Supreme Public Prosecutor’s Office updates methodology for corporate exoneration

Apart from extending the number of offences that corporations may be liable for, the amendment to the Corporate Criminal Liability Act also introduced a new concept of exoneration. Corporate entities may avoid criminal liability if they are able to prove that they have made every effort that can fairly be required to minimise the risks of criminal acts performed by their employees, statutory representatives and other persons. An entity’s efforts may involve, e.g., the implementation and maintenance of an internal system of measures to prevent crime, i.e. a compliance programme. The amendment itself, however, neither stipulates how the requirement to actively prevent crime should be fulfilled nor specifies any compliance programme standards. The related case law is also underdeveloped and, consequently, the exoneration concept remains quite unclear for many corporate entities. The Supreme Public Prosecutor’s Office’s updated methodological guide on the application of Section 8 (5) of the Corporate Criminal Liability Act dated 14 August 2018 should help change this situation.

What requirements does the new methodology impose on compliance programmes? They must be tailored to the corporate entity’s needs, i.e. they must correspond to the entity’ nature and line of business, products and services on offer, and structure and size. To be able to claim exoneration, the entity must implement measures preventing the types of offences of which employees or other representatives are suspected. If a corporate entity plans to exonerate itself from its employees’ corrupt behaviour, efficient anti-corruption measures such as a code of ethics, training, a zero-tolerance policy against corruption, etc. must be implemented by the entity. Such measures may not be implemented only after an offence has been committed. In addition, the entity’s endeavour to prevent criminal behaviour even after a crime was committed will also be taken into account.

Compliance programmes should be based on analyses of potential risks. Specific measures should include the prevention of criminal activities (a code of ethics, training, education), the detection of such activities (an ethics hotline, internal investigations and audits, modern data analysis tools) and the response to such activities (determination of unlawful conduct consequences, damage recovery, other legal measures). It will not be sufficient to have these measures implemented only formally into internal policies. These measures must be adhered to, actively promoted, checked and updated when necessary. In short, they may not just stay on paper but must be actively asserted.

Since 2012 when the Corporate Criminal Liability Act entered into effect, the total number of corporate entities prosecuted and charged with crimes has been constantly growing. A total of 595 corporate entities faced criminal prosecution in the last two years, while 336 of them were convicted. The courts primarily imposed pecuniary punishments. The highest penalty levied was CZK 5 million but, on average, penalties amounted to CZK 150 thousand. A more serious threat is a ban on business activity or the judicial dissolution of a company (which occurred in 52 cases). Much more serious penalties await companies that are subject to legislation with international applicability (American FCPA or the UK Bribery Act). Here, the highest penalty that has so far been imposed amounted to the equivalent of CZK 12 billion. Yet, the possibility of exoneration and avoidance of punishment need not be the only motivation to implement and review adherence to a robust compliance programme. It has been proven that compliance programmes primarily fulfil a preventive role and restrict financial and reputational damage.