The Chamber of Deputies has overruled the veto of the President of the Republic, who had denied his signature on the bill for a Corporate Criminal Liability Act. In doing so, the President followed numerous critics of the seminal law, the primary objective of which is the introduction of criminal corporate liability, i.e., making legal entities culpable and punishable for actions and decisions of their owners, management and supervisory bodies (and members thereof), and employees.
The Czech Republic was the last of all EU member states to pass a law of this kind. The Czech government hails the new law as an important tool in the fight against corruption and organized crime.
On the basis of the new law, legal entities may be prosecuted on grounds of the perpetration of certain criminal offenses (which are exhaustively listed in the Criminal Corporate Liability Act). These crimes fall within the scope, inter alia, of public procurement. From among the individually defined offenses, we ought to mention fraud, misrepresentation of the financial standing and economic performance of a legal entity, the acceptance of bribes, direct or indirect bribery, etc. The types of punishment which may be imposed unto legal entities for such violations of the law run the gamut from monetary fines (of up to two million crowns per diem), the forfeiture of assets, bans on operation of up to 20 years, or compulsory dissolution and winding-up. Sentencing is public. Criminal liability passes to the legal successor of legal entities.
The Act defines a criminal offense by a legal entity to be unlawful conduct in the name or on behalf of the legal entity or within the scope of its operations, provided that such conduct can be attributed to the said entity. These include:
- unlawful actions by the executive body (or individual members thereof) or other authorized agents of the legal entity;
- actions by individuals who hold a management or supervisory position at the legal entity;
- actions by parties who have decisive influence on the management of the legal entity (“controlling entities”); or
- actions by employees and individuals in a similar role.
The Act explicitly allows for punishment of the legal entity even if the specific perpetrator cannot be determined – all that is required is that the occurrence of unlawful conduct in the name or on behalf of the legal entity or within the scope of its operations has been established beyond doubt, either based on decisions (or connivance) by the executive body (“statutory body”) or because the executive body failed to take measures in order to avert the perpetration of unlawful actions.
The new Act will undeniably have the positive effect of coercing legal entities into passing measures which curb unlawful conduct (e.g. by introducing various preventative programs, employee training, etc.). On the other hand, the new Corporate Criminal Act harbors a number of risks and ambiguities which will hamper its application. For instance, the tasks and cases generated by corporate criminal liability are to be resolved by the law enforcement authorities – who presumably lack the necessary manpower to properly investigate tips or official criminal complaints against delinquent legal entities. Another serious problem in connection with the practical implementation of the Act will be the large number of frivolous or slanderous complaints filed e.g. by competitors.
In other words, it is unlikely that we will witness a “revolution in the fight against corruption and organized crime” – but the consistent application of the new Act may still significantly strengthen the government’s position in fighting these two pervasive social problems. We are of course at your disposal if you wish additional information in this regard.
Originally published by the bnt newletter bnt – pravda & partner, s.r.o.; author: Jan Šafránek, Attorney-at-Law, Partner.
