Liability of Legal Persons for Corruption Offences Liability of Legal Persons for Corruption Offences Corruption for Persons Liability of Legal Liability of Legal Persons for Corruption Offences The opinions expressed in this work are the responsibility of the author(s) and do not necessarily reflect the official policy of the Council of Europe and the European Union. All requests concerning the reproduction or translation of all or part of this document should be addressed to the Directorate of Communication (F-67075 Strasbourg Cedex or publishing@coe. int). All other correspondence concerning this document should be addressed to Directorate General Human Rights and Rule of Law. This document has been produced as part of a project co-funded by the European Union and the Council of Europe. The views For more information on the subject expressed herein can in no way be taken to of the publication, please contact: reflect the official opinion of either party. Economic Crime and Cooperation Division Action against Crime Department Cover and layout: Documents and Publications Directorate General Human Rights and Rule of Law Production Department (SPDP), Council of Europe Council of Europe Photo: Shutterstock Email: [email protected] This publication has not been copy-edited Contributors: by the SPDP Editorial Unit to correct Tilman Hoppe, Martin Polaine, Georgi Rupchev, typographical and grammatical errors. Mark Livschitz, Dr Constantino Grasso, Bright Line Law, and Hughes Hubbard & Reed LLP © Council of Europe, May 2020 Printed at the Council of Europe www.coe.int/econcrime Contents 1. FOREWORD 5 2. THE IMPORTANCE OF CORPORATE LIABILITY 7 2.1. Case exercise 1: Greek settlement 7 2.2. Pros and cons 8 2.3. Success stories 9 3. CONCEPTS OF LIABILITY 11 3.1. Imputation 11 3.2.Objective Attribution 12 3.3. International conventions 12 3.4. Systematic comparison of international instruments 13 3.5. Case exercise 2: Siemens bribery cases 16 4. APPROACHES TO LIABILITY 19 4.1. Criminal Liability 19 4.2. Administrative liability 28 4.3. Analysis of approaches (criminal versus administrative) 29 5. ELEMENTS OF LIABILITY 33 5.1. Legal person 33 5.2. Natural person offender connected to the legal person 34 5.3. Corruption offence committed by a natural person 35 5.4. Link between the offence and the legal person 37 5.5. Attributing fault to the legal person 38 5.6. Excursus: affiliated companies 44 5.7. Case exercise 3: Energetica 47 5.8. Case exercise 4: Umbrella Company 49 6. SANCTIONS 51 6.1. Financial 52 6.2. Non-financial remedies 54 6.3. Case exercise 4: Moscow traffic control 59 6.4. Case exercise 5: Award-worthy investigation? 59 7. PROCEDURAL ASPECTS 63 7.1. Jurisdiction 63 7.2. International legal cooperation 65 7.3. Double jeopardy (“Ne bis in idem”) 66 7.4. Procedural safeguards 68 7.5. Trial tactics: natural and legal persons 68 7.6. Case exercise 6: Offshore Limited 69 7.7. Case exercise 7: Transactions abroad 70 7.8. Internal and external investigations 70 7.9. Corporate settlement agreements 76 8. LEGISLATIVE TOOLKIT 85 8.1. Chapter I: Liability 85 8.2. Chapter II: Procedural questions 101 9. ANNEX 109 9.1. International conventions 109 9.2. Non-convention standards 112 ► Page 3 1. Foreword he publication before you reflects a growing trend worldwide in the last 15 years towards holding legal entities criminally or administratively accountable for economic crime. From the first big cases of cor- T porate prosecution for economic crimes, such as the Siemens, BAE Systems, and Daimler AG, to more recent examples of cross-jurisdictional investigations and prosecutions of Erricson, MTS, Skansen, Deutsche Bank, and Societe Generale for suspected involvement in corruption and money-laundering, among other offences, liability of legal entities is steadily gaining equal footing to individual liability internationally. This does not come as a surprise, bearing in mind the roles played by many multinational companies in bribing foreign officials or laundering the proceeds of crime. This publication has been tailored to serve a dual purpose. One is to provide policy makers and practitioners with an overview of the concept of corporate liability and enforcement approaches taken by different jurisdictions. To that end, the publication also refers to relevant international standards inviting states to introduce similar mechanisms into their respective systems. From this aspect, this publication can also be used as a training manual, as well as a resource on standards and comparative practices in the domain. The second is to inform future efforts on codification and revision of rules on liability of legal entities in member and non-member States by providing model legal provisions and accompanying explanatory notes. The suggested model legal provisions could be used as a baseline by jurisdictions which are yet to introduce rules in this area. The knowledge contained herein is a result of multidisciplinary efforts taken