Liability of collective entities for criminal offences

On the website of the Government Legislative Centre, a new text of the bill on liability of collective entities for criminal offences and amending certain laws was published.[1] . The changes to the original wording of the project have been dictated by many critical remarks made to its content in public consultation and opinion. The primary objective of the planned changes to the rules is to increase the efficiency of sanctions tools for collective actors, including in particular serious economic and fiscal crime.

Introduction

The legislature, implementing the provisions of the Act of 28 October 2002 liability of collective entities for criminal offences under penalty[2] (hereafter ‘the current Act’) decided that, in addition to natural persons, collective entities, such as equity companies, would also be prohibited from being liable for repressive actions. However, the standards set out in the current law do not provide for the existence in the Polish legal system of the so-called principle of direct criminal liability of collective entities; thus, the repressive effects on such entities depended on the previous conviction of a natural person as a perpetrator of a crime or fiscal criminal offence.

Basic assumptions of the new rules as indicated by the authors in the justification of the project[3] , This appropriation is intended to cover the following: exhaustive the nature of the prohibited act and the waiver of the requirement to obtain prior convictions of a natural person. Under this article, the main regulations provided for in the current draft will be presented, taking into account the comments made to their content, inter alia, in the framework of public consultation and opinions.

Lack of efficiency of current regulations as the main cause of the changes

The reason why it was decided to revolutionise issues related to collective entities' liability for criminal offences is because of the poor efficiency of the current regime in this area, which is reflected in the statistics below.

According to the explanatory memorandum of the draft law, 2017 to the courts only received 14 cases concerning criminal liability of collective entities, in 2016 – 25 in 2015 – 14 in 2014 was it 31 cases[4] . This data shows that the current collective liability regulations remain properly dead.

In addition, the justification for the project indicates that the fines previously ordered in such cases were low, leading to the conclusion that the proceedings were against small entities.

Furthermore, it should be remembered that Poland's accession to the Convention on the Protection of the Financial Interests of the European Communities, adopted by the Council of the European Union, has been the primary source of the legislative initiative to introduce collective liability rules.

26 July 1995, requiring its signatories to make appropriate provisions on this subject. Poland has therefore committed itself to establishing a well-functioning collective liability system, which, given the limited number of proceedings conducted in this area, seems to remain an unexecuted commitment.

However, it is worth noting that Community law does not impose on Member States how they are to fulfil the above-mentioned obligation, thereby leaving freedom to create a country-specific model of liability for collective entities.

Principles of collective liability for criminal offences

In the draft law, the principle of prior conviction of a natural person is abandoned as a condition for the possibility of bringing a collective entity to account.

The new rules base the possibility of this liability on the concept of quasi-wine of its own entity which is directly linked to the creation by the projector of a prohibited act considered to be an act of the collective entity itself and on the concept of so-called "anonymous fault" which provides for the possibility for such entity to bear responsibility even in cases where the investigating authority does not individualise a particular offender or fiscal criminal offence.

Therefore, it should be considered that the project promoter intends to introduce into the Polish legal order a model of direct criminal liability of collective entities, according to which the legal person can be held liable by direct attribution of its fault (the accusation will be directed directly against the entrepreneur).

It is worth adding that according to the planned Article 37(1) The proceedings concerning repressive liability of a collective entity may be conducted independently of criminal proceedings against a natural person.

In the proposed model, proceedings against a natural person will remain irrelevant from the point of view of being able to hold a collective entity accountable.

The implementation of this responsibility model is reflected in the proposed Article 5, according to which the collective entity will be liable for a prohibited act whose marks will be exhausted by an act or omission which is directly related to its activities. The liability of a collective entity will be conditional on the fact that, until the performance of the prohibited act has been exhausted, there will be an act or omission of the authority, an intentional act or omission of a member of the body, or a failure of the collective entity to exercise the caution required in the circumstances in question, even though the possibility of a prohibited act could have been envisaged.

The above regulation is complemented by a design Article 6, which lists a catalogue of natural persons who may lead to collective liability.

A condition for a specific "transfer" of responsibility from a natural person to a collective entity is to commit a prohibited act by such person, who is in direct relation to the collective entity's activities and its functions as a person who, inter alia, acts in the interest or for the benefit of that entity and is entitled to represent, take decisions or supervise it on his behalf.

Furthermore, under this provision, it is indicated that a collective entity will be liable for a prohibited act, from which, at least indirectly, it has obtained a benefit from a subcontractor or another trader who is a natural person, if his activity has remained prohibited in connection with the performance of a contract concluded with a collective entity, and a worker or a person authorised to act in the interests or for the benefit of a trader who is not a natural person, if his activity has remained in connection with the performance of a contract concluded by that entrepreneur with a collective entity.

