www.buttiandpartners.com corporate governance and environmental crimes dr. attilio balestreri - avv....

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Corporate governance and environmental crimes

dr. Attilio Balestreri - avv. Diana Michelazzo

[email protected]

[email protected]

UNIVERSITY OF PADUAFACULTY OF ENGINEERING

Second Cycle Degree in Environmental Engineering 2013-2014

International Environmental Law


1. Civil, criminal and corporate liability1. Civil, criminal and corporate liability


Civil liability can be defined as a breach of contract which is not of criminal nature.

It refers to potential responsibility for payment of damages in a civil lawsuit.

It is different from criminal liability which means punishment for a crime committed.

Civil and criminal liabilityCivil and criminal liability


Criminal liability can be described as damages from criminal dispositions which impact the society while damage from civil dispositions impacts individuals).

The penalty which follows criminal dispositions is punishment as prescribed by the law, while the penalty which follows civil liability is, generally, a financial compensation



Who can request punishment on civil or criminal liability?


Public Prosecution is the only authorised entity to request punishment on criminal liability. With civil liability the injured party is the one who claims compensation.

In criminal liability, public prosecution or injured party may not compromise or waive the punishment prescribed by the law; this is due to the fact that it is involved with the rights of society.

Within civil liability cases the injured party or debtor may compromise or waive such compensation, given the fact that it is a personal right of the injured party or the debtor



Can a legal entity be responsible

for civil or criminal liability?


Decree no. 231/2001 Decree no. 231/2001 and the prevention of corporate crimes and the prevention of corporate crimes


Legislative Decree no. 231/2001Legislative Decree no. 231/2001

Decree 231 introduced into the Italian system the corporate liability of legal entities, in case one of the crimes specifically listed in the Decree is committed by subjects that acts on behalf of the company.

For the company to be liable, the crime has to be committed: - In the interest or benefit of the company; - By subjects who carry out management or control

activities (representatives, executives, directors, subordinates, etc.).

Both natural person who perpetrated the offence and legal

entity in which interest or benefit the offence was committed shall be held liable.


The Decree’s scopeThe Decree’s scope

The main scope of the Decree is to induce companies to establish specific internal rules (a Compliance Program, named “Modello di Organizzazione e Gestione”) for the prevention of corporate crimes by their employees.

In order to ensure the respect of the Program, the Government Board has to appoint a Compliance Officer (“Organismo di Vigilanza e Controllo”), which also constantly updates the Program.


Penalties Penalties

Penalties provided under the Decree include:

• Pecuniary fine;• Ban from business activity (temporary or permanent);• Withdrawal or temporary suspension of licences, permits,

and authorizations linked to the violation;• Prohibition to contract with the Public Administration;• Disqualification from financial aid, subsides etc.• Disqualification from advertising goods;• Mandatory confiscation of the price or profit arising from

the unlawful conduct;• Publication of the judgment.


HowHow to avoid the corporate liability?to avoid the corporate liability?

In case a crime is committed, the company shall not be considered liable if:

• The Program had been (previously) adopted and efficiently implemented.

• A Compliance Officer, with an adequate level of autonomy and indipendence, had been appointed. This Officer did not omit to exercise its control duties.

• The individual committed the crime in his/her sole interest or in the interest of third parties

• The individual committed the crime with the fraudolent intention of violating the Program.


Interest or benefit of the companyInterest or benefit of the company

The crime must have been committed in the interest or benefit of the company.

“Interest” and “benefit” are not the same thing.

The interest is verified ex ante, the benefit is verified ex post.

Court of Cagliari, July 13, 2011 Interest and benefit are not required jointly


The Compliance Program The Compliance Program

In order to be considered efficiently implemented, the Program has to:

specifically point out the areas of risk; provide for specific procedures concerning the Officer’s

decision-making process and the implementation of its decisions;

provide for an appropriate financial management, in order to prevent the perpetration of financial crimes;

provide for a specific duty to report violations of the Program to the the Officer;

Provide for specific disciplinary sanctions.

The Program has to be constantly updated by the Officer.


Why should companies adopt the Compliance Why should companies adopt the Compliance Program?Program?

