individuals or legal entities, are criminally liable before French criminal courts as long as the alleged offence has been For what kind of wrongdoing can a committed within the territory of the company be held criminally liable? French Republic. An offence is deemed to Before the entry into force of the Perben II have been committed within the territory law on 31 December 2005, France of the French Republic where one of its adhered to the principle of “specialty”, constituent facts was committed within according to which legal persons, that territory. including companies, could only be held Even if the offence is not committed criminally liable for a particular criminal within the territory of the French Republic, offence if there were express provisions French criminal courts may also have that provided for corporate criminal liability jurisdiction, under certain conditions, in relation to the offence in question. when either the perpetrator or the victim Nowadays, companies can be held liable of the criminal offence is French. for any offence except for press offences, such as defamation.

However, the criminal act committed by the corporate body or representative must be committed on the company’s behalf in order for the latter to be held liable. Linklaters 21

Is the company legally obliged to What is the position of the Further to a Circular of the Minister of disclose criminal offences to the defendant company in Justice dated 13 February 2006, Public competent prosecution authorities? criminal proceedings? Prosecutors are encouraged to: There is no obligation under French law Criminal proceedings are directed (i) prosecute both the individual and to disclose criminal offences: any party against the company, as represented the company where an offence has under investigation, including a company, by its legal representative. However, the intentionally been committed by has the right to avoid self-incrimination. company may also be represented in the the individual for the benefit of the proceedings by an individual who has company; and However, certain companies, such as been delegated the power to do so. banks, have a duty to report any suspicion (ii) prosecute the company where a regarding funds received or transactions Moreover, in the case where both the non-intentional offence has been performed to the Unit for Intelligence legal representative and the company are committed by an individual to the Processing and Action Against Illicit prosecuted, the legal representative may benefit of the company; but prosecute Financial Networks (TRACFIN – Traitement request the appointment by the Court of both the individual and the company du renseignement et action contre les First Instance (Tribunal de grande instance) if the individual committed a personal circuits financiers clandestins). This can of an official representative (mandataire fault justifying criminal prosecution. be the case when it involves terrorist de justice) to represent the company in financing, tax fraud or the proceeds of the proceedings. The Prosecutor, the Is the company legally obliged to certain offences. Failure to do so may investigating magistrate or the civil plaintiff co-operate with the prosecution lead to disciplinary sanctions and/or to the may also request such an appointment prosecution of the company in criminal when there is no longer a legal authorities in the proceedings? proceedings if its actions are deemed to representative to represent the company. The right to avoid self-incrimination be intentional. When such an official representative is allows any person not to co-operate with appointed, the company loses the ability the prosecution authorities, although Are the prosecution authorities to conduct its defence independently. co-operation may be given on a voluntary basis. The collaboration of a company legally obliged to conduct a Proceedings against a company are exactly and its willingness to co-operate with the criminal investigation into the same as those against an individual, prosecuting authorities may be taken into corporate wrongdoing? except that the legal representative of the account by courts when ruling on the company in the proceedings cannot be penalty. There are no official sentencing According to Articles 40 et seq. of the remanded in custody ahead of trial, unless guidelines in relation to such co-operation. French Criminal Procedure Code, the he is being prosecuted personally. Public Prosecutor has a broad discretion However, French criminal law is slowly in his decision to initiate a prosecution – Criminal courts must identify the organ evolving on this point in order to whether it concerns an individual or a or representative who has triggered the encourage co-operation. For example, company. However, pursuant to Articles company’s criminal liability in order to according to the newly created Article 85 and 86 of the French Criminal convict the latter for a criminal offence. 324-6-1 of the Code, anyone who has Procedure Code, if the victim of the attempted to commit the offence of A company might be prosecuted without offence initiates the criminal investigation money laundering is exempted from its organs or representatives being and satisfies the legal conditions, the punishment if information provided to the personally involved in the proceedings. Public Prosecutor is obliged to pursue judicial or administrative authority helped However, Article 121-2 of the Code the investigation in relation to the offence prevent the completion of the offence and provides that just because a legal entity in question. identify, if necessary, other perpetrators is found criminally liable for an offence, or accomplices. Moreover, the sentence this does not prevent the individuals who incurred by the perpetrator or accomplice were the perpetrators of or accomplices of money laundering is reduced by half to the same offence from being held liable if the alert/information provided to the for it as well. administrative or judicial authority helped end the infringement or identify other perpetrators or accomplices. 22 A review of law and practice across the globe

What kind of sanctions can be >>prohibition from conducting a public imposed on companies? offer of securities or from having financial instruments admitted to The sanctions that can be imposed on a trading on a regulated market, either company are set out in Articles 131-37 permanently or for a maximum period to 131-44-1 of the Code. According to of five years; these Articles, a fine may be imposed, with the maximum amount applicable to >>prohibition from drawing certain legal persons being five times that which cheques and using payment cards, is applicable to natural persons under for a maximum period of five years; the law sanctioning the offence. confiscation of the object which was used or intended to be used for the For instance, legal persons can incur a commission of the offence or of the fine of up to EUR 1,875,000 in cases of assets which are the product of it. money laundering, it being specified that (For offences punishable by at least five In a landmark the amount of the fine may be increased years imprisonment, as may be the case d e c i s i o n ... F r a n c e ’s to EUR 3,750,000 if aggravating for money laundering, confiscation may circumstances are present (habitual be extended to all assets whose origin Constitutional conduct, organised crime etc.). cannot be justified by the liable person); Court ruled Alternatively, the fine may be up to half >>display or publication of the judgment; or unconstitutional of the value of the funds laundered. Where there is no provision for a fine to be >>prohibition from receiving any state aid the provisions of paid by natural persons, the fine incurred from the French state, local authorities the Monetary and by legal persons is EUR 1,000,000. or a private person entrusted with a public service mission, for a maximum Financial Code. Where expressly provided for in the period of five years. Code, the following additional criminal punishments may also be imposed: In respect of certain offences, French courts may also impose on the company, >>dissolution, where (i) the company was instead of or at the same time as the created to commit an offence or (ii) the fine, a punishment called “sanction- corporate entity was diverted from its reparation”, which consists of an corporate objects in order to commit a obligation on the company to indemnify felony or other offence punishable by a the victim within a certain time period prison sentence of three years or more; and in accordance with certain conditions determined by the court. >>prohibition on exercising, directly or indirectly, one or more corporate or Furthermore, certain types of wrongdoing professional activities, either permanently that constitute a criminal offence, such or for a maximum period of five years; as stock market, competition and data protection offences, may also constitute >>placement under judicial supervision for a breach of administrative regulation a maximum period of five years; and may be investigated by the relevant administrative authority (such as the >>permanent closure or closure for up Financial Markets Authority (Autorité des to five years of one or more of the Marchés Financiers), the Competition company’s business establishments Authority (Autorité de la Concurrence), the that were used to commit the offence; Prudential Supervisory Authority (Autorité >>exclusion from participating in public de Contrôle Prudentiel et de Résolution) contracts, either permanently or for a and the National Commission for maximum period of five years; Information Technology and Civil Liberties (Commission Nationale de l’Informatique et des Libertés). Linklaters 23

Contrary to the ECHR case law in relation Moreover, the new bill: Moreover, a new draft bill is currently to the ne bis in idem rule, French case law under discussion which would introduce permits both administrative and criminal >>toughens penalties for market abuse legislation on compliance systems and sanctions to be imposed by the relevant offences by increasing the maximum reinforce the fight against corruption courts and authorities on the same legal amount of the fine from EUR 7.5 million in France. person for the same conduct. to EUR 500 million for legal entities; The following measures, among others, However, in a landmark decision dated >>creates a new criminal offence of are proposed: 18 March 2015 and in line with the recent encouraging or recommending ECHR decision in Grande Stevens v. transactions in financial instruments, >>the creation of a new administrative Italy, France’s Constitutional Court ruled based on insider information. anti-corruption agency with investigative unconstitutional the provisions of the and administrative sanctioning powers Monetary and Financial Code, conferring Please note, however, that currently both and able to check the enforcement of both regulatory and judicial authorities the administrative and criminal sanctions can compliance programmes by companies power to investigate and sanction insider still be imposed by the relevant courts and and produce guidelines; trading offences. authorities on the same individual or legal entities for the same conduct, for offences >>the obligation for large companies This ruling is likely to extend to other that are not included in the Monetary and (with a turnover above EUR 100 million market abuses that are reprimanded by Financial Code (that is, in matters such and 500 employees or more) to apply both the Criminal Code and the regulation as tax, antitrust, and so on). A recent compliance and corruption prevention of the Financial Market Authority (e.g. example is the decision rendered on 24 plans, to set up a code of conduct price manipulation and dissemination of June 2016 by the Constitutional Court in describing the types of behaviour to be false information). the so-called “Cahuzac case”. avoided, to set up an internal scheme for whistle-blowing and to establish a It is also worth noting that this decision What is the relevance of an effective process for checking the integrity of prohibits the continuation of all concurrent clients, suppliers and partners; sets of proceedings. In that sense, compliance system? France’s Constitutional Court goes further France does not require its companies >>the protection of whistle-blowers, from than the reasoning expressed by the to implement any particular compliance confidentiality to financial assistance; ECHR which does not “preclude that systems and the law does not take several concurrent sets of proceedings >>the adoption of a new settlement tool such compliance systems into account allowing a company to avoid criminal are conducted” before a final decision when assessing penalties. Hence, has been issued. conviction for corruption, by accepting a generally speaking, adequate compliance fine of up to 30% of its average annual structures do not mitigate the risk of As a result of this ruling, a new bill was turnover over the last three years and being prosecuted/fined and, conversely, enacted on 21 June 2016. This bill agreeing to be monitored to ensure it inadequate compliance structures do not introduces a guiding mechanism between implements specific remedial measures increase the risk of being prosecuted/ the French Financial Markets Authority and compliance systems, without having fined. However, the judge is free to take and the French National Financial to plead guilty. into account any relevant circumstances Public Prosecutor. These two authorities when assessing the appropriate sanction shall consult each other to determine, Another draft bill under discussion to impose. within 2½ months, the most effective would impose an obligation on French companies with over 5,000 employees to way to commence proceedings, Recently, influenced by US, UK and based on the seriousness of the facts. implement compliance programs in order Italian legislation, by best practice derived to prevent their employees, subsidiaries, Should they disagree, the Paris Court from them and the sanctions imposed of Appeals General Prosecutor will make subcontractors and suppliers worldwide, pursuant to their provisions, many breaching legislation regarding human the final, non-appealable, decision, French companies have adopted internal within two months. rights, fundamental freedoms, personal compliance structures to ensure respect injury, environmental and sanitary for the law, as well as the company’s damages and corruption. A breach of ethics policy, led by compliance this obligation, also called “duty of care” officers selected from among the senior (devoir de vigilance) could be sanctioned management or legal department. by a civil fine of up to EUR 10 million. 24 A review of law and practice across the globe

How are criminal proceedings Likely future scope and Finally, as described above, a new bill was against companies conducted development? enacted on 21 June 2016 which modifies in practice? legislation regarding market abuse Recent regulation clearly demonstrates a offences and two further bills are currently Deals between companies and the tough stance regarding corporate liability. under discussion, which would introduce prosecution authorities/criminal court French legislation on compliance systems terminating criminal proceedings are In this context, on 1 February 2014, and reinforce the fight against corruption. not common practice in France, even France’s Financial Public Prosecutor though Articles 495-7 to 495-16 of the took office. This new specialist Public French Criminal Procedure Code allow any Prosecutor has been granted exclusive defendant charged with most intermediate jurisdiction to investigate and pursue offences to ask to negotiate its penalty with offences related to stock market activities. the Public Prosecutor, provided that it first The position also has concurrent admits its guilt. If the Public Prosecutor jurisdiction over offences such as bribery, agrees to initiate the discussion, once the influence peddling, unlawful taking of facts are admitted, the Public Prosecutor interests, misappropriation of public funds proposes a penalty to the defendant. and tax fraud, as well as any related Once they come to an agreement, it is money laundering activities, in respect of then submitted to the Court for approval. offences with a high degree of complexity due to the large number of perpetrators, Until recently, this procedure, which accomplices or victims or their geographical was created in 2004, was mainly used reach. This should lead to an increase for minor offences. However, in January in the number of investigations into 2016, for the first time, a financial companies’ activities. institution and its two directors, who were involved in a complex money laundering French investigating judges do not hesitate procedure, managed to conclude a either to seize companies’ assets or to settlement agreement with the National order companies to pay large amounts Financial Prosecutor. in bail when placing them under judicial examination. For instance, in July 2014, Also, as detailed above, a draft bill a foreign bank was ordered to pay currently under discussion proposes a EUR 1.1 billion in bail after being judicially new settlement tool allowing a company to examined in relation to allegations it had avoid a criminal conviction for corruption, laundered the proceeds of tax evasion. by accepting a fine of up to 30% of its average annual turnover over the last Moreover, a special Agency for the three years and agreeing to be monitored Recovery and Management of Seized and to ensure it implements specific remedial Confiscated Assets in criminal matters measures and compliance systems, (“AGRASC”) was created by a law of without having to plead guilty. 9 July 2010, aimed at facilitating asset seizures and confiscation in criminal Lastly, it should be noted that the French matters. Among its other responsibilities, procedural system allows civil and the AGRASC handles the management criminal claims to be pursued in the same of assets seized in the course of criminal set of proceedings. Hence, a company proceedings. It also undertakes the sale can face a civil damages claim from the of confiscated assets prior to judgment victim of an illegal act at the same time as when they are no longer necessary for the it faces criminal sanctions. investigation or may decrease in value. There has been a significant increase in the activity of AGRASC since its creation. Linklaters 25 26 A review of law and practice across the globe

Germany

Can companies be criminally liable Under Section 130 OWiG, the owner of for wrongdoing? an operation or a business who wilfully or negligently fails to take the supervisory At present, companies cannot be held measures required to prevent a breach of criminally liable under German law. any duties which are incumbent on him Rather, only those individuals committing or her, the breach of which is potentially a crime can be held accountable under subject to punishment or fine, can be German criminal law, even if the crime held administratively liable if such a benefits solely the company. However, breach would have been prevented or it is possible to impose administrative materially impeded by due supervision. fines on companies under the German Given that the legal entity cannot take Administrative Offences Act any supervisory measures itself and (Ordnungswidrigkeitengesetz) (“OWiG”), is therefore not capable of acting nor to disgorge profits and to order forfeiture being criminally liable, Section 9 OWiG against a company. extends the owner’s duties mainly to its representatives. This legal situation may change in the future since, in September 2013, a draft bill was presented by the Ministry How far does criminal liability of Justice of the Federal State of North- extend? Rhine Westphalia which provides for In order for a company to be found liable, the implementation of the concept of the individuals committing the criminal corporate criminal liability in the German or administrative offence must belong legal system. to the group of persons listed in Section 30 para. 1 OWiG. Under this provision, For what kind of wrongdoing can a the individual perpetrator must be company be held criminally liable? an executive or representative of the company or, at least, someone responsible An adequate Under the OWiG there are two relevant for the management of the operations compliance system sections governing the (administrative) or business of the company, which liability of companies: Section 30 and includes persons with managerial powers can protect 130 OWiG. (Leitungsbefugnisse) or with surveillance the owner of a If criminal or administrative offences and supervisory powers (Überwachungs- und Kontrollbefugnisse). Whereas company from being have been committed, a corporate fine (Unternehmensbuße) pursuant to managerial powers may result from the found guilty. Section 30 OWiG may be ordered against powers of representation or decision- making, persons with surveillance or the company if, generally speaking, an organ, a representative or a person with supervisory powers are generally those functions of control within the company people with particular responsibility for a has committed a criminal or administrative certain business division, e.g. the internal offence resulting in the breach by the financial control or audit. Members of company of any of its duties or which the supervisory board belong to this resulted or was intended to result in the group, provided that the position entails enrichment of the company. the potential to influence the management of the company. Section 130 OWiG does not directly govern the liability of a company as such but sets The company cannot be held liable for out the liability of the company’s owner. crimes committed by persons other than This section is still of utmost importance those mentioned in Section 30 para. 1 as to the liability of the company itself, OWiG. This means that the conduct of as an administrative offence under this third parties, such as subcontractors, section can constitute the basis for liability cannot be attributed to the company for of the company under Section 30 OWiG. the purposes of administrative liability under Section 30 OWiG. Linklaters 27

Does criminal liability extend to >>Pursuant to Section 11 of the Anti-Money main proceedings against the accused foreign companies? Laundering Act (Geldwäschegesetz), individuals, the company appearing entities shall report any transaction to in the proceedings as an ancillary Generally, a fine can also be imposed on the competent prosecution authority participant by way of a participation order foreign companies pursuant to Section whenever factual circumstances exist (Beteiligungsanordnung). 30 OWiG, provided that the corporate indicating that the assets or property structure of the foreign company is connected with a transaction or business The participation order may be issued by comparable to that of a German legal entity relationship are the product of an offence the court ex officio or at the request of the and German criminal or administrative under Section 261 of the German Public Prosecutor. The court’s decision law is applicable to the relevant crime or Criminal Code (namely breach of trust) on the participation is final and non- administrative offence. In general, German or are related to terrorist financing. appealable. law applies in the following cases: >>Section 153 Fiscal Code Generally, an ancillary participant has the >>Pursuant to Section 3 et seq. German (Abgabenordnung) imposes an obligation same rights as an accused individual in Criminal Code (Strafgesetzbuch), crimes to correct tax returns upon discovery of the main proceedings, in particular the that are committed in Germany or, with an inaccuracy or inadequacy that may right to present one’s arguments in full to certain restrictions, are committed by indirectly lead to the disclosure of a past the court, the right to refuse to testify and a German citizen in a foreign country, criminal offence by a third person. the right to file applications for the taking or in a foreign country by a foreigner of evidence. However, some specifics exist: but the victim is a German national, are subject to German criminal law. Are the prosecution authorities >>Right to refuse to testify: In principle, legally obliged to conduct a the ancillary participant has the right >>The territorial reach of Section 5 OWiG criminal investigation into to refuse to give testimony. In the case which governs administrative offences corporate wrongdoing? of legal persons, this right lies with the is narrower in scope and, in essence, current statutory representatives only. only allows for the sanctioning of In relation to the prosecution of Former statutory representatives or administrative offences which have administrative offences, the principle other employees may not invoke the been committed within Germany. of discretionary prosecution applies. company’s right to refuse to testify. This means that the prosecution authority Instead, these individuals have the rights However, for practical reasons, an has to decide, after due consideration, of normal witnesses and are therefore administrative company fine is likely to be whether or not to prosecute the offence. entitled to refuse to answer only such imposed on a foreign company only where However, the legal situation is different questions that would subject them to the the foreign company has a registered under German criminal law where the risk of being prosecuted for an offence office or assets on German territory. prosecution authority is generally legally (Section 55 German Code of Criminal obliged to conduct a criminal investigation Procedure (Strafprozessordnung)). Is the company legally obliged to once it becomes aware of a potential Obviously, this only applies to former disclose criminal offences to the criminal act (Legalitätsprinzip). Hence, statutory representatives who are not the prosecution authorities are under a accused themselves and thereby have competent prosecution authorities? duty to investigate the crime committed the right to refuse to testify. There is no such obligation under German by an individual perpetrator but, where law in general. However, there are some the crime also fulfils the prerequisites for >>Right to file applications for the taking exemptions. For example: a company fine under Section 30 OWiG, of evidence: The ancillary participant the prosecutor retains discretion whether has the right to file applications for the >>Pursuant to Section 10 Securities or not to commence administrative taking of evidence in support of the Trading Act (Wertpapierhandelsgesetz), proceedings against the company. accused. However, the court has a wider investment services enterprises, other discretion to reject these applications in comparison to applications for the credit institutions and asset management What is the position of the companies are obliged to notify the taking of evidence filed by the accused supervisory authority of any facts giving defendant company in individuals. Nevertheless, the court is rise to the suspicion that a transaction criminal proceedings? obliged to investigate the case and to collect all relevant evidence ex officio. involving financial instruments The decision whether or not to impose contravenes certain provisions. a corporate fine or forfeiture (Verfall) pursuant to Section 73 German Criminal Code is usually made in the 28 A review of law and practice across the globe

The decision to impose a corporate fine What kind of sanctions can be Forfeiture requires that an unlawful act or forfeiture on the company can also be imposed on companies? has been committed and that the company rendered in separate and independent has obtained something in return for, or proceedings. A division of the proceedings The potential sanctions under the as a result of, the perpetrator’s criminal is only permitted by law if no proceedings Administrative Offences Act, in offence. In calculating the amount to against the individual have been initiated conjunction with the Criminal Code, be surrendered, the courts generally at all, the proceedings against the individual are mainly: the imposition of an apply the “gross principle”, using the perpetrator have been terminated or the administrative fine, the disgorgement of company’s revenue without deducting competent authority has decided not profits (Gewinnabschöpfung), recovery any expenses. However, should the to impose a sanction on the individual. (Einziehung) and forfeiture (Verfall). draft law on corporate criminal liability In this respect, it is irrelevant why the eventually be implemented, sanctions for individual perpetrator has not been In principle, a company may be fined up companies may be significantly higher in sanctioned. Under German law, in order to to EUR 10,000,000. However, if the profit the future since the draft bill provides for, be able to prosecute the company, it is not generated by the offence is greater, then for example, a fine potentially amounting even necessary to identify the individual the fine can be as high as the profit made to up to 10% of the average annual perpetrator. It is only necessary to prove or even exceed that. Thus, where the turnover of the company, assessed on the that any individual acting in the capacity firm has gained a commercial advantage worldwide turnover of the corporate group required by law has committed an offence. by the wrongdoing, its “advantage” will over the past three years. One of the reasons for this is that the be the lower limit of the fine. In recent allocation of responsibilities in large cases, fines have even exceeded A company may also face exclusion international companies or groups makes EUR 100,000,000. from public tenders. Such debarment is mandatory in cases where an individual it almost impossible to trace misconduct Section 17 para. 3 OWiG stipulates back to one single employee. whose conduct is attributable to the that the basis for determining the company is convicted of certain qualified amount of the fine is the significance criminal offences (Katalogstraftaten), Is the company legally obliged to of the administrative offence and the including bribery. An administrative fine co-operate with the prosecution blameworthiness of the perpetrator. exceeding the amount of EUR 200 must authorities in the proceedings? Mitigating circumstances are, inter alia: be registered in the central trade register if the perpetrator attempts to compensate if it relates to the operation of a business Under German law, there is no obligation for resulting damage, helps to solve the or if the offence was committed by a for the company to co-operate with case, especially in very complex cases, responsible individual when operating the the authorities during the investigation or if the contravention dates back some business (Section 149 para. 2 no. 3 of the proceedings. In practice, however, time and the company has been German Trade, Commerce and Industry co-operation occurs on a voluntary basis, compliant since then. Circumstances Regulation Act (Gewerbeordnung)). often in complex business crime matters. that may justify a lower fine are: if the A registration is not cancelled until the contravention remains exceptional, the expiry of a three year period if the fine is In addition, German cartel law provides a degree of wrongdoing is low and only leniency rule, stipulating that the Federal less than EUR 300, and a five year period minor damage was caused and if no if the fine amounts to EUR 300 or more. Cartel Office may reduce the fine or even other adverse consequences resulted. refrain from imposing a fine at all on During the award procedure, bidders are participants of a cartel who co-operate Companies may also be subject to a usually required to submit an excerpt from with the authority and thus contribute to forfeiture order requiring them to surrender the central trade register, which means the detection of the existence of the cartel. all profits gained from a criminal offence that the registration is of major importance committed by an individual perpetrator, in practice. However, the registration in who may not even be connected to the the central trade register by itself does not company. Such order is neither a criminal automatically result in a mandatory sentence (Strafe) nor an administrative or discretionary exclusion. fine (Bußgeld) implying any wrongdoing Special rules with different and/or higher by the company liable to forfeiture, but sanctions apply in special industry sectors rather a measure (Maßnahme) to resolve (e.g. banking) or in special areas of law and rectify the unlawful situation. (e.g. cartel law). Linklaters 29

What is the relevance of an effective How are criminal proceedings Should the draft law eventually be adopted compliance system? against companies conducted by parliament, the existence of a well- in practice? functioning compliance system will be An adequate compliance system can of increased importance for companies protect the owner of a company from The number of cases in which a corporate when it comes to defending themselves being found guilty under Section 130 fine has been imposed on a company is in criminal proceedings. If the company OWiG. Section 130 requires that the rather low. According to a survey which has engaged personnel or organisational owner of a company must have wilfully has been conducted among the 19 public measures to prevent similar crimes in or negligently omitted to take adequate prosecution offices in the Federal State of the future and has additionally supported supervisory measures, which would North-Rhine Westphalia, a company fine the investigating authority in detecting have been able to prevent or at least was ordered in only 27 cases during the the crime, or if no significant damage materially impede the breach. An adequate period 2006-20111. was caused or the damage was mostly compliance system could thus help to remedied, the court may, under the draft ensure that the owner is not be sanctioned Moreover, in practice, the vast majority law, refrain from sanctioning the company. in relation to the contravention committed of cases in which administrative fines Thus, under the draft law, a compliance by one of his employees. As Section 130 are actually imposed on companies do system can be taken into account for OWiG is the main ground on which a not undergo a full trial but are instead the purposes of sentencing. Another fine may be imposed on the company terminated by negotiated agreements difference to the current law is that the under Section 30 OWiG, the risk of the between the companies and the prosecution authorities would be obliged company being fined would be minimised prosecution authorities and courts to conduct a criminal investigation into the significantly. However, as there are no respectively. company and to prosecute the company. clear rules, neither in law nor in court They would, under the draft law, no longer rulings, on how a compliance system Likely future scope and have discretion in that regard. has to be organised to be deemed as development? sufficient, there is no absolute certainty The draft bill on the introduction of to the companies as to whether their 1. Draft bill on corporate criminal liability (Entwurf owners may be fined. Moreover, German corporate criminal liability is currently eines Gesetzes zur Einführung der strafrechtlichen courts often take the fact that a breach under scrutiny by the Federal Ministry of Verantwortlichkeit von Unternehmen und sonstigen Verbänden), p.23. of duties took place as evidence that Justice and Consumer Protection, which is supervisory measures have not adequately expected to decide by the end of 2016 been taken, meaning that no adequate as to whether or not it will introduce a compliance system was in place. draft bill into the legislative process.

Whether a compliance system should be The current draft law sets out two separate taken into account when determining the offences for which companies can be held amount of the company fine is not clearly criminally liable: stated in the law. It is not expressly stated >>the inappropriate choice of its that it should be taken into account, management staff and decision makers but neither is its consideration explicitly (which mainly corresponds to the forbidden. A survey taken in different current administrative liability under prosecution authorities shows that only a Section 30 OWiG); and minority of the responding authorities take compliance systems into account. >>the failure of a decision maker of the company to take sufficient supervisory measures (which mainly corresponds to the current administrative liability under Section 30, 130 OWiG).

