Corporate Responsibility in Comparative and European Law

Divided in three different phases, the project aims to analyse three interrelated and complementary problem areas which, in turn, are subdivided into the topics and questions identified below, the aim of which is twofold: to specify and delimit the initial problem areas; and to orientate the project towards innovative results and relevant outputs.

First problematic node: Prevention, detection, processing, investigation and sanctioning of corporate offence through enforced self-regulation, internal investigations, and responsive regulation?

Topics and issues to consider:

(i) Compliance programmes for preventive-repressive purposes and privatisation of public functions

Companies are required to have, or, at least, it’s convenient for them to adopt, compliance programmes aimed at preventing, detecting, and sanctioning (any) legal infringements typical of the activity carried out, the organisation and mode of operation adopted, the market or region in which they operate, etc.

These preventive-repressive compliance programmes involve granting private entities policing powers (which are often intrusive on the fundamental rights of employees, especially their rights to privacy and confidentiality of communications), as well as powers to conduct internal investigations (including of administrative/misdemeanor offences and even criminal offences), of processing, (disciplinary) sanctioning and civil reparation for the damage caused by internally proven offences.

(ii) Internal investigations, misdemeanor/administrative proceedings, and criminal procedure

In the case of administrative/misdemeanor and criminal offences perpetrated through the enterprise (and perhaps also against it), the granting of powers of processing, investigation and evidence gathering to private entities – powers which are currently constitutionally and legally reserved to public authorities – raises complex (and unresolved) questions about the relationship between internal investigations and misdemeanor/administrative proceedings and criminal procedure, including about the possible migration of information and/or evidence obtained in the context of corporate investigations and, moreover, in the context of a relationship between employer and employee, to such proceedings.

Among these issues, the following stand out.

• Internal investigations, preservation of fundamental rights and the nemo tenetur se ipsum accusare of investigator and investigated.

Should internal investigations be carried out by the enterprise and/or by an independent entity? Which independent entity? Selected and paid for by the company itself? Which requirements must such an independent entity fulfil?

Can the evidence gathered by the independent entity, which independently co-conducts the internal investigations, be used in misdemeanour/administrative or criminal proceedings without breaching the investigated entity’s right not to self-incriminate or the attorney-client privilege regarding the offence in question?

Can the suspected or accused company use information and evidence incriminating its employees or managers produced as part of the internal investigation to defend itself in misdemeanour/administrative or criminal proceedings?

• Legal regulation of internal investigations: recognition of pre- and para-investigations communicating with administrative/misdemeanour proceedings and/or criminal procedure?

Should internal investigations be legally regulated (who can direct and conduct them, in what cases, under which circumstances, according to which procedures?) and be subject to the fundamental guarantees of any sanctioning procedure, especially the presumption of innocence, the right to a hearing and defence, assistance by a lawyer, protection against self-incrimination and constitutional and legal prohibitions on certain means of evidence gathering?

If yes, however, would this lead to a problematic legal recognition of private pre-investigations and para-investigations, parallel to the misdemeanour/administrative proceedings or criminal procedures, which were once exclusively public, but now maintain a relationship of communicating vessels with the latter?

(iii) Compliance as a reward and a sanction for legal persons: the emergence of a Criminal Law and a Criminal Procedure based on the regulatory pyramid and responsive regulation?

In an effort to drive all legal entities to implement compliance programmes (even those that are not legally required to do so), the State has decided to reward companies as soon as they adopt such programmes, either before the offence is committed or during the criminal proceedings, and to punish them when they fail to do so until the delivery of the final decision.

The rewards can, for example, take the form of “suspension of the coercive measure”; provisional suspension of the criminal procedure through an order to adopt, amend or implement a compliance programme; special mandatory mitigation of the penalty; replacement of the fine with an alternative penalty.

In turn, the punishment consists of the imposition of an accessory penalty if, before the final decision is delivered, the legal person has not adopted and implemented a compliance programme suitable for preventing the commission of the crime or crimes of the same kind. This accessory penalty is a judicial order to adopt and implement a compliance programme aiming at the prevention of crimes of the same nature or, at least, at the significant reduction of the risk of their occurrence in the future. It may also be accompanied by the substitute penalty of judicial supervision.

The hypothesis of the present existence of Criminal Law and Criminal Procedural Law based on responsive regulation in relation to compliance by legal persons raises the following questions:

• Does the outlining of regulatory compliance as a reward and punishment make sense also in misdemeanours/administrative law, in their respective procedure and in the sanctioning of companies/corporations?

Considering that the aforementioned rewards and punishments related to compliance programmes do not always find a parallel in administrative/misdemeanour offence laws, procedures and sanctioning, even at sectoral level, the perplexity intensifies. The natural field of application of responsive regulation and of the use of the regulatory pyramid is precisely that of administrative regulation, supervision, and sanctioning of economic activity.

