The Czech Act No. 418/2011 Coll. on the Criminal Liability of Corporations and Proceedings against Them (the “Act“) has been criticised for containing only the minimum requirements arising from the Czech Republic’s international commitments so far. The new amendment to the Act, effective from 1 December 2016 (the “Amendment“), will extend the range of criminal acts for which corporate entities may be criminally prosecuted, and also the possibilities to exclude their liability.
Corporate entities can be held criminally liable in the Czech Republic since 1 January 2012. Generally, a corporate entity may only be held criminally liable in the Czech Republic, if a criminal offence:
- was committed on its behalf, in its interest or within the scope of its activities; and at the same time
- was committed by (i) its statutory body or other persons acting on its behalf (eg under a power of attorney); (ii) persons performing management or supervisory activities within the corporate entity (eg manager, head of department); (iii) persons exercising decisive influence over the management of the corporate entity (eg parent company); or (iv) the employees while carrying out their tasks.
Furthermore, a corporate entity can be held criminally liable if
- it has a registered office in the Czech Republic;
- conducts its business in the Czech Republic through an enterprise, branch or otherwise; or
- has assets in the Czech Republic.
Therefore, not only Czech corporate entities, but also foreign corporate entities can be held criminally liable under the Act for criminal offences committed in the Czech Republic. In addition, Czech corporate entities (ie entities with a registered office in the Czech Republic) can also be punished under the Act for criminal offences committed abroad.
Extended range of crimes
Until now, the Act listed eighty-four possible criminal offences which could be committed by corporate entities. The Amendment introduced a new system by which criminal of-fences that can be committed by legal entities are no longer specifically enumerated in the Act. Rather, the Act only sets out criminal offences which cannot be committed (usually by their very nature) by corporate entities and refers to the range of criminal offences which can be committed by natural persons under the Czech Criminal Code (Act No. 40/2009 Coll., as amended). To this end, corporate entities may now be held liable for about 200 crimes.
As a result, under the Amendment certain crimes against property (eg embezzlement) and economic crimes (eg unauthorised business or consumer detriment) will be added to the list of crimes that can be committed by a corporate entity. Similarly, certain crimes against life and health (eg negligent homicide or bodily harm) and defamation (libel) will be also added to the list.
Compliance programmes: New possibility to exclude corporate entities’ liability
Another introduction is the extension of exculpation, ie the possibility of corporate entities to free themselves from liability for a criminal offence. Under the current Act, corporate entities can exculpate themselves from criminal liability only for crimes committed by their employees in the course of their work performance, if the corporate entity can demonstrate in criminal proceedings that its employees committed a criminal offence despite the fact that the corporate entity or its part implemented (i) obligatory legislation or (ii) measures that can be justly required from the corporate entity.
Under the Amendment, corporate entities have the new possibility to exculpate themselves from criminal liability even if the criminal offence was committed by their statutory body or a person in a managerial or supervisory position, or another individual outside the corporate entity who exercises decisive influence over it. However, in order to be exonerated from criminal liability, the corporate entity must prove that it has made every effort that may be reasonably expected to prevent the commitment of the criminal of-fence.
As case law does not address the question of what “every effort that may be reasonably expected” is, the interpretation of the term is now subject to discussion and will be further developed and elaborated on by professional writings and corporate commentaries.
Based on current expert views on the assessment of whether a company made every effort that may be reasonably expected, it will be necessary to examine, on a case by case basis (i) if a company has internal regulations in place which define the rights and obligations of individual employees, as well as persons in leading management positions; and (ii) whether a monitoring system is implemented which would control the compliance of respective employees and persons in leading management positions in line with the internal regulations.
The broad professional public view is that as a basic starting point in order to be exonerated as a corporate entity, basic rights and obligations should be stipulated in employment contracts or agreements on performance of a function or other contracts or agreements, or in the conditions of employment or the general internal regulations of the corporate entity. Other preventive duties in order to prevent possible criminal offences should be elaborated in statutes, working and organisational regulations, and other measures of the corporate entity. Mid-size and large companies should adopt other internal regulations that are mandatory for employees to comply with and that ensure the prevention of possible criminal offences, such as codes of ethics, standardised rules of employee conduct, and they should hold anticorruption and other programmes and trainings aimed at preventing risks and thereby creating awareness and a corporate culture, on a regular basis. Some companies create compliance programmes, comprehensively declaring that the corporate entity wants to act in accordance with all laws and regulations, as well as the internal ethics codes, both within the company as well as externally.
Further, in order for a corporate entity to have a chance to exculpate itself, it is also necessary to monitor and ascertain whether all employees as well as executives and members of the boards of the corporate entity are duly informed about all internal documents from which they derive relevant obligations, rules and instructions. For this reason, regular mandatory training sessions – compliance trainings – should be organised.
Besides the two above mentioned core changes, the Amendment also extends the range of criminal offences that can be committed abroad by a corporate entity without registered office in the Czech Republic (eg crimes against the Czech Republic, foreign states and international organizations, as well as crimes against humanity, against peace and war crimes), and also extends the catalogue of criminal offences where effective mitigation of liability is excluded and the catalogue of criminal offences whereby the ending of criminal liability and barring of the service of a sentence (punishment) by the statute of limitations are excluded.
Corporate entities should be aware of the wide range of crimes that they may be liable for under the Amendment. They should also be aware of the possibility to avoid criminal liability for delictual actions of their employees, statutory bodies and other entities in leadership or influential positions. It is important not only to ensure the implementation of prevention and compliance programmes, but also to provide control mechanisms relating to compliance combined with internal rules. It is always necessary to ascertain whether all employees, statutory bodies and other entities in leadership or influential positions are familiar with all internal documents and are informed of their special duties and the rules and instructions. In terms of prevention, employees and further persons involved in the management of a company listed above should undergo compliance trainings.
It is important not only to ensure the implementation of prevention and compliance programmes, but also to provide control mechanisms relating to compliance combined with internal rules.