In conclusion, the collective entity will bear responsibility for ‘own actions’, i.e. one which remains in connection with its activities, and for other activities, committed by specific entities (described under Article 6(2)(1) and 2 the project), provided that it has obtained from this act, even indirectly, an asset benefit.

Projektowa pointed out that the collective entity would be liable for actions committed by the persons designated under Article 6 on the basis of guilt in choice, guilt in supervision or so-called organisational fault.

As she rightly noted Polish Confederation Lewiatan[5] , in the Act of 6 June 1997 - Criminal Code[6] ((kc) no such forms of guilt as specified in the draft law are foreseen. Therefore, there is a discrepancy between project regulation and the forms of fault envisaged by k.k.

The draft law also proposes exempting a collective entity from being liable for irregularities in the organisation of the activity (no organisational fault), provided that such entity demonstrates that all authorities and persons entitled to act on its behalf or interest have retained the due diligence required under the circumstances in the organisation of the activity of that entity and in the supervision of that activity.

In view of the above, it should be noted that the project promoter uses terminology and fault concepts typical of civil law, which leads to the conclusion that the design of collective liability provided for in the proposed provision is mixed in nature.[7] .

The draft also includes the principle that the responsibility for carrying out a prohibited act will be ‘throwed over’ to a collective entity even if there is a circumstance that excludes the criminal liability of the perpetrator of the prohibited act in the event of the death of the offender, discontinuance of proceedings because of its non-detection, and in the event of a suspension of proceedings in a case in which the accused or the accused cannot be apprehended, he may not participate in proceedings due to mental illness or other serious illness.

This proposal to address the small number of criminal proceedings against collective entities raises controversy. Without doubt, the new regulations will reduce the path that law enforcement authorities will have to go through in order to make an effective attempt to hold collective entities responsible for carrying out prohibited acts.

However, there was an opinion among the comments received relating to the proposed changes that only the condition of previous criminality of a natural person provides a guarantee of reasonable attribution of responsibility to a collective entity.

The Ombudsman expressed the above position[8] and stated that the introduction into the Polish legal order of the so-called "anonymous guilt" model is contrary to the principle of trust in the state and law (otherwise the principle of the loyalty of the state to citizens) and constitutes a legislative trap set against persons acting within collective entities, because even if their behaviour is not considered criminal, for example, due to lack of guilt, responsibility will be "turned" into a collective entity. The Ombudsman noted that the draft of the above regulation had been developed with the exception of constitutional standards for lawmaking.

In order to demonstrate the legitimacy of the position taken, the Ombudsman referred to the judgment of the Constitutional Court[9] , According to which the law must be laid down in such a way that "it does not become a trap for the citizen and that he can arrange his affairs in confidence that he does not expose himself to legal effects which he could not foresee at the time of the decision and action and that his actions under the applicable law will also be recognised in the future by the legal order." In addition, it should be pointed out that ‘This principle has not been expressly spelled out in the text of the Constitution, but it certainly belongs to the canon of rules consisting of the concept of the rule of law in the sense in which this concept exists.

Under Article 2 Constitution. Compliance with this principle is of particular importance in a situation where the existing rules are amended, in particular those which have already been applied as a factor for the legal situation of their addressees."[10].

It should also be noted that according to the proposed content Article 8 The Act ‘To the extent not governed by this Act, the rules of liability of a collective entity shall apply to the general part k.k.’. The procedure applied under this provision should be regarded as unfortunate as the vast majority of the provisions contained in K.K.

are not adapted to the specificities of collective entities, which makes it impossible to apply the majority of institutions resulting from this part of K.K. Therefore, the postulate of de lege ferenda is to amend the bill, consisting at least in exhaustive indication of the provisions that could be applied to collective entities.

Retributive liability of a collective entity

The drafter under the new Collective Entity Liability Act for criminal offences also provided for the introduction of rules on financial and compensation liability of collective entities in the event of a criminal offence for which they will not be held liable. In Chapter 3 It was decided that, in the event that the act referred to above was committed, from which it was achieved by a collective entity, albeit indirectly, an asset advantage exceeding 500,000 PLN, the court will be competent to declare the forfeiture of the collective entity's assets or rights in whole or in part, or their equivalent, if the collective entity has served in whole or in substantial part or was intended to commit that prohibited act or to conceal its benefit.