Does this mean that, as far as legal persons are concerned, it is the already existing criminal law, but, above all, criminal procedure law, that is regulatory in nature?

• Confrontation of the purposes of criminal penalties with the purposes of misdemeanour/administrative sanctions applied to enterprises/legal persons.

Criminal Law and Criminal Procedure, by focusing on the regulatory pyramid and responsive regulation in relation to enterprises/legal persons, force us to reflect on the true and specific purposes of the penalties applied to them: more orientated towards preventing future recidivism (special prevention) than towards punishing the crime committed by and/or through them (general prevention).

Is the special positive prevention of integration or socialisation of the legal entity/enterprise the primary purpose of the misdemeanour/administrative sanctions applied to it? Or are they – unlike the criminal sanctions applied to legal entities – essentially aimed at positive general prevention, reaffirming the validity of the administrative/misdemeanour rule that has been breached and at negative general prevention, intimidating potential offenders? What are the reasons for this?

• Prevention of recidivism through socialisation as the primary purpose of penalties imposed on legal persons and legitimate purposes of penalties imposed on natural persons.

In the Criminal Law of a constitutional state grounded on human dignity, are there valid reasons why the sanctions imposed on natural persons, at least in economic criminal law, should not primarily aim at preventing future recidivism, through special positive prevention of socialisation, as is already the case in general with legal persons?

The fact is that the criminal law of a democratic state governed by the rule of law prohibits both retribution as the purpose of punishment and the instrumentalisation of the (human!) person to achieve any purpose, even a community one.

In other words: the confrontation with a Criminal Law and Criminal Procedure that are essentially regulatory in relation to legal persons, and therefore above all concerned with ensuring the future fulfilment of legal-criminal requirements by the specific collective entity, forces us to rethink the legitimate purposes of criminal sanctions against natural persons, not only in the context of economic Criminal Law, but in general. In fact, the liability of legal entities for offences provided for in the Criminal Code is not restricted to economic criminal law, but covers, for example, sexual offences.

(iv) Collaboration of offending companies with public authorities, opportunity in misdemeanour/administrative proceedings and criminal proceedings brought against them vs. preponderance of legality in the processing and sanctioning of non-business offences?

The privatisation of the functions of prevention, detection, processing, investigation, evidence gathering and repression of civil/administrative/misdemeanour and criminal corporate offences, the consequent opening up to new forms of collaboration between enterprises/legal persons and the public authorities and the proliferation of manifestations of opportunity in misdemeanour/administrative and criminal proceedings for business offences – all phenomena determined by the importance given to compliance programmes – require from us the reflection on the justification for the possible preponderance of the principle of legality in the processing and sanctioning of non-business offences.

Outside the realm of corporate offenses, administrative/misdemeanour and criminal in nature, isn't there also a case for making administrative/misdemeanour and criminal proceedings more permeable to new forms of collaboration with the perpetrators of offences and other expressions of opportunity on the part of the authorities?

Second problematic node: Enterprises, responsive regulation, enforced self-regulation and Private Enforcement: blurring of the boundaries between Administrative Law and Criminal Law and between Public and Private sanctioning? The emergence of a "hybrid" regulatory and sanctioning law: administrative-criminal and privatistic.

This problematic node is somewhat conclusive in relation to the problems discussed and addressed in the first node, and now brings up Private Enforcement, i.e., the private application of the law through collective protection actions (brought, in particular, by consumer protection associations or foundations or by associations of enterprises whose members consider themselves to have been harmed by the infringement) and actions for compensation for damage caused by corporate offences.

For the time being, Private Enforcement seems to be limited to national and European competition law offences (Directive 2014/104/EU and Portuguese Law nr. 23/2018). However, in Portugal, its regime should be articulated with that provided for in the broader Law nr. 83/1995 (Right to procedural participation and popular action). Both Directive 2014/104/EU and Portuguese Law nr. 23/2018 aim to solve problems and bring solutions that are not the prerogative of anti-competition offences, thus raising a problem of articulation of the respective regime with other fundamental diplomas such as the Civil Code and the Code of Civil Procedure.

Specification of the topics and issues of the second core of problems:

(i) Private Enforcement: concept and scope of application

There are several issues (interconnected with each other and with the previous problematic node) to be analysed and discussed in this area:

• Is Private Enforcement effectively limited to anti-competition offences, or does it at least extend to offences against public health, consumer rights, quality of life, preservation of the environment and cultural heritage, by virtue of its coexistence with the broader right of popular action?
• In view of this coexistence, is Private Enforcement restricted to actions for damages or does it extend to private (and only subsidiarily public – see Article 16(1) of Law nr. 83/95) claims for the prevention, cessation and prosecution of anti-competition offences, offences against public health, consumer rights, quality of life, the preservation of the environment and cultural heritage?

