Recent Supreme Court case law on Compliance – Compliance Keys #24

It rejects the possibility of holding a sole proprietorship criminally liable due to its fully instrumental nature. Specifically, the Court understands that, given that the company has only one partner and administrator, the assets of which are confused and diluted with those of the legal entity, the latter cannot be condemned.

It is alleged that the legal entity lacks sufficient organizational development to differentiate it from the natural person. Consequently, article 31 bis of the Criminal Code cannot be applied given the impossibility of differentiating between the natural person (partner and administrator) and the legal entity and the impossibility of implementing a regulatory compliance program in the latter.

In particular, the High Court understands that when the individual convicted as a natural person is the sole owner of the company, it is not possible to punish the legal entity as well.

The Supreme Court, as a note, pronounces in this ruling on the effectiveness of Compliance Systems to prevent criminal conduct of which companies may be victims. In this sense, Compliance Systems not only mitigate the conducts that may generate a possible corporate criminal liability, but also hinder what the High Court calls “self endangerment“.

Thus, the Supreme Court considers that, although the conduct being prosecuted cannot entail the criminal liability of the legal entity (these are crimes of misappropriation, which are not susceptible to generate the attribution of criminal liability of the legal entity under article 31 bis of the Criminal Code), of which the legal entity itself (a sports club) would have been a victim, these could have been avoided with control measures aimed at preventing the abuse of personal relationships (through controls relating to seizures, for example).

In this sense, also, Provincial Court of Madrid Decision 90/2023, of February 22, 2023.

In the present decision, the Supreme Court resolves in cassation the famous “Pescanova Case“. Among other issues regarding the criminal liability of legal entities, it is worth mentioning the analysis carried out in this ruling regarding the element of “direct or indirect benefit“, required both in the cases of letter a) (crimes committed by directors) and in those of letter b) (crimes committed by employees) of article 31 bis of the Criminal Code, in order to attribute criminal liability to legal entities.

The Supreme Court points out that, in fact, what article 31 bis of the Criminal Code requires, as an indispensable element for the criminal liability of the legal entity to be established, is not that the legal entity has obtained as a consequence of the crimes committed in its name or on its behalf a real, direct or indirect benefit, but that those criminal acts have been committed “for the benefit” of the legal entity.

Thus, legal entities may be convicted for criminal conduct that may even have caused them some kind of damage, when they were originally carried out with the purpose of bringing them some kind of benefit, direct or indirect.

In this sense, the Public Prosecutor’s Office and the High Court agree that the system of criminal liability of legal entities complements that of natural persons, but does not replace it. It is not a question of deciding whether the criminal consequences are to be borne by the natural person or by the legal entity, but whether, in addition to the natural person, the entity on whose behalf he acted must be criminally sanctioned. This double sanction will be applicable when the conditions set forth in article 31 bis of the Criminal Code are met.

Finally, it establishes that only if the legal entity can be identified with the person criminally responsible (in the case of very small entities, for example) would it be possible to waive one of the convictions (that of the legal entity) so as not to violate the prohibition of ne bis in idem (punishing the same person twice, for the same facts, on the same grounds).