CLIENT ALERT
The Italian Supreme Court issued decision No. 11626 of April 7, 2020, establishing jurisdiction in corporate criminal liability cases under Legislative Decree No. 231/2001 (“Decree”) over foreign companies that fail to prevent crimes committed by their associates in Italy.
As a consequence of this ruling, foreign companies are required to implement compliance programs that meet the standards provided by the Decree in order to avoid liability.
By establishing these principles, the Supreme Court aligns the interpretation of the Decree with other anti-corruption laws having an extraterritorial reach, such as the Foreign Corrupt Practices Act in the United States, the Sapin II law in France, and the UK Bribery Act.
Corporate criminal liability in Italy
Legislative Decree No. 231/2001 introduced corporate criminal liability in Italy for certain crimes, including bribery, money laundering, and corporate and tax crimes committed by companies’ associates in the interest or to the benefit of the companies.
Corporate criminal liability can be excluded where companies implemented compliance programs aimed at preventing the commission of criminal offenses and appointed independent supervisory bodies that oversee the effectiveness and adequacy of the compliance programs.
Companies found liable can be sanctioned with pecuniary fines up to EUR 1.5 million and temporary disqualification sanctions, which include: i) ban from exercising business activity; ii) suspension or revocation of authorizations, licenses, or concessions; iii) prohibition on entering into Public Administration contracts; iv) exclusion from benefits, loans, contributions, or subsidies and potential revocation of those already granted; v) ban on advertising goods or services. In addition, confiscation of the profits from the crimes is ordered.
Grounds for establishing corporate criminal liability of foreign companies
The case at hand was concerned, inter alia, with the assessment of corporate criminal liability of a Dutch company triggered by bribery offenses committed by its representatives in Italy in the interest and to the benefit of the same company.
The Supreme Court mirrors the reasoning already carried out by some Italian courts of merit[1] in what is known as the “Viareggio railway disaster case” to establish jurisdiction over foreign companies without principal offices in Italy, deeming relevant the sole fact that the crime was committed in the country.
According to the Court, the principle stipulated by sections 3 and 6 of the Italian criminal code, under which all individuals who act in Italy, whether citizens or not, are subject to Italian criminal law, is also applicable to legal entities. Indeed, deeming legal entities subject to different rules than those in force for individuals would be in breach of the equality principle protected by the Italian Constitution.
Furthermore, this would result in undue distortion of competition: in fact, unlike companies with registered offices in Italy, companies based abroad but operating in Italy would be allowed to carry out their activities without bearing the costs of compliance programs.
Given this framework, the Supreme Court states that it is not a defense for a foreign company to state that its headquarters are not in Italy and therefore the failure to prevent corporate misconduct happened abroad. Likewise, it is not relevant that the legal system of the country where the company is incorporated does not establish a requirement for compliance programs similar to those prescribed by the Decree for avoiding corporate criminal liability[2].
Whether a crime is committed in Italy by foreign companies’ associates in the interest or to the benefit of the same entities, lack of a compliance program comparable to the standards set by the Decree entails corporate criminal liability irrespective of where the failure to prevent the crime happened and the laws under which the compliance program was adopted.
Italian standards for compliance programs
The decision of the Supreme Court does not clarify when a compliance program of a foreign company can serve to exclude corporate criminal liability in Italy. In the Viareggio case, the Tribunal of Lucca specified only that a foreign company’s code of conduct is not comparable to the complex system of controls required by section 6 of the Decree.
In the absence of specific case law indications, in order to navigate corporate criminal liability issues in Italy, it seems prudent for foreign compliance programs to meet the main parameters set forth by section 6 of the Decree. Specifically, compliance programs need to be structured following a risk assessment analysis that identifies the activities in relation to which crimes may be committed and consequently provides specific protocols and procedures for the prevention of crimes (including whistleblowing procedures). In addition, it is necessary that said controls be not only well designed but also successfully implemented, which entails specific audits of the adequacy and effectiveness of controls, training on procedures, sanctions in case of noncompliant behaviors, and periodic reviews and updates of compliance programs.
Decision No. 11626 of April 7, 2020 is available at the following link:
[1] First instance Tribunal of Lucca, Decision No. 222 of July 31, 2017 and Court of Appeals of Florence, Decision No. 3733 of December 16, 2019.
[2] The leading case in this sense may be the “Siemens AG case” (Preliminary Investigation Judge – Milan Court of first instance, decision of April 28, 2004), where the potential corporate criminal liability of the company was recognized notwithstanding the absence of German regulations forming a system of corporate criminal liability comparable to the one under Legislative Decree No. 231/2001.