Possible sanctions are, inter alia, a financial criminal penalty, the public announcement of the sentence, the dissolution of the company and also the exclusion from subsidies or public calls for tender. 30 A review of law and practice across the globe

Hong Kong

Can companies be criminally liable There is no specific bribery offence for for wrongdoing? companies under the Prevention of Bribery Ordinance (Cap 201) (“POBO”). Yes, companies can be criminally liable for However, companies can be held wrongdoing in Hong Kong. liable under the identification principle outlined above. For what kind of wrongdoing can a company be held criminally liable? Does criminal liability extend to There are a number of offences in foreign companies? Hong Kong that have been drafted with Certain offences set out in the Companies companies in mind. These are mainly set Ordinances (Cap 32 and 622) apply to out in the Companies (Winding Up and registered non-Hong Kong companies. Miscellaneous Provisions) Ordinance (Cap 32), the Companies Ordinance (Cap 622) and the Securities and Futures Is the company legally obliged to Ordinance (Cap 571) (“SFO”). disclose criminal offences to the For the purpose of construing statutes, competent prosecution authorities? unless the contrary intention appears, There is no general obligation under Hong “person” includes a company Kong law to disclose criminal offences. (Interpretation and General Clauses There is an obligation to report where Ordinance (Cap 1) s 3). a person knows or suspects that any Hong Kong law follows English law in property is the proceeds of, was used in attributing to a company the acts and connection with, or is intended to be used states of mind of the individuals it employs. in connection with an indictable offence It will generally be necessary to invoke under the Organised and Serious Crimes the identification principle, by which the Ordinance (Cap 455 s 25A) and the acts and states of mind of any directors Drug Trafficking (Recovery of Proceeds) and managers who represent a company’s Ordinance (Cap 405 s 25A). There is “directing mind and will” are imputed to also an obligation to report in the context the company. of terrorism. Under the United Nations (Anti-Terrorism Measures) Ordinance How far does criminal liability (Cap 575 s 12) there is an obligation to extend? report property which a person knows or suspects is terrorist property. A company cannot be guilty as a principal of offences which by their very nature require There are also obligations under the a natural person, for example perjury. Securities and Futures Commission (“SFC”) Code of Conduct and the SFO Where a company commits an offence, to report actual or suspected misconduct and it is proved that the offence was either by the firm, its employees or clients. committed with the consent or connivance For example, the SFC would expect a of a director or other officer concerned in regulated firm to notify it and the Hong the management of the company, or any Kong Monetary Authority (“HKMA”) person purporting to act as such director (if applicable) of an event which: or officer, the director or other officer is guilty of the same offence (Criminal (i) directly involves the firm or any of its Procedure Ordinance (Cap 221) s 101E). representatives and may impact on It has been held that the words “consent” their fitness and properness; or “connive” cover a situation where the officers had deliberately shut their eyes to (ii) may have a significant impact on the an obvious means of knowledge1. operations or validity of the firm’s corporate group as a whole; or Linklaters 31

(iii) arises from a material failure of Are the prosecution authorities Is the company legally obliged to systems and controls, even if the legally obliged to conduct a co-operate with the prosecution failure occurred outside Hong Kong criminal investigation into authorities in the proceedings? or to other group entities. corporate wrongdoing? At the investigation stage, certain law There are requirements under the There are a number of law enforcement enforcement agencies have powers to Securities and Futures (Client Money) agencies which may investigate and require information from companies. Rules2, the Securities and Futures (Client prosecute corporate crime in addition to For example, the SFC or ICAC may Securities) Rules3, the Securities and the Department of Justice. These include: require a company to produce documents Futures (Keeping of Records) Rules4 the Hong Kong Police Force; the SFC; the or answer questions (through a and the Securities and Futures (Contract HKMA; and the Independent Commission representative). Failure to comply with the Notes, Statements of Account and Against Corruption (“ICAC”). enforcement agencies’ search warrants or Receipts) Rules5 for regulated firms to production orders constitutes a statutory self-report non-compliance with the These entities are generally under a duty offence under the SFO and POBO and provisions under these Rules. Such non- to investigate matters which fall under could amount to contempt of court. compliance may amount to a criminal their respective jurisdictions. This includes This duty of compliance would generally offence without reasonable excuse. indications of wrongdoing by a company. override the data protection and privacy laws in Hong Kong. Under the Securities and Futures As for the decision to prosecute, (Licensing and Registration) (Information) the Prosecution Code states that the Co-operation and early acceptance of Rules6, a regulated firm is required to two factors which should be considered guilt are likely to be mitigating factors notify the SFC if it is or has been convicted are the sufficiency of evidence and in sentencing. The sentence can be of or charged with any criminal offence the public interest. In assessing the reduced by up to one third if an early (other than a minor offence), in Hong sufficiency of evidence, the test is guilty plea is entered9. Kong or elsewhere. whether the evidence demonstrates a reasonable prospect of conviction. The SFC has discretion as to whether Further, under the HKMA Supervisory There is no specific code catering for the to deal with matters by way of criminal Policy Manual7, an authorised institution prosecution of corporate defendants. prosecutions, civil proceedings or is required to notify the HKMA as soon as disciplinary actions. Self-reporting can practicable of the breach of any provision be an effective way of mitigating the risk of the Banking (Amendment) Ordinance What is the position of the of criminal prosecution and the SFC puts 2002 or the SFO (including its subsidiary defendant company in a lot of emphasis on this. The SFC has legislation), committed by the authorised criminal proceedings? stated that, as a general rule, the earlier institution itself or an associated entity. and the more extensively a regulated A company will have the same rights firm co-operates, the greater will be the The HKMA has also stated in a Circular8 as an individual defendant in criminal credit given for it and a lighter sanction that if there is a suspected case involving proceedings. It will have the right to be may be imposed (although the SFC will possible criminal elements, authorised represented and the same burden and still take such disciplinary action as it institutions are expected to report the standard of proof will apply. However, may consider appropriate). incident to the HKMA and the police in a because of the identification principle timely manner. outlined above, it will usually be necessary Those under investigation by the SFC may for the prosecution to identify an individual make a settlement proposal to the SFC. who was the “directing mind and will” The SFC has the discretion to agree to a of the company, although conviction settlement if it is in the public interest. of the company is not contingent upon conviction of that individual.

In some instances, only individuals will be prosecuted for the offence and not the company. If both the individual and the company are prosecuted, they can be prosecuted for different offences. 32 A review of law and practice across the globe

What kind of sanctions can be There is no separate policy for prosecuting imposed on companies? companies. Penalties may include fines and In certain cases, the prosecutor may agree Regulated firms compensation or forfeiture orders. to withdraw certain charges or to pursue There is no mandatory scheme of charges for lesser offences. should have debarment from public procurement adequate internal processes for companies convicted of Likely future scope and criminal offences. control systems development? which would ensure Possible consequences for the directors In light of the fact that the United States compliance with of the company include disqualification, has been targeting PRC companies under fines and imprisonment. the Foreign Corrupt Practices Act 1977, the relevant law it remains to be seen the extent to which There are no specific guidelines for Hong Kong companies may also come and regulations. sentencing companies. under the same scrutiny. What is the relevance of an To date there are no legislative proposals effective compliance system? to introduce specific corporate criminal liability. The existence of an effective compliance system will generally be most relevant at the public interest stage of the 1. R v MG Mirchandani [1977] HKLR 523. prosecutor’s decision referred to above. 2. Cap 571I, section.11. The SFC also emphasises that regulated 3. Cap 571H, section.12. 4. Cap 571O, section.11. firms should have adequate internal 5. Cap 571Q, section.18. control systems which would ensure 6. Cap 571S, section 4, Schedules 1 and 3. compliance with the relevant law and 7. SB-1, Supervision of Regulated Activities of SFC-Registered regulations. Whether they are in place Authorised Institutions. and how adequate they are would almost 8. Abuse and Fraud Prevention in Private Banking and Wealth always have a bearing on the sanctions Management, 14 July 2009. 9. See Secretary for Justice v Chau Wan Fun [2006] 3 HKLRD to be imposed. 577. How are criminal proceedings against companies conducted in practice?

There must be sufficient evidence which demonstrates a reasonable prospect of conviction and the public interest must require that the prosecution be conducted.

When choosing charges, the prosecution should attempt to reflect adequately the criminality of the conduct alleged in a manner that is both efficient and that will enable the court to do justice between the community and the accused.

From the outset of the proceedings, the prosecution must consider appropriate orders in respect of property, whether used in the commission of crime or regarded as the proceedings of offending. Linklaters 33 34 A review of law and practice across the globe

Indonesia

Can companies be criminally liable Does criminal liability extend to for wrongdoing? foreign companies? The Indonesian Penal Code does not Yes, criminal liability can be extended to establish a general doctrine of corporate foreign companies in Indonesia. However, criminal responsibility. Nonetheless, a this will only occur where, by virtue of number of individual statutes creating the specific working relationship of the criminal offences provide for the individual committing the act and the attribution of criminal responsibility to company (e.g. as a director or other companies (“Relevant Statutes”) such authorised officer or employee of the as: Law No. 8/2010, Countermeasure company), the act is attributable to the and Eradication of Money Laundering company. In the ordinary course, the acts (“Anti-Money Laundering Law”); Law No. of an employee of a subsidiary should not 31/1999, Eradication of the Criminal Act be attributable to the parent company. of Corruption (“Anti-Corruption Law”); or Law No. 32/2009, the Environmental Is the company legally obliged to Protection and Management Law (“Environmental Protection Law”). disclose criminal offences to the competent prosecution authorities? In addition, a small number of Generally, companies are not required individual statutes provide for the to disclose potentially criminal conduct. attribution of criminal responsibility However, there are some exceptions. to boards of companies. For example, under the Anti-Money Laundering Law, financial services For what kind of wrongdoing can a providers are required to report certain company be held criminally liable? suspicious financial transactions. If a financial service provider fails to disclose Companies can be held criminally such transactions, the relevant authority liable for various criminal offences under can then impose sanctions against the the Relevant Statutes, including, for financial services provider, including example, under the Anti-Corruption Law, fines and formal warnings. for providing or offering bribes to public officials and engaging in related improper conduct or under the Anti- Are the prosecution authorities Money Laundering Law, for hiding or legally obliged to conduct a disguising the origin of assets obtained criminal investigation into as a result of criminal action. corporate wrongdoing?

How far does criminal liability Generally, relevant prosecutorial authorities are not obliged to conduct extend? criminal investigations into potentially Whether a company can be held criminally criminal conduct by companies. liable for acts committed by employees and third parties as well as directors and senior executives, is determined by the terms of the Relevant Statute. For example, Article 20 of the Anti- Generally, companies Corruption Law provides that “Criminal are not required to acts of corruption committed by a corporation are actions by persons either disclose potentially in the context of a working relationship criminal conduct. or other relationships, undertaken within the environment of the Corporation, either singularly or jointly”. Linklaters 35

What is the position of the Some Relevant Statutes impose additional How are criminal proceedings defendant company in criminal sanctions. For example, against companies conducted criminal proceedings? under the Anti-Money Laundering Law, in practice? a company may be fined up to 100 billion A defendant company will be represented rupiah (EUR 9,000,000) for committing The Indonesian legal system does not by the board of the company, and an offence under the statute and may also allow for prosecutorial authorities to reach special sanctions may be imposed on be subject to suspension of all or some settlements with defendant companies. the company (including suspension or of its business activities, revocation of its Once commenced, a criminal proceeding revocation of business licences). If the business licence, dissolution, confiscation may only be terminated on the ground of acts of an individual can be attributable to of its assets or state-takeover. If a company lack of evidence at the investigation stage the company by virtue of the individual’s cannot pay a fine after its assets have but must otherwise continue through to working relationship with the company, been confiscated, board members’ assets the issuance of a decision by a court. then it is not necessary to prosecute can be confiscated to discharge the fine. separately an individual perpetrator and/ Where board members’ assets are still Likely future scope and or to convict the individual perpetrator in insufficient to pay the fine, board members order to be able to prosecute the company. may be imprisoned to discharge the fine. development? In this sense, the criminal proceeding The presidential elections held in 2014 against the company is not an annex to the The Indonesian legal system does had a strong focus on anti-corruption criminal proceeding against an individual not contain a formal mechanism for enforcement. However, no clear statements perpetrator; it is a separate proceeding. plea bargaining. regarding tightening of sanctions against companies have been made yet. Is the company legally obliged to What is the relevance of an effective co-operate with the prosecution compliance system? authorities in the proceedings? The Relevant Statutes do not directly address the effect of compliance Generally, companies are not formally structures. However, having adequate required to co-operate with prosecutorial compliance structures in place might be authorities in proceedings and Indonesian used as a ground to argue that criminal law does not provide formal rewards for responsibility should not be attributed to companies that do so co-operate. a company. However, prosecutorial authorities may For example, the Anti-Corruption Law exercise various compulsory powers in does not provide for the mitigation of investigating and prosecuting offences, corporate criminal responsibility on the including freezing or confiscating assets, ground that a company had compliance questioning employees and conducting structures in place. However, a company searches of property. They may also may be able to adduce evidence of request information and the refusal to compliance structures as evidence that disclose information can result in fines or a relevant act of an individual should not imprisonment of the persons who fail to be attributed to the company, as the act provide the information requested. was not committed for or on behalf of the company. What kind of sanctions can be imposed on companies? Generally, companies are subject to fines for contraventions of criminal provisions. For example, under the Anti-Corruption Law, the maximum fine that may be applied to a natural person may be increased by one-third when applied to a company, which, depending on the offence, may ultimately lead to a fine of up to 1 billion rupiah (EUR 90,000). 36 A review of law and practice across the globe

Italy

Can companies be criminally liable A company can be held liable only if the for wrongdoing? criminal conduct occurred in the interest of the company, even if the profit gained Italian law does not provide for corporate by the company itself is marginal and criminal liability, as is the case for an incidental. However, when determining the individual. On the other hand, the amount of the sanction, the judge takes Legislative Decree of 8 June 2001, no. 231 into account the actual benefit derived (“Legislative Decree”), which came into by the company from the particular force on 4 July 2001, provides for the crime: the lower the benefit, the lower the administrative liability of companies and relevant sanction will be. Only where the other legal entities for crimes committed individuals committing the crime acted by its directors, executives, subordinates exclusively in order to further their own and other persons acting on behalf of interests or the interests of third parties, the legal entities, provided that the may a company not be held liable. unlawful conduct has been carried out in the interests of or for the benefit of the relevant companies. Does criminal liability extend to foreign companies? For what kind of wrongdoing can a The Legislative Decree does not expressly company be held criminally liable? provide for administrative liability of foreign companies. In this regard, Italian A company can be Pursuant to Article 5 of the Legislative case law states that a company having Decree, a company can be held held liable only its headquarters abroad shall be deemed administratively liable only for crimes liable pursuant to the Legislative Decree if: if the criminal committed in its interest or to its advantage. (i) the company operates in Italy, even conduct occurred The criminal offences for which a occasionally; and in the interest company can be held administratively liable are listed in Articles 24 – 25 (ii) all other conditions provided by Article of the company. duodecies of the Legislative Decree and 5 of the Legislative Decree are met include typical white collar financial (see above).

crimes such as embezzlement, corruption and money laundering. As a general rule, Article 6 of Italian Criminal Code states that crimes committed in Italy shall be punished How far does criminal liability pursuant to Italian Law. In this regard, extend? a crime is considered committed in Italy if the relevant unlawful conduct is As provided for by Article 5, the company carried out, even partially, in Italy or if can be held administratively liable only for the consequences of such conduct crimes committed by: take place in Italy. (i) persons in positions of representation, It is therefore advisable for a foreign administration or management of the company operating in Italy to adopt company or one of its organisational an adequate compliance system and units having financial and functional organisational polices, pursuant to the autonomy, as well as persons who provisions of the Legislative Decree undertake the management and (discussed further below). control of the company in practice; and/or

(ii) persons under the direction or supervision of one of the persons referred to above, if they committed the crimes while exercising their duties. Linklaters 37

Is the company legally obliged to What is the position of the Is the company legally obliged to disclose criminal offences to the defendant company in co-operate with the prosecution competent prosecution authorities? criminal proceedings? authorities in the proceedings? The Legislative Decree does not impose Article 36 of the Legislative Decree The Legislative Decree does not impose a any obligation on the company itself provides that jurisdiction to rule on the duty on the company to co-operate with to disclose criminal offences to the administrative liability of the company the prosecution authorities. In practical competent prosecution authorities. lies with the criminal court competent for terms, the company will usually choose to However, Article 6 of the Legislative the crimes on which the administrative co-operate with the Public Prosecutor, at Decree provides that the company will not liability depends. Nonetheless, as provided least in order to try to avoid preventative be held liable if it demonstrates that it has by Article 8 of the Legislative Decree, and/or disqualifying sanctions which adopted organisational policies capable the company’s position in the criminal prevent the company from entering into of preventing the crimes listed in Articles proceedings is autonomous, so that the agreements with public administration. 24 and 25 duodecies of the Legislative company can be held liable even when: Decree from being committed. (i) the person who committed the crime What kind of sanctions can be Such a policy must (i) identify the conduct has not been identified or, although imposed on companies? during which crimes may be committed, identified and deemed guilty of the The Legislative Decree provides only (ii) provide for protocols aimed at planning crime, cannot be convicted pursuant for administrative penalties since the formation and implementation of to Italian Law (since, for example, criminal penalties cannot be imposed on decisions of the company in relation to that when he committed the crime, companies in Italy. Pursuant to Article 9 of the prevention of such crimes, (iii) identify he was of unsound mind); the Legislative Decree, such administrative ways of managing financial resources penalties include monetary fines, in order to prevent the commission of (ii) the crime is not being prosecuted for a reason other than amnesty. disqualifying sanctions, confiscation of crimes, (iv) include a duty to disclose assets and the publication of the decision. relevant information to the body of the Usually, the proceedings dealing with the company tasked with supervising the administrative liability of the company Administrative offences which arise from functioning and observance of the policy are conducted alongside the criminal crimes always result in monetary fines, and (v) introduce a disciplinary system to proceedings concerning the accused which are calculated according to a scale sanction non-compliance with measures individuals, unless: set out in Article 10 of the Legislative set out in the policy. Decree. (i) the criminal proceedings concerning The task of supervising the functioning the accused individuals are In practice, courts have imposed double- and observance of such policies should suspended; digit fines. In decision 31-05-2011, n. be entrusted to a body of the company 29930 of the Italian Supreme Criminal with independent powers of initiative (ii) the criminal proceedings concerning Court against Ingross Levante S.p.A., and control. the accused individuals are terminated Levante was convicted of the corruption by a summary decision, with a plea- of certain judges and seizure of the Are the prosecution authorities bargaining agreement or a criminal company’s goods and cash up to the legally obliged to conduct a order of conviction is issued; maximum amount of EUR 58,972,680 was ordered. In another case, Saipem, an criminal investigation into (iii) it is necessary due to procedural Italian company, was convicted of paying corporate wrongdoing? provisions. Nigerian public officials (such as CEO of Nigerian National Petroleum Corporation Pursuant to Articles 55 and 56 of the Furthermore, as stated by Article 35 of Legislative Decree, the prosecution office and members of Government) more the Legislative Decree, the procedural than USD 187 million in order to obtain that acquires the information concerning rules provided for individuals also apply the administrative offence of the company EPC Contracts for the construction of to companies, which will therefore have a gas plant in Bonny Island in Nigeria. arising from the crimes listed in Articles the same rights as an individual against 24 and 25 duodecies is obliged to make According to the publicly available whom criminal investigations/proceedings information, Saipem challenged the inquiries into the company. This is the are conducted. same prosecution office as the one decision imposing the confiscation conducting the investigation with respect of about EUR 24,000,000 before the to the crime committed by an individual Supreme Court of Cassation and those in the interests of and/or for the benefit of proceedings are still ongoing. the company. 38 A review of law and practice across the globe

Disqualifying sanctions may only be applied (ii) has removed the organisational Likely future scope and if expressly provided for and when either: weaknesses that led to the development? crime through the adoption and (i) the company has profited from a implementation of procedures and Although there is currently no discussion crime committed by persons in senior policies suitable to prevent crimes about a potential tightening up of the positions or by persons under the like the one/s committed in the sanctions against companies, proceedings direction of others, and the crime future; and/or against companies generally are was caused or facilitated by serious increasing. “Criminal” liability of legal organisational shortcomings; or (iii) has surrendered the profit obtained entities often derives from very serious from the crime for the purposes of crimes, such as corruption or mafia- (ii) there is a repetition or pattern of confiscation. related offences. In recent years, the criminal conduct. Italian legislator has increased sanctions The Legislative Decree provides for the What is the relevance of an effective in this regard and public opinion deems mitigation of penalties imposed on the compliance system? it fair to convict each legal person company in certain circumstances. (whether individual or company) involved For example, a monetary fine will be In general, the main effect of having in such crimes, including the company reduced by half and limited to approximately adequate compliance structures in place associated with the convicted individual. EUR 100,000 if the accused individuals is the company’s ability to exclude or limit Furthermore, but no less importantly, the have committed the crime in their or its liability arising from any of the crimes Italian State is able to use the monetary in a third party’s best interests and the listed in the Articles 24 – 25 duodecies fines recovered to compensate the company has not gained any material of the Legislative Decree. damage suffered as a consequence of the advantage or if the economic damage In order to avoid or limit its liability, a crime, at least in part. caused is not particularly serious (Article company has to demonstrate that: 12 of the Legislative Decree). (i) it has adopted procedures capable Similarly, a reduction of one-third to of preventing the crimes listed in one-half is possible if the company, prior the Articles 24 – 25 duodecies of to the beginning of the proceedings, the Legislative Decree from being has fully compensated the damage and perpetrated; has taken steps to remove the harmful or dangerous consequences of the (ii) the task of supervising the functioning crime and, in addition, has adopted and and observance of the models has implemented procedures and policies been entrusted to a body of the aimed at preventing crimes like the company with independent powers one committed. of initiative and control; (iii) the perpetrators of the unlawful If the conditions for both types of reduction conduct committed the crime by are fulfilled, the fine may be reduced deliberately ignoring the procedures by half to two-thirds, although the fine and management of the company; can never be less than approximately and EUR 10,329.14 (in the Legislative Decree the minimum amount of the fine is (iv) there has not been a lack of or expressed as 20 million Lire, the former inadequate supervision by the body Italian currency, which approximates to of the company responsible for EUR 10,329.14). overseeing the operation of the policy.

According to Article 17 of the Legislative How are criminal proceedings Decree, disqualifying sanctions will not be against companies conducted imposed if, prior to the commencement of proceedings, the company: in practice? Deals between companies and (i) has fully compensated the damage prosecutors (which need the approval and has removed the harmful or of the judge) are quite common in Italy, dangerous consequences of the since they can avoid the application of crime or has taken effective steps in disqualifying sanctions. this direction; Linklaters 39 40 A review of law and practice across the globe

Japan

Can companies be criminally liable Does criminal liability extend to for wrongdoing? foreign companies? In Japan, the criminal liability of companies Criminal liability extends to foreign is generally set out as a dual criminal companies if they own a branch or an liability provision (ryobatsu kitei), which office in Japan, which is not considered means that both the company, as a a separate legal entity under Japanese business operator, and the individual Law. Criminal liability, however, would perpetrator can be punished for a be dependent on the existence of a dual certain crime. This dual criminal liability criminal liability provision. So far, no case provision was introduced in the Act on the law exists on this point. Prevention of Capital Outflow in 1932. In contrast, if a foreign company has a subsidiary company which is validly For what kind of wrongdoing can a incorporated under Japanese Law, only company be held criminally liable? the subsidiary company can be held Criminal liability of companies always criminally liable. requires a criminal offence being committed by the company’s Is the company legally obliged to representatives or employees. disclose criminal offences to the The company can then be held criminally competent prosecution authorities? liable if a dual criminal liability provision exists. This is not the case regarding There is no such obligation under offences like bribery or embezzlement. Japanese law. However, the company can be held criminally liable regarding offences such Are the prosecution authorities A company will be as insider trading or crimes under the legally obliged to conduct a held criminally Antitrust Act. In addition, the Companies Act makes it a crime for companies to criminal investigation into liable for crimes violate an order to suspend business or to corporate wrongdoing? falsely notify the Electronic Public Notice committed by any The prosecution office has the discretion System (denshi koukoku). Further criminal to decide both whether to conduct a of its employees. offences are included, inter alia, in the criminal investigation into the company Income Tax Law, the Foreign Exchange and, following that, whether to prosecute Law and the Environmental Pollution the company. Offence Law. What is the position of the How far does criminal liability defendant company in extend? criminal proceedings? A company will be held criminally liable for crimes committed by any of its When subject to criminal proceedings, employees, not only by its senior a company will have the same rights executives. However, a company will as an individual defendant. In criminal not be held criminally liable for crimes proceedings against a company, it will committed by third parties. be represented by one of the company’s representatives. Even a representative who itself is under investigation for the crimes the company is suspected of or charged with can validly represent the company during the criminal proceedings against the company. Linklaters 41

Although it is necessary to identify the from public tenders (e.g. from providing Likely future scope and individual perpetrator and the relevant construction services to the government, development? offence committed, the conviction of the as provided for in the Antitrust Act) for individual perpetrator is not a prerequisite some time, as well as setting fines or The statutory maximum fines that can to the prosecution of the company. tax penalties. be imposed on companies have Proceedings against the individual gradually increased over the past years. perpetrator and the company are What is the relevance of an effective Amendments to the Unfair Competition generally separate sets of proceedings. compliance system? Prevention Law (husei kyousou boushi However, they can be consolidated. hou) came into force on 1 January If a company can successfully show that 2016. These amendments provide that the maximum fine to be imposed Is the company legally obliged to it paid due attention and supervised its employees, it will be exempted from on a company whose employees or co-operate with the prosecution liability. Accordingly, the existence representatives have acquired the trade authorities in the proceedings? of adequate compliance procedures secrets of another company by way will generally reduce the risk of being of fraud or any other unlawful act There is no obligation on the company prosecuted. Even if the company is will increase from 300 million yen to to co-operate with the prosecution prosecuted, the set fine is likely to 500 million yen. Furthermore, if a authorities. However, the Antitrust Act be reduced as the court will take into company unlawfully obtains another provides for a leniency programme, by consideration the company’s adequate company’s trade secrets and uses then which the first reporting company can be compliance procedures. However, the outside of Japan, a maximum fine of exempted from fines set by the Fair Trade threshold to convince a court of the 1 billion yen, which was increased from Commission. If the reporting company is adequacy of a company’s compliance 300 million yen, can be imposed. not the first one to submit an independent efforts is very high in practice. report to the Fair Trade Commission, the In practice, the fines set by the relevant fine can still be reduced. The percentage authorities have mirrored this statutory by which the fine will be lowered depends How are criminal proceedings development. on how soon a company filed its report in against companies conducted comparison to others and on the quality in practice? of the material submitted in the report. When a company and its representatives What kind of sanctions can be or employees are prosecuted simultaneously, the proceedings are imposed on companies? usually consolidated and examined in In cases of criminal conduct, fines will parallel. However, the Japanese legal usually be imposed on companies. system does not allow for deals between In addition, confiscation (bosshu) companies and the prosecution authorities or collection of the equivalent value in order to conclude proceedings. (tsuityo) can be ordered in cases where confiscation is not possible.