The draft new law also introduces the principle that a collective entity is not to be held liable for retribution if it is not guilty in the organisation, or the decision of forfeiture would be disproportionate to the nature and extent of the infringement of the precautionary rules which preceded the criminal offence, and that if this would be disproportionate to the person whose property rights are held to the collective entity, in particular when that person has retained due diligence required in the circumstances in question, in the supervision of the activity of that entity or the damage caused by the offence or the value of the benefit achieved is not material to the size of the collective entity's activities. It should also be added that the draft also provides that a court, in the event of a failure to commit a forfeiture, will be able to declare a commitment to the State Treasury of up to 5,000,000 PLN.

Protection of signallers

The draft law provides for the introduction of important guarantees concerning the rights of employees of a collective entity, indicating irregularities in the functioning of their employer. According to the planned content Article 13(1), if in connection with the notified information referred to under Article 1111, there will be a breach of the employee's rights vis-à-vis the person submitting the information or termination of the employment relationship or of a mutual agreement with that person, the court may, at the request of the person who has notified the information, decide to return it to work and compensation.

It is worth noting that the reason for issuing a judgment of such content is the appropriateness of the information notified and the possibility of making it possible to prevent or detect a prohibited act more quickly. The above-mentioned condition for a decision to restore a worker to work or judge him for compensation was added to the draft text as a result of taking into account critical comments on the original version of the rule governing the matter in question, which did not make such a decision dependent on the veracity of the information submitted, nor on the reliable way of obtaining it, which could have led to a specific automatic protection of the signaller not related to the importance of the notification, nor on the purpose pursued by the notifier[12].

Penalties and penalty measures

The draft law proposes to tighten the fine, marking its limits from 30,000 PLN to 30,000,000 PLN. This represents a six-fold increase in the upper limit of this penalty compared to the current state of the law. Moreover, the draft does not provide for a limitation of the upper limit of the fine to 3% the income of the collective entity in a given financial year, as is the case under the current law.

According to the statement of reasons for the draft law, ‘Elevating the risk threshold by penalty to 30,000 PLN it follows from the assumption in the draft that legal proceedings should not be initiated for small collective entities.’ With regard to the above assumption adopted in the draft, it should be noted that the legislator did not foresee such a category of entities under the planned provisions. Designed content Article 35(1) a new law, collective liability proceedings for a prohibited act shall be initiated if there is a reasonable suspicion of a criminal offence on the basis of that liability and there is a public interest in so doing, which confirms the absence of a decision to punish a collective entity on its size.

The above-mentioned concept (concerning the categorisation of collective entities, i.e. not punishing small collective entities) is not justified either Article 35(2) draft law that does not make decisions in this respect dependent on the size of the entity[13]. In indicating the above, it should be considered that the legislator's assumptions in this regard are inconsistent with the wording of the proposed provisions and lead to confusion.

In addition, the proposed law introduces a new penalty in the form of a collective entity's dissolution. The court will be able to rule on such a penalty if the collective entity has, in whole or in large part, served for the purpose of committing a criminal offence punishable by imprisonment of no less than 5 years, and its continued operation threatens the safety of trade or when a penalty has previously been imposed on it and another penalty is not sufficient to achieve its objectives, in particular does not ensure that the collective entity complies with the principles of due diligence.

Having regard to the proposed wording Article 18(1) it may be considered to be a severe penalty, and the grounds for its application are particularly vague.

However, the wording of the provision providing for the imposition of a penalty for the dissolution of a collective entity indicates that the reason for its decision is that a criminal offence is punishable by imprisonment of up to years. 5 or higher, however, it should be noted that the catalogue of such crimes is very extensive.

Moreover, the proposed provision does not answer the question of how the term "substantially committed crime" should be understood.

At the same time as the penalty for disposing of the collective entity, the court will order the transfer of the assets or property rights of the collective entity to the Treasury, unless they are subject to reimbursement to the victim or to another entitled entity.

Under the new law, the drafter also provides for an extension of the list of criminal measures to which they will include: the forfeiture of property or property benefits or their equivalents, the prohibition of promotion or advertising of the activities carried out, manufactured or sold, the provision of services or benefits, the prohibition on the pursuit of a certain type of business activity, the prohibition on the use of subsidies, subsidies or other forms of financial support from public funds, the prohibition on the use of aid from international organisations whose Republic of Poland is a member, the prohibition on the application for public contracts, the obligation to return to the Treasury the equivalent of financial support by public means obtained from the moment of the act prohibited from the moment of the decision on the liability of a collective entity, the provision of a judgment to the public, the obligation to make good damage or compensation for the damage suffered, the attachment and the permanent or temporary closure of the branch of the collective entity concerned.

