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Maurizio Vasciminni
Pavia e Ansaldo Studio Legale, Rome
maurizio.vasciminni@pavia-ansaldo.it

Giada Russo
Pavia e Ansaldo Studio Legale, Rome
giada.russo@pavia-ansaldo.it

Giovanni Gigliotti
Pavia e Ansaldo Studio Legale, Rome
giovanni.gigliotti@pavia-ansaldo.it

 

A foreign company can be held criminally liable in Italy, according to a recent judgment of the Italian Corte di Cassazione.^[1] More precisely, a foreign company, even one without a secondary office in Italy, can be held criminally liable under Legislative Decree no 231/2001 for the offences committed for its benefit or in its interest by its legal representatives or by persons subject to the direction or supervision of others.

Corporate criminal liability under Italian law

According to Legislative Decree no 231/2001 ('Decree 231'), a company may be considered criminally liable for certain offences committed in its interest or for its benefit by senior officers (ie, those who hold positions of representation, administration or direction of the company or exercise the control and direction of the company) or by subordinates (persons subject to the direction or supervision of senior officers).

Decree 231 implements European Union (EU) regulations. It has been revised through the years to include new offences, often of a trans-national nature: for example, the Italian execution of EU Directive 2017/1371 of 5 July 2017 (PIF Directive), on the fight against fraud to the Union’s financial interests by means of criminal law is currently in progress.

The list of offences from which the company's liability may arise is constantly updated. It currently covers a wide range of commercial offences, such as:

• bribery;

• corruption;

• fraud against the state;

• market manipulation and insider trading;

• false accounting;

• money laundering;

• handling stolen goods;

• health and safety crimes;

• intellectual property crimes;

• infringement of trademarks; and

• environmental crimes.

It also covers tax offences such as:

• fraudulent declarations using invoices or other documents for non-existent operations;

• issuance of invoices for non-existent operations;

• concealment or destruction of accounting documents; and

• fraudulent evasion of tax payments.

In other words, Decree 231 is the path Italy is following to fight fraud and criminal offences committed by a company’s employees or directors in the interest of, or for the benefit of, the same. If there is an ‘organisational fault’ on the part of the company, the latter is considered guilty along with the perpetrator, inasmuch as it has lacked or failed to supervise and/or to take appropriate measures to prevent the offence.

Italy put in place harsh measures to ensure that a legal entity held liable pursuant to Decree 231 is subject to effective, proportionate and dissuasive sanctions. They include criminal or non-criminal fines and other sanctions, such as:

• exclusion from public benefits or aid;

• temporary or permanent exclusion from public tenders;

• temporary or permanent disqualification from the commercial activities;

• judicial winding-up;

• temporary or permanent closure of establishments which have been used to commit the crime; and

• freezing and confiscation of instrumentalities.

The Model 231

According to Articles 5 and 6 of Decree 231, the company may be exempt from liability if, prior to the commission of the offence, it has adopted and efficiently enacted an organisational, management and control model ('Model 231') aimed at preventing the offences referred to in Decree 231.

Model 231 is a system of principles, rules, procedures and measures governing both the internal and external activities of the company. In order to be efficient and comply with the requirements of Decree 231, a Model 231 must:

• identify the areas of business activities in which offences may be committed;

• provide for specific protocols for the adoption and implementation of company’s decisions;

• identify specific guidelines for managing financial resources in order to prevent the commission of offences; and

• introduce a disciplinary system to punish any violation of the provisions of Model 231.

Model 231 must be effectively implemented and frequently updated. Therefore, the company also has to establish a supervisory body. This monitors and supervises the effectiveness and adequacy of the company's compliance program or internal control system in order to exclude or mitigate the criminal liability of the company.

In order to obtain the exclusion of the company's liability, the supervisory body should be composed of qualified professionals and must be granted autonomous and independent powers.

If all the above requirements are met, the company cannot be held liable even if the individual manager or employee is convicted of a crime.

The Corte di Cassazione judgment

Through judgment no 11626 of 7 April 2020, the Italian Corte di Cassazione stated that a foreign company, even one which does not have its registered office in Italy, can be held criminally liable under Decree 231.

As Decree 231 does not provide for any distinction between companies established in Italy or abroad, the court stated that the applicable jurisdiction is that of the place where the offence is committed. It is irrelevant where the ‘organisational fault’ arose or where the company's decision-making centre is located.

The nationality of the entity is irrelevant; both individuals and legal entities are subject to the principles of compulsoriness and territoriality of the criminal law. According to such principles:

• criminal law obliges all those, be they citizens or foreigners, who are on the territory of the Italian state; and

• anyone who commits a crime on the territory of the Italian state shall be punished under Italian law.

Such a principle complies with EU legislation, requiring that each Member State has to take necessary measures to establish its jurisdiction over criminal offences committed in whole or in part within its territory, or when the offender is one of its nationals.^[2] Otherwise, there would be an infringement of the principle of equality and an unjustified unequal treatment between a foreign individual and a foreign legal entity.

Finally, as the Corte di Cassazione pointed out, the inapplicability to foreign companies of the rules and obligations provided for by Decree 231 – and the consequent exemption from criminal liability – would unduly alter the free competition principle enshrined in the European treaties with respect to national companies. This would allow foreign companies to operate on Italian territory without having to bear the costs for the preparation and implementation of suitable Models 231.

Conclusion

The judgment of the Corte di Cassazione confirmed that foreign companies operating in Italy may be held criminally liable under Decree 231.

Foreign companies deciding to establish a branch in Italy should carefully evaluate and combine their corporate global procedures and ethical codes with an efficient Model 231 in compliance with the specific requirements of the Italian law.