The shift of liability from the officers and directors entitled to represent a company to the so-called 'responsible representatives' (under Section 9(2) of the Administrative Penal Act) aims to protect senior executives from being held liable for breaches of public law provisions at their company.
Despite this intent, the senior executives concerned are regularly astonished to discover, in the course of administrative penal proceedings, that the manner in which responsible representatives have been appointed was not compliant with the law and that their appointment was therefore ineffective. Consequently, the supposedly protected senior executives may be held liable if the violation of which the company is accused is established and the company is found guilty.
When appointing responsible representatives, the following requirements must be met:
- Individual persons only may be appointed.
- The appointed individuals must not benefit from any immunity from criminal prosecution.
- The appointed individuals must have their principal residence in Austria, or be European Economic Area citizens with their principal residence in a state in which the service of notifications in matters of administrative penal proceedings is ensured by a treaty or by other means.
- An agreement on an individual's appointment as a responsible representative must be concluded between the regular representatives themselves, or between the employer and the employee who is to be appointed as a responsible representative.
- The responsible representative to be nominated must demonstrably consent to his or her appointment.
- Both the nomination and the consent of the responsible representative must refer clearly and unequivocally to the assignment of penal liability.
- The responsible representative must have the authority to issue instructions in the field of responsibility assigned to him or her.
- The scope of responsibility of the responsible representative must be clearly defined as to its territorial and substantive application.
According to certain substantive public laws, particular requirements may be added to these general requirements. In most cases, these particular requirements subject the effectiveness of the appointment of the responsible representative to the notification of a specific authority, together with evidence of the consent of the designated responsible representative - for example, under the Foreigners? Employment Act or the Labour Inspection Act. The latter act restricts eligibility to serve as a responsible representative to executive staff members (Section 23(2)).
Due to the restrictive jurisprudence of the Supreme Administrative Court, failure to provide clear determination of the scope of responsibility to be assigned to the responsible representative has turned out to be the most prevalent reason for invalidating his or her appointment.
The law distinguishes between two cases in this regard - namely, whether a regular representative or whether "another person" is nominated (Section 9(2)(1) or (2) of the Administrative Penal Act). Only in the first case (the nomination of a regular representative) can an individual be assigned responsibility for the whole company. 'Other persons', as employees, may be appointed only for certain predetermined territorial and substantive areas.
The jurisprudence on the precise determination of the areas of responsibility assigned to a responsible representative is extensive. However, the case law must be evaluated on a case-by-case basis, according to both the circumstances of the company and the public laws concerned. In simplified terms, the territorial area attributed to the responsible representative refers to company premises or parts thereof. The territorial area concerned must be determined as precisely as possible. The substantive area, essentially, refers to the provisions for which the responsible representative shall be responsible. These provisions must also be determined as precisely as possible. In particular, if several public laws or provisions are mentioned in the appointment agreement - which, given the wide range of public law, is often the case - it must be guaranteed that no ambiguities or inconsistencies exist as to the assigned scope of responsibility.
The appointment of several persons as responsible representatives for the same area of responsibility is prohibited, and thus invalid. However, the appointment of several persons as responsible representatives is admissible if each of the attributed areas of responsibility:
- is distinct from the other areas;
- is clearly determined; and
- does not overlap with another area.
Upholding the assumption that the requirements of law and jurisprudence for the appointment of a responsible representative must be met, the Supreme Administrative Court has ruled(1) that the authorities may not be compelled to "conduct investigations on the premises in question and its territorial and substantive organization, in particular, as to its size and location and the use of separate installation facilities". Furthermore, the authorities shall be:
"released from the obligation to examine and interpret the appointment [of the responsible representative] and its evidence if this is only possible with recourse to further evidence due to the unclear declarations and content of the appointment."
Although it remains unclear as to when declarations shall be deemed ambiguous, it can be assumed that the authority must not be burdened with major additional tasks when examining the appointment of a responsible representative.
The appointment of responsible representatives should protect senior executives by releasing them from the liability that they generally bear. It is thus all the more annoying (and often surprising) if the appointment of responsible representatives turns out to be invalid due to non-compliance with the requirements of law and, in particular, of the rather restrictive and complex jurisprudence.
As a consequence, those officers and directors entitled to represent the company who are supposed to be protected by the shift of liability to the responsible representatives may still be held liable if the violation of which the company is accused is established and the senior executives are found guilty. Therefore, companies would be well advised to invest sufficient accuracy and diligence in their agreements on the appointment of responsible representatives from the start, in order to ensure that these are fully compliant with the respective requirements.
This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide. Register for a free subscription.