Under the Penal Code, a fine shall in principle be no less than 10,000 yen unless it is specifically reduced to less than that. This minimum amount The conviction of the applies to both fines against individuals individual perpetrator or companies. The Penal Code does not generally provide for a maximum is not a prerequisite amount. Apart from sanctions under to the prosecution of criminal law, Japanese Law also allows for administrative and other sanctions t h e c o m p any. against companies. These include the public naming of companies in the Official Gazette or newspapers, revocation of business licences or the exclusion 42 A review of law and practice across the globe

Luxembourg

Can companies be criminally liable the statutory bodies or to one or several for wrongdoing? managers/directors. However, the legal entity may be held responsible for Corporate criminal liability was introduced crimes committed by an employee if the in the Luxembourg legal system by a law employee is acting as a de facto manager/ of 3 March 2010 (“Law”). The provisions director (dirigeant de fait). of the Law have been incorporated into the Luxembourg Criminal Code (Articles By referring not only to the management 34 to 40) and the Luxembourg Code of bodies of the legal entity but also to any Criminal Procedure and entered into force other legal corporate body or de facto on 15 March 2010. management, the Law seeks to have a wide application. Given the broad approach This liability applies to all legal entities taken by the Luxembourg legislator, which are subject to private or public law it is possible that actions by delegates except for the State and municipalities of the board of directors also fall within (communes). The only requirement the scope of the Law. provided for by the Law is for the relevant legal entity to have legal personality. Whereas the wording of the Law (“in Hence, companies in the process of the name of the legal entity”) seems to incorporation (sociétés en formation), indicate that the offence must have been groups of companies (groupes de sociétés) committed in the course of the legal entity’s as well as temporary associations activities, the fact that a legal corporate (associations momentanées) and venture body or a manager/director may have associations (associations en participation) acted outside their scope of competence fall outside of the scope of the Law. does not seem to be relevant.

The offence must also have been For what kind of wrongdoing can a committed “in the interest” of the legal company be held criminally liable? entity. In this context “interest” is to be understood as any financial or According to the Law, a legal entity may There is no non-financial interest of the legal entity, be held liable for crimes (crimes) or i.e. the fact that the company did not limitation as to misdemeanours/offences (délits), provided derive any economic profit from the for in the Luxembourg Criminal Code the crimes and offence is not necessarily a reason to and other relevant laws, committed in its exclude the legal entity’s criminal liability. offences for name and in its interest by one of its legal The interests of the legal entity may be corporate bodies or by any of its de jure which a corporate considered to be those that oppose the or de facto managers/directors. entity may be personal interests of the manager/director or those of any third party. Offences held liable. Only minor offences (“contraventions”) are excluded from the scope of the Law. committed in the exclusive interest of the perpetrator (natural person) are thus There is no limitation as to the crimes and excluded (e.g. misuse of company assets). offences for which a corporate entity may be held liable. However, certain crimes It should be emphasised that no wrong- and misdemeanours can, by their very doing of the legal entity separate from nature, only be committed by natural that of the perpetrator of the offence is persons and are thus excluded. required. The legal entity will be held criminally liable as main perpetrator of the offence only when the conditions in How far does criminal liability Article 34 of the Luxembourg Criminal extend? Code are met; there is no “automatic” According to the wording of the Law, criminal liability of the legal entity. the offence (either act or omission) has to be attributable de jure or de facto to Linklaters 43

Does criminal liability extend to and offences committed entirely outside Is the company legally obliged to foreign companies? Luxembourg, namely those that are disclose criminal offences to the considered as particularly harmful to competent prosecution authorities? Criminal liability for companies under society or to individuals, e.g. crimes Luxembourg law is triggered by crimes against the state or against public There are no specific rules which impose (crimes) or misdemeanours (délits) security, acts of terrorism and financing an obligation upon legal entities to self- committed by certain natural persons of terrorism, provocation of terrorism, report criminal offences. or management bodies such as, for recruitment of terrorists and training of example, the manager or the director of terrorists, forging money, forging passports Are the prosecution authorities the company. Therefore, the Luxembourg or similar documents, corruption and Criminal Code does not distinguish unlawful taking of interests, private bribery, legally obliged to conduct a between foreign and national companies crimes against the protection of minors, criminal investigation into but between two types of natural persons, prostitution, control of prostitution (“sex corporate wrongdoing? foreigners and nationals/residents. trade”), rape, indecent assault, violating Under Luxembourg criminal law, the public decency, smuggling of migrants prosecution office has discretion whether The Luxembourg Criminal Code makes a and human trafficking, false testimony or to conduct criminal investigations. Article distinction between crimes and offences incitement of a false testimony before an 23 of the Luxembourg Criminal Procedure committed by foreigners (for example, the international tribunal and acts of torture Code states that “The State prosecutor foreign director of a foreign company) in committed against a Luxembourg citizen shall be informed of complaints and the territory of Luxembourg and crimes or a Luxembourg resident. and offences committed by foreigners accusations and shall determine what outside the territory of Luxembourg. Further, following the principle of ‘aut action is to be taken in respect of them”. dedere, aut judicare’ (“either extradite or This principle should, however, be Crimes and offences committed by prosecute”), Luxembourg can prosecute combined with the Luxembourg rules of foreigners within the territory of Luxembourg foreigners who are not extradited and criminal procedure according to which are punished in exactly the same way who have committed one of the following a victim may file a criminal complaint as crimes and offences committed by crimes outside Luxembourg: attacks together with a claim for damages with an nationals or residents. Just like nationals against individuals who enjoy international investigating judge. In such a case, the or residents, foreigners may be held liable protection; acts of terrorism or financing investigating magistrate loses discretion for crimes and offences provided for by of terrorism; serious violations of human and has the obligation to open a formal the Luxembourg Criminal Code, as well as rights; acts of torture; prostitution and investigation (although this may not by other relevant laws. For example, the sex trade; human trafficking; child necessarily lead to an actual prosecution). foreign director of a company that is not pornography; sexual advances or incorporated under Luxembourg law may propositions to a minor using means of be held criminally liable, together with the electronic communication and certain What is the position of the company, if he commits acts of bribery IT related infractions. defendant company in within the territory of Luxembourg in the name and in the interest of the company. Lastly, a foreigner who has been an criminal proceedings? accomplice to a crime committed by The Law does not distinguish between As regards crimes and offences committed a Luxembourg citizen outside of the crimes committed by legal entities or by outside the territory of Luxembourg by Luxembourg territory can be prosecuted individuals. The company therefore has foreigners, the law distinguishes between either jointly with the Luxembourg citizen the same rights as an individual against crimes and offences committed entirely or after the latter has been convicted. whom criminal proceedings are conducted. outside Luxembourg and crimes and offences which have been partly committed Crimes and offences partly committed According to Article 34 of the Luxembourg in Luxembourg. outside Luxembourg are considered to be Criminal Code, “the criminal liability of committed within the jurisdiction of the legal entities does not exclude that of If the crime or offence is committed entirely Luxembourg courts, and may hence incur natural persons who perpetrated or were outside the territory of Luxembourg, criminal liability, if any one element of the accomplices to the same offences”. a foreigner cannot, in principle, be held crime or offence took place within the This cumulative nature of criminal liable (and, consequently, no corporate territory of Luxembourg. liability of companies aims at preventing criminal liability under Luxembourg law natural persons from using legal entities can incur). It is only in certain specific to evade or conceal their personal cases determined by the law that the criminal responsibility. foreigner may be held liable for crimes 44 A review of law and practice across the globe Linklaters 45

The prosecutor or the plaintiff may thus be multiplied by five, raising the maximum How are criminal proceedings elect to sue (i) both the legal entity and fine for these crimes to EUR 3,750,000. against companies conducted the individual who physically committed Moreover, in the case of re-offending, in practice? the offence or (ii) the individual only or the maximum applicable fine will be (iii) the legal entity only. substantially increased. For example, The period over which the Law has been in cases of money laundering, bribery in force is still rather short. Hence, the The recitals of the draft Law stress that, or corruption, the applicable fine for number of criminal cases conducted although it is not necessary for the actual re-offending could reach a total amount against companies remains limited. perpetrator (legal corporate body or de of EUR 15,000,000. The cases identified so far relate to the jure/de facto manager/director) to be absence of sufficient security measures/ sued and sentenced, its guilt must be Special seizure may apply to the material lack of precaution of the company, which established by the court. The judge must assets that are the object of the offence, resulted in accidents and caused injuries. declare that all the essential elements the material assets that helped commit of the offence were committed in order the offence or the material assets that However, investigations and prosecutions to hold the legal entity criminally liable. were gained by the offence or acquired in cases of criminal proceedings against Hence, if criminal proceedings are with the proceeds of the offence. companies are carried out according to commenced against both the company the general rules contained in the Criminal and the individual perpetrator and the Dissolution and liquidation may apply Procedure Code and the Criminal Code. latter is found not guilty or not responsible, when the legal entity was set up for the the legal entity may not be successfully purpose of committing the offence or A law of 24 February 2015, published on charged with the criminal offence at issue. used to perpetrate a serious offence (as 4 March 2015, introduced a plea bargaining further specified in the Law). However, procedure applicable to both natural and this sanction is not applicable to public legal persons in the Luxembourg Criminal Is the company legally obliged to legal entities. Procedure Code. It has been applicable co-operate with the prosecution since 7 March 2015. authorities in the proceedings? The Law neither sets out specific circumstances in which liability will be The law applies to crimes and offences No specific rules impose an obligation to excluded nor provides for mitigating punishable by fines or subject to co-operate with the prosecution authorities factors. However, courts generally take a maximum penalty of five years’ or establish a reward system for into account the co-operation of the imprisonment (so as to exclude the most co-operation on a voluntary basis. perpetrator and its attempt to redress serious criminal offences). Complex and/or the damage caused as mitigating factors economic offences, carrying a maximum What kind of sanctions can be in determining the penalty. penalty of five years’ imprisonment, also imposed on companies? fall within the scope of the law. Thus, the What is the relevance of an effective new plea bargaining procedure may be In terms of sanctions, the Law provides frequently used in the future to reduce for fines, special seizure proceedings, compliance system? the need for detailed inquiries in complex the exclusion from public contracts bids Generally speaking, the prosecution must cases involving economic offences. processes (marché public), as well as establish wilful fault in order for a legal Minor offences (“contraventions”) are dissolution and liquidation of the legal entity to incur criminal liability. Therefore, excluded from the scope of the Law. entity. These sanctions may apply in the a defence based on the existence of alternative or cumulatively. sufficient control mechanisms/compliance The plea bargain will terminate the public systems could be taken into account if prosecution as to the facts included in its In general, fines may vary from a the compliance systems are effective to scope, without affecting civil actions. minimum of EUR 500 for both crimes the point that wilful fault can be excluded. and misdemeanours to a maximum of There is no case law in which it was held EUR 750,000 for crimes only. A specific Likely future scope and that sufficient control mechanisms could “conversion system” is provided for development? be a mitigating or even exonerating factor offences punishable by imprisonment for the prosecuted legal entity. However, The existence of corporate criminal liability (terms of imprisonment being converted one decision (confirmed in appeal) found is a recent phenomenon in Luxembourg into fines). For specific offences a company criminally liable on grounds Law. Case law is still scarce on the issue (e.g. offences regarding the security of the of a lack of internal organisation, which and actual trends difficult to establish state, terrorism, money laundering, illegal lack was attributable to the director of so far. taking of interests, bribery and corruption, the company. etc.), the above maximum amounts may 46 A review of law and practice across the globe

Mongolia

Can companies be criminally liable Under the Revised Criminal Code, the for wrongdoing? crimes for which corporations may be criminally liable have been extended to Traditionally, corporations have not been cover a wide range of crimes in numerous considered to be subject to criminal categories, from “Economic Crimes”, liability in Mongolia. Article 8 of the crimes such as “competing illegally” General Part of the Criminal Code of (anti-trust crimes), tax evasion, money Mongolia (2002) (“Criminal Code”) laundering, to crimes against public safety governs the “Principle of Criminal Liability and interest such as terrorism, illegal In Person”. It expressly states that only possession of firearms, crimes against physical persons may be subject to the justice system, crimes against the criminal liability and that an individual environment, and crimes against traffic wrong-doer must bear criminal liability safety. Interestingly, there is still no corporate himself/herself. liability specified for crimes of corruption.

In January 2014, amendments to the Other than criminal liability, a company current Criminal Code were made to may be subject to administrative liabilities modify Article 8 to state that, “where for violations of law that are not of specified in the Special Part of the criminal nature (i.e. not identified by Criminal Law, corporations may be held the Criminal Code). Under the current criminally liable”. These “specified” administrative law system, there are no crimes are “Money Laundering”, and other sanctions known (and tested) other “Financing Terrorism”. than the possible blacklisting by the state procurement authorities. The Law on Furthermore, as part of a legal reform Procuring Goods, Works and Services by initiative, a new revised Criminal Code the State and Local Property provides that, (“Revised Criminal Code”) was adopted if a participant in a tender or any person by the Parliament of Mongolia on violates an obligation under the agreement 3 December 2015. Set to enter into to purchase, fails to fulfil a duty under force on 1 September 2016, this revision such agreement, has provided misleading establishes corporate criminal liability in information in a tender pitch or committed greater detail than the abovementioned a crime of corruption that has been interim amendment to the Criminal established by court or state inspector, Code. In particular, the Revised Criminal the decision shall be submitted to the Code incorporates in its general rules state administrative central organisation in and principles that a “legal entity” charge of budget affairs (i.e. the Ministry (i.e. a company) shall be subject to of Finance) and such person shall be criminal liability if the crime was committed added to the list of persons restricted on behalf of, and in the interests of such from participating in tenders. legal entity, and furthermore provides specific rules on the grounds on which The traditional approach under the current to base criminal liability on companies law does not provide clear prerequisites and types of punishments to impose for a company to be held liable, other and identifies specific types of crimes for than where the legal provision expressly which corporate criminal liability may provides the violation and liability to be be applied. applicable to a business entity or a legal person rather than a natural person. For what kind of wrongdoing can a It should be noted that administrative company be held criminally liable? liabilities are set forth separately in each of the 400+ laws in Mongolia at present As stated above, under the current and the violations for which administrative Criminal Code, there are two crimes liabilities are applicable are independently for which a corporation may be held identified by each law, with no underlying criminally liable: money laundering and prerequisites set for its application to legal financing terrorism. or natural persons. Linklaters 47

However, like the Criminal Code overhaul, How far does criminal liability these various administrative liabilities extend? have been combined by the legislator to form one general Law on Breaches, The current Criminal Code does not which will also enter into force on provide rules other than the provision 1 September 2016. This Law on to add corporate criminal liability and to Breaches provides rules regarding the specify the two crimes for which corporate [The] Law on grounds on which a company may be criminal liability is applicable. In particular, Breaches provides held administratively liable and the the Criminal Code fails to provide any types of administrative liabilities that further clarification as to who may commit rules regarding may be imposed on companies, and the offence. There is no formal legal the grounds on identifies specific violations for which commentary around this matter at the companies may be deemed as breaches moment (there is no longer any Supreme which a company of administrative law. The administrative Court commentary as it has been ruled may be held breaches for which a company may be unconstitutional by the Constitutional held liable is wider in range than in the Court and judicial precedence does not administratively Criminal Code, covering almost all of exist in the legal system). liable. the breaches specified by the Law on Breaches, ranging from categories such The general provisions section of the as breaches of rules to protect social Revised Criminal Code provides that a health and environmental security to “decision made solely or by a group of breaches of social morale and order, officials authorised to represent a legal breaches of rules on public property, person, to commit or omit to commit breaches of business activities, etc. an action in the interests of a legal The sanctions applicable to companies person shall constitute the grounds for under the Law on Breaches are fines or sanctions”. The term “official authorised the termination of the licence to carry to represent a legal person” is currently out specific activities. It is expected that not formally defined, although similar this new Law on Breaches will remove terms such as “authorised official of a any inconsistencies or overlapping of company” (which includes “member(s) breaches and liabilities, as is common of the Board of Directors, Executive at the present time. Management team, Executive Director, Head of Financial Department, Chief Separately, given the absence of Accountant, Chief specialist and Secretary administrative liability set for companies of Board of Directors amongst others, who in respect of breaches of anti-corruption participate directly or indirectly in making laws, it should be noted that Article 6.5.2 official decisions of the company, or in of the Anti-Corruption Law of Mongolia concluding agreements and transactions” passed in July 2006 (“Anti-Corruption under the Company Law, and “Person Law”) stipulates a general obligation authorised to represent a company on economic entities and organisations without proxy” (which is only the Executive to define and comply with the rules of Management Team or Executive Director)) business ethics in the private sector. The are used commonly in practice. It is current Anti-Corruption Law, however, expected that further clarity around the does not specify any administrative definition will be available once the new sanctions for private companies – those Revised Criminal Code comes into effect that are embedded in the law refer to in September of 2016. public officials or officials subject to the Anti-Corruption Law only. 48 A review of law and practice across the globe

Does criminal liability extend to >>review and verify the declaration of Is the company legally obliged to foreign companies? assets and income of persons specified co-operate with the prosecution by the Anti-Corruption Law. This is a authorities in the proceedings? The current Criminal Code does not provide general function, and not related to for specific rules regarding whether the investigatory role of the Agency. As stated above, there are no specific corporate criminal liability extends to The Anti-Corruption Law requires rules that deal with procedural matters a foreign company. The general rule specific public officials to declare their and the rights and obligations of the provided by the Criminal Law sets forth income and assets on a regular basis, corporation in a corporate criminal liability that a “person” (general term that applies which is reviewed by the Agency. case. However, the Criminal Procedure to both natural and legal) that has Law generally provides that the court committed a crime within the territory Furthermore, under the Law on shall consider voluntary self-reporting of Mongolia shall be subject to criminal Prevention of Crimes (1997), citizens and active co-operation in recovering liability under the Criminal Law. (individual persons) are obliged to illegal gains of a crime as a mitigating inform the authorities of any information circumstance in imposing a penalty. The Revised Criminal Law sets forth that they possess regarding a crime. a “legal entity” that has committed a Organisations (i.e. companies) do crime within the territory of Mongolia shall not bear the same obligation. What kind of sanctions can be be held criminally liable. The wording imposed on companies? suggests that there is no differentiation The criminal sanctions applicable for between a foreign and a national legal Are the prosecution authorities corporations are: fines; termination of entity in terms of application of the law if legally obliged to conduct a licence to carry out specific activities; the crime was committed on Mongolian criminal investigation into and/or liquidation of the company. territory. There are no further rules corporate wrongdoing? For administrative breaches, the applicable regarding application of the Revised sanctions for corporations are fines and Criminal Code to foreign companies The general rule applies in this case, termination of licence to carry out specific outside of Mongolia. as there is no specific rule of law that pertains to corporate wrongdoing. Under activities. Currently, the fines for crimes the Criminal Procedure Law (2002), range between USD 10,000 and USD Is the company legally obliged to prosecution authorities are required to 400,000, for administrative breaches disclose criminal offences to the accept any complaints or information between USD 100 and USD 50,000, competent prosecution authorities? regarding a crime and to initiate an initial based on the current exchange rate. investigation based on such. However, There is no obligation for private entities prosecution authorities have discretion A specific administrative sanction, to report prohibited conduct by persons in deciding whether to open a criminal for example, is that under the Law on operating in the public sector. However, case investigation based on the initial Procuring Goods, Works and Services by citizens and legal persons may submit investigation or whether to terminate the State and Local Property. If a company complaints, requests or information to initial investigation. participating in a tender has breached the Anti-Corruption Agency. The Anti- the procurement agreement, is in Corruption Agency is established under default of any obligations set forth in the the Anti-Corruption Law and is defined What is the position of the procurement agreement, has provided as an independent, special state defendant company in false information in the pitch documents organisation with the remit to: criminal proceedings? or has been determined by court or by a competent state inspector of having >>promote public awareness of corruption; Since the Criminal Procedure Law has committed a crime of corruption, it not been updated to reflect the corporate is possible for the State Procurement >>conduct operational work and criminal criminal liability amendment to the Inspector to suggest that the company investigations for the purposes of Criminal Law, the current law does not be included on a blacklist. If an entity is discovering and preventing corruption; provide adequate clarity as to what rights registered on the blacklist, it is prohibited and a defendant company has. The new from participation in any Government Revised Criminal Procedure Law, which procurement process for three years. will enter into force on 1 September 2016, A general sanction for breaches of this provides that a legal entity is entitled to the law has been included in the new Law same rights and obligations as a natural on Breaches. person. There are no rights particular to a company outside of the general rule1. Linklaters 49

What is the relevance of an effective While a major novel aspect of these laws compliance system? is the establishment of corporate criminal liability, certain practical issues, such These are matters that have not been as the extent of corporate liability and addressed by the law at all. the specific rights and obligations of a company and the prosecution authorities How are criminal proceedings in criminal proceedings, have yet to be against companies conducted clarified and tested. in practice?

Taking into account the procedural 1. At the time of writing, the Revised Criminal Law draft had not framework in general, it is expected that been made public yet and should not be considered to be deals between the companies and the the final version officially. 2. See OECD, Anti-Corruption Network for Eastern Europe prosecution authorities are not made/ and Central Asia report titled “Anti-Corruption Reforms allowed. Practical examples, however, in Mongolia: Assessment and Recommendations” dated do not exist so far. 18 April 2014.

Likely future scope and development? In a recent report, the OECD recommended, in general terms, that Mongolia establish effective liability of legal persons for corruption criminal offences with proportionate and dissuasive sanctions, including liability for lack of proper supervision by the management which made the commission of the offence possible. According to this recommendation, corporate liability should be autonomous and not depend on detection, prosecution or conviction The OECD [has] of the actual perpetrator. The report recommended ... also suggests that Mongolia consider developing incentives for compliance with that Mongolia this legislation, such as providing that the establish effective existence of an effective anti-corruption compliance programme may provide liability of companies with a defence from liability2. legal persons Subsequently, as mentioned above, for corruption there have been major legal reforms in criminal offences. the criminal and administrative systems. These include the revised versions of the Criminal Code and the Criminal Procedure Law and, for administrative violations, the Law on Breaches amongst others. 50 A review of law and practice across the globe

The Netherlands

Can companies be criminally liable Since a company will always act through for wrongdoing? individuals, the relevant act of that individual must be attributable to the Section 51 of the Dutch Criminal Code company. Only then can the company be (“DCC”) provides that both individuals held criminally liable for the wrongdoing. and legal entities can commit criminal The Dutch Supreme Court has ruled that offences. Before the introduction of this may be the case when: this provision in 1976, Section 15 of the Economic Offences Act (Wet op de (i) the relevant conduct concerns the act Economische Delicten, (“WED”)) was the or omission of a person who, by virtue most important provision regulating the of an employment or other reasons, criminal liability of corporate entities for is working on behalf of the company; economic offences. When the number of companies began to grow rapidly, (ii) the conduct is part of the normal it became necessary to introduce a operations of the company; more general and practical provision (iii) the criminal conduct has been which made the entire DCC applicable beneficial to the company’s business; to companies, i.e. via Section 51 DCC. and/or Under this provision, not only the company but also the person by whose (iv) the company could have prevented authorisation the offence is committed the occurrence of the criminal (opdrachtgever) and/or the person who conduct but did not do so. de facto directs the offence (feitelijk leidinggevende) can be prosecuted1. How far does criminal liability extend? For what kind of wrongdoing can a company be held criminally liable? A company must have been negligent or have a certain degree of intent for it to be Section 51 DCC is a broad provision liable for a crime which is attributed to it. which does not exclude criminal liability of companies for any section. It is obvious The Dutch legislator found it too restrictive that, in practice, companies can only to limit criminal liability of a company only commit certain offences under the general to the conduct of its bodies, directors criminal law. A company prosecuted or managers. In certain circumstances, for unlawful entry of a dwelling or crimes committed by other individual bigamy, for example, is highly unlikely employees will also be attributable to the (if not impossible). On the other hand, company. Whether the criminal conduct of companies can be held liable for the a particular employee is attributable to the typical white collar crime offences such as company itself will depend on (inter alia) bribery of officials, embezzlement, fraud the internal organisation of the company and money laundering. A company may and the duties and responsibilities also be prosecuted as a fellow perpetrator allocated to that employee. For instance, (medeplichtige) of a criminal offence. if the internal organisation of the company guarantees a certain level of control by Furthermore, the WED codifies the the company and it can thus be said that economic criminal laws which may the company could or should have been also be applicable to companies, aware of the actions of its employees, encompassing a wide range of social the criminal conduct committed by its and economic offences as well as employee may be attributable to environmental offences. the company. This will, however, be determined on a case by case basis. Linklaters 51

Does criminal liability extend to What is the position of the foreign companies? defendant company in The DCC does not exclude the criminal criminal proceedings? prosecution of foreign companies for To the extent possible, the rules and conduct in the Netherlands. Pursuant regulations applying to individuals in to Section 2 DCC, the Dutch courts pre-trial investigations and during the trial have jurisdiction when an offence itself are also applicable to companies. has been conducted, even just in part, in the Netherlands. With regard to (human) rights, the tendency is to apply these equally Is the company legally obliged to to companies, (again) to the extent appropriate. The court should assess P r o c e d u r a l r u l e s ... disclose criminal offences to the the purpose of a particular right in order are acknowledged competent prosecution authorities? to decide whether or not it may apply Under the DCC, there is no obligation for to a company. Procedural rules, such to be of such companies to disclose criminal offences as the right to an impartial judge, are importance for committed by it to the competent acknowledged to be of such importance prosecution authorities. for the quality and fairness of a trial the quality and that they equally apply to companies. fairness of a Furthermore, the Supreme Court has ruled Are the prosecution authorities that the safeguards as laid down in Article trial that they legally obliged to conduct a 6 ECHR are applicable to companies as equally apply criminal investigation into well as individuals. Therefore, “the right corporate wrongdoing? to remain silent and not to incriminate to companies. himself” can be invoked by a company. Section 124 Judiciary Organisation Act (Wet op de rechterlijke organisatie) If criminal proceedings are initiated has vested the enforcement of criminal against a company, that company will law solely with the prosecution office. be represented during the trial by, in The prosecution office may at its own principle, (one of) its director(s) (Section discretion decide whether or not to pursue 528 DCPC). This representative cannot prosecution. Section 167, subsection 2, act as a witness during the trial and may of the Dutch Criminal Procedural Code invoke his right to remain silent. Since (“DCPC”) provides that the prosecution the legislator has not provided for the office may refrain from prosecution on representation of a company during grounds based on the public interest. pre-trial investigation, there is an ongoing discussion in Dutch literature whether or Any party directly concerned with the not any representative of a company can decision by the prosecution office to refrain use the right to remain silent during the from prosecution may file a complaint pre-trial process. with the relevant court of appeal, with the request to order the prosecution office to If a company has committed a criminal pursue prosecution (Section 12 DCPC). offence, both the company and the A decision by the court in this regard instructor and/or de facto manager of cannot be appealed. the offence can be prosecuted. These are separate proceedings, in which the outcome of one will not affect the other. The proceedings do not necessarily take place simultaneously. 52 A review of law and practice across the globe

