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Adam Smith
General Counsel
 


Is corporate liability for corrupt business activity heading for the danger zone?


In this edition of TalklawGlobal Adam Smith, General Counsel for DCNS Group in France, chairs a panel on one of the most pressing problems facing chief legal officers all around the continent: what will be the impact in other member states of the high-profile UK Bribery Act?

The experts joining him on this panel are (in alphabetical order by country):

Australia: Annette Hughes, Partner, Corrs Chambers Westgarth

Czech Republic:
 Ivan Sagal, Partner, Bird & Bird

France: Jonathan Mattout, Of Counsel, Herbert Smith Freehills

Germany: Christian Pelz, Partner, Noerr

Italy: Bruno Cova, Partner, Paul Hastings

Poland: Janusz Tomczak, Partner, Wardynski & Partners

Spain: Alberto Echarri, Managing Partner, Ernst & Young Abogados

Turkey:
 Gonenc Gurkaynak, Partner, ELIG

Ukraine: Volodymyr Monastyrskyy, Partner, Dentons

DISCLAIMER: Any opinions, statements or other information expressed in TalklawGlobal by the respective author(s) do not necessarily state or reflect those of TalklawMedia, the chairperson or his employer, the firm to which the author belongs or other panellists. The information submitted by the legal experts is for educational purposes only and does not create an attorney-client relationship between the reader, their firm, or any lawyer in their firm, and does not prevent any lawyer in any firm on this panel, from representing a party in any matter or manner (including taking a different position to that which he/she might have expressed or endorsed in TalklawGlobal) or serving as arbitrator, mediator, dispute board member or in any similar position based on the expression of his/her opinions on the various subjects published on TalklawGlobal. No information published on TalklawGlobal may be quoted or reproduced elsewhere without the prior written consent of the author and TalklawMedia.


Adam’s questions for each jurisdiction are:

Question 1) The Bribery Act shows the UK adopting a tougher regime of corporate liability for corrupt activities. What is the current state of legislation in your jurisdiction, and is it expected to evolve in line with the UK approach?

Question 2) Given the guidance issued by the Ministry of Justice, we at least have some idea of what "adequate procedures" a company should be putting in place in the UK. What would constitute best practice in your jurisdiction?

Question 3) Multinational companies will obviously prefer to have a common standard, which should presumably be the highest common denominator of best practice in the countries in which it operates. Given the answers to Q2, could you try to highlight what such standard would look like?

Question 4) In your experience, how do companies structure their compliance function in your jurisdiction and what changes would be needed (if any) to bring it into line with the answer to Q3?








 


Annette Hughes
(biography)
Partner
Corrs Chambers Westgarth
Australia
Tel: +61 3 9672 3506
Annette.Hughes@
corrs.com.au
 


Australia:

Annette Hughes, Partner, Corrs Chambers Westgarth

Answer 1) The Australian anti-bribery and anti-corruption regime has been toughened in recent years and, following the October 2012 report of the OECD Working Group on Bribery regarding Australia’s poor enforcement record, is likely to become tougher.  (Click here to see a summary of the OECD Report: http://www.corrs.com.au/thinking/insights/australia-will-ramp-up-anti-bribery-and-corruption-enforcement-after-oecd-criticism/ , and here for the report itself http://www.oecd.org/daf/briberyininternationalbusiness/AustraliaPhase3en.PDF).  Currently, Australian law takes a multi-tiered approach, including overlapping national and state legislation of various types.  The main national law provisions relating to corruption and bribery are found in The Criminal Code Act 1995 (Cth), which criminalises bribery of foreign (and Commonwealth) officials, secret commissions, false record keeping and accounting, and money laundering (including dealing with property that is or is reasonably suspected to be the proceeds of crime).  Other relevant legislation includes The Proceeds of Crime Act 2002 (Cth), The Financial Transaction Reports Act 1988 (Cth), The Anti-Money Laundering and Counterterrorism Act 2006 (Cth), and various state-based legislation.