If prevoiusly adopted and implemented, the Program can exempt the company from liability.

If not previously adopted, the Program can still be adopted and implemented after the crime was committed, before the trial begins. I this case the sanction is reduced.


The Compliance OfficerThe Compliance Officer

The Compliance Officer has to ensure:Autonomy;Independency;An high level of competence.

Therefore, one or more external members are

reccomended.


Crimes punished under the DecreeCrimes punished under the Decree

Back in 2001, only a few crimes were mentioned under the Decree (offences against the Public Administration, such as corruption, fraud, embezzlement, etc).

The list of crimes has been periodically updated, and new offences have been introduced (organized crimes, computer crimes, crimes against business and trade, market abuse, perjury, money laundering and many others).


The extent to culpable homicide, culpable injury The extent to culpable homicide, culpable injury and certain environmental offencesand certain environmental offences

Recently, in 2007, culpable manslaughter

and culpable injury (both committed in violation of workplace health and safety rules) were included in the Decree.

More recently, in 2011, certain environmental crimes have been included.


Interest or benefit in culpable crimesInterest or benefit in culpable crimes

Most of the crimes punished under Decree 231 are intentional.

The only culpable crimes are the ones concerning workplace health and safety (art. 25 septies) and certain environmental offences (art. 25 undecies).

A culpable homicide or injury are very unlikely to constitute an advantage for the company. Therefore, Several Italian Courts stated that, in this case, the interest or benefit can arise from a company’s cost-cutting decision (for instance, avoiding investments in workers’ training or safety measures).


An Italian Case Law An Italian Case Law

• Criminal Court of Turin, April 15, 2011, n. 31095 (Thyssenkrupp case). In case of a workplace death, the employer that omitted to install the necessary fire systems is charged with intentional homicide, instead of culpable manslaughter, due to his recklessness (state of mind). The employer was aware of the risk of avoiding the safety measures, nevertheless he acceptd such risk.

Intentional homicide (committed with recklessness) is not one of the crimes punished under the Decree 231. Therefore, a company cannot be held liable under the Decree 231 for such conduct.


Comparative Law: general outlineComparative Law: general outline

In common law countries it is possible to identify three basic models of criminal corporate liability:

(i)the respondeat superior or vicarious liability model (U.S.A.)

(ii)the “identification” model (UK)

(iii)the “corporate culture” model (Australia)

A general trend is to assign even more importance to corporate culture and organizational factors.

Civil law countries have been more reluctant to recognise criminal corporate liability


U.S. vicarious liability modU.S. vicarious liability modelel

Organizations are held liable for crimes committed by their agents (i) within the scope of their duties and (ii) with the aim, at least in part, to benefit the corporation.

Organizational factors:•are taken into account by prosecutors in order to decide whether to charge the corporation or negotiating plea. •determine the culpability score: e.g. the presence of an effective Compliance and Ethics Program is a mitigating circumstance.


The UK identification modelThe UK identification model

Organizations are generally held liable for crimes committed by employees sufficiently senior to represent the organization’s “directing mind and will”.

In the last few years more relevance to organizational factors:

•Corporate Manslaughter and Corporate Homicide Act 2007 = liability for manslaughter (by gross negligence) for deaths caused by the way in which the activities are managed or organized;

•Bribery Act 2010 = liability for bribery offences committed by “persons associated” (even not senior!), unless «adequate procedures» to prevent them are in place


The Australian corporate culture modelThe Australian corporate culture model

Corporations are held criminally liable when expressly, tacitly or impliedly authorize or permit the commission of the offence.

It is so even when a corporate culture (attitude, policy, rule, practice) exists that directs, encourages, tolerates or lead to non‑compliance with the relevant provision.

The corporation is exonerated from liability if proves that it exercised due diligence to prevent the conduct, or the authorization or permission.


Civil law models: France and SpainCivil law models: France and Spain

France: the Criminal Code provides that organizations are liable for crimes committed by their agents or representatives on behalf of the organization. Originally limited to certain offences, in 2004 this regime was turned into a general principle.

