On 22 January 2016, the Spanish Ministry of Public Prosecutions issued its Circular 1/2016, interpreting the scope of the provisions finally enshrined in the Criminal Code with regard to the criminal liability of legal entities and calibrating the continuing effects of its earlier Circular 1/2011.
Issued by the government department responsible for moving the action of the Courts in defence of the law, the Circular contains the general criteria for action, interprets the changes made to the Criminal Code, establishes structural ground rules, and lays out the functioning of the Public Prosecutors in criminal proceedings brought against organizations.
Although the contents of the Circular do not in any way bind or oblige the Judiciary or the Courts, the position of the Ministry of Public Prosecutions is significant insofar as it has a bearing on the implementation of an adequate, effective organizational and management model through the “Regulatory Compliance Programme", which may exempt, or at least attenuate, a company’s criminal liability.
The key principles established in the Circular are as follows:
- Regulatory Compliance Programmes should not be treated as a cast-iron guarantee in the event of possible offences, but should establish a company’s ethical commitment and its determination to conduct its affairs to the highest standards of honesty and integrity as the underpinning of a “compliance culture”.
- The group of persons deemed “authorized to take decisions” for which a company could be held criminally liable company has been broadened to include the entity’s duly empowered agents, executives, middle managers and any persons to whom risk control and management functions may be delegated (including the Compliance Officer).
- In the interpretation of the Ministry of Public Prosecutions, the wording “to its [the entity’s]direct or indirect benefit” included in Art. 31(ii) of the Criminal Code would allow a legal entity to be held criminally liable even in the absence of financial gain, and it would be sufficient to show that a reputational, organizational, competitive or some other kind of benefit had accrued to the company.
- A legal entity can only be accused of negligence in cases involving the following offences: (i) culpable insolvency, (ii) environmental offences, (iii) money laundering, and (iv) terrorism financing. Negligence must be grave, and it will be held to be so if the entity fails to establish sufficient measures to prevent adverse outcomes, or fails to apply such measures having established them.
- The Regulatory Compliance Officer may be held criminally liable both as the material author of criminal offences and for offences committed by subordinates in the event of failure to supervise their activities or duly to discharge the duties inherent in his/her office. In the latter case, the company will not be exempt from criminal liability in any circumstances.
- Failure on the part of legal representatives, directors, executives, middle managers or legal agents to discharge the “duties of supervision, oversight and control” shall be necessarily be serious matter. Otherwise, the entity would be subject only to administrative sanctions.
- In addition to criminal liability, a legal entity may be found to have civil liability on a subsidiary basis for offences committed by related natural persons, including directors, legal representatives, legal agents, executives, middle managers, compliance officers and employees, as well as self-employed professionals and/or subcontractors operating under the company’s control.
- Professional Associations, Chambers of Commerce, Trade Unions and Political Parties may also be held criminally liable.
- Certification of the adequacy and effectiveness of Regulatory Compliance Programmes may be viewed in a positive light, but it shall not under any circumstances negate the criteria of the Courts.
- The Ministry of Public Prosecutions considers prima facie that it would be extremely difficult to substantiate the efficiency and effectiveness of any Regulatory Compliance Programme which had been flouted or ignored by a company’s senior management, or where the entity had incentivized or rewarded employees for infringements of its provisions.
- The Public Prosecutors will consider the following in a positive light: (i) detection of offences by the entity and reporting of their internal investigations to the authorities; (ii) firm organizational responses to earlier cases, or the absence of any previous criminal proceedings; (iii) imposition by the entity of disciplinary measures against the authors of any infringements; (iv) implementation of strict selection processes for executives and employees, based on the highest standards of honesty and integrity; (v) redress of any damages caused and cooperation with the authorities.
Finally, the Circular notes the benefits of engaging external professionals to discharge the functions incumbent on the Regulatory Compliance Officer, including for example management of whistle-blowing channels, and employee and executive training, in order to guarantee higher levels of independence and confidentiality.