The Australian bribery legislation is not as comprehensive or strong as the UK Bribery Act 2010, which criminalises private as well as public bribery, does not allow a defense for facilitation payments, and creates a separate offence for the failure of a commercial organisation (with relatively minimal connections to the UK) to prevent an act of bribery (public or private).  However, Australian law does impose criminal liability on a company for the corrupt activities of its employees or agents in certain circumstances.  Companies will be held liable for a foreign bribery offence not only where the company intentionally, knowingly or recklessly committed that offence through its officers, directors or agents, but also where the company failed to create and maintain a corporate culture requiring compliance with relevant laws.  Of course, criminal liability will also lie for everything in between these two extremes (eg where a bribe is offered and the conduct is tacitly or impliedly authorised because a corporate culture existed that directed, encouraged, tolerated or











Ivan Sagal
(biography) Partner
Bird & Bird
Czech Republic
Tel: +420-226 030 500
ivan.sagal@twobirds.com
 
 



Czech Republic:

Ivan Sagal, Partner, Bird & Bird


Answer 1) The Czech Republic legislation deals with the liability for corrupt activities at several levels, including the criminal law. Unlike in the UK, there is no specific “anti-bribery” act, which would address the measures against and the liability for the corrupt activities. Such activities are, however, listed in Czech Criminal Code as constituting specific crimes (criminal acts). The Czech Criminal Code itself is only applicable to individuals (physical persons), not legal entities.

Historically, even the corrupt actions of the representatives of legal entities (typically directors or employees) conducted in relation to the legal entity’s activities were prosecuted solely against the particular individuals, depending on the level of their personal involvement in such activity. However, very recently (as of 1 January 2012), the criminal liability of legal entities has been introduced into Czech legislation by way of a special Act on Criminal Liability of Legal Entities, no. 418/2011 of the Collection of Laws (“Corporate Criminal Liability Act”).

The Czech Corporate Criminal Liability Act is not specifically focused on the corrupt activities, but is applicable to a wider group of crimes, including those that are typically referred to as “corruption” (e.g. bribery, scheming in relation to public procurement, fraud in relation to application for public subsidies, etc.). The main principles of the Corporate Criminal Liability Act in relation to certain criminal actions being attributable to a legal entity are, however, similar to those included in the UK 2010 Bribery Act. These include, e.g., the corporate criminal liability being applicable in case of actions of (i) the directors/statutory representatives of the entity or (ii) the entity’s employees, provided that the employees either acted upon the instructions or approval of the directors or










Jonathan Mattout
(biography)
Partner
Herbert Smith Freehills
 



France:

Jonathan Mattout, Partner, Herbert Smith


Answer 1) Under French Law, there is no provision equivalent to the so-called "corporate offence" contained in section 7 of the UK Bribery Act ("the Act") which criminally sanctions "commercial organisations" who fail to prevent bribery. Moreover, there is no equivalent provision to the extension operated by section 7 of the Act which punishes a commercial organisation as a result of an act committed by an "associated person".  Under French law, such an extension could arguably be interpreted as contravening the legal principle according to which one can only be liable for one's own conduct (article 121-1 of the French Criminal Code ("the FCC")).

There is, however, a general concept of corporate criminal liability expressly provided for by article 121-2 of the FCC. As a consequence, all the existing criminal offences dealing with bribery or influence peddling are applicable to both individuals and corporate entities.

Expected evolutions:

Although the debate of the criminal liability of corporate entities involved in acts of corruption is an ongoing issue, we are not aware of any official statement made, to date, announcing a modification of the French legislation designed to create a criminal offence equivalent to the one contained in section 7 of the Act. Though it should be noted that fighting against corruption was part of the "priorities" of the French Presidency of the G20 Group. As such, France officially reaffirmed its willingness to "associate more closely with the private sector in the fight against corruption" and to promote the creation and the development of "best practices instruments" for commercial organisations.









