Legality/opportunity principle regarding corporate criminal liability

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Vladimir Hrle
Hrle Attorneys, Belgrade
vladimir.hrle@hrle-attorneys.rs

This article briefly examines an application by the prosecution of the well-established legality and opportunity principle and its impact on the corporate criminal liability legal framework.

The legality principle establishes an obligation to prosecute where there are grounds for suspicion that an individual prosecutable criminal offence has been committed or that a certain person has committed a criminal offence prosecutable ex officio.^[1] There should be no doubt that the legality principle should be applied to legal persons; however, its application is still not clearly articulated in this regard.

Having company liability for a criminal offence in Serbia does not exclude the responsibility of natural persons – it merely means that in addition to the individual liability of officers and employees, a complementary company liability also exists.^[2] Consequently, the prosecuting authority always has a wider discretion to prosecute the individuals, the companies, or both. This is decided on a case-by-case basis, depending on the circumstances of each case, as the application of the legality principle towards legal persons is not clearly defined in law.

In most cases to date, the prosecution has focused on the natural person, even when it was realistic to expect that the unlawful act could have been attributed to the legal person due to the identification doctrine. Under this doctrine, as seen by domestic legislation, a criminal mind of the legal person is actually a criminal mind of an individual who holds a controlling position in the legal profession or exercises supervisory duties.

However, it is highly debatable whether the legality principle is adhered in cases where the prosecution authority initiates proceedings against a natural person where there were grounds to prosecute a legal person, based on the same facts. Some argue that this principle is being respected whenever a person (natural or legal) is being prosecuted, provided there are reasonable grounds, as the same facts are applicable both to a natural and a legal person.

For this reason, some countries have opted to clearly define the application of the legality principle to legal persons, therefore removing any room for different interpretation and prosecutorial discretion. For example, the new German corporate criminal liability framework^[3] removes prosecutorial discretion (opportunity) and requires that public prosecutors prosecute legal persons whenever there is sufficient reasonable suspicion of occurrence of a criminal offence attributable to a legal person. Furthermore, due to the legality principle, the majority of legal systems are not allowed to choose whom to prosecute and must prosecute both the legal person and the natural person without the possibility of giving a preference.

In any case, the legality principle must be further solidified in Serbia’s legal framework by prescribing that where conditions for attributing a wrongful act to the legal person exist, such a legal person shall be prosecuted. At the same time, the conditions for departing from this principle (by applying the opportunity principle) should be clearly defined, as described below.

By contrast, the opportunity principle (prosecutorial discretion) gives the public prosecutor the right not to initiate, or conduct criminal proceedings against a person despite there being the legal conditions for such a criminal prosecution.

Each time a prosecutor is faced with an offence related/attributed to a legal person they should make an assessment as to whether it is justified to ignore the legality principle and apply the opportunity principle instead. This assessment should include various factors but obviously an economic interest should play a crucial role, in terms of cost of the proceedings and amount to be fined and, therefore, an anticipated contribution to a state budget. In this respect, Croatian corporate criminal liability legal framework^[4] states that a public prosecutor may dismiss a criminal complaint or abandon a prosecution where the legal person owns no property or when their property is of such insignificant value that it would be insufficient to cover the costs of the criminal proceedings, or if bankruptcy proceedings are conducted against the legal person. Similar provision is set up in the current framework, that is, the legal entity has no assets or a bankruptcy procedure has been instituted against such legal entity. However, this is only applicable to offences punishable by a fine or a prison sentence of up to three years.

If the legal person possesses some considerable assets, and considering the amount of the monetary fine, than the legal person should be prosecuted, as well. Other factors should include the complexity in obtaining relevant evidence and, above all, whether there are reasonable legal grounds for initiating the proceedings against the legal person.

It is important to note that there are major discrepancies between the current corporate criminal law framework and the adversarial criminal procedure code with respect to general conditions for application of the opportunity principle and a deferred prosecution as a special and most commonly used form of this principle. The conditions for application are not the same in the respective legislation.

For these reasons, both the legality principle and the opportunity principle need to be clarified and recorded in the current legal framework while bringing them in line with the discrepancies in the criminal procedure code.