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Corporate criminal liability in comparative law.

1. Introduction

My analysis complements the growing literature on the concept of corporate criminal liability, the need for international regulation of corporate behavior, the liability and accountability of corporations for international crimes, and the prosecution of corporations for complicity in genocide. In this paper I am particularly interested in exploring the correlation between the development of corporate criminal liability and the growing influence of corporations, the increasingly important role that corporations play internationally, the blurring of the roles between states and corporations, and the ever-increasing economic and social influence that corporations have internationally.

2. The Correlation between the Development of Corporate Criminal Liability and the Growing Influence of Corporations

Slawotsky claims that states have outsourced public functions and services (1) to private entities such as corporations, assuming the role of private actor by becoming active participants in private markets. Large global corporations are at the epicenter of multifaceted governance systems. Large corporations share similar characteristics with state actors on the global stage, whereas traditionally state actors are operating in the arena of private corporate actors. A consequence of globalization is the rise of the state-like role of the large corporation.

The above discussion indicates that large global corporations can be treated as actors similar to sovereigns. Ownership of large transnational enterprises constitutes authority. Slawotsky explains that in today's global economy, states are private market actors in the private realm, whereas private corporations engage in public actor functions.
   Global corporations engage in misconduct that can cause severe harm
   in the nations those private entities operate in. Immunization from
   legal liability may play a role in the decision to conduct business
   in a foreign state. [...] To treat the large global corporation as
   not being subject to international law will potentially allow
   multinationals to engage in liability arbitrage. Such corporations
   can transfer litigation risk by selecting jurisdictions to engage
   in misconduct known for weak sovereign power. (2)

Kyriakakis examines the proposal for a non-criminal corporate liability regime under the ICC Statute. Many states do not delineate between natural persons and legal persons for the purpose of criminal law. The ICC Statute may have avoided the question of corporate liability for international crimes by limiting the Court's jurisdiction to natural persons, does not demand that states adopt criminal laws for the purpose of prosecuting perpetrators of international crimes, and envisages that states will primarily apply their criminal law to conduct proscribed by the Treaty.

In sum, there is considerable theoretical support for the notion that both criminal and non-criminal corporate liability (3) may be sufficient to achieve the outcomes sought by international criminal justice. Kyriakakis argues that civil liability regimes are more efficient and effective in terms of deterring unlawful conduct in the corporate context than criminal regimes. The ICC Statute does not mandate that states take any particular steps in relation to criminalizing the conduct proscribed under the Statute. The provisions for corporate criminal liability should reflect the more progressive models of corporate criminal liability. (4)

3. The Legal Framework for Holding Corporations and Their Individual Agents Criminally Responsible at the International Level

Fauchald and Stigen analyze how states in different fields have established international corporate responsibility, (5) evaluating the chosen regimes as well as the nature of the rules and the institutions and procedures to enforce them. The activities of transnational corporations (TNCs) can have negative consequences amounting to international concern. State behavior and the resolution of interstate disputes by necessity must be regulated by international law. Regulating corporations is inherently complex for any state, regardless of the state's relative power. States are the sole source of authority and law in the international system. One cannot deny the existence of certain rights and duties for individuals and international organizations. There is nothing preventing states from jointly regulating corporate behavior through international law. Some states are notoriously unable or unwilling to hold corporations accountable. The existence of an international enforcement mechanism implies the existence of a direct obligation.

It is worth stressing that international law is characterized by a lack of international enforcement mechanisms. Fauchald and Stigen put it that the commission of international crimes involves the abuse of a state apparatus. Private corporations increasingly play an ancillary role through various forms of contributions. State responsibility and international criminal law are available for establishing responsibility for gross human rights violations. No international tribunal authorized to prosecute corporations has existed (international law does not impose criminal responsibility on corporations). The punishment typically applicable to corporations is economic sanctions. The concept of corporate criminal responsibility is increasingly recognized and refined in national legal systems. The Security Council can impose indirect sanctions on corporations when their activities threaten peace and security.

The important point here is that international law protection of the interests of corporations has become independent of the home states' political will. Fauchald and Stigen observe that provisions setting out obligations of investors are virtually nonexistent in investment agreements. Investment agreements do not provide any explicit legal basis for corporate responsibility under international law. Provisions of investment agreements must be read in light of general principles of law and customary international law. Interests of corporations are increasingly protected through international rules or norms. States often fail to regulate activities of transnational corporations and to enforce the regulations that exist. Penal sanctions applicable to corporations could be developed in the field of international criminal law. (6)

Diskant holds that many criminal statutes do not contain explicit provisions for corporate or entity liability. The regulation of corporate behavior and individual white-collar criminals within the context of distinct criminal justice systems allocates powers and protections differently. When a corporation pleads guilty and cooperates, prosecuting the employees at the center of alleged corporate fraud is easier. Corporations are routinely threatened and actually prosecuted for the conduct of individual employees. Germany and France regulate corporate behavior largely through administrative and civil laws. The United States imposes significant criminal liability in addition to those administrative and civil regulations. Corporate criminal liability in the United States has developed because of the acts of American prosecutors. Corporations enjoy an attorney-client privilege, routinely assisting individuals under investigation. American prosecutors use their unique powers to compel corporations to cooperate. American corporate criminal liability sits atop a pile of punitive and regulatory remedies. United States has individual liability and administrative regulation in addition to corporate criminal liability. Individual directors can be prosecuted in the United States under the same laws applied to the corporations themselves.