(ii) Relationship between Private Enforcement and Public Enforcement

• How can (autonomous) actions for compensation for damages caused by business offences and/or private requests for the prevention, suppression and prosecution of these offences be reconciled with the respective prevention, processing, investigation, evidence and prosecution by the competent authorities? Private Enforcement as an alternative or rather a complement to Public Enforcement?
• How can Private Enforcement be a tool for more effective economic regulation and more efficient self-regulation?

(iii) Private enforcement, responsive regulation, and evidentiary collaboration of the regulated and offending entities

• Is it justified to limit the scope of the obligation to compensate and the subsidiary nature of this obligation in relation to the offender who has been exempted from a sanction thanks to the cooperation with the competent public authorities in detecting, processing, investigating, and proving an anti-competition offence (see Article 5(4) of Portuguese Law nr. 23/2018)?
• How independent is Private Enforcement from Public Enforcement? Can Private Enforcement become an instrument of responsive regulation and evidentiary collaboration of the regulated and offending entities?

(iv) Blurring the boundaries between administrative law and criminal law: influence of ECtHR case law and repercussions on domestic legal systems

• ECtHR case law: identification and discussion of leading cases.
• Procedural benefits and risks for the control of the domestic legal decision to incriminate certain conduct and for the limitation of sanctions legitimately applicable under national law. The repercussions of ECtHR case law on the legal systems of the Member States, including constitutional case law.

(v) Blurring the boundaries and confusing the functions of public and private sanctions law: the influence of Anglo-American law and experience in Europe

• Private Enforcement as an alternative and instrument of Public Enforcement?
• Compensation for emergent damages and loss of profits as a sanction (and not mere reparation) for the misdemeanour/administrative and criminal wrongdoing of enterprises?
• The emergence of a broad principle of opportunity in the processing and prosecution of misdemeanour/administrative and criminal offences against companies: non prosecution agreements or suspension misdemeanour/administrative and criminal proceedings in the law of EU Member States.

Third problematic node: Corporate liability in European sanctions law

Topics and issues to consider:

(i) Corporate liability in European law and in the case law of the CJEU and the ECtHR: identification and discussion of the main normative instruments and leading cases in European case law;

(ii) Drawing conclusions on the scope of application, prerequisites and criteria for imputing liability to legal persons or enterprises in European sanctions law, applicable sanctions and guarantees for their enforcement in and by the Member States;

(iii) Does a European sanctions law for enterprises/legal persons already exist, can it exist, and should it exist? 

(iv) Possible manifestations of self-regulation, responsive regulation and opportunity mechanisms in European sanctions law and procedure;

(v) Corporate Liability, Private Enforcement and Public Enforcement in European Law;

(vi) European Competition Law: the enterprise, the legal person or the personalised enterprise ("economic unit") as the subject of sanctions?

The problem in the national law, doctrine, and case law of the Member States (subject to the primacy of European law), in the case law of the CJEU and of the ECtHR.

Once again, a blurring of boundaries, confusion of functions and imputation criteria between public and private sanctions law?

Justification of the relevance of the project and links with the CIDP’s lines of research

The problematic nodes, and the topics and issues that concretise and delimit them are of undeniable relevance and practical topicality, not only domestically, but also in the fields of comparative law (EU Member States and the Anglo-American system) and of European sanctions law, and from both a lege lata and lege ferenda perspective.

The project therefore meets the fundamental core of the research line it is part of ("New Perspectives on Regulation, Compliance and Private Enforcement") and applies the respective methodology: analysing and reflecting on the state of the art, taking into account Portuguese, foreign, comparative and European experience, followed by the presentation of reform proposals emerging from these analyses and reflections.

The project is also related to practically all of CIDP’s research lines.

It is linked to the "New Perspectives on Corporate Governance" line of research, due to the topics of enforced self-regulation and responsive regulation, which presuppose an understanding of the company/legal person as an offender but also as an economic subject.

It maintains close links with the "Diversity, Harmonisation and Unification of Private Law" research line through the proposed study of Comparative Law, the attention it devotes to corporate liability in European sanctions law and to the influence of Anglo-American law and experience in Europe, promoted by the globalization of economy.

There are also strong links with the "Foundations of Private Law" research line, due to the topics of Private Enforcement and the relationship between Private Enforcement and Public Enforcement; the hypothesis of interpreting the evolution of legal systems in the sense of the blurring of boundaries, some confusion of the functions and criteria for imputing responsibility in Public Sanction Law and Private Law and the emergence of a "hybrid" Regulatory and Sanction Law (administrative-criminal and privatistic). The project also shares with this research line the methodology of critically analysing judicial activity and its impact on the aforementioned evolution of legal systems.