Criminal exculpation of a legal entity under Section 8 (2) of the Criminal Liability of Legal Entities Act (Zákon o trestní odpovědnosti právnických osob) is still a relatively new institute of the Czech legal system. It was not until December 1st of 2016 that it became a part of the Act itself by amendment. The Prosecutor General’s Office reacted to this legislative novelty by releasing methodology material, which was meant to serve as a practical tool for law enforcement agencies in determining which circumstances are significant when evaluating the possibility of criminal exculpation of a legal entity in criminal proceedings.
Now, nearly two years later, the Prosecutor General’s Office felt it necessary to update the methodology and to extend it by applying, among other things, the practice of the courts and law enforcement agencies. It released an updated version of the material, which supplements the previous practice. In the material are contained barriers for application of the conditions of criminal exculpation of a legal entity including the assessment of its aspects and measures have been extended even further. The methodology, taking into account international sources and foreign comparisons, focuses widely on the use of a compliance management system (CMS), the importance of its application and arrangements for its functioning, especially regarding the need for actual everyday functioning and usage of such system. It is expected that the Prosecutor General’s Office’s specification of its understanding of CMS will be taken into serious consideration in criminal proceedings against legal entities. The question of establishing and updating a CMS and the correct setting of already existing CMSes (where they are already established) is becoming more and more important.
The culpability of a legal entity is fundamentally derived from the culpability of a natural person who acted in the interests of the legal entity or within the operation of the legal entity when committing a crime. To be exculpated, the legal entity must prove it exerted every effort to stop the tortious act that could have been reasonably required of it. An active approach of the legal entity is a presumption for the possibility of exculpation, hence the value of presenting documents and evidence proving a functional CMS is in place.
The creation, exercise and promotion of practical precautions by the legal entity also form part of a functional CMS according to the methodology. Their purpose is to deal with the risks of inciting, facilitating, or supporting criminal activity. The effort invested is assessed comprehensively, taking into consideration at least six aspects (functionality, material, time, personnel, capability of achieving the goal by the present means, and finally the procedural aspects emphasising an active systematic approach). The purpose of adopted precautions and their ability to, in fact, stop the commission of a crime, as well as when these precautions were adopted and whom they affected, alternatively in what way and how actively they were exercised, are examined as part of these aspects.
As can be seen above, in order to achieve successful exculpation from criminal culpability the legal entity must prove the existence of a real and really functional system of precautions which are able to stop tortious acts or to at least minimise the risks of them originating. For these purposes, the implementation or upgrading of a compliance system seems to be fundamental, because clearly it would be one of the key aspects of a defence strategy in proceedings where it might make it possible to achieve a favourable outcome. It is clear that law enforcement agencies’ emphasis when evaluating the possibility of application of an exculpation clause to a legal entity will be focused on whether a CMS is a living, active and actually applied mode of company functioning. On the other hand, mere creation of a pro forma documentation framework, which has no effect, is not sufficient.
From the context of methodology, it is clear that companies with a well-functioning CMS will be clearly advantaged in criminal proceedings over companies without one. ROWAN LEGAL has been handling the implementation, monitoring and updating of CMSes according to the Prosecutor General’s Office’s instructions for quite some time. Our specialists help to set each CMS correctly, so that it corresponds to the size of the company, the regulatory demands, the nature of the business, the riskiness of its profile, and the market background, by addressing the exact risks which the company might face. By applying precisely configured procedures and precautions we are able to efficiently help to prevent crime committed within companies and thereby protect companies against possible prosecution for the crimes of their employees.