by the Council of Europe from 2013 to 2018 in supporting Eastern Partnership and Western Balkan countries to address the roles played by legal entities in different economic crime schemes. It represents a compilation of contributions from subject matter experts and practitioners from different jurisdictions, including Tilman Hoppe, Mark Livschitz, Georgi Rupchev, Martin Polaine and Dr. Constantino Grasso, as well as principals and attorneys from internationally acclaimed law firms Bright Line Law and Hughes Hubbard & Reed LLP. It is our hope that the information presented in the following pages will be a valuable tool for all interested in the topic of liability of legal entities for economic crimes, those creating policy and compliance solutions, and those considering how to best investigate and prosecute involvement of legal entities in specific criminal schemes. ► Page 5 2. The importance of corporate liability iability of natural persons has existed for thousands of years. In comparison, the concept of legal persons has only been recognised in certain jurisdictions since the 19th century. With the emergence of legal L persons, it soon became clear that liability of natural persons alone was not sufficient and that liability for legal persons would also require regulation. The criminal liability of legal persons is therefore particularly valuable in the realm of corruption, where unfet- tered bribery can be a profitable business for corporations. Estimates suggest that the return on bribes is, on average, ten times the amount of the bribe,1 while reports indicate that approximately 15% of corporations worldwide think it is justified to bribe under certain circumstances.2 2.1. Case exercise 1: Greek settlement Background The Siemens bribery scandal in Greece concerned a series of state contracts entered into between Siemens AG and Greek government officials during the early 2000s. By paying substantial sums to government officials, Siemens allegedly managed to win a series of prestigious deals including security contracts for the 2004 Summer Olympic Games, a contract for the Athens subway and in relation to other purchases by OTE in the 1990s. According to press reports, Siemens company offi- cials earmarked more than €12 million for Greece’s main political parties between 1998 and 2005.3 Greece had claimed that bribes paid by Siemens to the various Greek governments from the late 1990s to 2007 had cost taxpayers close to €2 billion. About 100 people, including former executives in Siemens AG’s Greek unit and OTE, testified to the Athens prosecutor’s office during the two-year investigation which lasted until 2008. Several businessmen and stockbrokers suspected of acting as middle men for the payouts have also given testimony in court. In 2008, the prosecutor could only file non-individual charges against “all responsible”. These types of charges allow authorities to open a wide-ranging investigation where anyone considered a suspect is automatically charged. The former Minister for Transport and Communications during the PASOK administration in 1998 admitted in May 2010 to a parliamentary inquiry committee that the sum of 200,000 German marks was deposited in 1998 in a Swiss bank account from Siemens during his administration, allegedly for funding his election campaign. However, until 2012, no individual bribery wrongdoing has been proved by Siemens, by Greek government officials, or by anyone else. In August 2012, the Greek finance ministry and Siemens signed a €330 million settlement.4 At the time, the Greek prime minister was in Berlin asking the Chancellor for “time to breathe” on the bail-out deadlines for the Greek debt crisis. Under the terms of the settlement, the German group has agreed to write-off €80m it is owed by the Greek state and guarantee a further €250m of investment in the country. Siemens will pay €90m over five years to fund Greece government infrastructure, from medical equipment to university research programmes. It has also pledged to invest €100m in Greece during 2012 “to ensure the continued presence and activity of the company, which currently employs more than 600 employees”. In addition, the company has agreed 1. The Economist (2 June 2012), You get who you pay for, www.economist.com, accessed 28 October 2019. 2. Idem. 3. Deutsche Welle (2 July 2008), Siemens Hit by Corruption Charges in Greece, Norway, www.dw.de, accessed 28 October 2019. 4. Siemens AG (5 April 2012), Siemens and the Hellenic Republic reach a settlement agreement and mark a new beginning, www.siemens. com, accessed 28 October 2019. ► Page 7 to “build a new plant in Greece with a budget of over €60 million, which will lead to the employment of over 700 people.”5 Questions a. What are the advantages and disadvantages of non-criminal (administrative and civil) and criminal liability of legal persons in this case? b. What can non-criminal and criminal liability of legal persons not remedy in this case? c.