Further Internal Control in Spanish Businesses
The Spanish criminal law reform introduced by Law 5/1010, dated June 22, 2010 and in force since December 23, 2010, introduces important changes in Spain's business environment. For the first time, Spanish law has gone beyond the principle of societas delinquere non potest to recognize criminal liability for legal entities.
The introduction of criminal liability for legal persons has been influenced by international law. However, because of the way it has been set up, the reform breaks with the basic principles of Spanish criminal law, leading to serious difficulties in its interpretation of the rights of legal entities, a matter the courts will ultimately have to resolve.
Criminal liability of legal entities is applicable only with respect to certain offenses specifically identified in the Spanish Criminal Code such as fraud; bankruptcy involving criminal negligence; offenses against intellectual and industrial property rights, the market, and consumers; money laundering; offenses against the tax authorities and the Social Security Administration; illegal construction, building, or zoning activities; offenses against the environment; corrupt practices; and trading in influence.
Criminal liability will be incurred if any of the aforementioned offenses are committed by the administrator (whether in fact or by law) or legal representative, or by an employee for failing to exercise the necessary control over him, notwithstanding the specific circumstances of the case.
The criminal liability of legal entities is independent of the individual perpetrator of the offense, in such a way that the criminal liability of the legal entity could be recognized without the perpetrator of the crime being condemned or even identified. In any case, it is necessary for the individual perpetrator to have acted on behalf of the legal entity (when it is a question of administrators or legal representatives) or within the company (when it is a question of employees).
In practice, the criminal law reform is going to cause Spanish companies to adopt or reinforce internal control mechanisms for crime prevention and detection, most likely with two objectives: prevention (i.e., avoidance of the eventual criminal liability) and reparation (to the extent that the law permits criminal liability to be attenuated if such measures are adopted prior to the oral proceedings).
However, the implementation of such measures prior to the commission of a crime has not been expressly established as an exemption under this reform. Neither has the reform established the nature of the detection and prevention measures to be adopted, so it will be necessary to resort to comparative law and the regulations established for other matters in order to determine the adequate internal control mechanisms in each case.
Fines are the basic penalties established for legal entities. Only in those cases in which special danger is perceived will the courts impose penalties such as the suspension of business operations, the closure of business premises and establishments, the banning of certain activities, disqualification, legal intervention, and, in the most extreme cases, the winding up of the company.
The reform also tries to prevent the legal entity from avoiding its criminal liability in certain situations. Thus, in the event of merger, criminal liability must be transferred to the resulting entity. In such cases, the judge may determine how liability will be apportioned between the entity that committed the offense and the resulting new entity.
These mechanisms for transferring criminal liability may not only cause procedural problems, but also have serious consequences in practice, which call into question the Spanish regulation of the criminal liability of the legal entities. If the underlying intention was to toughen/reinforce the liability of legal entities, this could have been achieved within the scope of sanctioning administrative law without resorting to criminal law.
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