What these latter observations reveal is that the threat of corporate criminal sanctions has blossomed as a tool of American prosecutors. Diskant writes that American prosecutors leverage the powers they possess over corporations, as defendants. American corporate criminal liability is part of an effort by American prosecutors to pursue individual corporate directors. Corporations can be "persons" for the sake of the criminal code and for the purposes of privilege laws. Corporate lawyer has an attorney-client relationship with all corporate employees. In Germany, corporations face no prospect of criminal liability, and have no power to thwart the investigation and prosecution of individual employees. There is no corporate criminal liability in Germany, the German system punishing individual corporate officers.

It therefore seems reasonable to suggest that Germany extends its criminal law to individual corporate directors and agents, relying on administrative and civil law remedies to regulate and punish the corporation itself. Diskant emphasizes that Germany, adhering to the principle of societas delinquere non potest, does not think a corporation, as an entity, (7) is capable of committing a crime (corporations have "privacy" rights). A German corporation can be held administratively accountable or liable for damages in a civil tort action. Some European countries have expanded their administrative regulation or even experimented with corporate criminal liability. Corporate crime in Europe has not taken on quite the same scope or severity as it has in the United States (the Europeans have shifted compliance to corporations themselves). (8)

4. The Role of Corporate Actors in the Commission of International Crimes

Kelly notes that corporations should be treated as natural persons (9) as far as the law and factual reality allow. "In order for a corporation to be prosecuted as an entity for violations of international law, it must be in breach of an obligation or duty or its actions must violate a customary peremptory norm." (10) Kelly remarks that multinational corporations have been complicit in genocides over many years, but none have been prosecuted. The modus operandi for dealing with corporate involvement in genocide has been individual criminal liability for corporate officers and civil liability for the corporate entity. The avenue of criminal liability for the corporate entity has remained inchoate. Corporations have gained dramatically in transnational power, and should bear greater responsibility for their actions.

It is necessary to point out that international law says little about corporate criminal liability for atrocities like genocide. Kelly posits that corporations are staffed by natural persons (11) who ultimately make decisions for the corporation. Multinational corporations are in fact regulated by international law on a daily basis. Any court has jurisdiction over genocide and may hear a case against a company as long as the court has criminal jurisdiction over corporations. International criminal law should catch up with other international legal fields in holding corporations accountable for their actions. (12)

On Bishai's reading, crimes expressing animus towards groups as a whole (13) are insidious in many societies. Superiors' responsibility over their subordinates shapes an atmosphere of lawlessness and impunity for crimes. A different mixture of objectives underpins sentencing in the international criminal justice system. Participants in mass atrocities do not fit the characteristic profile of career criminals in domestic jurisdictions.

The findings referred to here suggest that the lack of any tangible sentencing guidelines complicates the predictability and justness of sentencing. Bishai states that sentences vary in severity based on how the crimes can be classified within international human rights law and policy (sentences should be distributed based on the severity of the individual crimes). (14)

5. Conclusions

The current study set out to identify the principle and form of corporate criminal liability, the development of corporate international criminal responsibility, the legal framework for holding corporations and their individual agents criminally responsible at the international level, and the recognition of corporate criminal liability. The findings of this study have implications for the growing risk of corporate malfeasance, the rise of corporations as controlling cultural entities, corporate criminal liability in the United States, the lack of corporate criminal liability in Germany, and the legal liability of corporations.


(1.) Paraschiv, Gavril (2013), "Gendered Decision-making Practices in the Juvenile Justice System," Contemporary Readings in Law and Social Justice 5(1): 76-81.

(2.) Slawotsky, Joel (2013), "Corporate Liability for Violating International Law under The Alien Tort Statute: The Corporation through the Lens of Globalization and Privatization," International Review of Law 6: 23.

(3.) Nicolaescu, Eugen (2012), "The Mechanisms of Corporate Governance and Their Empirical Relation to Firm Performance," Economics, Management, and Financial Markets 7(4): 203-208.

(4.) Kyriakakis, Joanna (2009), "Corporate Criminal Liability and the ICC Statute: The Comparative Law Challenge," Netherlands International Law Review LVI: 333-366.

(5.) Ionescu, Luminita (2013), "The Impact that e-Government Can Have on Reducing Corruption and Enhancing Transparency," Economics, Management, and Financial Markets 8(2): 210-215.

(6.) Fauchald, Ole K., and Jo Stigen (2009), "Corporate Responsibility before International Institutions," The George Washington International Law Review 40: 1025-1100.

(7.) Berna, Ioana-Bianca (2013), "The Diplomatic Process within the EU," Contemporary Readings in Law and Social Justice 5(1): 64-69.

(8.) Diskant, Edward B. (2008), "Comparative Corporate Criminal Liability: Exploring the Uniquely American Doctrine through Comparative Criminal Procedure," The Yale Law Journal 118: 126-176.

(9.) Paraschiv, Gavril (2013), "Conceptualizing Transnational Organized Crime," Economics, Management, and Financial Markets 8(2): 173-178.

(10.) Kelly, Michael J. (2010), "Grafting the Command Responsibility Doctrine onto Corporate Criminal Liability for Atrocities," Emory International Law Review 24: 687.

(11.) Nica, Elvira (2013), "Organizational Culture in the Public Sector," Economics, Management, and Financial Markets 8(2): 179-184.

(12.) Kelly, Michael J. (2012), "Prosecuting Corporations for Genocide under International Law," Harvard Law and Policy Review 6: 339-367.

(13.) Manolache, Elena (2013), "Transforming the Gendered Social Relations of Urban Space," Journal of Research in Gender Studies 3(1): 125-130.

(14.) Bishai, Christine (2013), "Superior Responsibility, Inferior Sentencing: Sentencing Practice at the International Criminal Tribunals," Northwestern Journal of International Human Rights 11(3): 83-108.


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Author:Paraschiv, Daniel-Stefan
Publication:Contemporary Readings in Law and Social Justice
Article Type:Report
Geographic Code:4EUGE
Date:Jan 1, 2013
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