Is the company legally obliged to If a company is convicted of a crime for The maximum amount could furthermore co-operate with the prosecution which the specified fine category does not be higher than EUR 8,000,000, if the authorities in the proceedings? include an appropriate penalty, a fine may company has gained a financial benefit be imposed not exceeding the amount of at least EUR 2,000,000 from non- Derived from Article 14 ICCPR and of the next higher category (Section 23, compliance with the FSA. In that case, (implicitly) Article 6 ECHR, the nemo subsection 7, DCC). There are six fine the maximum amount of the fine could be tenetur principle applies in the categories ranging from a maximum of twice the amount of such financial benefit. Netherlands. This principle, in essence, EUR 405 to EUR 810,000. Additionally, grants the accused a right to be silent pursuant to legislation that entered into Similarly, according to the Financial when questioned. As the safeguards force in 2015, the maximum fine may be Supervision Act (“FSA”) (Wet financieel laid down in Article 6 ECHR apply as high as 10% of a company’s annual toezicht), the Dutch regulator has the to companies as well, it is generally turnover. It is noted that, where an offence authority to impose a designation order acknowledged that companies fall under has been committed by a subsidiary on a company, appoint an administrator, the nemo tenetur principle. As such, they whose policy is determined by the parent or impose a penalty or administrative fine cannot be forced to co-operate with a company, their joint revenues will be taken up to EUR 5,000,000 (Section 1:81 FSA). criminal prosecution. Therefore, certain into account when calculating the fine. This amount will be doubled if the same investigative powers are restricted by this breach was committed less than five years Under the WED, there are in principle principle. Please note that the investigative previously. The maximum amount may three types of sanctions: (i) pecuniary powers as outlined under Sections 18-23 be increased up to EUR 20,000,000 sanctions (e.g. a fine or confiscation WED (e.g. the right for investigating where this is required under binding of the proceeds of criminal conduct); officers to seize objects, review documents EU law. However, the amount of the (ii) corporate sanctions (e.g. the dissolution and enter premises) are in principle not fine will be limited to 10% of the net of the company, deprivation of rights restricted by Article 6 ECHR. turnover of the preceding financial year and publication of the punishment); and in respect of breaches of the information In administrative enforcement rather (iii) freedom sanctions (which are not obligations of issuing institutions and of than criminal investigations, however, applicable to companies). the reporting requirement in respect of the regulatory authorities may demand During the criminal trial, only the court interests in issuing institutions, where this the active involvement of a company and has the right and the discretion to is higher than two times the applicable companies may be fined for refusing to determine the degree of the sanction maximum fine. This percentage may do so. Pursuant to the Act establishing given the circumstances and within be increased up to 15% where this is the Authority for Consumers and Market the limits established by applicable required by binding EU law. Alternatively, (Instellingwet Authoriteit Consument en statutory provisions. The existence the maximum amount of the fine could Markt), for example, a company can of sufficient control mechanisms or be three times the amount of the financial be fined a maximum of EUR 450,000 compliance systems (see below) could, benefit the company has gained from if it does not provide the documents for instance, be of relevance when the non-compliance with the FSA. The Dutch requested by the authority under that Act. sentence is determined, provided that regulator is obliged to publish the fact the judge considers it appropriate in that a fine has been incurred, unless What kind of sanctions can be the circumstances. publication would violate the purpose of supervision carried out by the regulator. imposed on companies? In addition, non-criminal sanctions may Companies are subject to all the penalties apply. Breaches under the General Administrative Law Act (Algemene wet What is the relevance of an effective and measures set out in the relevant compliance system? legislation and applicable to individuals bestuursrecht) as well as under the to the extent that these penalties are Competition Act (Mededingingswet) by In general, having a compliance system effective and appropriate in relation to a company may result in a penalty or in place not only mitigates the risk of companies. Hence, a financial penalty is administrative fine. Similarly, according wrongdoing occurring but simultaneously the main penalty available for companies. to the Financial Supervision Act (“FSA”) mitigates the risk that any wrongdoing Consequently, if the only sanction provided (Wet financieel toezicht), the Dutch may be attributable to the company. by the law is imprisonment, the court may regulator has the authority to impose a Where a company has set control not be able to impose a penalty on the designation order on a company, appoint mechanisms in place to avoid criminal company at all. an administrator, or impose a penalty or conduct by its employees, it can be administrative fine up to EUR 4,000,000 considered to have taken sufficient steps (Section 1:81 FSA). This amount will be not to have “accepted” the criminal doubled if the same breach has been behaviour of others in its organisation. committed less than five years previously. Linklaters 53

In this way, the company can raise the bar This development is intertwined with at which it will be deemed to be liable for the recent focus on the prevention of any wrongdoing. However, the company financial crimes (see below). may still be found liable depending on the other circumstances of the case. Likely future scope and development? How are criminal proceedings against companies conducted New legislation amending the DCC, the DCPC and the WED, with a focus on in practice? financial criminality, entered into force Pursuant to Section 74 DCC, the Public on 1 January 2015 (Wet verruiming Prosecutor may, before the start of a trial mogelijkheden bestrijding financieel- and under certain conditions, offer the economische criminaliteit). This legislation defendant an out-of-court settlement. aims to promote a more responsive These conditions may include (for and efficient framework for financial instance) the payment of a fine up to criminality, tightening sanctions and the maximum amount set by law for increasing the possibility of detection, Tens of thousands the relevant crime and/or deprivation of prosecution and adequate punishment the proceeds or advantages from that for such offences. In addition, it includes of settlements crime and/or compensation of losses provisions expanding the criminalisation are concluded by incurred. Upon fulfilment of the conditions of certain conduct, i.e. the abuse of laid out by the Public Prosecutor, the public funds, money laundering and the prosecution wrongdoing may no longer be prosecuted. offences relating to official corruption and authority every The prosecution will decide to offer a corruption in the private sector. would-be defendant such a settlement Continuing and systematic infringements y e a r. in appropriate circumstances. Any such of the WED will carry increased penalties settlement does not involve the admission pursuant to this new legislation. of guilt or the approval of the court, it is Acknowledging that the severity of the merely a consensual agreement with the penalties available is limited in comparison view of avoiding prosecution. to the financial capacity of companies, it introduces a flexible cap for fines Tens of thousands of settlements are in respect of legal entities, increasing concluded by the prosecution authority the maximum fine up to 10% of a every year. An increasing tendency company’s annual turnover instead of towards settling larger criminal (financial) the EUR 810,000 noted above. cases can be derived from this course of conduct. Examples include a settlement However, as most of the proceedings of EUR 70,000,000 which was agreed in against companies relating to criminal 2010, in relation to an extensive property activities are settled by agreement with the fraud case involving several legal entities, public prosecutor with such settlements a settlement in 2012 when Ballast Nedam not being limited to the statutory fines, settled for EUR 17,500,000 regarding it is not clear whether the flexible fine unauthorised payments made to foreign system will have a significant impact on intermediaries and a settlement between the criminal prosecution of companies. the public prosecutor and SBM Offshore for USD 240 million (consisting of a fine of USD 40 million and confiscation 1. The de facto director of an offence will have been actively of unlawfully obtained gains for involved in the offence and would have had the authority USD 200 million). More recently, in to prevent and/or stop the offence. These criteria were February 2016, the public prosecutor re-affirmed by the Dutch Supreme Court in a judgment of 26 April 2016 (ECLI:NL:HR:2016:733). reached the highest settlement publically known in the Netherlands with telecom company VimpelCom Ltd., amounting to USD 397,500,000, in relation to corruption. 54 A review of law and practice across the globe

Papua New Guinea

Can companies be criminally liable A corporation cannot be imprisoned, for wrongdoing? but the Criminal Code at Section 19(1)(b) permits a person liable to imprisonment In given circumstances, companies to instead be sentenced to pay a fine. can be held liable for criminal acts in It is not clearly established how the Papua New Guinea (“PNG”). Whilst courts in Papua New Guinea would the term “person” is undefined in the deal with offences where criminal intent Criminal Code Act 1974 (“Criminal is a necessary element of the offence. Code”), the Interpretation Act (Chapter However, corporations operating in Papua 2) (“Interpretation Act”) recognises New Guinea have been found guilty of companies as legal “persons”. strict liability offences and ordered to pay Companies are therefore subject to the a fine. There are numerous statutes in general provisions in the Criminal Code, Papua New Guinea which set out these including those that regulate bribery, offences (e.g. the Environment Act 2000, corruption, secret commissions and the Mining (Safety) Act 1977 and the improper gifts in the public and private Investment Promotion Act). sectors. Companies are also expressly subject to the Proceeds of Crime Act 2005, which prohibits money laundering How far does criminal liability by both natural persons and corporations extend? and the Criminal Code (Money Laundering Where liability depends on corporate and Terrorist Financing) Act). The Anti- intention, this must be established on Money Laundering and Counter-Terrorist the part of the “directing will and mind” Financing Act has recently come into of the corporation. This will usually be operation and also expressly applies the directors. to corporations. However, a company may be found liable In practice, there are very few reported in criminal law for the actions of an agent, prosecutions against corporations and employee or contractor if the company little judicial treatment of corporate has the right to control that person and There are very criminal liability. they are acting within the scope or course few reported of their employment1. In Bromley and For what kind of wrongdoing can a Manton Pty Ltd v Eremas Andrew, the prosecutions against company be held criminally liable? Papua New Guinea National Court of corporations and Justice (“National Court”) held that: To attribute liability to a corporate entity little judicial the necessary elements of the applicable “...if responsibility has been delegated to treatment of offence must be established. In criminal an employee by a company which involves law, the requirements of each offence day to day compliance with particular corporate criminal may include both actus reus (the physical laws, the requirement of those laws to liability. element of an offence) and mens rea be obeyed lies clearly within the scope (the mental element of an offence). of his employment and his failure is that Some crimes do not require proof of a of his employer. After all, it is somewhat mental element and are called crimes of unreal for a company, simply because strict liability. it has instructed its employees to obey a particular law, to escape liability to In general, the Criminal Code will directly prosecution by blaming its employees.”2 hold directors and employees liable as individuals for their criminal acts and omissions. However, in light of the broad definition of “person” as including corporations in the Interpretation Act, it is technically possible to also hold the corporation criminally liable for offences under the Criminal Code. Linklaters 55

In this case, the National Court found that While the Criminal Code does not contain Thus, a foreign company that is registered the relevant employee was “in control provisions dealing explicitly with the to carry on business in PNG or has a of the ‘effective management’ of the criminal liability of companies, there are resident agent appointed under the PNG appellant’s business” and as such was a number of laws that contain provisions Companies Act may be subject to the the directing mind for the purposes of that apply specifically to corporations. provisions of the Criminal Code in the assessing attribution. For example, the Proceeds of Crime Act same way as PNG incorporated companies, 2005 provides for the manner in which the provided the offence in question has The Interpretation Act extends liability “state of mind” of a corporation may be occurred wholly or partly in PNG. in the context of “aiders and abettors”, established. To that end, the Proceeds of where it provides in Section 23 that: Crime Act provides at Section 171: To be amenable to service of PNG process, the foreign company would be required to “A person who aids, abets, counsels or “Conduct engaged in for a body have a registered office in PNG, or for a procures, or by an act or omission is in corporate is taken for this Act, to have director to be served within PNG. any way directly or indirectly concerned been engaged in by the body corporate in, the commission of an offence against if it was engaged in – or contravention of any law shall be Is the company legally obliged to deemed to have committed the offence (a) by a director, servant or agent of the disclose criminal offences to the or contravention, and is punishable body corporate within the scope of his competent prosecution authorities? accordingly.” actual or apparent authority; or It is not an offence under the Criminal The Criminal Code goes further to provide, (b) by another person, if – Code if the company fails to report a at Section 7, that where an offence is suspicion of an offence. committed, in addition to the person who (i) it was done at the direction or with However, where any person assists actually committed the offence, each of the consent or agreement, whether another who is, to their knowledge, guilty the following people will also be liable: expressed or implied, of a director, servant or agent of the body of an offence, in order to enable him to (i) every person who does or omits to do corporate; and escape punishment, that person is liable any act for the purpose of enabling or as an accessory after the fact and guilty of aiding another person to commit the (ii) giving the direction, consent or a crime under Section 10 of the Criminal offence; and agreement was within the scope of Code. Particularly, Section 390 of the the actual or apparent authority of Criminal Code specifically requires that (ii) every person who aids another person the director, servant or agent.” anyone aware of an unlawful killing has in committing the offence; and a duty to report the killing and it is an The Proceeds of Crime Act goes further to offence not to do so. (iii) any person who counsels or provide at Section 171 (2) that in order to procures any other person to commit establish the “state of mind” for conduct the offence. engaged in by a body corporate, it is Are the prosecution authorities sufficient to show that a director, servant legally obliged to conduct a Accordingly, a company may be liable or agent of the body corporate who criminal investigation into for the commission of an offence where engaged in the conduct within the scope corporate wrongdoing? an agent, employee, officer or contractor, of his or her actual or apparent authority who is “the directing mind and will of had that state of mind. The Royal PNG Constabulary (“RPNGC”) the corporation”, has aided a third party is the body responsible for investigating to commit an offence3. Moreover, the suspected or actual criminal conduct. directors and other officers of a company Does criminal liability extend to While the Criminal Code does not expressly that were involved in the commission of an foreign companies? refer to it, as a matter of practice the RPNGC does not have unlimited resources offence, along with any other individuals Section 12 of the Criminal Code sets and does make judgements as to which that were involved in committing the the territorial application of the Criminal cases have priority. offence, may be liable as individuals, Code and provides that the Criminal Code either directly or as aiders and abettors of applies to every person in PNG at the time the company. of the doing of an act or omission that constituted an offence. The Criminal Code also applies in respect of offences where elements of the offence occurred in PNG and elsewhere in the world. 56 A review of law and practice across the globe

Section 4 of the Public Prosecutor (Office In a prosecution for a strict liability For instance, under the Criminal Code and Functions) Act (Chapter 338), provides offence, the prosecution need only prove there is no statutory upper limit for fines in that the Public Prosecutor “shall control the facts constituting the offence and cases of bribery of certain public officials, and exercise the prosecution function of need not lead evidence of the intention including judges and public servants. the State” and4: of any individual. Guilty pleas generally result in imposition “shall, in his absolute discretion, give However, in an offence with a mental of a lower fine than otherwise. consent or refuse consent, to proceed with element, evidence of the intention of the the prosecution of any criminal offence individuals who represent the “directing There are no PNG cases of which we are where his consent is by law required; …” will and mind” of the corporation will aware that have resulted in convictions for need to be adduced. white collar crimes.

What is the position of the The Criminal Code modifies the applicable defendant company in punishment where the perpetrator is What is the relevance of an effective criminal proceedings? a corporation, typically by increasing compliance system? the amount of the fine. Where the only Prosecuting authorities are very likely to Section 37 of the Constitution of PNG punishment available for an offence sets out the rights of every “person” take into account whether a company is imprisonment, there is arguably an can prove that it has sufficient control to the protection of the law and provides, “implied” indication that a company among other things that: mechanisms in place to prevent wrong- cannot commit the offence. doing when considering what action >>every person has the right to the full to take. The impact of a robust and protection of the law (Constitution, Is the company legally obliged to appropriately tailored compliance system Section 37(1)); and co-operate with the prosecution can be significant. authorities in the proceedings? Conversely, inadequate compliance >>a person charged with an offence shall structures may go towards a finding that be presumed innocent until proved Where the corporation is the defendant the company expressly, tacitly or impliedly guilty according to law, but a law may in criminal proceedings, there is authorised or permitted the commission place upon a person charged with an no requirement for a company to of an offence. offence the burden of proving particular co-operate with prosecution authorities facts which are, or would be, peculiarly in the proceedings, although guilty within his knowledge (Constitution, pleas generally result in reduced fines. How are criminal proceedings Section 37(4)(a)). against companies conducted Failure to disclose that a person has in practice? Companies in PNG are recognised committed an offence, however, may as having separate legal personality. itself result in prosecution, as an Generally, the direction of proceedings As noted above, pursuant to the accessory after the fact. against a company will be managed by the prosecuting body. As noted in Section 6 Interpretation Act, “person” is defined to Under other legislation, companies are above, criminal matters are the province include “a corporation sole” and “a body required to provide information and of the RPNGC and the Public Prosecutor, politic or corporate”. assistance to regulators, such as under although there is very little case law the Income Tax Act 1959, the Companies The Criminal Code does not provide involving criminal proceedings against Act 1997 or the Independent Consumer for the manner of prosecution of a companies. Furthermore, there is no and Competition Commission Act 2002. corporation and there is no requirement precedent of which we are aware involving to identify an individual perpetrator an agreement between a company and to be able to prosecute a company. What kind of sanctions can be the prosecution authorities/criminal court In cases where there is an individual imposed on companies? to terminate criminal proceedings. perpetrator identified, it depends on the The penalties for companies that circumstances and the discretion of the Section 130 of the Criminal Code is breach provisions of the Criminal Code prosecuting authority whether the trial relevant, which makes it an offence to or the Proceeds of Crime Act 2005 against the individual and the company settle a prosecution without the consent vary and include fines as well as would be conducted separately or jointly. of the court in which it is brought. confiscation of the proceeds of a crime. In theory, there is no maximum sanction applicable for companies as a number of criminal offences carry a penalty of an unlimited fine. Linklaters 57

Likely future scope and In July 2015, the PNG Parliament passed development? the Anti-money Laundering and Counter- Terrorist Financing Act (“AML/CTF Act”) Over the past few years the government of and the Criminal Code (Money Laundering These new PNG has implemented a number of anti- and Terrorist Financing) (Amendment) Act provisions paint corruption measures, although they have 2015 (“Criminal Code amendments”). not been aimed specifically at tightening a clearer picture up the sanctions against companies. In Section 5, the AML/CTF Act defines “person” to mean both a natural person of the manner in On 16 July 2007, the government ratified and a body corporate. While the Criminal which corporations the United Nations Convention Against Code does not define “person”, the Corruption. Following this, in 2011, AML/CTF Act does provide that the will be dealt with a National Anti-Corruption Strategy Criminal Code applies to all offences in some cases and was approved pursuant to which the under the AML/CTF Act, which indicates government established what essentially that companies will clearly be liable may indicate the became the country’s anti-corruption for criminal offences related to money direction that watchdog, Task Force Sweep, also in 2011. laundering or terrorist financing. the PNG Government One of the key anti-corruption platforms The AML/CTF Act also contains a may move in. of the PNG government has been the provision that is almost identical to the creation of an Independent Commission provisions of the Proceeds of Crime Act Against Corruption (“ICAC”). A significant necessary to determine the “state of step toward achieving this milestone mind” of a corporation that may have was reached in February 2014, with the engaged in conduct prohibited by the country’s Parliament unanimously passing AML/CTF Act. legislation introduced by Prime Minister Peter O’Neill to amend the country’s The AML/CTF Act and the Criminal Code Constitution and provide for the creation amendments also introduce separate of, and basic framework for, the ICAC. penalties for individuals and corporations. An Organic Law to provide more detail on the powers and functions of the ICAC has These new provisions paint a clearer been presented in Parliament but has not picture of the manner in which yet been passed. corporations will be dealt with in some cases and may indicate the direction In addition to this, the Chief Justice of the that the PNG Government may move in, National Court, Sir Salamo Injia, launched in relation to the prosecution of white a new specialised court track for fraud and collar crimes, including bribery, fraud and corruption. The new track was established corruption-related offences. under the Criminal Practice (Fraud & Corruption Related Offences) Rules 2013, which were made on 4 November 2013. 1. Heduru Transport Pty Ltd v Gairo Vegoli (Unreported) The rules apply to offences involving theft, Judgment N 99 of 24 June 1977. fraud, dishonesty, misappropriation of 2. Bromley and Manton Pty Ltd v Eremas Andrew (1978) property and corruption and are intended PNGLR 498. 3. Heduru Transport Pty Ltd v Gairo Vegoli (Unreported) to provide for the quick, fair and efficient Judgment N 99 of 24 June 1977. disposition of such cases. 4. Public Prosecutor (Office and Functions) Act (Chapter 338) Sections 4(1)(g) and (4(1)(ga). In addition to the recent anti-corruption and fraud related developments there have also been changes in legislation indicating an increased readiness to hold corporations liable for a variety of offences. 58 A review of law and practice across the globe

People’s Republic of China

Can companies be criminally liable If a person is found to have incorporated for wrongdoing? a company for the sole purpose of committing a crime or the company’s Both companies and individuals employed primary activity is to commit crimes in or engaged by those companies may face the PRC, only that person, and not the criminal liability in the PRC. company, may be criminally liable for the unlawful conduct. Criminal liability for companies was first introduced in the PRC under the Customs Law of the PRC of 22 January 1987. Does criminal liability extend to The relevant sections were subsequently foreign companies? repealed in 1997, when the Criminal Law The Criminal Law adopts the principle of the PRC (“Criminal Law”) introduced of territorial jurisdiction. A company a specific statutory regime in respect of incorporated under the law of any such liability. jurisdiction other than the PRC may be held criminally liable if it commits a For what kind of wrongdoing can a corporate offence set out in the Criminal company be held criminally liable? Law within the territory of the PRC. A criminal offence is deemed to have A company can be held criminally liable been committed within the PRC if either if it is found to have committed one of the the act or consequences of the criminal offences expressly set out in the Criminal offence take place within the PRC. There is an Law. Other than terrorism, threats to increased scrutiny state security and severe environment pollution, these offences mostly relate to Is the company legally obliged to of, and enforcement white collar financial crimes which seek disclose criminal offences to the against, companies to make an unlawful economic gain, competent prosecution authorities? such as corruption, embezzlement, in the PRC for tax evasion, fraudulently or dishonestly Upon becoming aware of the facts of a crime or a criminal suspect, a company criminal liability creating corporate records or inducing investment in companies. or individual has a duty to report the in an ongoing case or provide information to the public A company may incur criminal liability security authority, procuratorate or court nationwide crackdown where it acts at the direction of, and/or its under Article 108 of Criminal Procedure on corruption. acts are performed directly by, a person Law of the PRC. However, failure to in charge of it or other personnel who are report suspicious circumstances does directly responsible for the company. In not result in criminal liability. When the each case it must be intended to gain an court, procuratorate and public security unlawful advantage for the company. authority exercise their right to collect evidence from a company or individual, How far does criminal liability there is an obligation to co-operate with the authorities’ investigation and truthfully extend? provide evidence. A company may be held criminally liable for crimes committed by a person in Are the prosecution authorities charge of the company or other personnel legally obliged to conduct a who are directly responsible for that company. The person need not be a criminal investigation into senior executive, nor is it required by law corporate wrongdoing? that the person who committed the crime In normal circumstances, the public is an employee of the company, as long as security authority (which is the equivalent that person is in charge of the company or of the police in the PRC) should conduct directly responsible for it. However, there a criminal investigation into a company are no statutory examples as to who such which has allegedly committed a crime. persons may be. Linklaters 59

In the PRC, criminal investigations are What kind of sanctions can be What is the relevance of an effective usually undertaken by the public security imposed on companies? compliance system? authority which will submit the case to the procuratorate for prosecution. A fine is the only type of criminal penalty Adequate compliance structures The exception is certain cases where that may be imposed on a company found should, in practice, help a company to a company bribes a PRC government criminally liable under the Criminal Law. monitor and mitigate the risk of criminal official or a PRC state-owned entity, in The confiscation of unlawfully obtained activity occurring within the company. which case criminal investigations will property and/or unlawfully gained profit However, whilst a court would consider be conducted directly by the procurator. may only be imposed on convicted the existence of adequate or inadequate Once a case is submitted to or taken up individuals. However, there is no limit on compliance structures when exercising its by the procurator, it will use its discretion the level of fine imposed on companies discretion in rendering a judgment, there to determine, within a statutory set of except that, according to Article 52 of the is no guidance on the extent to which rules, whether the alleged crime should Criminal Code of the PRC, the amount adequate compliance structures would be prosecuted. of the fine shall take into account the mitigate the risks of being prosecuted circumstances of the crime. and fined or how the lack of such would enhance the risk. What is the position of the In addition to criminal penalties, there defendant company in are five types of sanctions set out under How are criminal proceedings criminal proceedings? the Law of the PRC on Administrative Penalties that may be imposed on against companies conducted A defendant company has the same companies, namely: disciplinary warnings; in practice? rights as an individual in criminal fines; confiscation of unlawfully obtained While there has been speculation in proceedings, including legal representation property; suspension of business and social networking forums about deals or and a right to receive compensation in revocation of a regulatory permit or licence. negotiations between companies and cases where the authorities wrongfully Also, if an administrative organ imposes the prosecution authorities, there is no exercise their powers. fines on a company which is later convicted statutory or other formal framework for this of a crime and fined by a court, the To convict a company of a crime, an to occur as in certain other jurisdictions. obligation to pay those administrative fines individual perpetrator (e.g. a member of If, however, a defendant and its victim can be offset against the criminal penalty. the company’s management team) must reach a settlement such as payment of be a joint defendant under the procedures The implementation of control mechanisms a compensation, the procuratorate may prescribed by the Criminal Procedure and compliance systems is neither a choose not to prosecute the defendant or Law, because it is the presence of the valid defence to criminal liability nor a may recommend a more lenient sentence act or omission of the individual in the mitigating factor to be considered by the is applied by the court. name of the company which forms procuratorate under the Criminal Law or a component of the alleged crime the prosecution standards issued by the Likely future scope and committed by the company. PRC courts. However, a court is obliged development? to impose a mitigated penalty where it Is the company legally obliged to finds that a company has discontinued the There is an increased scrutiny of, and co-operate with the prosecution crime, surrendered itself to the authorities enforcement against, companies in the PRC for criminal liability in an ongoing authorities in the proceedings? and provided a truthful statement of its crime, exposed others’ crimes or provided nationwide crackdown on corruption. The Criminal Procedure Law provides for important information on those crimes Officials are keen to be, and to be seen an express duty of companies to co-operate or acted only as an accomplice or been to be, more proactive in punishing such with the authorities. Such co-operation coerced to participate in the crime. offences. Related to this government may result in a mitigated punishment or, In practice, a judge may, at his or her initiative, PRC administrative and criminal in cases where the impact of the crime is discretion, give a mitigated penalty to the regimes are understood to be currently minimal, an exemption from punishment company if an individual defendant who is under review by the government and subject to the court’s discretion. representing a company confesses to the relevant authorities, in particular in crime and shows genuine remorse during connection with the execution, auditing the trial. and accountability of the activities of PRC state-owned enterprises. 60 A review of law and practice across the globe

