I.- Corporate criminal law and the criminal responsibility of legal entities

For many years now our country’s criminal laws have included a series of offences commonly committed by companies and business people and these make up what has become known as corporate criminal law or economic criminal law.

Until 2010, when a crime was committed inside a company (for example Spanish VAT (IVA) fraud, or dumping polluting waste) our Criminal Code punished those responsible (shareholders, directors and owners) with prison sentences and/or fines and made the company vicariously liable for the payment of the penalties and indemnities.

In 2010, as a result of directives laid down by the European Community, this system changed, and now the Criminal Liability of Legal Entities is regulated in Spain . This added to all the aforementioned the need to also punish the company when a director or employee committed a crime which in some way benefited the company.

II.- Criminal Liability of Legal Entities

The Spanish Criminal Code has drawn up a list of corporate entities which can be criminally liable. Included in this are all companies, foundations, associations and employers organisations, excluding state companies which carry out public policy or provide services of general economic interest.

There are two types of behaviour for which a legal entity can be criminally prosecuted:

1º.- When the directors commit an offence which benefits the legal entity, for example a tax offence of hiding income which lowers the amount of company tax by more than 120,000 euros.

2º.- When the directors, employees or agents commit a crime which benefits the legal entity because it has not taken the necessary control measures over the behaviour of their employees, for example, when their employees dump polluting waste into a river on a Friday afternoon to save having to take it to a treatment plant

When we refer to “acts which benefit the legal entity” we are speaking in very broad terms, and this could mean not only economic enrichment but also financial saving, gaining competitive advantage, enhanced reputation, increased knowledge, better market positioning, or any other similar conditions

The sanctions which can be imposed on a legal entity are varied and some of them are extremely tough, leading to what is virtually the equivalent of a social death penalty:

•    Fines: proportional or calculated on a daily basis;
o    In the case of fines calculated on a daily basis these could range from the minimum fine of 30 euros to one of 5,000 euros a day, and could run to a maximum fine of 9,000,000 euros.

o    In the case of proportional fines, the amount must be set bearing in mind the profit obtained from the offence, or the damage caused, and could run to several million euros.

•    Suspension of business activities for up to five years;

•    Closure of premises and establishments for up to five years;

•    Temporary or permanent ban on future business activity in the field the crime was committed in;

•    Ban from obtaining public aid and grants, tax benefits and contracting with the public sector for a period of up to 15 years;

•    The legal intervention of the company or legal entity; and

•    Dissolution of the legal entity disqualifying it from acting in any legal capacity or carrying out any business activity, even lawful.

These sanctions may be considerably lowered by four mitigating circumstances included in the Spanish Criminal Code:

1.    That the legal entity discloses the breach to the authorities before they themselves discover it;

2.    That the legal entity collaborates in the investigation providing decisive proof in order to clarify the facts;

3.    Repair or reduce the damage caused by the offence; and

4.    Put in place efficient measures to prevente new crimes being committed inside the legal entity (prevention or compliance programmes) before the day of the trial.

III.- Offences which the legal entity is liable for

The Spansh legislator opted for a so called “numerus clausus”, whereby only those crimes which are expressly stated carry a criminal sanction for a legal entity. In this list we find the most frequent and well known: computer crime, fraud and embezzlement, crime against industrial and intellectual property, tax crime and social security fraud, money laundering, urban planning offences, bribery and illegal lobbying, as well as other less common offences.

The remaining economic or corporate offences will continue to be punished in compliance with the system in existence prior to 2010, that is to say, with prison sentences for the authors of the unlawful act and civil liability for the legal entity.

IV.-Special mention for offences committed by directors, employees or agents

We have mentioned that the legal entity will be liable for those inside offences committed by its directors, employees and agents so long as the following conditions are present:

1º.- That they benefit the legal entity; and

2º.- That they were committed because of a lack of adequate control measures over the work of the authors, which should be prevented by implementing criminal risk prevention programmes or compliance.

For example, if at a car dealership employees are helping to launder money by buying and selling luxury cars, their incentive is to enrich themselves, not the company. However, as they indirectly increase the number of sales and company profits, the company would also be liable, unless it had previously adopted a series of monitoring procedures aimed at preventing money laundering in the company.

V.- Procedures of criminal risk prevention or compliance as a protection mechanism for the company and the legal entity

Corporate compliance are procedures which analyse and detect criminal risk inside a company and establish rules of behaviour with the aim of preventing the directors, agents and employees from behaving in a way which could lead to a criminal sanction for the company.

These procedures are carried out by legal firms specialising in corporate criminal law and are adapted to the needs and structure of each company.

In today’s world they are absolutely essential for all companies with a minimal structure and staff.

Francisco Bonatti Bonett
Founding Partner
Bonatti Defensa Penal
Twitter: @bonattipenal

In collaboration with Estudi Jurídic Sánchez & de Canals