Spain: new (2010) art. 31-bis of Criminal Code provides that corporations are liable for certain offences when committed on behalf and for the benefit of the same

a)by legal representatives and administrators of fact or law

b)by anyone under their authority, due to lack of control


2.The directive 2008/99/EC2.The directive 2008/99/EC


1. The Directive 2008/99/EC: principles (1)

Corporate governance and environmental crimes:

The main European regulation

DIRECTIVE 2008/99/EC OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 19 November 2008 on the protection of the environment through criminal law



Main principles

1. “According to Article 174(2) of the Treaty, Community policy on the environment must aim at a high level of protection.

The Community is concerned at the rise in environmental offences and at their effects, which are increasingly extending beyond the borders of the States in which the offences are committed. Such offences pose a threat to the environment and therefore call for an appropriate response”.

joint intervention (recitals 1,2)



2. “Experience has shown that the existing systems of penalties have not been sufficient to achieve complete compliance with the laws for the protection of the environment. (…) Common rules on criminal offences make it possible to use effective methods of investigation and assistance within and between Member States(…) In order to achieve effective protection of the environment, there is a particular need for more dissuasive penalties for environmentally harmful activities, which typically cause or are likely to cause substantial damage to the air, including the stratosphere, to soil, water, animals or plants, including to the conservation of species”

“strong” sanctions for relevant problems, common target (recitals 3-5)



“Failure to comply with a legal duty to act can have the same effect as active behaviour and should therefore also be subject to corresponding penalties. (…) such conduct should be considered a criminal offence throughout the Community when committed intentionally or with serious negligence”

Targets of compliance strictly binding for the Member States (recitals 6-7)


The directive 2008/99/EC: offences (1)The directive 2008/99/EC: offences (1)

Art. 3

Member States shall ensure that the following conduct constitutes a criminal offence, when unlawful and committed intentionally or with at least serious negligence:

(a) the discharge, emission or introduction of a quantity of materials or ionising radiation into air, soil or water, which causes or is likely to cause death or serious injury (…);

(b) the collection, transport, recovery or disposal of waste(…) (waste management);

(c) the shipment of waste;

(d) the operation of a plant in which a dangerous activity is carried out or in which dangerous substances or preparations are stored or used (…);

(e) the production, processing, handling, use, holding, storage, transport, import, export or disposal of nuclear materials or other hazardous radioactive substances (…)


The directive 2008/99/EC: offences (2)The directive 2008/99/EC: offences (2)

(f) the killing, destruction, possession or taking of specimens of protected wild fauna or flora species (…);

(g) trading in specimens of protected wild fauna or flora species or parts or derivatives (…);

(h) any conduct which causes the significant deterioration of a habitat within a protected site;

(i)the production, importation, exportation, placing on the market or use of ozone-depleting substances

The aim of the Directive is that the Member States provide sanctions for these offences.

Also for companies…


The directive 2008/99/EC: corporate The directive 2008/99/EC: corporate liabilityliability

Art. 6

1.CORPORATE LIABILITY

Member States shall ensure that legal persons can be held liable for offences (…) where such offences have been committed for their benefit by any person who has a leading position within the legal person, acting either individually or as part of an organ of the legal person, based on:

(a) a power of representation of the legal person;

(b) an authority to take decisions on behalf of the legal person; or

(c) an authority to exercise control within the legal person.

2. LACK OF SUPERVISION

Member States shall also ensure that legal persons can be held liable where the lack of supervision or control, (…) has made possible the commission of an offence (…) for the benefit of the legal person by a person under its authority.

3.LIABILITY OF NATURAL PERSONS

Liability of legal persons (…) shall not exclude criminal proceedings against natural persons


The directive 2008/99/EC: The directive 2008/99/EC: sanctions to be introduced by the Member States

Art. 7

Member States shall take the necessary measures to ensure that legal persons held liable pursuant to Article 6 are punishable by effective, proportionate and dissuasive penalties.


Italian regulationItalian regulation

In Italy the main reference for corporate liability is legislative decree n. 231/2001, which has partially derogated from the general principles in force in Italy in the field of criminal liability.

The legislative decree n. 231/2001 as introduced a “corporate liability” for offenses committed by persons acting on behalf of the company or for its benefit.