Poland

Can companies be criminally liable How far does criminal liability for wrongdoing? extend? Under Polish criminal law, only an A company may be held liable for individual can be prosecuted for and offences committed not only by its senior convicted of an offence. Polish criminal executives but also by other persons law does not recognise crimes that can specified in the Liability Act. In general, be committed by a legal entity. the list of persons whose offences may lead to quasi-criminal liability of However, a legal entity, including a a company is very broad. It includes company, may incur a specific type of managers, directors, proxies, accountants, liability which can be described as a tax advisors, employees and virtually every “quasi-criminal liability” under the Act person acting on behalf of the company, of 28 October 2002 on the Liability of provided that the company had knowledge Collective Entities for Acts Prohibited or ought to have had knowledge of the Under Penalty, as amended (“Liability offender’s actions. Act”). Under the Liability Act, a company may be held liable for specific types of More specifically, Article 3 of the Liability punishable criminal or fiscal offences Act provides the following list of persons committed by its employees after who may incur company liability: (i) a 28 November 2003. person acting on behalf of the corporate entity or in its interests and within the For what kind of wrongdoing can a scope of his powers or duty to represent the corporate entity, making decisions company be held criminally liable? for it and exercising internal control, or Article 16 of the Liability Act sets out a as a result of an abuse of such powers list of offences that may result in quasi- (“Manager”)1; (ii) a person authorised criminal liability of a company. This to act by a Manager as a result of the exhaustive catalogue consists of crimes Manager’s abuse of power or oversight; specified in the Polish Criminal Code of (iii) a person acting on behalf or in the 6 June 1997 (“PCC”) and other legal interests of the corporate entity with the acts and includes, amongst other things, consent or knowledge of a Manager; or bribery, fraud, an abuse of trust and (iv) a sole trader being directly involved in certain fiscal offences. a business relationship with the company in pursuit of a goal permitted by the law. Pursuant to the Liability Act, a company may be held liable for an offence Does criminal liability extend to committed by an individual that has resulted (or may have resulted) in a foreign companies? benefit for the company, even if such Yes. Foreign entities may also incur liability benefit is non-pecuniary However, before under Article 2 section 2 of the Liability a company can be found liable, an Act. The circumstances in which a foreign individual must first have been convicted entity may be liable under the Liability Act of the offence by a court, as set out are the same as for Polish entities. in the Liability Act (Articles 3 and 4). The potential criminal liability of the legal However, where an employee of a foreign entity is therefore secondary, yet separate, company’s Polish subsidiary commits a to the liability of the individual who criminal offence incurring liability under committed the crime. the Liability Act, it is the Polish subsidiary that will be held liable rather than its non- Polish parent. Linklaters 61

Is the company legally obliged to What is the position of the disclose criminal offences to the defendant company in competent prosecution authorities? criminal proceedings? There is no such obligation resulting In criminal or criminal fiscal proceedings from the Liability Act. However, the against an individual for an offence Fiscal Penal Code of 10 September where it may reasonably be suspected 1999 (“FPC”) provides that an offender that a company benefitted or could (whether they be a corporate or an have benefitted, whether financially individual) will not be subject to a of otherwise, from the offence, the penalty for a fiscal offence or a fiscal company may, no later than the close A company may be transgression, provided that they report of first instance proceedings, appoint the unlawful conduct to the prosecution a representative in the proceedings. held liable for authority, disclosing the relevant The company’s representative may not be offences committed circumstances of the conduct and, in the individual against whom the criminal particular, identifying any other persons action or criminal fiscal action has been not only by its involved in its committal (Article 16 FPC). brought (Article 21 of the Liability Act). senior executives In such court proceedings, after declaring but also by other Are the prosecution authorities of the attendance of such a representative, the company may benefit only from those persons specified in legally obliged to conduct a rights established in the Polish Code criminal investigation into of Criminal Procedure of 6 June 1997 the Liability Act. (“PCCP”) as specified in Article 21a of corporate wrongdoing? the Liability Act2. The court may hear the Prosecution of offences may be classified company’s representative as a witness. into three groups: (i) offences prosecuted However the company representative has ex officio where the prosecution authorities an implied right to decline testimony. are obliged to institute proceedings; (ii) offences which require a petition of the In relation to proceedings involving aggrieved party in order to be prosecuted the alleged quasi-criminal liability of a by the prosecution authorities; and company, the provisions of the PCCP (iii) offences which can only be prosecuted will apply, save for specific provisions in a private prosecution brought by the regarding the private prosecutor, civil aggrieved party. plaintiff, social representative and pre-trial procedure (Article 22 of the Liability Act). According to Article 27 of the Liability Act, proceedings regarding the liability of a Since the potential quasi-criminal liability company are instituted at the petition of of a legal entity is ancillary yet separate the prosecutor or the aggrieved party. In from the liability of the individual who cases where the liability of a company is committed the crime, quasi-criminal founded on an offence defined by the law proceedings against a company as an unfair trading practice, proceedings may either be run separately from or may also be commenced at the petition of concurrently with the proceedings of the President of the Office of Competition the individual. and Consumer Protection. Usually the proceedings are run separately, with those against the individual taking place first, since the proceedings against the legal entity cannot be completed before the offence of the individual has been confirmed by a final court decision. 62 A review of law and practice across the globe

Is the company legally obliged to The Liability Act provides that the court co-operate with the prosecution shall take into account the gravity of the authorities in the proceedings? irregularities in the supervision procedures within the company when determining a A company does not have a duty to monetary penalty (Article 10 of the Liability co-operate with the prosecution authorities Act). Also, where it can be shown that the in the proceedings, but the court may company did not benefit from an offence The relatively take any voluntary co-operation into for which it is held liable, the court may small number of consideration when deciding upon the decide not to impose a fine but order only sentence. It may therefore potentially forfeiture, prohibition of certain activities cases to date result in a more favourable sanction for (such as advertising, utilising public or dealing with quasi- the company. foreign organisations aid or applying for public tenders), or publication of the criminal liability What kind of sanctions can be judgment (Article 12 of the Liability Act). of companies Alternatively, both a fine and one or more imposed on companies? of these penalties may be imposed. Other has not allowed A fine ranging from PLN 1,000 to than these provisions, the Liability Act for any common PLN 5,000,000 is the main penalty for contains no provisions that would permit offences committed by legal entities the mitigation of the level of penalty. practice to be (Article 7 of the Liability Act). Sanctions other than criminal (quasi- established with The fine may not exceed 3% of the criminal) may also be specified by regard to criminal entity’s revenue in the financial year statutes other than the Liability Act. in which the offence was committed. proceedings against When determining the fine, the court For example, under the 2004 Polish companies. must take into account several factors, Public Procurement Law (“Polish PPL”), the most important being the company’s a company could be excluded/debarred financial situation, the social implications from future public tenders if individuals of the penalty and its effect on the convicted for specified types of offences company’s future. The court also has were responsible for managing its affairs, full discretion to evaluate other factors i.e. if they were members of its managing that may prove material in the specific body at the time of bidding in a public case, such as co-operation in uncovering tender. A conviction for the following the offence or actions taken to mitigate types of offences justifies debarment the damage. under the Polish PPL: (i) an offence committed in connection with contract In practice, the fines imposed on award proceedings; (ii) an offence companies under the Liability Act range against the rights of persons performing from PLN 1,000 to PLN 5,000 on average paid work; (iii) an offence against the and the highest fine imposed, based environment; (iv) bribery; (v) an offence on available sources, is PLN 20,0003. against commercial trade; (vi) any other In addition, the forfeiture of any proceeds offence committed to obtain a material or benefit derived from the criminal activity benefit; (vii) a fiscal offence; and/or is often imposed under the Liability Act (viii) an offence of participation in an (pursuant to Article 8). The Liability Act organised group or in an association does not provide any maximum cap on whose purpose is to commit an offence the amount that may be ordered to be or fiscal offence (Article 24.8 Polish PPL). forfeited. Furthermore, the court may prohibit the company from bidding for public contracts, running promotions or benefiting from certain grants. The court may also decide to make the judgment public (Article 9 of the Liability Act). Linklaters 63

Also, under the FPC, a company may How are criminal proceedings incur subsidiary liability where the person against companies conducted with primary responsibility (for example, in practice? the individual acting on the company’s behalf) does not pay any penalty The relatively small number of cases to ordered against them, if the company date dealing with quasi-criminal liability has benefited or could have benefited of companies has not allowed for any in any way from the unlawful conduct common practice to be established with committed by the individual (Article 24.1 regard to criminal proceedings against FPC). In addition to this subsidiary liability, companies. It should be noted that under a company would also be ordered to Polish law it is not possible for companies disgorge the benefit obtained to the and the prosecution authorities to enter State (Article 24.5 FPC). into “deals” that would prevent the instigation of criminal proceedings. What is the relevance of an effective compliance system? Likely future scope and development? To protect itself against liability for an offence committed by its Manager, a In practice, the Liability Act has been company must prove that it exercised due engaged only on rare occasions. diligence in preventing the offence from There are no indications that would being committed. To do that the company suggest a major change in this trend will need to show that its organisation in the near future. Neither is the topic and the way it is run provided safeguards of tightening up sanctions connected against that Manager committing the with criminal liability against companies offence. The existence of adequate currently subject to debate. compliance procedures and control systems may therefore be considered by courts when deciding whether the required 1. The statutory basis for liability was modified through due diligence was exercised by the amendments to the Liability Act that came into force on company (Article 5.2 of the Liability Act). 14 November 2011. Due to the legal loophole that existed before this date, the company did not have a due diligence obligation with regard to running the company in a manner If an offence is committed by a person who that should prevent an offence by its Manager. As a is not a Manager in the company, it is consequence, the Polish Supreme Court ruled on several occasions that the company cannot be held liable for offences sufficient to prove that due diligence was committed by its Manager prior to 14 November 2011. exercised in the hiring or supervision of that 2. These rights include, inter alia, access to criminal person (Article 5.1 of the Liability Act). proceedings, files and rights, including: to request evidence; to question a witness; to participate in a hearing for It must be noted, however, that there are conditional termination of proceedings; to participate in a hearing regarding voluntary submission to criminal liability; no (more) specific criteria provided in to participate in a main criminal case hearing; to participate statute that would indicate what elements in evidence presented out-of-court; to have a final word in a case; to request written grounds or a judgment and receive are to be assessed by the court in order it; and to file an appeal from a judgment or challenge other for the company to exculpate itself. court decisions. Moreover, there is insufficient case law 3. As reported under Supreme Court file no. V KK 128/12, available to identify any patterns in the published in Legalis No. 517582; please note that since the Supreme Court annulled the judgment imposing the fine and reasoning of Polish courts when it comes returned the case for re-examination, we are not aware of to the defences a company can use to whether the fine was finally adjudicated. protect itself from liability for the offences of its Managers or employees. 64 A review of law and practice across the globe

Portugal

Can companies be criminally liable that the crime has been allowed to occur for wrongdoing? due to a breach of any duty of control or supervision of the former. Although the existence of corporate criminal liability in Portugal can be traced For these purposes, the company’s back to 1984, it was not until 2007, corporate bodies (órgãos) and any with the approval of Law no. 59/2007 of attorney acting on behalf of the company, 4 September, that it was established in the as well as any other person who controls Portuguese Criminal Code (“General Law”). the company’s activities to any extent (which may include both top and middle- For what kind of wrongdoing can a level management), will be considered to hold a position of authority within the company be held criminally liable? company. The Portuguese Constitutional Under Portuguese law, a company may Court has already ruled that companies only be held criminally liable if a specific can also be held liable for crimes rule so provides. Where no such provision committed by de facto directors. exists, only individuals may be held liable However, in the case of tax crimes and for crimes. crimes against the economy and public Crimes for which companies can be health, only the actions of senior executives held liable under the General Law relate (that is, those who hold a position on to white collar crimes, crimes against the company’s corporate bodies) will be property, crimes against physical and attributable to the company. It was not until moral integrity and environmental crimes. 2007 [that corporate Finally, as a general rule, a company Apart from the General Law, there are will not be criminally liable for conduct criminal liability] some specific legal provisions which committed by an individual acting in was established provide for companies to be held liable for breach of a direct order or an instruction criminal offences, such as crimes against given by a person with the authority in the Portuguese the economy and public health, crimes to do so. Criminal Code. compromising the security of computer data, systems or communication networks, Does criminal liability extend to tax crimes (including tax fraud, tax evasion and embezzlement), corruption crimes foreign companies? relating to international commercial and When determining whether Portuguese private activities, crimes against the social law applies to a given crime, the General security system, terrorism crimes (such Law does not distinguish between foreign as terrorism financing), crimes relating to and national companies but rather illegal immigration, crimes against industrial whether the crime has been committed property rights and sport-related crimes. in Portugal or abroad. As a general rule, Portuguese criminal law will apply to In addition, the acts or omissions have crimes committed within Portuguese to be attributable to the company. While territory, regardless the nationality of the the requirements for such attribution may perpetrator. Therefore, crimes committed differ, it is usually necessary for the crimes by a foreign company within Portuguese to have been committed in the name and territory will be punished exactly in the on behalf of the company for its benefit. same way as crimes committed by a Portuguese company. As such, if a director How far does criminal liability of a company which is not incorporated extend? under Portuguese law commits an act Under the General Law, companies may of bribery within Portuguese territory be held liable for crimes committed by in the name and in the interests of the either (i) a person who holds a position of company, the foreign company may be authority within the company or (ii) any held criminally liable (together or not with person under their supervision, provided the director). Linklaters 65

On the other hand, if a crime is What is the position of the What kind of sanctions can be committed outside Portuguese territory, defendant company in imposed on companies? Portuguese criminal law will only apply criminal proceedings? if given conditions are met. With regard The General Law provides for two different to corporate entities, Portuguese law Apart from the natural limitations applicable kinds of criminal sanctions that can be will only apply to crimes that have been to legal entities, Portuguese Law recognises applied to companies: main penalties committed outside Portuguese territory the same procedural rights for a company (i.e. monetary fines and winding-up); if they were committed by a company or as for individuals. Companies are therefore and ancillary penalties (i.e. judicial against a company which is headquartered in a similar position to an individual in determinations, limitations to carrying in Portugal. criminal proceedings, both in terms of out its business, prohibitions on entering rights and prerogatives and in terms of into certain agreements or conducting Is the company legally obliged to defence mechanisms. business with certain entities, losing the right to public grants or subsidies, disclose criminal offences to the Since companies can only be held temporary closure of undertaking or the competent prosecution authorities? criminally liable if the crimes are somehow disclosure of the conviction to the media). Companies have the benefit of privilege attributable to them, it is always necessary Monetary fines are the most commonly against self-incrimination, which means to identify the individual perpetrator that applied main penalties for crimes that they are not required to disclose any has committed the wrongdoing. committed by companies. In some cases, criminal offences they have committed. However, Article 11(7) of the General Law, a monetary fine may be replaced by other However, voluntary disclosure may be as well as several other specific provisions, penalties (such as admonitions, good considered a mitigating factor when provide that corporate criminal liability behaviour caution or judicial supervision determining any applicable sanction. is completely independent from the of the company). Some companies, particularly regulated individual’s criminal liability. Thus, although companies, (e.g. public companies and identification of the individual perpetrator Where the penalty for an offence committed credit institutions) are legally bound to is necessary, the conviction of the latter by a company is imprisonment, that co-operate with the regulatory authorities is not necessary in order to prosecute penalty will be converted into a monetary and are required to provide information and convict the company. In practice, fine with the conversion mechanism taking requested by the regulators. when there is proof that a crime has been into consideration the financial resources committed by both the company and the of the company and its staff costs. Are the prosecution authorities individual, the most common situation is for the proceedings to be conducted Winding-up is the most severe penalty legally obliged to conduct a together. This will also be the case when, that can be applied to a corporate entity. criminal investigation into from the same set of facts, different This may only be applied if the company corporate wrongdoing? criminal liabilities arise for the company (i) is found to have been incorporated with and for the individual. the main purpose of committing crimes or Whenever there is a suspicion that a (ii) is repeatedly committing crimes that crime has been committed, either by an reveal that the company is being mainly individual or a company, the competent Is the company legally obliged to used for such purpose by persons in prosecution office is required to initiate co-operate with the prosecution positions of authority. an investigation to determine if there are authorities in the proceedings? sufficient grounds to submit the case to Ancillary to these main penalties, the Under Portuguese law, co-operation with the court. court may also order a company to take the prosecution authorities is always certain specific measures to prevent Nevertheless, subject to certain voluntary. However, this co-operation can criminal activities. For example, the court requirements, Portuguese procedural be taken into account by the court as a may order that the company refrain law allows the prosecution authority mitigating factor, particularly when it takes from entering into certain agreements (Ministério Público) to suspend criminal place at an early stage of the proceedings, or negotiations with particular entities proceedings for up to two years (or, in depending on the benefit of such co- for a period of time from one to five relation to sexual crimes against under- operation to the overall investigation. years. It may also deprive the company age persons, up to five years) for offences from benefits, such as public grants or Also, companies will often co-operate with for which the penalty is imprisonment subsidies for the same period of time. of less than five years or a penalty other the prosecution authorities on a voluntary than imprisonment. basis as a way to reduce the reputational damage of certain crimes. 66 A review of law and practice across the globe

The court may also order the company not What is the relevance of an effective Likely future scope and to carry out certain activities for a period compliance system? development? between three months and five years, or close an undertaking for the same period The existence of adequate compliance Following the recent financial crisis, it of time. In some specific cases, the court systems is crucial when assessing a is expected that public authorities will may also order the court’s ruling to be company’s criminal liability as it is a way increase their supervision of companies’ published in the media. for the company to argue that it has made businesses. Additionally, some in the all appropriate efforts to prevent crimes judicial community favour the relaxation Portuguese law also provides for from being committed, thereby reducing of requirements to attribute criminal and the sanctioning of misdemeanours or even eliminating its culpability. administrative wrongdoings to companies, (contra-ordenações), which are including removing the need to identify essentially regulatory wrongdoings The existence of control structures and the individual perpetrator, especially in and administrative offences. These effective compliance systems can lead to a the financial sector. are punishable by administrative fines finding that individuals committing crimes of up to EUR 5,000,000 (an amount within the company were acting contrary Some recent court decisions relating which, in some cases, may increase to the company’s corporate culture and to misdemeanours have imposed depending on the company’s net turnover that, therefore, the company should not administrative fines on companies without or the economic benefit arising from be liable for them. determining the identity of the individual the misdemeanour), depending on the perpetrator. It should be noted, however, company and its business area. The effect of having compliance structures that this approach has not yet been in place depends on the specifics of considered in criminal proceedings. The regime applicable to misdemeanours the particular case. For example, when also provides for several ancillary the crimes have been committed by In terms of legislative actions, the trend penalties relating to the operation of the directors of a company or any of its has been to reduce the conditions needed the company’s business. managerial agents, the existence of a to attribute an action to a company, with compliance system is less likely to affect more recent legislation widening the group Misdemeanour proceedings are conducted the sanctions imposed than where the of persons whose actions can be attributed by regulatory authorities (e.g. the Securities crime was committed by a company to the company so as to include employees Market Commission or the Bank of employee. and other staff. Portugal) which will both conduct any As the management responsibilities of investigations and apply the applicable How are criminal proceedings sanction. These decisions can then be companies are increasingly under the appealed to the national courts. Portuguese against companies conducted scrutiny of public authorities, we can law provides for several mitigating factors in practice? expect an increase in the number of criminal proceedings brought against that can reduce the level of penalty Plea bargain deals are not permitted companies in the near future. and which are considered on a case by under Portuguese Law. However, early case basis. acceptance of guilt and co-operation with For legal entities, the main mitigating the prosecution authorities can be treated factor is the existence of control as a mitigating factor, although they will mechanisms/compliance systems. not usually lead to the negotiation of the This will not always prevent the conviction outcome of the case. but it will almost certainly reduce the Conversely, in situations where a penalty imposed. temporary suspension of the proceeding Early acceptance of guilt and co-operation is applied by the prosecution authorities, it We can expect an increase is possible to negotiate about the terms of with the prosecution authorities may in the number of criminal also be taken into account and lead to such suspension. a reduced penalty. On the other hand, proceedings brought previous convictions and the profits against companies in arising from the crimes, together with the degree of culpability of the company, the near future. are usually aggravating factors that the courts take into account when determining the penalty. Linklaters 67 68 A review of law and practice across the globe

Russia

Can companies be criminally liable For what kind of wrongdoing can a for wrongdoing? company be held criminally liable? In Russia, there is no criminal liability for In the context of white collar offences, companies such as exists for individuals. the CAO RF imposes liability on If a company commits illegal conduct, companies, for instance, for transferring it may face civil or administrative liability. a bribe on behalf of, or in the interests of, a company to a public official or a Administrative liability, in contrast to civil person performing management functions liability connected with breach of civil within a commercial company. The same legislation, is imposed when the public conduct will lead to criminal liability for interests of the state and society are commercial bribery or bribe-giving by the violated (“Administrative Offence”). individual, acting on behalf of the company.

Under Russian administrative legislation, Companies can also be held liable it is presumed that a company itself is an under the CAO RF for not providing tax independent legal entity and may commit authorities with relevant information various actions, including Administrative as required, a failure to pay taxes or Offences. Therefore, administrative liability customs fees on time, a failure to submit of a company means that a company itself necessary information or the submission is liable for its Administrative Offences. of misleading information when applying under a public tender, breach of the In reality, a company acts through currency regulation, breach of anti- individuals. Under Russian law, any monopoly regulation, unlawful use of individual who acts on the company’s insider information and the like. In Russia, there behalf, whether or not they are formally is no criminal employed by the company or provide Criminal proceedings against an individual services under a civil law contract, may are not necessary to find a company liability for bring about liability for the company for administratively liable if it has committed companies such an Administrative Offence. In situations an Administrative Offence. Criminal when it is possible to identify a particular proceedings against an individual and as exists for individual who has committed illegal administrative proceedings against the individuals. actions on behalf of a company, this company may be started independently individual may face personal criminal of each other. If a company liability for his conduct in parallel with administrative liability of the company. com mits illegal How far does criminal liability conduct, it may Therefore, Russian legislation provides extend? for two parallel liabilities if an offence face civil or is committed by the company: Under the CAO RF, a company is liable administrative (i) administrative liability and sanctions for an Administrative Offence if it is for the company for an Administrative established that the company had a liability. Offence (generally a fine); and chance to comply with the rules and regulations of the CAO RF, but it did not (ii) criminal liability for a specific individual acting on behalf of the take all reasonable steps to comply with it. company (various types of liability and According to certain available court reports, sanctions, including imprisonment). companies may be held administratively Administrative liability is imposed liable when they are found to have based on the rules of the Code of the failed to exercise due control over Administrative Offences of the Russian individuals who physically committed the Federation (“CAO RF”). Administrative Offence on their behalf. Linklaters 69

In addition, available court reports Are the prosecution authorities Is the company legally obliged to suggest that, in order for a company to legally obliged to conduct a co-operate with the prosecution be held liable, individuals who commit the criminal investigation into authorities in the proceedings? Administrative Offence do not even need to be formally employed by, or provide corporate wrongdoing? Although there is no legal obligation services under a civil law contract to, Pursuant to the CAO RF, the prosecutor to co-operate, co-operation with the the relevant entity, as long as they act decides whether to initiate administrative authorities in establishing the facts of on its behalf. proceedings and issues an order on the the Administrative Offence can be taken administrative investigation as soon as into account as circumstances alleviating Does criminal liability extend to he receives information about the facts administrative liability and can thus result in a more lenient punishment. foreign companies? of the Administrative Offence committed by the company. The prosecutor initiates Foreign companies, incorporated in administrative proceedings only in relation What kind of sanctions can be foreign jurisdictions, can also be held to the most serious offences against imposed on companies? administratively liable for the Administrative society – corruption, terrorism financing Offences committed on their behalf by and the like. For other offences, another For an Administrative Offence, the various individuals within the territory of state official initiates administrative company can face an administrative Russia. At the same time, shareholders proceedings. Once all the facts of the fine, the confiscation of property or the and subsidiaries are not liable for actions Administrative Offence have been suspension of operations. In the case of the foreign company. investigated and established, the case is of bribery, the penalty for a company is transferred to the court for consideration. an administrative fine of up to 100 times A Russian company may transfer functions the value of the bribe accompanied of its chief executive officer to another What is the position of the by the confiscation of the bribe itself. company and not to an individual as it However, disgorgement of profits may is usually done (“Management Company”). defendant company in not be ordered. According to available court practice, a criminal proceedings? Management Company may also face In the context of public procurement, administrative liability if it commits an In essence, two different proceedings the Procurement Law No. 44-FZ dated Administrative Offence on behalf of the for illegal actions committed by an 5 April 2013 (“Procurement Law”) company. In this situation the Management individual on behalf and in the interests requires the CEO, executive directors and Company would be considered as acting of the company will be conducted: the chief accountant of any company on behalf of the company. administrative proceedings against taking part in a public tender, not to the company; and separate criminal have been accused of or penalised for Therefore, if the Management Company proceedings against the individual. any economic crimes, nor to be barred is involved in the illegal conduct, the or disqualified from any professional following liability may be imposed: Moreover, the Russian Supreme Court has indicated that the liability of a company positions. However, the Procurement Law does not impose the same requirements (i) administrative liability for the company; should not depend on the sentence passed on the relevant individual and on the company itself as, under the rules (ii) administrative liability for the that the company should be prosecuted of Russian criminal law, only individuals Management Company acting on separately. Nonetheless, current case can be found criminally liable. behalf of the company; and/or law shows that there is a tendency for Russian law does not automatically authorities to start an investigation into the exclude companies which have been (iii) criminal liability of an individual of the conduct of the individual first. Once they Management Company. found administratively liable in Russia or have established that unlawful conduct criminally liable outside of Russia from was committed by a specific individual, public tender. However, there remains Is the company legally obliged to they will commence proceedings against a risk that such liability can be taken disclose criminal offences to the the company. into account by the tendering authorities competent prosecution authorities? and can preclude a company from participating in a tender. Companies with There is no obligation under Russian taxes and other state fees in default are law to disclose information about excluded from public tenders. Administrative Offences. 70 A review of law and practice across the globe

According to the CAO RF, the voluntary What is the relevance of an effective provision of information about an compliance system? Administrative Offence by the company that has committed that Administrative Federal Law No. 273-FZ “On Combatting Offence, the assistance in establishing Corruption” obliges companies to take the circumstances of the Administrative measures to combat corruption, such Offence, the prevention of harmful as designating departments, units and circumstances resulting from the officers responsible for the prevention of Administrative Offence and the voluntary bribery; developing and implementing payment of compensation or elimination standards and procedures to ensure When imposing a of harm can be taken into account by ethical business conduct; and creating punishment, state the state authorities and the court as means of identifying, preventing and circumstances alleviating administrative resolving conflicts of interest. Moreover, authorities or the liability. As the list of circumstances government officials can apply for a court court may also alleviating administrative liability is open, order to compel a company to comply when imposing a punishment, state with this obligation. take into account authorities or the court may also take Having such measures in place may be other factors, into account other factors, such as the compliance system and reputation of put forward by a company as a defence such as the the company. to an allegation of corrupt practices. compliance system Under the general principles of the CAO How are criminal proceedings and reputation RF, the company can be exempted from against companies conducted administrative liability for Administrative of the company. Offences if, for instance: in practice? There are different types of administrative >>the action was taken in order to prevent proceedings in Russia and they depend harm to individuals or the interests of on the type of the Administrative Offence the state, the harm could not have been in question. For example, administrative prevented by other means and the liability for bribery on behalf of companies action was less damaging than the is relatively new in Russia and case law harm that would have occurred without on the issue is limited. However, the the company’s intervention; or Supreme and Constitution Courts have >>a judge or an administrative official already stated that the administrative rules that the Administrative Offence liability of companies is in line with the is insignificant. rules of international agreements and the fact that there are two different and However, case law emphasises that, separate proceedings for companies and for example, bribery is considered to individuals in Russia does not breach be a serious Administrative Offence the right to a fair trial, enshrined in even when the amount paid is small, Article 6 of the European Convention due to the social harm it engenders. on Human Rights. There are already several cases in which administrative liability for bribery was imposed on companies. However, most of these cases were based on criminal cases against individuals. Linklaters 71

Likely future scope and For now, disgorgement of profits gained development? as a result of an Administrative Offence is not stipulated in the CAO RF as a sanction The need to introduce criminal liability for for companies. However, the Federal companies has been widely discussed in Financial Monitoring Service has prepared legal circles, especially since Russia has a draft law imposing administrative liability signed several international agreements, for money laundering which proposes including the Criminal Law Convention on sanctions in the form of disgorgement Corruption 1999 and the United Nations of profits gained as a result of such Convention against Corruption 2003. an offence. As stated above, there is currently no criminal liability for companies in Russia. However, a draft law which would create criminal liability for companies was published in March 2015. The draft law provides that companies would be criminally liable for corruption, money laundering and other serious crimes. Suggested criminal penalties include significant fines, confiscation of the company’s property, prohibition of the company’s activities and involuntary liquidation. The draft law has not been transferred to the Russian Parliament and there have been no developments with regard to its adoption.