According to the proposed Article 28(1) the court should take into account, in ruling on penalties and criminal measures, in particular: the seriousness of the irregularity in the conduct of the due diligence rules, the extent of the benefit obtained or obtainable by the collective operator, its property situation, the social consequences of the penalty, the impact of the penalty on the continued functioning of the collective entity, the action taken within the collective entity following a prohibited act aimed in particular at detecting and punishing the perpetrators, repairing the damage and reimbursement of the benefit obtained.

Liability of the collective entity in the event of merger, division or transformation

An important noveum on the basis of the proposed rules is the introduction of regulations providing for the possibility of bringing collective entities to account also in the case of prior transformation processes by such an entity. In accordance with the legislator's proposal, in the event of a merger of collective entities, responsibility for a prohibited act committed before the date of merger is borne by a collective entity entering into the rights and obligations of a collective entity subject to the merger.

On the other hand, in the event of the division of a collective entity, responsibility for the act committed before the day of the division is to be borne by all collective entities which have taken over at least part of the rights and obligations of the shared entity. In turn, in the event of a transformation of a collective entity, responsibility for the act committed before the date of the conversion will be borne by the collective entity resulting from the transformation.

These solutions should be assessed positively as the current law[14] refers to the matter of merger, division and transformation of collective entities only in the context of the possibility for such entities to apply a preventive measure prohibiting transformation processes during the ongoing procedure. Maintaining this may help collective actors to escape criminal responsibility.

Prosecutor's Opportunism

According to the wording of the draft law, the grounds for initiating proceedings against a collective entity will be the existence of a social interest, and the only body entitled to verify a particular case in this respect will be the prosecutor. It is worth noting that in order to assess whether the above condition exists in a given case, the prosecutor will have to take into account the degree of social harm of the act, the amount of benefit achieved by the collective entity, the type of precautionary rules breached and their degree of infringement within the collective entity organisation and the economics of the proceedings.

According to the Supreme Court,[15] The fact that proceedings are subject to the existence of a social interest "(...) may lead to the fact that either it will be a dead ground and there will always be proceedings against a collective entity, because the social interest always requires the entity to be punished or worse, is actually the introduction of the principle of opportunistic prosecution into the Collective Entity Liability Act – that is, we are pursuing those we want to pursue".

According to the position adopted by Polish Confederation Lewiatan¹⁶, “The rules for initiating proceedings against collective entities provide for so-called prosecutorial discretion. There are no grounds for granting prosecutors such powers. The concept of the public interest has been addressed in case law concerning privately prosecuted offences. Extending that approach to the draft legislation is inappropriate.”

In view of the above, it should be considered that these solutions raise doubts as to their compatibility with the principle of legalism in force in Polish criminal proceedings. Furthermore, following the opinion expressed by the Supreme Court, it can be considered that the regulations in question give rise to selective and instrumental penalties for collective entities.

Preventive measures and forced management

The project promoter intends to ensure that collective liability proceedings are properly conducted by extending the list of preventive measures which may be applied in the event of a high likelihood of a criminal offence being committed by a collective entity whose activity could result in another criminal offence, causing damage to the Treasury or to another person, or would impede criminal proceedings or collective liability proceedings.

The proposed catalogue includes the following preventive measures: a prohibition on promotion and advertising, a prohibition on the conclusion of contracts of a certain type, a prohibition on the pursuit of a particular activity, a prohibition on the imposition for the duration of proceedings without the consent of the court of its assets or the disposal without such agreement of the assets specified by the court, a prohibition on the application of public contracts for the duration of that procedure, a suspension of subsidies or subsidies, a prohibition on merger, division or transformation of a collective entity.

The greatest controversy among the commentators of the project resulted in a precautionary measure in the form of a ban on specific activities. As the Ombudsman rightly pointed out[17], the purpose of such a measure may have a similar effect on the liquidation of the undertaking if its scope covers all fields of activity of the entity concerned.

The legislator gives the same authorities conducting the proceedings powerful weapons which will enable them to bankrupt a collective entity before its final conviction. This problem is of added importance in the context of the lack of inclusion in the draft law of detailed rulings on preventive measures, which may result in arbitrariness in the activities of the investigating authorities.

In addition to the above-mentioned preventive measures, the investigating authority will be able to apply to a collective entity for which it is highly likely to commit a prohibited act, an additional measure of a specific nature in the form of a forced board. According to the statement of reasons, the separation of this measure is to be based primarily on the objective of its application, which will be to ensure the proper conduct of the proceedings, to prevent any new offence from being committed, or fiscal criminal offence and security against future penalties and measures.

The forced board would be applied in accordance with the rules enshrined in the Act of 6 June 1997 Code of Criminal Procedure[18] c) where applicable, the investigating authority shall determine the undertaking or its organised part which will be subject to compulsory management and shall appoint the administrator from among the persons holding the restructuring adviser’s licence.

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