Corporate liability and environmental Corporate liability and environmental crimescrimes

Following the principles introduced by the Directive 2008/99/EC, the legislative Decree n. 121/2011 has extended “corporate liability” to environmental crimes.

The most important environmental offences sanctioned today for corporate liability are:

Offences Italian legislative reference

Killing, destruction, catching, taking, possession of animals or destruction of animal’s habitat

Penal code artt. 727-bis e 733-bis

Offences related to discharges of wastewater, water treatment, remediation of contaminated sites, waste management, emissions

Environmental Code(Legislative decree 152/06)

Trade in animal and plant species in danger of extinction National law n. 150 of 1992

Pollution produced by ships Legislative decree n. 202/2007

Air emissions dangerous for ozone National law n. 549 of 1993


SanctionsSanctions

• Pecuniary fine

• Temporary ban from business activity

• Permanent ban from business activity


The most relevant offences

Wastewater discharge:

•Without authorization;

•violation of the prohibitions of discharge;

•violation of wastewater discharge limits (quantity, concentration of substances)

Waste management:

•irregularities in collection, transport, recovery or disposal of waste

Remediation of contaminated sites:

•omitted remediation of a contaminated site;

•omitted notify to the authorities of the discovery of a potential contamination.

Air emissions (substances dangerous for the ozone)


What content of Directive 2008/99/EC has What content of Directive 2008/99/EC has not yet been implemented in Italy?not yet been implemented in Italy?

Today in Italy, some environmental crimes are not linked yet to a corporate liability (only natural person’s liability). The most relevant:

- irregularities in the management of incineration plants

- irregularities in the management of “Seveso" plants (risk of chemical accidents)

- environmental damage

- irregularities in the management of IPPC plants


3. Environmental management systems3. Environmental management systems


What kind of operative system a company can What kind of operative system a company can implement to prevent environmental crimes?implement to prevent environmental crimes?


Environmental Management Systems Environmental Management Systems (EMS): general aspects(EMS): general aspects

One of the most important systems to prevent irregularities - and criminal liability – for the company is the adoption of environmental management systems (EMS).

It is not mandatory for companies to have an EMS. Companies choose to have an EMS to obtain benefits in environmental management.

Common targets of Environmental Management Systems are: a. continuous improvement (linked to a continuous review)b. compliance with all environmental regulations c. pollution prevention.


EMAS and ISO14001: the main EMSEMAS and ISO14001: the main EMS

i) Regulation (EC) n. 1836/93 updated with Regulation (EC) n. 761/2001 - Eco-Management and Audit Scheme (EMAS) - allowing voluntary participation by “organizations” (industrial companies) in a common eco-management and audit system

ii) ISO 14001 allows companies that voluntarily adopt it to obtain a control by an independent and accredited certifier ("environmental certification“)


EMAS and ISO: main differencesEMAS and ISO: main differences

EMAS ISO 14001

Is a public accreditation Is a private certification

Is valid into the EU Is worldwide valid

Provides a public comunication of the outputs of the environmental analysis carried out in the plant

Does not provide a public comunication of the outputs of the analysis carried out

Provides a larger number of requirements for the enterprise

Provides fewer requirements for the enterprise

It is not yet widespread among companies

Great spread among companies


Main steps to implement EMS (1)Main steps to implement EMS (1)

1. Check (mapping) of activities and risks

2. identification of specific operating procedures

3. audit and continuous review


Main steps to implement EMS (2)Main steps to implement EMS (2)

Corporate functions

Other inputs…

Law and Court’s

decisions

Corporate history

Corporate regulations

Corporate operative

procedures

Complete risk assessment

Check of main environmental

aspectsMeasurement

analysis of the operating procedures

assessment of the

significance


EMS: main outputsEMS: main outputs

Ethical Code: expresses a set of principles and values which must inspire the conduct of activities (the EMS allows to link the Ethical Code with environmental targets)

Environmental Policy: contains corporate values and principles in the field of environmental management

Operational protocols (measures): measures to ensure an effective and efficient environmental management and related risk’s reduction


Thank you for your attention

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Documents

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corporate liability

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criminal dispositions

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civil lawsuit

financial compensation