Since the introduction of criminal liability into the Russian legal system would necessitate complex amendments to the Russian Criminal Code, the Criminal Procedure Code and the Criminal Execution Code, it is likely to take some time.

Over the last few years, there has been a tendency towards tightening up administrative liability. According to statistics from the state arbitrazh courts (commercial courts), the amount of administrative fines levied on companies doubled between 2010 and 2013. This corresponds to recent amendments Over the last few to the CAO RF. For example, liability for breaching corporate legislation on years, there has conducting general meetings, for been a tendency non-disclosure of information to the Central Bank and for attracting financial towards tightening resources in a manner prohibited by up administrative legislation has already been added to the CAO RF. Fines for these Administrative liability. Offences amount to approximately USD 10,000. 72 A review of law and practice across the globe

Singapore

Can companies be criminally liable Does criminal liability extend to for wrongdoing? foreign companies? Yes, companies can be criminally liable for Where offences are concerned, the wrongdoing in Singapore. statutes generally do not distinguish between local and foreign companies For what kind of wrongdoing can a and extend criminal liability to foreign companies when there is a penal provision. company be held criminally liable? For example, criminal liability under the A company can be held criminally various offences prescribed under the liable for a very wide range of offences. Securities and Futures Act (Chapter 289) Although Singapore is a common law extends to foreign companies which jurisdiction, the criminal law of Singapore participate in Singapore’s securities and is largely statutory in nature. These statutes futures market and/or are regulated by usually make it an offence for “a person” the Monetary Authority of Singapore. to do or fail to do a particular act. Similarly, a foreign company can be held By virtue of the Interpretation Act criminally liable for contravening the (Chapter 1), subject to the appearance provisions of the Prevention of Corruption of a contrary intention, “a person” Act (Chapter 241). will include a company. It is generally necessary for a prosecutor to invoke the That said, as a general matter, the principle of identification, by which the Singapore courts recognise separate acts and state of mind of any directors legal personality and a parent company incorporated overseas will not be held A refusal to and managers who represent a company’s “directing mind and will” are imputed criminally liable in Singapore when c o - o p e r a t e ... i s to the company, or the principle of employees of its Singapore subsidiary commit an offence. An exception to this likely to result agency, by which a company’s officers and employees are said to have acted may be where it is demonstrated that the in the prosecution as agents of the company. corporate structure was instituted for the primary purpose of assisting the parent to authorities evade the consequences of wrongdoing. applying for and How far does criminal liability extend? obtaining the Is the company legally obliged to Case law has established that the necessary court disclose criminal offences to the appropriate test for the court is whether competent prosecution authorities? orders to secure the individual in question had sufficient status and authority to make his acts There is no general obligation under the company’s the acts of the company, such that the Singapore law, either on individuals or compliance. individual is to be treated as the company companies, to report criminal offences. itself. It follows that individuals other This is subject to a few exceptions. First, than directors or senior executives may the Terrorism (Suppression of Financing) be found to have been the company’s Act (Chapter 325) requires companies “directing mind and will” and/or agent. which have, for example, information The individual’s title is unlikely to be about transactions in respect of any determinative. That said, there are property belonging to any terrorist, to natural limits to the types of crimes that immediately inform the police. Secondly, a company may commit, so it cannot the Terrorism (Suppression of Bombings) commit bigamy or perjury, or an offence Act (Chapter 324A) requires companies that is punishable only by imprisonment. which have, for example, information which may be of material assistance in preventing the commission by another person of a terrorist bombing offence, to immediately disclose the information to the police. Thirdly, the Corruption, Drug Linklaters 73

Trafficking and Other Serious Crimes Practically speaking, the prosecution Further, the police may examine (Confiscation of Benefits) Act (Chapter authorities’ decision as to whether to orally any person (including company 65A) requires companies which have, conduct a criminal investigation will representatives) who appears to be for example, reasonable grounds to be guided by evidential sufficiency, acquainted with any facts or circumstances suspect that any property was used in public interest and the availability of of the case. A person being examined connection with criminal conduct, to prosecutorial resources. by the police shall be bound to state disclose the knowledge or suspicion to truly what he knows of the facts and a competent officer. What is the position of the circumstances of the case, except that he need not say anything that might Nonetheless, it may be advisable, defendant company in expose him to a criminal charge, penalty depending on the facts of a particular criminal proceedings? or forfeiture. This privilege against self- case, for a company to report discovered A company will have the same general incrimination would appear to extend to offences even where there is no positive rights as an individual defendant in corporate entities as well as individuals. obligation to do so. The fact that an offence criminal proceedings. For example, While a company representative who is has been self-reported may result in a it will have the right to be represented being questioned has a right to exercise lighter fine for the company. Further, it and the same burden and standard of the privilege against self-incrimination that reduces the risk of the company of being proof will apply. Although (for the reasons is contained in this proviso, this right is found to be guilty of aiding and abetting set out above), it will usually be necessary subject to two qualifications. First, if the the commission of the offence. for the prosecution to identify one or employee can properly be said to have more individual(s) who, in the particular acted “as the company” and claimed Are the prosecution authorities case, constituted the “directing mind the privilege against self-incrimination legally obliged to conduct a and will” and/or agent(s) of the company, on behalf of the company in the matter, conviction of the company is not contingent the company risks incurring an evidential criminal investigation into disadvantage at the trial if he exercises corporate wrongdoing? upon conviction of the individual(s). Criminal proceedings against the company this right; that is, the trial judge may draw There are a number of law enforcement are not, therefore, ancillary to criminal an adverse inference against the company agencies that may investigate and prosecute proceedings against the individual(s) and from his failure to mention a fact in its corporate wrongdoing. In Singapore, prosecutions may be brought against the defence when questioned. Secondly, the these include the Singapore Police company without the individual(s) also police do not have to inform him that the Force (including its constituent unit, the being prosecuted. company has this right. Commercial Affairs Department), the While it may not always be an offence not Corrupt Practices Investigation Bureau, Is the company legally obliged to to comply with the prosecution authorities’ the Accounting and Corporate Regulatory requests, a refusal to co-operate on a Authority, the Inland Revenue Authority, co-operate with the prosecution matter which the investigators deem the Ministry of Manpower and the National authorities in the proceedings? to be material is likely to result in the Environment Agency. These prosecuting At the investigation stage, certain law prosecution authorities applying for and authorities are, generally speaking, under enforcement agencies have powers to obtaining the necessary court orders to a duty to investigate allegations which fall require information, documents and/or secure the company’s compliance. within their ambit and this will include things from companies. For example, Other than in the context of these powers, allegations which suggest wrongdoing by the police may, by way of written order, co-operation by the company during a company. require a company to produce documents an investigation would be voluntary. That said, the authorities have a wide or things which they consider necessary Co-operation with the authorities during discretion as to whether to institute or desirable for any investigation. an investigation is likely to result in a criminal proceedings. While it may be While we are not aware of judicial lower fine, although this will also depend possible to apply for judicial review of guidance on point, it is arguable that an on how the company approaches the the exercise of prosecutorial discretion, employee is only required to produce criminal proceedings themselves. we are not aware of any such instance company property in response to an and assess the chances of success of investigation into the company and not such an application to be low in view personal property. of the prevailing attitudes of the Singapore courts. 74 A review of law and practice across the globe

What kind of sanctions can be What is the relevance of an effective imposed on companies? compliance system Criminal statutes generally provide for The existence of an effective compliance two sorts of sanctions: imprisonment; system will, generally, be most relevant and fines. A company cannot of course at the public interest stage of the be imprisoned, although if individuals prosecutor’s decision referred to above. are themselves separately convicted in If criminal proceedings are brought, the relation to the same activity, they may be. existence of an effective compliance In the event of a corporate conviction, system will not amount to a defence in the sentencing court will almost inevitably criminal proceedings, although it is likely impose a fine. to be a mitigating factor when the court assesses the level of fines in the event of There are no specific guidelines for a conviction. sentencing companies and the usual sentencing considerations of, for example, Further, the existence of an effective retribution and deterrence will apply. compliance system is more likely to Sentencing courts will generally take into support a finding that the conduct of an account timely guilty pleas and the fact individual did not reflect the “mind” of that an offence was self-reported when the company or was otherwise not assessing fines. authorised by the company.

The conduct which gives rise to a How are criminal proceedings prosecution for a criminal offence, whether or not it leads to a conviction, against companies conducted The existence may result in civil consequences. in practice? An example of this would be prosecutions of an effective Under Singapore law, technically for breaches of financial services speaking, any criminal offence which compliance system regulations where the prosecutor does not can be committed by a company carries succeed in meeting the burden of proof is more likely to corporate criminal liability, because the for a criminal conviction, but the market definition of “person” in all laws includes support a finding regulator is able to establish breach on a corporate persons. However, prosecution balance of probabilities. The obligation to that the conduct of individuals rather than corporations hand over evidence also differs between for offences is often preferred by the of an individual criminal and civil proceedings in that authorities because the mental state of companies do not have a right against did not reflect larger corporations is difficult to establish self-incrimination in civil proceedings. the “mind” of in the absence of specific provisions Types of non-criminal sanctions include dealing with corporate liability, as is the the company. civil penalty, suspension, variation or case with the anti-bribery and corruption legislation. This is to be contrasted with revocation of a licence by a regulator (such as the Monetary Authority of the anti-money laundering legislation, Singapore, in the case of a financial which includes express corporate offence institution). Listed companies are subject provisions that can be proven through to the purview of the Singapore Exchange the state of mind as well as the conduct which can take various disciplinary actions, of any “director, employee or agent” who including reprimand, fine, suspension, was acting within the scope of his or her expulsion and/or impose requirements on actual or apparent authority. The issue company officers to attend education or is obviated in the case of strict liability compliance programmes; these sanctions offences where there is no need to too are non-criminal. establish the mental state of the company. Linklaters 75

Hence, in regulatory areas where liability Likely future scope and for offences is often strict (for example development? environmental protection, workplace safety and health, taxation, food and Financial markets and anti-bribery and drug safety), it is common for companies corruption are two of the key areas to be prosecuted. of regulatory focus given Singapore’s dependence on finance and corporate In January 2015, Criminal proceedings against companies activity for its prosperity. In January 2015, the Singapore are commenced with the service of the Singapore government announced charge sheet(s) on the company by the enhanced funding for the detection and government prosecuting agency. There will usually be prosecution of bribery and corruption announced enhanced a reasonable period before the company matters and in March announced the is required to answer to the charges at a co-operation of the Commercial Affairs funding for the first mention date. If the company pleads Department (which handles white collar detection and guilty, proceedings will move to a date for crime) and the Monetary Authority sentencing. If the company seeks a trial or of Singapore in investigating market prosecution is otherwise not prepared to plead guilty, misconduct. The government has also of bribery and a Pre-Trial Conference date will be fixed. recently announced a new executive The objective of the Pre-Trial Conference department focused on cybersecurity and corruption matters. process is to ensure parties would be we anticipate a strong focus on enhanced ready for trial within the court’s target regulation in this area. In view of their timelines (usually cases are disposed of subject matters, it is anticipated that the within six months of first being charged). scope for corporate criminal liability will In the process, there is usually some increase with these developments. limited disclosure by the prosecution and defence of their respective cases and the Since 1 August 2016, the Monetary evidence they are relying on, subject to Authority of Singapore has had dedicated an overriding duty of the prosecution to anti-money laundering and enforcement disclose material that tends to undermine departments, whose functions used to the prosecution’s case or strengthen be carried out by different departments the defence’s case. This helps in plea in the organisation. Consistent with the bargaining and to narrow down contentious authority’s statements, we anticipate issues to achieve a more accurate these developments to result in greater assessment of the time required for trial. supervisory focus, more rigorous investigations of suspected violations There is no formal mechanism for and swifter action by the regulator to companies to negotiate a settlement of punish wrongdoing. criminal proceedings with a prosecutor. Rather, the usual course is that the company will initiate such negotiations, if at all. Court approval of the negotiated outcome is not required. It is possible for the prosecution to reduce charges to lesser charges or withdraw charges altogether without court approval.

We understand that the Attorney-General’s Chambers have studied the merits of introducing a Deferred Prosecution Agreement scheme in Singapore. To date, no such mechanism has been introduced. 76 A review of law and practice across the globe

South Africa

Can companies be criminally liable This goes further than vicarious liability for wrongdoing? as it allows liability to be imputed on the company even where the individual South Africa does not have one specific was not acting in the course and scope piece of legislation which deals with the of their employment but rather in the criminal liability of companies. However, furtherance of the interests of the it is possible for corporations to incur company. This imputes mens rea onto criminal liability in terms of Section 332 a corporation even though the corporation the Criminal Procedure Act, 1977 (“CPA”). is strictly incapable of thinking4.

For what kind of wrongdoing can a How far does criminal liability company be held criminally liable? extend? Under section 332 of the CPA, companies Section 332 refers to actions or omissions can be held criminally liable for any by a company “by or on instructions or offence, under any law or at common law with permission, express or implied, given either for: by a director or servant of that corporate body”. The section defines “director” as >>“any act performed, with or without a “any person who controls or governs that particular intent, by or on instructions corporate body or who is a member of a or with permission, express or implied, body or group of persons which controls given by a director or servant of that or governs that corporate body or, where corporate body; and there is no such body or group, who is a member of that corporate body”. >>the omission, with or without a particular intent, of any act which ought to have There is no definition for “servant” in the been but was not performed by or CPA but it seemingly includes any person on instructions given by a director or who performs his or her work under the servant of that corporate body”. control of the company5. This definition would be consistent with South African A company can be held liable for common labour law. law crimes, statutory offences, strict liability crimes and crimes requiring either Although the section does also refer intention or negligence1. However, a to persons acting on instructions or corporation cannot be held liable for a with permission, express or implied, of crime where a particular statute limits a director or a servant, this has been the liability to natural persons only. Actual interpreted restrictively by the courts and knowledge of the act or omission by the a degree of supervision and control by director or servant is not necessary for the company is required in order for the 6 the company to be held criminally liable2. company to incur liability .

Both the company and the individual Does criminal liability extend to who commits the offence can be held foreign companies? liable in terms of Section 332 of the CPA. This allows for a company to be held liable The CPA does not provide a definition while not allowing the individual who knew for a “corporate body” as referred to in that they were acting in a criminal capacity section 332. It does not expressly include to escape liability3. multi-nationals or companies incorporated outside South Africa. Furthermore, the rest The liability of the company where an of the CPA does not refer to multi-national employee has committed a criminal or foreign companies. offence is not based on vicarious liability but rather on the derivative approach. Linklaters 77

However, the Companies Act 71 of 2008, A salient example of such a duty is found If a crime is reported, a case docket (“Companies Act”) does acknowledge in Section 34(1) of the Preventions and will be opened and allocated to a police foreign companies, referring to them as Combating of Corrupt Activities Act 12 of detective. The police detective will then external companies. External companies 2004 (“PCCA Act”) which provides that be required to carry out an investigation are defined as “a foreign company that any person holding a position of authority and upon completion of the investigation is carrying on business, or non-profit and who knows, or ought reasonably to must present the docket to the relevant activities, as the case may be, within the have known, that another person has court for prosecution. Republic, subject to section 23 (2)”. committed an offence under the PCCA Act involving an amount of at least R100,000, The NPA does have discretion with regard Section 23(1) of the Companies Act must report such knowledge or suspicion to the actual prosecution. Section 6 of the provides that “an external company to a police official. Failing to do so shall CPA provides that an attorney-general or must register with the (Companies and itself constitute an offence under the any person conducting a prosecution at Intellectual Property) Commission PCCA Act. the instance of the State may withdraw a (“the Commission”) within 20 business charge before pleading or stop a charge any days after it first begins to conduct Another example of ways in which time after pleading but prior to conviction. business, or non-profit activities, as co-operation with authorities may occur the case may be, within the Republic”. is found in the Protected Disclosures Under Section 7 of the CPA, where a Therefore, for a foreign company to Act, 2000 (“Disclosures Act”). It must be Director of Public Prosecutions declines operate in South Africa, it has to register noted that the Disclosures Act applies to to prosecute an offence, a private person with the abovementioned commission and disclosures made by employees rather can pursue a private prosecution under will thus be bound by its rules. Section than companies themselves. certain circumstances, provided they have 186 (d) of the Companies Act sets out the suffered harm as a result of the alleged objectives of the Commission, including The Disclosures Act was enacted to conduct of the accused. “the promotion of compliance with this protect employees, in both private and The Companies and Intellectual Property Act, and any other applicable legislation”. public sectors, from being subjected to an occupational detriment on account Commission (“CIPC”) is established in If a multi-national corporation has a of having made a protected disclosure. terms of section 185 of the Companies subsidiary in South Africa, such subsidiary It sets out procedures by which Act. In terms of section 187 of the will have to be registered with the an employee can, in a responsible Companies Act, CIPC must, amongst Commission and will thus be bound to manner, disclose information regarding other things, monitor the proper comply with the Companies Act and improprieties of his or her employer and compliance with the Companies Act, other related legislation such as the provides remedies for any detriment issue and enforce compliance notices and CPA. Therefore, if a parent company suffered as a result of having made a refer any alleged offences in terms of the incorporated abroad has a subsidiary in protected disclosure. Companies Act to the NPA. South Africa, its subsidiary will be bound by the Companies Act and the CPA (and Are the prosecution authorities What is the position of the other related legislation), such that if the defendant company in subsidiary’s employees in South Africa legally obliged to conduct a commit a criminal offence, then they criminal investigation into criminal proceedings? will be liable in terms of local legislation. corporate wrongdoing? Section 8(4) of the Constitution grants The criminal liability will only extend to Investigation into criminal activity is companies all the rights pertaining to the employees and subsidiary operating undertaken by the South African Police arrested, detained and accused persons within South Africa and the parent Service (“SAPS”) while the responsibility found in Section 35 of the Constitution, company will not incur criminal liability. for the prosecution of the crime will lie including amongst others, the right to a with the National Prosecuting Authority fair trial. Is the company legally obliged to of South Africa (“NPA”). It is not necessarily a requirement that disclose criminal offences to the the individual perpetrator be identified in competent prosecution authorities? Chapter 11 of the Constitution of the Republic of South Africa, 1996 order to prosecute the company. Certain legislation imposes a duty on (“Constitution”) prescribes that the SAPS The prosecution will take place as persons who become aware of possible has a responsibility to investigate any a separate prosecution with an offences to report those offences to crimes that threaten the safety or security individual being cited in his/her police officials. of any community. representative capacity. 78 A review of law and practice across the globe

Is the company legally obliged to >>Section 8(2) of the Constitution provides The Competition Commission is governed co-operate with the prosecution that the Bill of Rights is binding on a by Chapter 4 of the Competition Act and authorities in the proceedings? juristic person to the extent that it is is empowered by Section 21 to investigate applicable, taking into account the alleged contraventions of the Competition As set out above, both companies nature of the right and any duty imposed Act and refer investigated firms to the and individuals are subject to the by the right. It is therefore likely that a Competition Tribunal (“Tribunal”). The rights pertaining to arrested, detained criminal offence which violates a victim’s Tribunal may impose an administrative and accused persons and thus both rights under the Constitution would penalty of up to 10% of the firm’s annual companies and individuals have a right be used as an aggravating factor in turnover if that firm is found guilty of a to remain silent after having allegedly sentencing. contravention. Section 4(1)(b) of the committed an offence. Further, both Competition Act prohibits restrictive individuals and companies cannot be >>The King Report on Corporate horizontal practices and therefore the compelled to make any confession or Governance in South Africa (“King III”) behaviour of a cartel is specifically admission that could be used in evidence. may provide guidelines regarding the prohibited under section 4(1)(b)(iii). During the trial, there is the right to be morality of actions of corporations. King III was released in 2009 and presumed innocent, to remain silent What is the relevance of an effective and not to testify. became effective on 1 March 2010. It prescribes a set of principles as compliance system? The CPA sets out that any record which well as best practice in relation to Once an accused has been convicted was made or kept by a director, servant each principle. King III applies to all in a criminal court, the parties make or agent of the company within the scope entitles incorporated and resident in arguments regarding aggravation and of his activities or which was under his South Africa. King III indicates certain mitigation of sentencing. Factors such custody shall be admissible in evidence peremptory requirements by use of the as control mechanisms may be raised against the company (see Sections word “must” and other principles, by the defence as a mitigating factor 332(3)-(4)). This would therefore require which are not legal requirements but that could ultimately result in the judge the company to hand over any such which would result in good practice, imposing a lower fine. However, this is records to the prosecuting authority and by use of the word “should”. Failure to an issue which will be dealt with on a they are obliged not to withhold the same. comply with King III could also result case by case basis. in an aggravated sentence. What kind of sanctions can be In the case of Director of Public >>The courts have held that as a general 11 imposed on companies? Prosecutions, Kwazulu Natal v P , the rule, a South African court should court held that three main factors are Under Section 332(2)(c) of the CPA, the not impose a fine on an individual considered in sentencing: the crime; court may not impose any punishment which is clearly beyond the means of the offender; and the interests of society. 9 other than a fine, even if the relevant an accused . However, the Appellate It is therefore important that all information statute does not make provision for the Division has stated that this rule is regarding the commission of the offence 10 imposition of a fine in respect of the not inflexible . is placed before the court in order that an appropriate sentence may be imposed. offence in question. Company law and competition law Information regarding control mechanisms both prescribe other specific types of Although certain statues may prescribe may be useful in completing the picture of sanctions for companies found guilty the maximum fine which can be imposed, the surrounding circumstances which the of contraventions. the amount of a potential fine is often court may rely on for sentencing purposes. variable and will ultimately be determined The Companies Act makes provision Chapter 7 of the King Code (King III) by the court during sentencing. for punitive measures in respect of an provides that the board of a company offence committed by a company. Fines as a punitive measure have been should ensure that there is an effective Under section 175(1) of the Companies criticised as they prejudice not only risk-based internal audit, which should, Act, a court, on application by CIPC or the the offending corporation but also the inter alia, provide a source of information Takeover Regulation Panel, may impose innocent employees7. regarding instances of fraud, corruption, an administrative fine for the company’s unethical behaviour and irregularities. In general, the determination of an failure to comply with a compliance notice appropriate sentence will be affected by issued under the Companies Act. Self-disclosure and a willingness to the moral blameworthiness of the accused8. co-operate would likely be recognised as In assessing moral blameworthiness of a ground of mitigation in sentencing. corporations, certain texts may be useful. Linklaters 79

Plea and sentence agreements are also If the cited representative ceases to be a recognised under Section 105A of the representative of the company during the CPA. Plea and sentence agreements proceedings, then he may be substituted are always subject to judicial supervision for another representative of the company and approval. and the proceedings shall continue as though there was no substitution. How are criminal proceedings Likely future scope and against companies conducted development? in practice? One of the prevalent concerns with The liability of Criminal proceedings against companies section 332 of the CPA is whether or not will be governed by the CPA and do not its provisions would survive a challenge in other directors differ from those against individuals in the Constitutional Court. and servants will form. The prosecution shall first present their case and thereafter the accused may The constitutionality of section 332(5) was be determined by challenged in the case of S v Coetzee13. present their case. If the court does not the common law. believe that the prosecution has proven its This section provided that a director or case at the close of the prosecution’s case, servant of a corporation would be convicted then the court may return a verdict of not of the same crime as that committed by guilty before the accused presents their the company, unless that director or evidence. The burden of proof in criminal servant could show that they did not take proceedings is that the accused is guilty part in the commission of the crime and beyond a reasonable doubt, which is a could not have prevented it. This section, higher burden of proof than in a civil case. and the reverse burden of proof it placed on All proceedings are to take place in open individuals, was held to be unconstitutional court unless otherwise expressly provided. as it violated the right to be presumed All persons are to be examined under oath innocent, contained in section 35(3)(h) or affirmation unless the person is found of the Constitution. Therefore, the liability not to understand the nature and import of other directors and servants will be of the oath or affirmation. determined by the common law14. It has been suggested that section 332 of In the prosecution of a company, the the CPA, and in particular section 332(1), employee must be cited rather than the may be further challenged in the future for actual company, and for this reason it being overbroad15. must be made clear whether an individual is being prosecuted in their personal or representative capacity12. The cited representative does not stand as the 1. CR Snyman Criminal Law (5ed) 254. accused but allows the company to have 2. S v African Bank of South Africa Limited 1990 2 SACR 585 (W) at 650. a physical presence in court. Should the 3. Farisani D “The Regulation of Corporate Criminal Liability in company be found guilty of an offence, South Africa: A close Look (Part 1)” 2006 Obiter 27 2 265. the punishment will not be imposed upon 4.  Ibid at 266. the individual representative (unless they 5. R v Murray and Stewart 1950 1 SA 194 (C). are also guilty of the offence). 6. Ibid at 119. 7. A Rycroft “Corporate Homicide” (2004) 17 SACJ 141. The cited representative is to be dealt 8. Msane v S [2009] 1 All SA 454 (SCA) at para 11. with as though he were accused of having 9. S v Sithole 1979 (2) SA 67 (A) at para 69G. committed the offence. 10. S v Van Rooyen 1994 (2) SACR 823 (A). 11. 2006 (1) SACR 243 (SCA) at para 13. If the representative pleads guilty, other 12. Farisani D, at 266. than by way of paying a fine without 13. 1997 (4) BCLR 437. appearing in court, then that plea shall 14. Farisani D, at 274. not be valid unless the corporate body 15. L Jordaan Criminal Justice in a New Society – had authorised the representative to ssays in Honour of Solly Leeman 55. plead guilty. 80 A review of law and practice across the globe

Spain

Can companies be criminally liable How far does criminal liability for wrongdoing? extend? Corporate criminal liability was introduced A company can be held criminally liable in June 2010, (effective as from for crimes committed by either: (i) the December 2010), as an amendment to members of its managing body, its legal the Criminal Code. In addition, Resolution representatives or those members of a body 1/2011 from the Crown Prosecution within the company that are authorised to Service contains specific instructions to take decisions on behalf of the company public prosecutors on applying the new or that have organisational or control regime of corporate criminal liability. powers within the company; or (ii) its The Criminal Code was recently amended employees (whether senior executives or by a reform which defines more accurately regular employees subject to the authority the liability of companies for criminal of the persons identified in (i) above) offences and which came into force on while carrying out corporate activities and 1 July 2015. In addition, in January 2016 provided that the offence was committed as the Crown Prosecution Service (Fiscalía a result of a gross lack of due supervision General del Estado) issued an instruction and control of such employees (which (Circular 1/2016 (“Circular”)) addressed requires a case by case analysis). to public prosecutors, providing details on the practical application of this In terms of penalties, it makes no liability regime. difference who committed the offence.

