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Outlook on Recent Developments in Swiss Corporate Criminal Liability

Swiss corporate criminal liability entered into force on 1 October 2003 with the enactment of article 102 of the Swiss Criminal Code ("SCC").

In a nutshell, a corporation may become the target of criminal proceedings if an individual within the company perpetrates an offence but (i) no single person can be identified and held liable in this respect or (ii) several persons were instrumental in the perpetration of the offence but none of them reunite all necessary elements to meet the conditions of criminal liability. The corporation will be held accountable if it can be demonstrated that the impossibility to identify the responsible natural person is due to a failure of implementing the proper organizational measures in this respect. The foregoing is named "alternative liability".

Next to this, Swiss law provides for a "cumulative liability" that applies to a restrictive list of offences for which a corporation may be jointly held liable along with the individual wrongdoer.

This is particularly the case for offences such as participating with a criminal organization, financing terrorism, bribery, corruption or money laundering. The corporate criminal liability of the company may be engaged, regardless of the liability of a specific individual, if such company can be shown not to have taken all proper and necessary organizational measures to prevent the occurrence of such criminal behavior.

After more than 12 years of testing, it is fair to state that only a very limited number of cases of prosecution of corporations took place in Switzerland.

For instance, in the course of 2011, Alstom Network Schweiz AG was sanctioned for failing to prevent the occurrence of corruptive payments in various jurisdictions. No trial took place, for the decision was taken through a summary punishment order pronounced by the Swiss Office of the Attorney General. In the summary punishment order, Alstom was convicted of not having taken all necessary and reasonable organizational precautions to prevent bribery of foreign public officials in Latvia, Tunisia and Malaysia. The company was fined with an amount of CHF 2.5 million. Additionally, it had to pay a compensatory claim of CHF 36.4 million as well as the costs of the proceedings.

Also in 2011, the Swiss Post was found guilty for failing to implement sufficient organization measures preventing the occurrence of money laundering offences. Approximately CHF 4.6 million had been transferred through the financial services offered by the Swiss Post; however, it later appeared that this money constituted the proceeds of a vast fraud orchestrated by two individuals. The sanction was a fine to the tune of CHF 250,000.

In spite of these limited cases, the trend could however soon reverse with an increasing number of corporations being targeted on the basis of Article 102 SCC. The financial and industrial sectors have indeed recently witnessed a situation where criminal proceedings no longer focus strictly on individuals but are clearly directed against legal persons.

Although in several instances it appeared justified for prosecutors to concentrate their efforts on companies when investigating financial crimes, it should be stressed that corporate criminal liability is frequently used as a "sword of Damocles" to push and strike a deal with so-called deep pocketed institutions keen to avoid a long, protracted and media exposed litigation.

In this context, one growing area of concern is the criminal liability of a company for an offence perpetrated by a subsidiary based abroad. It is worth mentioning that the position is rather exploratory given the lack of actual cases to date.

According to certain scholars, one should consider an economic unit in the sense that both mother and daughter companies would be construed as an enterprise. In this respect, if one were to demonstrate that the mother company held a role of "guarantor", it could be found liable for actions perpetrated by the daughter company.

Such approach has been criticized by certain scholars who consider that the qualification of a group as a corporation is not compatible with the text of article 102 SCC.

A second approach could be to consider that an offense committed abroad within a daughter company should be deemed a form of "offense by omission" at the level of the mother company. This could for instance be the case if a group chief risk officer overlooked the control of corruptive payments to an external consultant. In this respect, one would allege that a better organization at the level of the mother company could have prevented the perpetration of the offense at the level of the daughter company.

A third approach is to consider that the mother company is a director in fact of the daughter company.

A last approach is the one where the mother company is deemed to be a body of the daughter company. In this respect, liability could be engaged should the mother company have known that its daughter was improperly organized and if it can be established that the mother company is responsible for such shortcomings. This could be the case for instance with an undercapitalization of the daughter company.

In all those instances, the question of the role of the mother company as a "guarantor" will have to be determined specifically. In this respect, issues related to compliance are of utmost importance, in particular the existence of a code of conduct and its application within the group. Other examples of organizational measures are the hiring of adequate staff, reasonable instructions, accessible information, sufficient surveillance, internal mechanisms that detect potential payments of bribes to foreign government officials, etc. The measures should be considered in accordance with the risks of the company's activities.

It goes without saying that the more the goal, the strategy and the resources are determined by the management at group level, the more it shall assume risks related to the possibility that an offence be perpetrated at the level of an entity within the group. Assuming that the mother company organizes a compliance structure integrated in the whole group, it can be considered that the daughter company is somehow prevented to do so directly, which could be construed as an exclusive liability for the mother company.