Christian Pelz
(biography)
Partner
Noerr
Germany
Tel: +49 89 28628179
christian.pelz@noerr.com
 

 


Germany:

Christian Pelz, Partner, Noerr


Answer 1) Despite continuing requests for reform, German law still does not acknowledge the concept of corporate criminal liability in the strict sense. However, corporations can be fined pursuant to § 30 Ordnungswidrigkeitengesetz [Act on Administrative Offences] if a criminal or administrative offence was committed by a member of the board, a manager, an employee with signatory powers or a person entrusted with supervision obligations. The maximum fine is one million euros per incident. Such a fine can be imposed for any kind of offences and is not limited to bribery. In addition to this, everything which the corporation has obtained by such criminal or administrative offence is subject to forfeiture. It must be noted that the act of bribing a German or foreign public official as well as commercial bribery have long been a criminal offence under German law, even if committed abroad. Additionally, board members and managers can be punished for failure to establish adequate organisation and procedures as well as for insufficient supervision and control if this facilitated corrupt activities.

Since the last years, the prosecution of corruption cases, both committed in Germany and abroad, has significantly increased and fines imposed upon companies meanwhile exceed 1 billion euros, with still increasing tendency. Forfeiture of what a corporation has obtained through an act of bribery is top priority, together with efforts to demonstrate personal liability of the top management. Unlike in the UK, prosecution is mandatory (ex officio) and need not necessarily be in the national interest. Further, investigating and tax authorities are obligated to inform each other about any suspicion of corruptive activities, so that bribery is fought by both penal and tax means.










Bruno Cova
(biography)
Partner
Paul Hastings
Italy
Tel: +39-02-30414 000
brunocova@paulhastings.com
 


Italy:

Bruno Cova, Partner, Paul Hastings


Answer 1) Italy is second only to the United States in the number of enforcement actions against corporations allegedly engaged in wrongdoings.

These enforcement actions are based on Legislative Decree No. 231 of 8 June 2001 on the administrative liability of legal persons, companies and associations (hereinafter referred to as “Law 231”), which introduced the concept of criminal liability of companies in relation to specific categories of crimes, among which corruption, committed by officers or employees of corporations, in the interest of the corporation. While Law 231 formally refers to “administrative” liability, from a practical standpoint the liability is of a criminal nature.

Law 231 provides a list of crimes which can lead to the liability of corporations.  These offences include domestic and international bribery, but also extend to financial and accounting crimes, health and safety, data protection, and other white-collar crimes.

If a director, an officer or an employee of a corporation has committed a crime, the corporation can be exonerated from liability in the following cases: (a) where the offenders acted solely in their own interest or on behalf of third parties and not in the interest of the corporation; and (b) where the corporation can prove that has adopted effective and specific internal compliance measures.

In particular, corporations must prove that, before any offence was committed, they established and implemented effective internal control systems for the purposes of preventing offences covered by Law 231, by implementing an adequate internal compliance program tailored to the characteristics of the company and setting up a supervisory body properly vested with










Janusz Tomczak
(biography)
Partner
Wardynski & Partners
Poland
Tel: +48 22 437 82 00
janusz.tomczak@
wardynski.com.pl

 




Poland:

Janusz Tomczak, Partner, Wardynski & Partners


Answer 1) Under Polish law, the immediate targets of efforts to battle corruption are the direct perpetrators of offences, that is, the individuals involved. The instruments contained in the criminal law are treated as the main measures for fighting corruption.

This approach to the issue of corruption is illustrated by the establishment in 2005–2007 of the Central Anti-Corruption Bureau, an institution whose main mission is to prosecute offences involving corruption.

A law has been in force for the past 9 years in Poland establishing a regime of corporate liability for offences committed by persons acting for or on behalf of corporate entities with the intention of obtaining benefits for them. Theoretically this law could be applied to corruption-related offences, but in practice it is rarely used (due to the ineffective model of liability), and for the most part only against tax offences.

Thus, for now, Polish law has not evolved very far at all in the direction laid down by UK law.


Answer 2) When responding to this question, it is important to note the differences in corporate culture between companies from Western Europe and from Eastern Europe. These differences obviously result from history, but also from a different legal culture.

In this respect, there are no official, commonly applicable guidelines for proper behaviour that would help prevent corruption within the internal organisational structure of companies.