For what kind of wrongdoing can a Does criminal liability extend to company be held criminally liable? foreign companies? Criminal liability under the Criminal Code While not all offences can be attributed to does not depend on the nationality of the companies, the Criminal Code sets out the company. However, some scholars believe specific offences for which a company can that its extension to foreign companies be held criminally liable. These include may present procedural and penalty the following: enforcement issues. >>discovery and disclosure of secrets As a general rule, provided that part of the conduct constituting the offence takes >>fraud and punishable insolvency place in Spain or the perpetrator of the >>crimes related to intellectual and offence is a Spanish national (or a foreign industrial property, the market and national that has acquired the Spanish consumers nationality) or a company registered in Spain, the Spanish courts will have >>tax fraud and money laundering jurisdiction over the conduct.

>>urban planning offences and crimes However, in cases where the conduct against the environment takes place outside Spain, such conduct must also be an offence in the country >>bribery/corruption offences where it took place; the perpetrator must have not been acquitted or already served It is required that the offence is committed the relevant sentence; and either the for the benefit of the company (even if the affected person or the Public Prosecutor benefit ultimately might not be achieved must bring a criminal action against the or even if the individual acted with perpetrator before the Spanish courts. the intention of obtaining a benefit just for himself). Linklaters 81

In relation to certain criminal offences What is the position of the >>having collaborated in the investigation (e.g. corrupt practices between individuals defendant company in of the events, to provide evidence, at or corrupt practices involving public criminal proceedings? any stage of the proceedings, that is authorities in the course of international new and decisive to clarify the criminal economic activities taking place outside In essence, companies generally have liabilities arising from the events; Spain), Spanish courts will have the same rights as an individual against >>to repair or decrease the damage jurisdiction, provided that either the whom criminal proceedings are conducted. caused by the offence at any time affected person or the Public Prosecutor Hence, there are few specific provisions during the proceedings and prior to brings a criminal action against the in the Criminal Procedural Law dealing the trial itself; perpetrator before the Spanish courts with legal entities in criminal proceedings. and where at least one of the following These provisions were introduced in >>to institute, prior to the trial itself, conditions is met: 2011 as a separate reform from the one measures that are effective to prevent establishing corporate criminal liability and discover offences that might be >>the proceedings must be against a in the Criminal Code. The most relevant committed in the future under the Spanish national or a foreign national one in practice is that the company must auspices of the company. with permanent residence in Spain; or appoint a representative for the criminal >>the offence must have been committed proceedings, a so-called “procurador”; What kind of sanctions can be by: (i) the officer, manager, employee in addition to its lawyer and court imposed on companies? or an associate of an entity with its representative. For the company to registered office, or based, in Spain; be held criminally liable, there is no The following types of sanctions can be or (ii) a legal entity based or having its need to identify and/or to convict an ordered against a company: individual perpetrator. registered office in Spain. >>fines (between EUR 30 and EUR 5,000 The criminal proceeding against the per day, up to a maximum of five years) Is the company legally obliged to company constitutes a “separate” >>winding up of the legal entity (a sanction disclose criminal offences to the proceeding in the sense that there is that in practice would only be imposed competent prosecution authorities? no need to proceed against the individual in those cases where there has been in order to find the company criminally a fraudulent use of the company’s There is no legal obligation but co-operation liable. However, if the individual is legal personality) in a criminal investigation or voluntary identified, both the individual and the disclosure prior to the commencement company will be tried in the same judicial >>suspension of activities of up to five of the investigation can mitigate the proceeding. In this case, the company years degree of penalties. The Circular from and the individual should have different >>closure of the company’s premises and the Crown Prosecution Service goes legal counsel so that the individual’s rights establishments for a period of up to five beyond this standard and requires the of defence are not jeopardised in practice. company immediately to report any years criminal activity within its organisation Is the company legally obliged to >>prohibition from carrying out in the of which it becomes aware. future any activities during whose co-operate with the prosecution performance the crime was committed, Are the prosecution authorities authorities in the proceedings? favoured or concealed. This prohibition legally obliged to conduct a Co-operation is not mandatory but may be temporary or definitive. If it co-operation can mitigate the degree were temporary, the term cannot criminal investigation into exceed 15 years corporate wrongdoing? of penalty. The following actions may constitute mitigating circumstances: >>disqualification from obtaining subsidies Although most of the crimes legal entities that, after the offence was committed, and public aid, from entering into can commit can be prosecuted ex officio, the company’s legal representatives took contracts with the public sector and there is in effect no legal duty for the steps: from enjoying tax or social security Public Prosecutor to do so. In addition, benefits and incentives for a period of public prosecutors are subject to the >>prior to having knowledge of judicial up to 15 years general instructions issued by the Crown proceedings being brought against them, Prosecution Service. to disclose the offences committed by >>judicial intervention of up to five years. them to the authorities; 82 A review of law and practice across the globe

The relevant penalty is imposed through a regimes that would apply to a wider range court judgment and may differ depending of companies: on the relevant offence. Where the penalty provides for discretion, its degree depends >>Tax: in general, proportional administrative on the circumstances of the case and the fines (i.e. a percentage of the relevant situation of the entity. In relation to fines, amount, up to 150%) and, depending if both the individual and the company on the seriousness of the offence, are found liable, the amount of the fine disqualification from obtaining subsidies can be moderated by the court so that and public aid, from entering into public the resulting amount is not disproportionate sector contracts and from enjoying tax in relation to the facts of the case. benefits and incentives of up to five years.

In some sectors, such as the environmental, >>Money laundering1: sanctions for the more serious offences include energy, telecoms or securities sector, administrative sanctions may be administrative fines of up to 5% of the Criminal liability compatible with criminal liability and its company’s net equity, revocation of the operating licence (if one is required) under the Criminal criminal sanctions. However, in cases where the administrative offence and the and fines of up to EUR 600,000 for Code does not criminal offence overlap, the principle directors and officers, together with dismissal and disqualification for depend on the of ne bis in idem (or double jeopardy principle) would apply (based on the up to 10 years. nationality of identity of facts, subjects and merits). >>Environmental: fines of up to To avoid violating the ne bis in idem t h e c o m p any. EUR 2,000,000 and revocation of principle, by law the same person cannot the relevant operating licence (if one be punished for the same crime and is required). In addition to sanctions, on the same legal grounds for which companies can be forced to make they have already been punished good any damage caused or to take by the criminal courts or authorities. preventive measures. If proceedings by the authorities are in progress and actions are expected to constitute a criminal offence, these will What is the relevance of an effective be referred to the Public Prosecutor, compliance system? requesting a report on the procedures carried out to that effect and agreeing Since 1 July 2015, the existence of to adjourn the proceedings. If public an effective compliance system may prosecutors do not find sufficient grounds serve to mitigate or exclude criminal to make a criminal case against any or all corporate liability. of the persons involved, or the criminal A key aspect of the recent reform of proceedings end with acquittal, they the Criminal Code is the introduction of will inform the authorities so that the a defence of adopting and effectively administrative proceedings can resume. having in place, before the offence was This has been subject to some debate committed, an “adequate organisational and the Spanish Constitutional Court has and management system to prevent effectively ruled that: (i) the criminal courts offences of the kind committed or have precedence over the sanctioning to significantly reduce the risk of power of the public administration; and such offences”. (ii) the public administration is bound For offences committed by “employees” by the facts declared proven in the (as defined above), having adequate criminal proceedings. procedures in place is enough for Although the specific kind of administrative companies not to be liable, provided sanction will depend on the sector, there that the measures were actually applied are certain kinds of administrative punitive in practice and were suitable to prevent wrongdoing (so that there has not been Linklaters 83

a serious failure in the duty of oversight Likely future scope and and supervision of the “employees” development? in question). Currently, we do not anticipate any further For offences committed by “management changes given that the most recent and legal representatives” (as defined changes to the regime of corporate above), the following circumstances criminal liability were only introduced must apply: in 2015. Having said that, the Spanish Supreme Court handed down two relevant >>supervision of the functioning of and judgments at the beginning of 2016. compliance with the system of prevention These judgments dealt with issues such in place must have been entrusted as direct or indirect benefit, requisites for to a body within the company with the release of liability, rights of defence, autonomous powers of initiative and the use of shell companies and the control or which has the legal function burden of proof. In one of the cases there of overseeing the effectiveness of the was a dissenting opinion in the judgment, company’s internal controls; backed by seven (out of fifteen) judges. This dissenting opinion covered key issues >>the individual authors have committed such as the absence of a culture of control the crime fraudulently, circumventing as an element of the actus reus and the the systems of organisation and company’s burden of proof in relation prevention; to exculpatory circumstances. There is >>there has not been a failure or shortfall therefore currently a degree of uncertainty in the performance of its functions of in case law as to how the new liability supervision, monitoring and oversight regime will develop. on the part of the supervisory body referred to. 1. The anti-money laundering regime under Spanish law is A complete exemption from criminal only applicable to certain types of entities (credit institutions, liability will only be available where all investment firms, pension fund managers, private equity managers, currency exchange houses, real estate developers, the circumstances apply (as well as money transfer companies, entities trading with goods when having the prevention programme in receiving or making payments above EUR 15,000, etc.) and individuals (lawyers, notaries, auditors, jewellers, place). However, should only some be antiquarians, etc.). present, they may still be taken into account to mitigate the sentence.

How are criminal proceedings against companies conducted in practice? Given the short period of time for which the new legislation has been in force, there is little practical experience of how proceedings against companies will be conducted. In particular, settlement deals between companies, prosecution authorities and the criminal courts are not commonplace, since the Spanish Criminal Procedural Law does not expressly foresee those kinds of deals. It is therefore not yet possible to say how the new law will be implemented in practice. 84 A review of law and practice across the globe

Sweden

Can companies be criminally liable >>the crime has been committed by: for wrongdoing? (i) a person with a managerial position in There is no corporate criminal liability the company (based on the person’s under Swedish law since only physical capacity to represent the company persons/individuals can commit and be or make decisions on behalf of the held directly responsible for criminal company); or offences. The introduction of criminal liability for companies was suggested (ii) a person who has otherwise had a as early as 1997 but rejected. To our special responsibility for supervision knowledge there are currently no plans to or control in the company. introduce a specific criminal liability for As set out in chapter 36, section 7, companies. the imposition of a company fine requires Nonetheless, the Swedish Penal Code that a crime has been committed (1962:700) (“Penal Code”) does provide in the exercise of business activities a specific sanction for companies: the (crimes committed directly against the “company fine”. The company fine, company are excluded). This requires which is classified as a “particular legal that the criminal offence must have been consequence of a criminal offence” rather committed by a person acting for or on than as a criminal punishment, can be behalf of the company, such as a director, imposed on a company in respect of an employee or a contractor and, as a criminal offences committed in the general rule, that the criminal offence course of the company’s business. has a clear connection to the business conducted by the company and the tasks performed by the person committing the For what kind of wrongdoing can a criminal offence. company be held criminally liable? The existence of general rules or [A] company fine The imposing of a company fine requires instructions are unlikely to be sufficient that a crime has been committed, i.e. that can be imposed to show that a company has done what is all prerequisites of a criminal provision reasonably required to prevent crimes. on a company, are fulfilled, including, where necessary, In order to fulfil this requirement, company wilfulness/intent. In theory, any criminal policies must be precise in this regard. provided that a offence can result in a company fine, c r i m e ... h a s b e e n provided that the punishment under Even if a company has done what could the provision for such offence includes committed in reasonably be required to prevent a crime, a more severe punishment than a fine a company fine may still be imposed if the the exercise of (i.e. imprisonment). crime has been committed by a manager/ executive or a person with a supervisory business activities. How far does criminal liability position in the company. Generally extend? speaking, these two groups include persons in the senior management of the It follows from chapter 36, section 7 of the company, as well as persons who report Penal Code that the company fine can be to senior management, (the provision imposed on a company, provided that a mentions employees in a “managerial crime (for which the punishment under position”) and persons responsible for the Penal Code includes imprisonment) ensuring that legislative rules and company has been committed in the exercise of policies are adhered to. Where appropriate, business activities, and: this may include foremen and supervisors below senior management. >>the company has not done what could reasonably be required to prevent the crime; or Linklaters 85

In brief: Are the prosecution authorities a formal trial. In these cases, the company legally obliged to conduct a fine may not exceed SEK 500,000. >>crimes committed by third persons and crimes that could not reasonably criminal investigation into A company that is subject to company be anticipated will generally fall outside corporate wrongdoing? fine proceedings (which are categorised the scope of the provision (as they as criminal proceedings in the courts) will, The prosecution office is obliged to bring are generally speaking not carried as far as possible, have the same rights a company fine action against a company out in the exercise of the company’s as an individual who is subject to criminal if the legal prerequisites for such an business activities); proceedings. Hence, the company may be action are deemed to be fulfilled, provided entitled to a defence lawyer, in accordance that there are no specific grounds not >>crimes committed by employees, that with the general rules set out in the to impose a company fine (in which have a connection with their tasks at the Swedish Code of Judicial Procedure. case, the prosecutor should refrain from company, may lead to a company fine if The company will, however, be obliged to bringing an action altogether). These the company has not done what could repay the cost for the defence lawyer if specific grounds include; for example, reasonably be expected to prevent the the court finds that the company is liable situations where a company fine is crime (such as, appropriate policies and to pay a company fine. supervision); and deemed disproportionate or where the company has voluntarily taken measures >>crimes committed by senior executives to self-report the offence. Is the company legally obliged to and management are likely to lead to a co-operate with the prosecution company fine regardless of the company’s What is the position of the authorities in the proceedings? measures to prevent such crimes. defendant company in Co-operation happens on a voluntary In very specific circumstances, a company criminal proceedings? basis. However, the fact that the company can incur liability in the form of a company has voluntarily reported the crime is a It is not necessary that an individual is fine even though a physical person is not ground that may result in a reduction prosecuted, convicted or even identified actually charged with a criminal offence. of the company fine in accordance with in order to impose a company fine, as This option has been included to permit, chapter 36, section 10, item 3 of the long as it can be ascertained that a crime in exceptional circumstances, a finding Penal Code. has been committed in the exercise of that a company’s liability is primary rather the company’s business activities. It will, than ancillary to an individual’s offence. however, generally be difficult to ascertain What kind of sanctions can be the existence of a crime if a perpetrator imposed on companies? Does criminal liability extend to cannot be identified. Accordingly, in some foreign companies? cases, it may be preferable from the The amount of a potential company fine prosecutor’s point of view to carry out a ranges from SEK 5,000 to SEK 10,000,000 A company exercising business activities preliminary investigation with the purpose (approx. EUR 550 to EUR 1,100,000). in Sweden may become subject to a of imposing a company fine rather than In assessing the size of the fine, the company fine regardless of whether the to seek a judgment against an individual fact that company management was company has a permanent establishment (such as the exceptional circumstance set unaware of a criminal offence or that the in Sweden or not, provided that the out above to make a company primarily offence has been committed in breach of prerequisites of chapter 36, section 7 of responsible in certain cases). management guidelines or policies may the Penal Code (set out above) are fulfilled. be taken into account to the company’s Company fine proceedings against a benefit. So far, no Supreme Court cases Is the company legally obliged to company may be conducted separately have become public in which company from the criminal proceedings against fines have been imposed as a result of disclose criminal offences to the the individual perpetrator. It is, however, “white collar crime”. However, following competent prosecution authorities? considered appropriate from a practical criticism from the OECD, Sweden has No, but the company’s voluntary disclosure perspective that the proceedings are taken several steps to enforce white collar of a criminal offence is an extenuating joined as far as possible so that; for crimes. Recent Supreme Court cases on circumstance when the amount of the example, the assessment of the criminal company fines have primarily pertained to company fine is being determined. offence does not have to be repeated. work environment offences. The absence It is also possible to impose a company of case law indicates that company fines fine by way of an order for a summary due to white collar crimes are currently punishment, i.e. where the company unusual but that Sweden is taking steps consents to the imposition of a fine without to change this. 86 A review of law and practice across the globe

Apart from white collar crimes, the highest >>Fines under chapter 3 sections 5-11 Likely future scope and company fines that have been made of the Competition Act (2008:579) development? public amount to SEK 6,000,000 (against (may not exceed 10% of the company’s Skanska AB) and SEK 2,500,000 (against turnover for the previous financial year). Sweden is currently seeking to bring Cascade Djupafors AB), both due to work its Penal Code provisions on company environment offences. >>Fine under the Banking and Financing fines in line with the OECD 2009 Business Act (2004:297). Such a fine Recommendation on Further Combating Chapter 36, section 10 of the Penal Code may not exceed: (i) 10% of the credit the Bribery of Foreign Public Officials. sets out four factors that may result in a institution’s turnover for the previous This may potentially entail a raising of the reduction of the company fine: financial year; (ii) twice the amount maximum potential corporate fine from the of the profit gained as a result of the current level of SEK 10,000,000 (approx. >>if the crime has already resulted in violation; or (iii) twice the costs that have EUR 1,100,000). The Government’s another sanction for the business been avoided as a result of the violation. official report will be published by the proprietor and the total sanction resulting The previous maximum amount was end of November 2016. Moreover, the from the crime (including the company SEK 50,000,000. OECD’s criticism of Sweden’s measures to fine) would be disproportionate; combat bribery may lead to an increase in the number of prosecutions against >>if the company tried to prevent, remedy What is the relevance of an effective companies, particularly in corruption or limit the effects of the crime; compliance system? cases, as the government seeks to >>if the company voluntarily reported the Adequate compliance systems reduce the answer its critics. crime; or risk of a company fine being imposed, as chapter 36, section 7 is only applicable >>there are other specific reasons to where a company has not done what reduce the fine. These would include could reasonably be required to prevent that it would be manifestly unreasonable the crime (provided that the crime has to impose a company fine (a theoretical not been committed by a manager, etc.). Criticism of Sweden’s example is that the crime is indirectly Adequate compliance structures may measures to combat directed against the company). therefore limit a company’s risk exposure for crimes committed by employees. bribery may lead to an Moreover, according to chapter 36, section 4 of the Penal Code, the economic benefits How are criminal proceedings increase in the number that a company has gained as a result of a against companies conducted of prosecutions against crime may be subject to forfeiture. in practice? c o m p a n i e s ... a s t h e In addition to the company fine, the government seeks to following are examples of administrative Swedish law does not allow deals in sanctions that may be imposed on criminal cases. However, it is possible answer its critics. Swedish companies: for a prosecutor to impose a company fine by way of an order for a summary >>Exclusion from public tenders, punishment, for example, where the chapter 10, sections 1-2 of the Public company consents to the imposition Procurement Act (2007:1091). of a fine without a formal trial. In these cases, the company fine may not >>Fines under sections 29-32 of the exceed SEK 500,000. Marketing Act (2008:486) (from SEK 10,000 to SEK 10,000,000).

>>Fines under chapter 30 of the Environmental Act (1998:808) (from SEK 1,000 to SEK 1,000,000). Linklaters 87 88 A review of law and practice across the globe

Thailand

Can companies be criminally liable as to whether the accused has committed for wrongdoing? the offence, the benefit of such doubt shall be given to the accused4. Yes, under Thai law, criminal liability may be imposed on legal entities (including companies, limited partnerships, For what kind of wrongdoing can a foundations and associations), which company be held criminally liable? may be penalised in the same way as As a general principle, a company can only individuals (although they cannot be be held criminally liable for the offences subject to certain penalties, such as which are committed in connection with imprisonment, confinement and capital business within the scope of the objectives punishment). The principle has been of the company, as set out in the acknowledged by the court of Thailand memorandum of association and where since the 1920s (for example, in the the relevant conduct was carried out Supreme Court’s judgment no. 841- by its representatives, i.e. the directors. 842/2469 (1926)). In most cases, Therefore, in order for a company to be companies will be held criminally liable liable for a criminal offence, the unlawful for the unlawful actions of its authorised action must have been conducted for and persons or the persons responsible for on behalf of the company, in the course the company’s unlawful conduct. of its business. The offences for which a company can be liable include tax evasion, There are several statutes which impose money laundering, embezzlement, bribery criminal sanctions on entities: the Anti- and terrorist financing. Money Laundering Act, B.E. 2542 (1999), 1 Criminal liability as amended (“AMLA”) ; the Financial Note, however, that some legislation also Institution Business Act, B.E. 2551 (2008) places criminal liability on a company may be imposed on 2 (“FIBA”) ; the Counter Terrorism Financing regardless of whether the offender is an 3 l e g a l e n t i t i e s ... . Act, B.E. 2556 (2013) (“CTFA”) ; and authorised person. For example, under the Act Prescribing Offences Related The principle has Thai anti-corruption law, a company, to Registered Partnerships, Limited having no proper measures to prevent been acknowledged Partnerships, Limited Companies, bribery, may be held criminally liable if Associations and Foundations, B.E. 2499 by the court of a person acting on its behalf commits (1956), as amended (“Partnerships and bribery for the benefit of that company. Thailand since Companies Act”)4. Under a number of statutes which impose sanctions on the 1920s. legal entities for criminal conduct, the How far does criminal liability representatives (including executives and extend? the persons responsible for the relevant In principle, a company may be conduct) shall also be subject to criminal held criminally liable for the offences sanctions. In such cases, it must be committed by its representatives (such proven that the offence was committed by as directors or managers) as a company the representatives or with their knowledge will be held to have acted through its or consent, or that they did not make representatives. Unlawful conduct by reasonable efforts to prevent the offence. employees or other third parties would Under the Criminal Procedure Code, not give rise to criminal liability for the for a company to be sanctioned, the company as it cannot be assumed Public Prosecutor is required to prove that such conduct was authorised by all elements of a particular offence and the company. prove beyond reasonable doubt that the company committed the crime. If the Public Prosecutor fails to prove this, the court will dismiss the case. It should be noted that if any reasonable doubt exists Linklaters 89

Does criminal liability extend to the conduct (Section 121 of the Criminal foreign companies? Procedure Code). If a complaint has been made to a police officer, whether for a A Thai court has jurisdiction over any compoundable offence or others, the White collar entity committing a criminal offence under police officer is obliged to proceed with the crimes, which Thai law within Thailand, notwithstanding criminal investigation without delay (see the country in which it is incorporated. Section 130 of the Criminal Procedure are complicated Therefore, it is possible that foreign Code) and report his findings and or which have a companies may be held criminally opinion to the Office of Attorney General liable. A criminal offence is deemed to (“OAG”). The OAG does not conduct the serious impact have been committed within Thailand investigation itself but will decide, after on public or the even if it was only partially committed reviewing the evidence, whether to take within Thailand, the consequence of the the case to court.5 economics and offence is intended by the offender to finance of the occur within Thailand (and does so), the White collar crimes, which are complicated nature of the offence necessarily means or which have a serious impact on public or country, are that the consequence of it will occur the economics and finance of the country, investigated by within Thailand or it was foreseeable that are investigated by the Department of the consequence of the offence would Special Investigation (“DSI”), pursuant to the Department occur within Thailand. Accordingly, a the Special Case Investigation Act, B.E. of Special foreign company may be held criminally 2547 (2004) (“DSI Act”) , who may liable, as a conspirator, for an offence act jointly with the Public Prosecutor Investigation. committed in Thailand by its Thai- (Section 32 of the DSI Act). incorporated subsidiary or the subsidiary’s representative. What is the position of the defendant company in Is the company legally obliged to criminal proceedings? disclose criminal offences to the A legal entity is treated the same way as competent prosecution authorities? an individual facing criminal proceedings Under the Criminal Procedure Code, and will be subject to the same rights there is no obligation for a company itself and obligations. In an inquiry, preliminary to make a disclosure of criminal offences examination or trial in which a company to the competent prosecutors. is the defendant, its representatives shall be summoned to appear before the Are the prosecution authorities inquiry official or the court (Section 7 of the Criminal Procedure Code). legally obliged to conduct a There is no need to identify or convict criminal investigation into an individual perpetrator in order to corporate wrongdoing? prosecute the company. Nor is it required that the representatives be prosecuted In general, pursuant to the Criminal together with the company and the Procedure Code, a police officer can proceedings against the company can commence an investigation or inquiry into be separate. However, in practice, if the a criminal allegation on his own initiative. company is alleged to have committed However, in respect of compoundable a crime, the Public Prosecutor would be offences (i.e. offences which are regarded likely to prosecute the company and its as private wrongs and so are considered representatives (as legal conspirators) as less harmful to the public and may be joint defendants in the same proceedings. settled by the injured party, a police officer will not have the authority to commence an investigation unless a complaint has been brought by a person allegedly suffering injury or damage as a result of 90 A review of law and practice across the globe

Is the company legally obliged to The maximum and minimum levels co-operate with the prosecution of fines which can be imposed on a authorities in the proceedings? company for any given offence will be set out in the relevant legal provision, with the The company may be requested by the actual fine to be imposed being subject government authority or police officer to to the court’s discretion. Examples in provide evidence or information as part the field of white collar financial crimes of the investigation into the alleged act include a maximum fine of Baht 2 million or to permit a search of the business for the offence of terrorism financing premises of the company. However, in (Section 16 of the CTFA). Note that court proceedings, the company may certain statutes also impose daily fines for refuse to provide any information and regulatory breaches, which will continue to In court remain silent throughout the trial and is apply while the breach continues and for proceedings, not obliged to provide evidence. Under which there is no maximum amount. the Criminal Procedure Code, no guilty the company judgment can be delivered by the court For some offences, the government may refuse to unless it is proved beyond reasonable authorities (e.g. the Anti-Money doubt that a company has committed Laundering Commission under the AMLA6, provide any the alleged offence. the commission appointed by the Ministry 7 information and of Finance under the FIBA ) may be Pursuant to Section 78 of the Criminal empowered to impose fines on a company, remain silent Code, if a company provides the court the payment of which will result in the throughout with information which facilitates the termination of the criminal proceedings. court trial, this co-operation may be taken t h e trial. into account and the court may reduce There is no one centralised and publicly the punishment to be imposed on the accessible index of white collar crime

company by up to one-half of the penalty cases and the respective sanctions in prescribed for the relevant offence. Thailand. The sanction to be imposed on a company in any case depends on several factors and is subject to the court’s What kind of sanctions can be discretion. imposed on companies? The company may mitigate the degree Pursuant to Section 18 of the Penal Code, of penalty by way of providing useful there are five criminal sanctions which information which facilitate the court trial, can be imposed by the court: capital e.g. by way of confession or testimony punishment; imprisonment; confinement; which accelerates the investigation fine; and forfeiture of property. The criminal process or the trial process. In addition, sanctions that are applicable to companies the fact that the company had sufficient are limited to fine and forfeiture of control mechanisms/compliance property. Under the Criminal Procedure systems in place may help prove that the Code, for a company to be penalised company had no intention in committing by those two criminal sanctions, the the relevant crime and had made all Public Prosecutor is required to prove reasonable efforts to prevent an offence. all elements of a particular offence and In such case, the court may lower the prove beyond reasonable doubt that a penalty to be imposed on the company company committed the crime. If the on the discretionary basis. Public Prosecutor fails to prove this, the court will dismiss the case. It should be In addition to criminal sanctions, a noted that if any reasonable doubt exists company may be liable for administrative as to whether the accused has committed sanctions imposed by the relevant the offence, the benefit of such doubt government authorities. For example, shall be given to the accused. the Transaction Committee under the AMLA may seize or attach the assets related to an offence (Section 48 of the Linklaters 91

AMLA), the Bank of Thailand under the It is unusual for deals to be agreed FIBA may order to prohibit any action in between defendant companies and the violation of, or to take action in compliance prosecuting authorities or the criminal with, the relevant regulations (Section 89 court for the purpose of the terminating of the FIBA), or to suspend the operations the criminal proceedings. In particular, of the company within a specified period there is no principle of plea bargaining (Section 90 of the FIBA). under Thai law.

