The Common Law-inspired decision to enlist corporations as precious, proactive allies in the essential activities of detection and combat of crime, and particularly of bribery, has often been looked at with the typical skepticism of civil law systems, which – a long way from accepting the idea of equal cooperation in the fact-finding mission – require a neat distinction of roles in proceedings. Nonetheless, it is by now undeniable that the perception of corporate compliance in the Italian legal system has undergone a significant transformation in recent years.
The structure of Legislative Decree n. 231/2001, which established for the first time in the Italian legal system an administrative liability of legal persons and entities without legal personality for the crimes committed by employees and executives, outlines a correction model that views the conduct held by the accused legal entity during an investigation and the related criminal proceedings as one of the cornerstones triggering the virtuous path towards compliance monitoring, which should bring the entity back on the tracks of profitable compliance.
The regulatory framework outlined by Legislative Decree n. 231/2001 for corporate liability, shares an essential common denominator with the pre-trial diversion mechanisms envisaged in the United States and the United Kingdom, that is the special-preventive purpose, which, with reference to sanctions and proceedings, attaches a specific weight to the conduct held by the accused entity in the course of the criminal proceedings. In return for self-regulation, Legislative Decree n. 231/2001 offers a wide spectrum of benefits: the company that decides to take the righteous path — by complying with the crime prevention rules set forth by the law — may avoid disqualification (or obtain revocation thereof where applied as a precautionary measure), benefit from lower financial penalties, or aspire, even in the enforcement stage, to the conversion of the former into the latter. This last aspect should be considered fundamental for the corporation, considering the repercussions that disqualification – in its different forms – may have on the company’s operations, in addition to the reputational damage arising from the news that a precautionary measure was ordered against the company.
The provisions set forth in Legislative Decree n. 231/2001
Among the tools provided to persuade organizations to return onto the path of legal compliance, the legislator has envisaged, in addition to the powerful threat of precautionary measures, a number of rewards connected with the fulfillment of certain specified conditions involving remedial actions, compensation of damages and corporate reforms, as a means of ‘voluntary settlement’ by which the legal entity offers the ‘removal and remediation of the overall damage’ caused by the latter and puts every effort into restoring the ‘status quo ante delictum’. The provisions referred to are set forth in Articles 12(2), 17 and 63, Legislative Decree n. 231/2001, which provide for a mitigating circumstance and a number of exceptions to disqualification rules.
Article 12(2) sets forth a reduction in the related financial penalty, from one-third to one-half, in the event of a full compensation of damages and the successful or attempted removal of the detrimental or dangerous consequences of the crime by the company, or in the event that the company has implemented a compliance program ‘suitable to prevent crimes of the same sort as the one committed’; this penalty may be further reduced, by one-half to two-thirds, when both of the above conditions are met.
Article 17, on the other hand, admits exceptions to disqualification, but not to the issue of a financial penalty, upon fulfillment of all of the following conditions: full compensation of damages and removal – whether successful or attempted – of the detrimental or dangerous consequences of the crime; removal of the structural deficiencies that made misconduct possible, by implementing an adequate compliance program; and making available, for the purpose of forfeiture, the profit earned as result of the crime. Requesting the fulfillment of the above conditions forces the legal entity to make a virtuous commitment for the future through corporate reforms aiming to overcome the deficiencies and remove the risk factors that lead to wrongdoing.
The launch of an internal investigation could be decisive for ‘obtaining a pass to access a settlement for a financial penalty’ under Article 63, but above all for avoiding disqualification – or obtaining revocation thereof – as a precautionary measure on the grounds of lack of the necessary requirements.
Legislative Decree n. 231/2001 and the principle of mandatory prosecution
The Italian system is still a long way from the ‘Deferred Prosecution Agreement’ and ‘Non-Prosecution Agreement’ schemes in place in the UK and the USA. Indeed, it is difficult to reconcile the principle of mandatory prosecution set forth by Article 112 of the Italian Constitution with basic diversion mechanisms, which are based on the public prosecution’s unconditional discretion to determine whether or not to prosecute a crime. It is also true, however, that the mechanism of dismissal provided for the offence under Legislative Decree n. 231/2001 has excluded the possibility for the court to interfere with the public prosecutor’s decision to take no further action, and grants the latter the power to dismiss charges by reasoned decree (Article 58, Legislative Decree n. 231/2001).
Compared to the corresponding codified rules, no role is assigned under the Decree to the injured party of the predicate crime or to all those who, albeit not the injured party, have otherwise been harmed by the offence charged to the legal entity. Such a stance essentially implies that the public prosecution is left with unfettered discretion to dismiss the charges and to choose, based on – at times even arbitrary – evaluations, which corporation may be ‘spared’ from criminal proceedings. Clearly the atypical mechanism of dismissal specifically provided by Legislative Decree n. 231/2001 does not allow to construe action against corporations as ‘optional’, but it does however seem to outline a set of rules that are distinct from the principle of mandatory prosecution outlined in Article 112 of the Italian Constitution, insofar as the oversight of dismissal is ‘hierarchy-based’ yet it is not exercised by a court.
The foregoing is demonstrated by the fact that judicial practices testify to a number of phenomena that may be summarized as follows:
a) the prosecution of companies – in the case of crimes committed by employees – is discretionary and is often based on criminal policy considerations made by the public prosecutor: if the goal is to obtain compensation for the damage suffered by the community as a result of the corporate crime, then pressures will be made by the public prosecutor to induce the company to take remedial actions. This means that the making of a freezing order is intended to encourage the entity’s consent to alternative proceedings and negotiated settlements (infliction of sanction upon request); while the amount of the profit to be made available — for the purpose of forfeiture or to obtain consent to a plea bargain — is calculated in such a way to, on one hand, recover the proceeds of crime and, on the other, prevent the company from being forced out of the market; a modus procedendi that, in a creeping manner, follows the lines of the U.S. system (which, however, is based on the principle of discretionary prosecution);
b) the center of gravity in criminal proceedings against corporations moves back: it is no longer the trial but rather pretrial diversion mechanisms (especially plea bargaining) that become the solution — from the public prosecution’s perspective — to overcoming the statute of limitations and to bypassing the complexity of investigations in corporate crime matters;
c) the focus of judicial assessment — after the first few years of application – has shifted: from assessing the adequacy and effectiveness of the compliance program implemented by the accused entity, to identifying (and determining), on a negotiated basis, the sanction to be inflicted.
Simone Lonati is an Italian Attorney and Professor of Law in Italian Criminal Procedure and European Criminal Procedure at Bocconi University. In addition, he also teaches in the Postgraduate Specialization School for Legal Professions at Bocconi University in Milan and at Pavia University.
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