Criminal liability of legal persons in the field of human rights [page 11-12]
“Implements Principles 1 and 3a
Modern business is inconceivable without companies and cooperatives. They facilitate the concentration of funds, limit risk, and create opportunities for professional management. They are a means of implementing major business projects. However, like any other such means, companies may be open to abuse. Those who engage in crime can divide up responsibility for decisions and hide behind convoluted management structures. At large corporations, it can often be difficult to find a specific liable person. The Act on the Criminal Liability of Legal Persons [Act No 418/2011 on the criminal liability of and proceedings against legal persons] resolves this by making it possible to infer that a legal person as a whole is liable.
The most serious human rights abuses can be punished as crimes. According to the case-law of the European Court of Human Rights, too, the state duty to efficiently investigate and ultimately punish infringements is central to human rights protection. However, criminal prosecution is the strongest instrument of power the state can wield, and has repercussions for employees, shareholders, creditors, business partners and others who have nothing to do with criminal activity. In this light, legislation needs to be monitored and evaluated.
While the state carries primary responsibility for human rights protection in its territory, in today’s interconnected age the stringent application of the principle of territoriality is impossible. The Czech Republic has decided that – whether unilaterally or on the strength of an international treaty – it will prosecute certain unlawful conduct by Czech nationals irrespective of where this conduct occurs. As such, it is assuming responsibility for the conduct of its nationals (including businesses) abroad, thus making it possible to fill in the regulatory gap to some extent in those cases where such conduct is not punishable under another country’s law.
Current state of play:
- The criminal liability of legal persons was introduced into Czech law in 2011 and covered and exhaustive set of criminal acts. In 2016, the concept underlying the definition of the criminal liability of legal persons was revised so that a legal person can now be liable for all crimes other than a narrow group of acts expressly precluded by law.
- Czech law allows a Czech citizen or a legal person established in the Czech Republic to be prosecuted even if they committed their crime abroad.
- Foreign nationals and legal persons perpetrating a crime to the benefit of a Czech legal person may also be prosecuted.
- Under Czech law, the most serious human rights violations [The criminal acts listed in Section 7(1) of Act No 40/2009, the Criminal Code] can be prosecuted regardless of the perpetrator’s nationality or where such violations occurred.
- The Czech Republic is party to a number of international treaties on legal assistance and on the prosecution of various types of international criminal activity, including the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions.
- Evaluate the impacts and practical application of the new text of the Act on the Criminal Liability of Legal Persons. If it transpires that the legislation still has loopholes impeding or preventing the prosecution of serious violations of human rights, propose amendments to the law.
Coordinator: Ministry of Justice
Deadline: 31 December 2018”
Disqualification of a member of a body [page 13-14]
“Implements Principles 1 and 3b
If a company executive orders or, due to negligence or connivance, allows the company he or she manages to encroach on human rights, that executive must be found to be liable. It is always more advisable to prosecute specific culprits rather than a whole company. However, a criminal penalty is not always appropriate. Indeed, criminal prosecution appears to be too strict a response to minor or negligent breaches of the law.
One possible solution is disqualification – banning someone from holding corporate directorships. Professionals recommend disqualification as a lighter form of punishment for a number of acts directly associated with business activity. Disqualification is a punishment that is suitably harsh for the perpetrator without carrying the stigma of criminal prosecution, and does not harm the company as a whole. Furthermore, judicial proceedings in such a case are simpler and more economical.
Although current Czech law does accommodate disqualification, this is restricted to a narrow set of offences and the maximum duration is limited. In this respect, we need to explore whether the present wording of constituent elements is sufficient, i.e. whether it is broad enough for the courts to have sufficient opportunity to apply this instrument, while being definitive enough so that members of company bodies know what acts are prohibited. We should also consider what the maximum duration of disqualification ought to be for the various acts.
Current state of play:
- The disqualification of members of governing bodies from holding such office was introduced into Czech law in 2014 by the Business Corporations Act. This makes it possible to punish those who have bankrupted their company or have repeatedly and seriously breached the tenet of due diligence. They may be disqualified for up to 3 years.
- Members of governing bodies, influential persons and controlling entities may be disqualified. [Section 76(2) of Act No 90/2012 on companies and cooperatives]
- Assess the use and applicability of this concept and consider whether it needs to be revised. In particular, evaluate the breadth of constituent elements, how sufficient the definiteness and precision of the law is, as well as the maximum disqualification period and variations depending on the seriousness of the act, and consider extending this concept to other persons effectively exercising influence over the running of a company. Also consider revising this concept so that it is not limited to companies, but can also be applied to other types of organisation with a different legal form. In these assessments, focus on the punishability of acts where a member of a governing body enables human rights standards to be breached either wilfully or out of gross negligence. If the concept of disqualification proves to be hard to apply in these situations, consider revisiting the constituent elements so that disqualification is easier to impose in such circumstances.
Coordinator: Ministry of Justice
Deadline: 31 December 2020”
State aid, guarantees and subsidies [page 26]
“Current state of play:
- Guidelines on Corporate Governance of State-Owned Enterprises are taken into account in the management of state enterprises and companies in which the state has a shareholding.”
Transparency [page 37-38]
“The Guiding Principles set great store by openness and transparency, which in practice means communication with the public, with employees and with other stakeholders. Businesses should make public the fact that they are mindful of their responsibility, that they are not just assuming this responsibility for show, and that they accept it as part of their business ethics. This ongoing communication could include not only the public, but also investors, business partners and potential employees, for whom the business, by following this path, has become a more attractive partner or place to work. Communication may be one way (e.g. various forms of non-financial reporting) or bidirectional (e.g. public hearings on matters of general interest).
The Government of the Czech Republic recommends that businesses where the activities, products, services or business relationships are associated with risks of serious human rights violations formally provide information on how they are dealing with those risks, even in situations where the law does not require them to do so. The government recommends all companies reporting on human rights to take account of the Reporting Framework for the UN Guiding Principles on Business and Human Rights. Reporting should provide information of relevance without overwhelming the reader. The Government also recommends that large-scale projects with a potential major impact be publicly presented and consulted.”