The law recognises two types of persons – natural and legal. The former are of course human beings to whom criminal law attributes criminal responsibility for actions that violate norms, the breach of which would result in criminal sanctions.
Legal persons, on the other hand, are all those to whom the law attributes a separate and distinct personality from the individuals who form that legal person. Such legal persons include companies, corporations and partnerships among others. However, this separate and distinct personality attributed to them is nothing more than a legal fiction.
Developments after the Industrial Revolution have led to widespread debate as to whether these legal persons can be held criminally responsible and consequently be subjected to the punishments established for natural persons who are found guilty of a criminal offence.
Originally, the general idea was that a legal person cannot be held criminally liable because it does not have its own brain and therefore lacks the capacity of will and understanding. Indeed, the mental capacity of will and understanding are attributes of physical/natural persons.
Another reason brought forward in this debate as to why a legal person cannot be held criminally liable stems from the argument that a company/corporation cannot be physically sent to prison and, moreover, certain criminal sanctions, such as a suspended sentence or a probation order, cannot be imposed on a legal person.
Thirdly, a company can only perform those acts that it is, according to its memorandum and articles of association, legally empowered to do. The same would apply to corporations or partnerships where the acts they can perform are outlined in the deed or in whatever other legal instrument would have been used to create them. Consequently, it was felt that, if a legal person committed a crime, such an act was necessarily ultra vires and therefore null and void.
However, further commercial developments and the increasing realities of progress led to the conclusion that continuing to permit legal persons to enjoy immunity from criminal proceedings was no longer tenable, nor indeed in the public interest.
Malta was no exception to these developments and initially addressed the issue by introducing the concept of vicarious liability. To this effect, the Interpretation Act was promulgated in 1975 and the approach adopted was that an offence could also be committed by a legal person both if that legal person has or does not have a separate legal personality.
This basically means the definition of the term ‘person’ extended to not only corporate entities but to all entities in general. Hence, the definition would include committees, NGOs and practically any type of association. Thus, the Interpretation Act gave, for the purposes of criminal proceedings, the status of a legal person to any type of association of persons, be it commercial or otherwise.
When we consider the enormous impact corporations have on our everyday lives, one cannot but agree that corporate criminal liability in proven cases of wrongdoing is salutary
The model adopted was to attribute criminal responsibility to any person who, at the time of the commission of the offence was a director, manager, secretary or other similar officer or was purporting to act in such a capacity on behalf of the said legal persons.
The model employed, therefore, was the identification liability model, where the law seeks to identify a natural person who would have acted on behalf of these legal persons and committed a criminal offence.
In fact, the law goes on to provide that it shall be a defence for the person so accused in terms of the Interpretation Act to prove that the offence was committed without his knowledge and that he exercised all the due diligence expected from a reasonable man to prevent the commission of the offence.
Further debate and the continuing evolution of the corporate world, however, led to the introduction of another concept, namely that of ‘corporate criminal liability’, which basically implies that in such a scenario the accused is the body corporate itself.
This notion of corporate criminal liability was introduced in Malta by Act III of 2002, whereby an amendment was made to the Maltese Criminal Code and a new provision was added catering for such a scenario. Although introduced way back in 2002, this provision is rarely used and it is only in recent years that it has been invoked in criminal proceedings.
To this effect, Section 121D of the Criminal Code essentially provides that the body corporate is liable to being punished when an offence is committed to which the legislator has attributed the applicability of Section 121D and such an offence is committed, in whole or in part, for the benefit of the body corporate by a person who is the director, secretary or occupies a position within the company whereby he can take decisions on its behalf or has authority to exercise control within that body corporate.
The type of punishment to be imposed is financial in nature and this precisely because a body corporate cannot be imprisoned. The fines are quite hefty and range from a minimum of not less than €20,000 and not more than €2 million.
Besides a pecuniary penalty our legislator also introduced other sanctions which could be imposed on a body corporate if criminal liability results against it in the circumstances explained above. These sanctions include the exclusion of that body corporate from being entitled to receive any public benefits or State aid. Similarly, the Courts can impose a suspension or cancellation of any licence or permit that body corporate has, whereby it can engage in any trade, business or other commercial activity.
Another possible sanction for a body corporate found guilty of a criminal offence is that it can be placed under judicial supervision or indeed obliged to wind up. Furthermore, corporate criminal liability can result in the Courts ordering the closure of any premises, whether temporarily or permanently, which may have been used for the commission of the offence.
The range of offences to which corporate criminal liability applies are various and include money laundering, drug trafficking, human trafficking, corruption and trading in influence among others. It is high time that corporate criminal liability is extended also to those companies which are found to be in breach of laws damaging the environment.
Thus, while a company cannot be sent to prison, it nevertheless can be the subject person of criminal proceedings and consequently be subjected to sanctions. While the legislator, rightly so, has opted for the identification model, in the sense that there must always be a natural person who carried out the offence, the point remains that if from that offence the body corporate benefitted in some way, then it must suffer the wrath of criminal law.
In today’s world, when we consider the enormous impact corporations have on our everyday lives, one cannot but agree that corporate criminal liability in proven cases of wrongdoing is salutary.
Dr Joseph Giglio is senior partner, LexPractis.