What is the relevance of an effective Likely future scope and compliance system? development? A compliance system may help prove The principle of corporate criminal that the offence was not deliberately liability has long been developed in the committed by the company and that the Thai legal system and it is now relatively company has made every effort not to established how a court would penalise engage in wrongdoing. This may persuade a company whose action has constituted the court to impose a lower penalty on a criminal offence. The current trend in the company. On the other hand, the legislation practice is for laws to include existence of inadequate compliance provisions that impose clear penalties structures would not, of itself, increase on company representatives and other the risk of being prosecuted or fined, persons responsible for a company’s absent a regulatory breach or a criminal activities, to ensure that such individuals offence occurring. avoid committing an offence on the company’s behalf.

How are criminal proceedings We are not currently aware of any against companies conducted discussions in relation to a potential in practice? tightening up of sanctions against companies, particularly those in In general, white collar crimes are the context of white collar crimes, in dealt with by the government authority addition to the anti-Corruption Law empowered to initiate proceedings under discussed above. the relevant legislation. The government authority would normally review the reported crime in order to gather information and submit a complaint to the 1. Section 61 of the AMLA. Economic Crime Suppression Division (a 2. Sections 122, 124, 125 and 128 of the FIBA. police division responsible for economic 3. Section 16 of the CTFA. crime investigation) or the DSI (if it is a 4. Sections 7-24 of the Partnerships and Companies Act. 5. Section 227 of the Criminal Procedure Code. serious crime and may have extensive 6. Examples would include criminal offences under the AMLA, impact on public under the DSI Act), who the FIBA, the Securities and Exchange Act, B.E 2535 (1992), would proceed with further investigation as amended, the Exchange Control Act, B.E. 2485 (1942), before referring the case to the OAG. The as amended and the Revenue Code. 7. Section 64/1 of the AMLA. OAG, as the prosecuting authority, will 8. Section 156 of the FIBA. decide whether the case should progress to court. In practice, the government authority will use its powers to impose fines for regulatory breaches which do not have a serious effect on the public and in these cases, the criminal prosecution shall be terminated without proceeding to trial. 92 A review of law and practice across the globe

United Kingdom

Can companies be criminally liable Does criminal liability extend to for wrongdoing? foreign companies? Yes, companies have been criminally Generally, whether the English authorities liable for wrongdoing in the UK for will prosecute a foreign company for many decades. wrongdoing is a decision to be made by the prosecutors and investigators of the For what kind of wrongdoing can a jurisdictions involved. Specific factors will be considered when reaching a decision company be held criminally liable? where to prosecute. A company can be held criminally liable for a very wide range of offences. With a However, in specific cases, legislation may few exceptions, criminal offences in the extend UK criminal liability to offences UK are created by statutes. These usually committed by foreign companies. make it an offence for “a person” to do For example, under Section 7 UKBA, or fail to do a particular act. By virtue of a company may be liable to prosecution the Interpretation Act 1978, subject to in the UK if a person associated with it the appearance of a contrary intention, bribes another person intending to obtain “a person” will include a company. It is or retain business or an advantage in the generally necessary for a prosecutor to conduct of business for the company and invoke the principle of identification, by the company has no adequate procedures which the acts and state of mind of any in place designed to prevent bribery. directors and managers who represent Under Section 7(5) UKBA, this provision a company’s “directing mind and will” extends to companies and partnerships are imputed to the company. carrying on business in the UK, no matter where they are incorporated. “Carrying on a business” is not defined in the UKBA How far does criminal liability but will include engaging in commercial extend? activities, irrespective of the purpose for which profits are made. Under guidance Case law has established that the A company can be published by the Ministry of Justice (“MoJ”) appropriate test for the court is whether to accompany the UKBA, a “common held criminally the individual in question had sufficient sense approach” is to be applied by the status and authority to make his acts liable for a courts when deciding whether a foreign the acts of the company, such that the company has a “demonstrable business very wide range individual is to be treated as the company presence” in the UK, such that it would itself. It follows that individuals other of offences. be caught by this provision. than directors or senior executives may be found to have been the company’s “directing mind and will”. The individual’s Is the company legally obliged to title is unlikely to be determinative. disclose criminal offences to the Although Section 7 of the Bribery Act competent prosecution authorities? 2010 (“UKBA”) introduces wider liability in the context of bribery, by making a There is no general obligation under company liable where (for example) one English law, either on individuals or of its agents has paid a bribe intending to companies, to report criminal offences. obtain business for the company, general This is subject to an exception in two corporate criminal liability is governed by particular areas. First, there are duties to the identification principle outlined above. report in the context of terrorism, such as the obligation to pass on information which may be of assistance in preventing the commission of an act of terrorism. Linklaters 93

Second, the Proceeds of Crime Act 2002 What is the position of the What kind of sanctions can be makes it a criminal offence for those defendant company in imposed on companies? employed in the “regulated sector” to criminal proceedings? fail to report any suspicions they have of Criminal statutes generally provide for two money-laundering. Examples of activities A company will have the same general sorts of sanction: imprisonment (up to a falling within the regulated sector include: rights as an individual defendant in certain number of years) and an unlimited accepting deposits from the public; criminal proceedings. For example, it will fine. A company cannot of course be offering life assurance or investment have the right to be represented and the imprisoned, although if individuals services; performing statutory audit work same burden and standard of proof will are themselves separately convicted in and operating a casino. It may also be apply. Although (for the reasons set out relation to the same activity, they may be. advisable, depending on the facts of a above) it will usually be necessary for the In the event of a corporate conviction, particular case, for a company to report prosecution to identify an individual who, the sentencing court will almost inevitably offences even where there is no positive in the particular case, was the “directing impose a fine. Since October 2014, obligation to do so. mind and will” of the company, conviction new sentencing guidelines have applied of the company is not contingent upon to companies convicted of offences of fraud, bribery or money laundering. Are the prosecution authorities conviction of that individual. Criminal proceedings against the company are not, These make it clear that the sentencing legally obliged to conduct a therefore, ancillary to criminal proceedings court should seek, through a combination criminal investigation into against the individual(s). The “Guidance of a fine and any orders for compensation corporate wrongdoing? on Corporate Prosecutions” envisages or confiscation, to achieve the removal that a company will usually be tried at the of all gain and impose any appropriate There are a number of law enforcement same time as (i.e. in the same trial as) additional punishment. For example, in agencies which may investigate and relevant individuals, although this will not serious cases of bribery, the penalty might prosecute corporate wrongdoing: in necessarily be the case. be four times the gross profit from the particular, the police, the Serious Fraud contract obtained, although it should be Office (“SFO”), the Financial Conduct stressed that there is usually no financial Authority (“FCA”), Her Majesty’s Is the company legally obliged to maximum set by law. Rather, the court Revenue and Customs (“HMRC”) and co-operate with the prosecution will use multipliers set out in guidelines to the Department for Business, Energy and authorities in the proceedings? achieve an appropriate figure. There have Industrial Strategy. These are, generally been very few criminal penalties imposed At the investigation stage, certain law speaking, under a duty to investigate on companies for financial crime in the enforcement agencies have powers to allegations which fall within their ambit UK. Most penalties take the form of civil require information from companies. and this will include allegations which recovery orders, which are a non-criminal For example, the SFO may require suggest wrongdoing by a company. As to sanction. Recently, companies have been a company to produce documents the decision to prosecute, there is a two- found liable to pay over dividends and or to answer questions (through a stage test based on evidential sufficiency payments received as a result of contracts representative). It is a criminal offence and public interest. This test applies to obtained by corruption by subsidiaries. both individual and corporate suspects. to fail to comply with such a requirement, Prosecutors have a discretion as to although there are limitations on the use Sentencing courts are obliged to take whether to institute criminal proceedings to which the SFO might put any evidence into account guilty pleas when assessing but this is subject to judicial oversight. obtained in this manner in any criminal fines. A company which has pleaded There is formal “Guidance on Corporate proceedings against the company. guilty either to the offence charged or Prosecutions” which makes it clear Other than in the context of these to some lesser offence (as part of a that although corporate prosecutions powers, co-operation by the company negotiated plea) can expect to receive a should not be seen as a substitute for during an investigation would be voluntary. lower fine than if it had fought the case prosecutions of individuals, they are Co-operation with the authorities during unsuccessfully. The degree of discount important in capturing the “full range an investigation is likely to result in a lower depends on the stage at which the guilty of criminality” and ensuring “public fine, although this will depend on how plea is entered. confidence in the criminal justice system”. the company approaches the criminal proceedings themselves. 94 A review of law and practice across the globe Linklaters 95

Additionally, conviction for certain types How are criminal proceedings Likely future scope and of offences (such as corruption) results in against companies conducted development? mandatory exclusion from public sector in practice? tenders (subject to an exception based on There are now strong signs that the “overriding requirements in the general Criminal proceedings generally may be government wishes to place increased interest”). Other offences, if they relate to brought against a company by the Director emphasis on the prosecution of the conduct of business, may give rise to a of Public Prosecutions and, in relevant corporate entities. discretionary exclusion from such tenders. circumstances for specified crimes, by Other types of non-criminal sanction would other authorities, including the SFO, At the time of writing, the government is include suspension or variation of a licence FCA and HMRC. Historically it has been consulting on a new corporate criminal by a regulator (such as the FCA in the case difficult to bring successful prosecutions offence of failure to prevent the criminal of a financial institution). against corporate bodies, due to the need facilitation of tax evasion. The proposed to demonstrate the involvement of “the offence would impose criminal liability on corporations who fail to prevent What is the relevance of an effective directing mind and will” of the company in the relevant conduct. Prosecuting their “representatives” facilitating or compliance system? authorities have therefore tried to encourage committing a UK tax evasion offence or an equivalent offence committed The existence of an effective compliance the self-reporting by companies of crimes overseas and who cannot show that they system will generally be most relevant such as bribery and corruption offences. have taken reasonable steps to prevent at the public interest stage of the However, there is no formal mechanism such misconduct. prosecutor’s decision referred to above, for companies to negotiate a settlement or when the SFO is deciding whether to of criminal proceedings with a prosecutor Furthermore, in May 2016, it was offer a deferred prosecution agreement without court approval. Even where announced that the government is (“DPA”). For example, on page 7 of the formal plea discussions take place and to consult on whether to extend the “Guidance on Corporate Prosecutions” the prosecutor agrees in principle to the corporate criminal offence of “failing to it is said that a prosecution is more likely payment of a particular fine, the ultimate prevent” beyond bribery and tax evasion to be in the public interest where the decision is for the court. That said, it is to other economic crimes. The proposed offence was committed at a time when common for a company to negotiate with new general offence would extend at least the company had an ineffective corporate a prosecutor by offering to plead guilty to misconduct such as money laundering compliance programme. Conversely to a lesser offence. If these negotiations and fraud and possibly other forms of (on page 8), the existence of a “genuinely are successful, the court cannot force economic crime, such as false accounting. proactive and effective corporate the prosecutor to proceed with the more However, it will be unclear until the compliance programme” will be a public serious charge. consultation is published how the offence interest factor against prosecution. will be framed and its scope. It is probable If criminal proceedings are brought, the As of February 2014, companies may be offered DPAs in certain cases. Such an that liability will be balanced by some existence of an effective compliance form of “adequate procedures” defence, system will not generally amount to agreement is likely to include the payment of a financial penalty and the disgorgement akin to that available for failing to a defence in criminal proceedings prevent bribery. (unless, as with section 7 UKBA, the of profits and may include a review of law specifically provides for it), although the company’s anti-corruption and/or it is likely to be relevant when the court anti-fraud policies and monitoring by an assesses the level of financial penalty appropriate third party. Prosecution would in the event of a conviction. then be deferred for a set period. Again, court approval is needed.

Two DPAs have been concluded since their introduction in 2014. The first, relating to Standard Bank PLC, was concluded in November 2015 while the second, between the SFO and an as yet unidentified company, was agreed in July 2016. In both cases the companies had admitted to misconduct and agreed to pay a financial penalty and to abide by other terms in the DPA. 96 A review of law and practice across the globe

United States

Can companies be criminally liable Does criminal liability extend to for wrongdoing? foreign companies? Yes, U.S. law at both the state and federal Although jurisdiction to prosecute criminal levels provides for criminal liability for offences in the United States generally corporations for crimes committed by relates to territorial borders, U.S. law does individual directors, managers, or low-level allow for the extraterritorial enforcement employees1. Corporate criminal liability of U.S. criminal law, including as regards was applied in courts in the United States non-U.S. companies. Among the most to varying degrees during the late 19th important examples of laws with such century, but by the beginning of the 20th extraterritorial implications is the FCPA, century, corporate criminal liability was which contains two sets of prohibitions and widely accepted when it was validated by requirements: the “books and records” the U.S. Supreme Court2. provisions, and the “anti-bribery” provisions. The anti-bribery provisions of the FCPA For what kind of wrongdoing can a broadly prohibit offers or payments of anything of value made directly or company be held criminally liable? indirectly to a foreign official in order to In the U.S., corporations can be held influence any act or decision of the foreign official in his or her official capacity or liable for a number of offences, including white collar crimes (for example, fraud to secure any other improper advantage By the beginning under the Securities Exchange Act and in order to obtain or retain business. The anti-bribery provisions apply to: (i) of the 20th corruption under the Foreign Corrupt Practices Act (“FCPA”)), antitrust “issuers” and their officers, directors, century, corporate violations, and regulatory violations (for employees, agents and shareholders; (ii) “domestic concerns” and their criminal liability example, environmental and food and drug regulations). Since the U.S. Supreme officers, directors, employees, agents and was widely accepted. Court’s decision in New York Central, shareholders; and (iii) certain persons and under the doctrine of respondeat superior, entities, other than issuers and domestic

a corporation may be held criminally concerns, acting while in the territory of liable for the acts or omissions of its the U.S. The books and records provisions employees if the criminal act committed require any “issuer” that has registered is (i) within the scope of the employee’s U.S. securities or that is required to file employment, and (ii) if it is for the benefit certain periodic reports with the U.S. of the corporation. This doctrine has Securities and Exchange Commission been applied by U.S. courts at the state (“SEC”), including non-U.S. companies, and federal level in a wide variety of to keep records that accurately reflect statutes, including mail and wire fraud transactions affecting the issuer and statutes, money laundering statutes, and to maintain an adequate system of the Racketeer Influenced and Corrupt internal controls. Organizations (“RICO”) Act. As described by one journal article, by some estimates The Resource Guide to the U.S. Foreign “there are more than three hundred Corrupt Practices Act, issued in the fall of thousand federal offences with which a 2012 by the U.S. Department of Justice corporation could be charged”3. (DOJ) and the SEC noted that the FCPA’s anti-bribery provisions apply to “foreign persons and foreign non-issuer entities How far does criminal liability that, either directly or through an agent, extend? engage in any act in furtherance of a corrupt payment (or an offer, promise or Under U.S. law, corporations may be authorization to pay) while in the territory subject to liability for the actions of their of the United States”4. Because of the directors, managers, and even low-level broad interpretation by the DOJ with employees. respect to these various jurisdictional Linklaters 97

hooks under the FCPA, including, Are the prosecution authorities a prosecutor’s decision to prosecute. for example, the passage of email legally obliged to conduct a In fact, recent amendments to the U.S. communications related to the alleged criminal investigation into Attorneys’ Manual in accordance with the bribery through U.S. email servers,5 Yates Memo explain that in order for a non-U.S. companies can quite easily corporate wrongdoing? company to receive any consideration for be found to be subject to jurisdiction United States Attorneys offices have the co-operation, the company must identify under the FCPA. Other U.S. laws and discretion to prosecute a corporation or all individuals involved in or responsible regulations, including U.S. economic its culpable employees, though the U.S. for the misconduct at issue, regardless sanctions and antitrust rules, also give Department of Justice has guidelines, set of their position, status or seniority, and rise to liability for non-U.S. companies. forth in Title 9 of the U.S. Attorneys’ Manual, provide to DOJ all facts relating to that Indeed, a majority of corporate criminal governing the decision to prosecute. misconduct. If the corporation is ultimately FCPA and antitrust cases over the past indicted, any co-operation could be decade have been against non-U.S. considered to reduce penalties either in a companies. Because most U.S. legislation What is the position of the plea bargain with the prosecutor or by the does not explicitly address the issue of its defendant company in judge at the sentencing stage. extraterritorial application, it is generally criminal proceedings? left to the federal courts to determine from In a criminal investigation or proceeding, What kind of sanctions can be Congress’ intent whether individual laws corporations enjoy many, but not all, will have extraterritorial affect. As such, imposed on companies? of the constitutional rights afforded to it is difficult to make general statements individuals. For example, the Fourth Federal law has a separate set of corporate regarding the application of U.S. criminal Amendment contained in the U.S. sentencing guidelines, which can call for law to non-U.S. companies; it is therefore constitution right to privacy is not fines for corporations into the hundreds essential that such issues be considered as extensive for corporations as for of millions of dollars for each offence (see on a case by case basis. individuals, particularly in the regulatory 18 U.S.C. 3571, (“Guidelines”)). The context6. The Fifth Amendment Guidelines set specific standards only Is the company legally obliged to guarantees against self-incrimination for crimes with a commercial purpose- disclose criminal offences to the and a right to grand jury indictment are antitrust, smuggling, and gambling offences, for example. competent prosecution authorities? not provided to corporations, though a corporation is entitled to due process The U.S. Sentencing Commission declined Except in very rare circumstances, there and protection against double jeopardy. to promulgate corporate fine standards for is no obligation for the company itself to In contrast, the Sixth Amendment other offences, leaving such fines to the make a disclosure of criminal offences, (regarding the right to notice of the general statutory sentencing provisions. though self-disclosure is rewarded at the charges, assistance of counsel, a However, limited case law suggests that sentencing stage and could be a factor public and speedy trial and to confront sentencing courts may disregard these when the federal prosecutor decides accusers) applies equally to corporations general statutory provisions. In addition, whether to initiate a prosecution. and individuals. a sentencing court has discretion in This principle was recently reinforced in applying fines and may take into account a memorandum released by DOJ Deputy Statutes which expose a corporation to a variety of factors, including the presence Attorney General Sally Quillian Yates in criminal liability do not absolve officers of an effective ethics and compliance September 2015, commonly referred to or employees of responsibility, though program. There is no minimum amount as the “Yates Memo”. The U.S. Attorneys’ the necessity to identify an individual is under the statute but the statute Manual, which has been updated to dependent on the circumstances of the does provide maximum amounts for reflect the guidance in the Yates Memo, charge brought by the prosecution. different kinds of offences committed encourages corporations to conduct by organizations, e.g., for a felony, the maximum amount per offence is internal investigations and to disclose Is the company legally obliged to the relevant facts to the appropriate USD 500,000. However, the statute authorities, and signals that “timely and co-operate with the prosecution provides an alternative fine based on voluntary disclosure” is a factor to be authorities in the proceedings? gain or loss, which provides that if there is pecuniary gain from the offence, or if considered in determining whether to As with individuals, corporate defendants the offence results in pecuniary loss, a pursue prosecution. have no obligation to talk to or co-operate defendant can be fined not more than with investigators or the prosecution under the greater of twice the gross gain or U.S. law. However, co-operation, or the twice the gross loss. lack thereof, is a factor that can affect 98 A review of law and practice across the globe

Corporations can also be placed on How are criminal proceedings the DOJ has hired 10 additional FCPA probation or ordered to pay restitution against companies conducted prosecutors, increasing the number of and their property can be confiscated. in practice? staff in the FCPA Unit responsible for Depending on the specific statute, investigating and prosecuting violations other sanctions can be instituted, Federal prosecutors have wide latitude of the Act by more than 50%, and such as suspension and/or debarment to reach plea bargains/deals with announced that it is strengthening its from entering into contracts with the defendants. Trials represent inherent co-ordination with foreign counterparts federal government. risk for companies; the certainty of a in an effort to increase individual and resolution negotiated with a prosecutor is company accountability. Administrative agencies like the SEC often preferable to the uncertainty of a trial may choose to bring a civil action against verdict. In addition, trials can prove costly. a company in a federal court or before For these reasons, corporate prosecutions 1. Note, that due to the federal nature of the U.S. government, an administrative law judge. In a civil rarely result in a criminal trial and, often, individual states have their own criminal laws covering action before a federal court, the SEC the corporation pleads guilty in exchange corporate criminal liability. This note focuses on federal can seek (similar to a criminal action) law because “Federal law dominates the principal fields in for a reduced sentence negotiated with which corporate prosecutions arise, and federal prosecutions monetary penalties or disgorgement. In an the prosecution or entry into a deferred are much more numerous and significant than state administrative proceeding, the agency can or delayed prosecution agreement or prosecutions.” Sara Sun Beale, The Development and Evolution of the U.S. Law of Corporate Criminal Liability, seek a variety of sanctions in accordance non-prosecution agreement. Duke Law Scholarship, 1 (January 6 2014), with the role of the agency. For example, http://scholarship.law.duke.edu/faculty_scholarship/3205/. the SEC can seek cease and desist orders, 2. New York Cent. & H.R.R. Co. v. United States, 212 U.S. suspension or revocation of broker-dealer Likely future scope and 481, 29 S. Ct. 304, 53 L. Ed. 613 (1909) (upholding the constitutionality of the Elkins Act, a federal statute regulating and investment advisor registrations, development? railway rates that imposed criminal liability on corporations censures, bars from association with the There is increasing focus in the United that violated the statute’s mandates). 3. Edward Diskant, Comparative Corporate Criminal Liability: securities industry, civil monetary penalties, States on criminal law, particularly with and disgorgement. The Guidelines also Exploring the Uniquely American Doctrine Through respect to corporations. The Yates Memo, Comparative Criminal Procedure, 118 Yale L.J. 126, 139 allow a court to impose at sentencing (or discussed above, is just one example (2008). pursuant to a plea bargain) an effective and indicates that federal prosecuting 4. A Resource Guide to the U.S. Foreign Corrupt Practices compliance and ethics program. Act, November 2012, available at authorities will be focusing more of their http://www.justice.gov/criminal-fraud/fcpa-guidance. attention on identifying the individuals 5. SEC v. Straub, 11-cv-09645 (S.D.N.Y. Feb 8, 2013). What is the relevance of an effective responsible for corporate misconduct. 6. See New York v. Burger, 482 U.S. 691, 702-703 (1987) As another example, there is legislation (“Because the owner or operator of commercial premises compliance system? in a “closely regulated” industry has a reduced expectation currently pending in the U.S. Congress of privacy, the warrant and probable-cause requirements, Corporate sentencing guidelines reward that would require federal agencies that which fulfil the traditional Fourth Amendment standard of self-disclosure, co-operation, restitution, reasonableness for a government search have lessened enter into settlement agreements that application in this context....”). and the presence of preventative measures include over USD 1 million in payments (i.e. compliance programs). An effective to publicly disclose the key terms of compliance program may reduce the those agreements. chances of a prosecution and reduce the severity of the charges or any subsequent The DOJ has also recently implemented sentence should a prosecution occur. a new pilot program offering leniency for The Fraud Section at DOJ now employs a alleged FCPA violations, which will run compliance expert to assist, among other for one year beginning 5 April 2016. things, in assessing the existence and The pilot program requires companies to effectiveness of any compliance program (i) voluntarily self-disclose FCPA-related that a company had in place at the time misconduct; (ii) fully co-operate with any of the conduct giving rise to the prospect investigation; and (iii) remediate internal of criminal charges, and whether the flaws in internal controls and compliance corporation has taken meaningful remedial programs in order to be eligible for the action, such as the implementation of full range of potential mitigation credit. new compliance measures to detect and The pilot program offers up to a 50% prevent future wrongdoing. reduction in otherwise applicable fines, as well as the possibility that DOJ will decline to prosecute any alleged violations. In connection with the pilot program, Linklaters 99 100 A review of law and practice across the globe

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