Alberto Echarri
(biography)
Managing Partner
Ernst & Young Abogados
Spain
Tel: +34-91-572 7633
alberto.echarriardanaz@
es.ey.com


 




Spain:

Alberto Echarri, Managing Partner, Ernst & Young Abogados


Answer 1) Criminal offences and liabilities under Spanish Law are regulated by Act 10/1995 (the “Criminal Code”). Before one of the latest amendments of the Criminal Code, corporate entities, although could not be held criminally liable, were joint and severally liable for the payment of fines imposed to its representatives due to criminal offences committed by said representatives on behalf of the corporate entity.

However, this beneficial legal status of corporate entities was modified after Act 5/2010 came into force. This piece of legislation amended the Criminal Code, introducing in Spanish Law the possibility of corporate entities being held liable for criminal offences.

Under this new regulation, corporate entities will be liable for criminal offences committed by their representatives or directors and by their employees, to the extent that said criminal liability is established by Law for corporate entities.

Act 5/2010 sets forth a list of criminal offences for which corporate entities can be held liable. Among those, Act 5/2010 includes national and international bribery, fraud, money-laundering, health and safety or environmental crimes.

The corporate entity’s behaviour may influence in the graduation of its criminal liability. Some circumstances, such as the confession of the crime or the collaboration in its investigation may reduce the criminal liability whereas others, such as the recidivism, may increase it.











Gonenc Gurkaynak
(biography)
Partner
ELIG
Istanbul, Turkey
Tel: +90 212 327 17 24
gonenc.gurkaynak@elig.com

 
 


Turkey:

Gonenc Gurkaynak, Partner, ELIG


Answer 1)
The general principle under Turkish criminal law is that penal sanctions cannot be imposed on legal entities. On the other hand, Turkish criminal law provides that if a bribe creates an unlawful benefit to a legal entity, the entity is to be punished with three security measures: invalidation of the license granted by a public authority; seizure of the goods which are used in the commitment of, or the result of, a crime by the representatives of a legal entity; or seizure of pecuniary benefits arising from or provided for the commitment of a crime. Where there is entity liability and personal liability, authorities will directly pursue an individual and if deemed necessary, pursue the legal entity itself in order to impose relevant security measures. There are no changes expected to be made in the Turkish legislation to follow suit with the "identification principle" of the UK approach.


Answer 2)
While there are no official set of best practice regulations and guidelines that companies operating in Turkey are expected to adhere to, the general approach employed at the corporate level of company in ensuring transparency and establishing effective corporate compliance measures would constitute compliance training (which may be tailored to meet the specific needs of each industry-related function carried out by the respective employees), internal company policies establishing effective managerial commitment to combating bribery and other irregularities, and implementing effective whistleblowing mechanisms to create a balance between employer and employee interests.


Answer 3)
Given the lack of any official guidance under Turkish law, one would expect multinational companies to align their internal company policies with other jurisdictions in which they operate. Needless to say, companies would have to regard certain local regulations on











Volodymyr Monastyrskyy
(biography)
Partner
Dentons
Kyiv, Ukraine
Tel: +380 44 494 4774
 


Ukraine:

Volodymyr Monastyrskyy, Partner, Dentons


Answer 1) The issues of corruption were addressed in Ukraine several years ago in the Administrative Code of Ukraine (which deals with minor offences or offences of insignificant value) and the Criminal Code of Ukraine (which deals with criminal offences). In practice, most of the cases were related to bribing public servants in various sectors of economy with bribes ranging from obtaining a license or permit to possibility of taking a public office.

On 07 April 2001, the Law of Ukraine “On Principles of Prevention and Counteraction of Corruption” (the “Corruption Law”) was adopted. It expanded corruptive offences by adding:

1. restriction on abuse of office
2. restriction on conduct of certain actions/activity while holding a public office
3. restriction on gifts (donations)
4. restriction on work of relatives in governmental/local authorities
5. restriction on employment of persons who left public office (akin to “pantouflage”)
6. special screening of persons seeking public office.

Both the Administrative Code and the Criminal Codes were amended respectively.

Thus, the Administrative Code was added with the new chapter dealing with administrative corruptive offences and the Criminal Code was supplemented with new notions such as “abuse of influence”, “unlawful enrichment”, “subornation of private company”, “abuse by