Corporate criminal liability and how to avoid it

The criminal liability of companies in Spain was introduced in broad outline as early as 2010, but the issue has only become more present in everyday business life since the introduction of Art. 31bis in the Criminal Code. Liability and the requirements for companies to avoid it apply to all companies, although depending on their size there are major differences in terms of the efforts to be made and the resources to be deployed.

The reform was intended, on the one hand, to promote a culture of standardized behaviour in companies through the necessary introduction of prevention and control systems, and, on the other hand, to reduce the willingness of companies to gain competitive advantages by violating criminal law regulations through the introduction of appropriate sanctions. Hence, the Criminal Code sets out around thirty different conducts which could lead to possible criminal liability for the legal entity, with sanctions ranging from dissolution and the definitive loss of their legal personality, through cessation of operations, closure of business and production facilities, to disbarment and judicial receivership; in practice, however, the fine is the king sanction, along with the unwritten penalty of the associated loss of image on the market.

Past experience with the regulations teaches that companies that want to avoid or minimize the risk of criminal conduct within their ranks (and, as a result, their criminal liability) must implement a Compliance Program. This starts with drafting a company's internal code of ethics, with the first step being to create an overview of potential criminal risks. These must subsequently be monitored effectively, which in turn requires an appropriate resource management model to ensure the program is operational and that the review and control functions of the compliance officer are performed. This function is preferably performed internally by a staff member who must be provided with appropriately sufficient autonomous authority.

A central element for the effectiveness of the Compliance Program is also an internal reporting facility (whistle-blowing) through which employees can report conduct which they believe could trigger criminal liability for the company.

In addition to the intrinsic necessity for an organization to have a compliance culture, the most important incentive for companies to implement a compliance program is that, should any of the identified risks nevertheless materialize, they will thus be exempt from (or mitigate) criminal liability. The prerequisite for this is always that the company can prove that the program was actively and effectively implemented with the aim of preventing criminal behaviour in the organization, and were there to be such conduct, that the company deployed all resources within its reach to avoid such commission.

Autor: Unai Mieza