Almost everyone is aware of the existence of the provisions of the Penal Code and the Code of Criminal Procedure in the Polish legal system. However, it is probably not common knowledge that Polish law also includes the Act of 28 October 2002 on the Liability of Collective Entities for Acts Prohibited under Penalty , which defines the principles of liability of such entities for crimes or fiscal crimes, as well as the rules of procedure for such liability. However, the lack of public awareness of the applicability of these provisions is fully justified – although the provisions of the aforementioned Act have been in force for less than two decades, they are applied extremely rarely, and the lack of practical application by Polish courts clearly impacts public awareness.
The lack of widespread application of the provisions of the Act on the Liability of Collective Entities does not, of course, mean that prohibited acts related to the activities of, among others, commercial law companies do not entail criminal liability. A number of criminal cases involving individuals are pending before Polish courts:
- acting on behalf of or in the interest of a collective entity (e.g. the aforementioned commercial law company) within the framework of the authority or obligation to represent it, make decisions on its behalf or perform internal control, or when exceeding this authority or failing to fulfil this obligation;
- allowed to act, e.g. by representatives of such an entity, which was allowed as a result of exceeding the powers or failing to fulfil the obligations by that representative;
- acting on behalf or in the interest of a collective entity, with the consent or knowledge of the person referred to in point 1;
- being entrepreneurs who directly cooperate with a collective entity in achieving a legally permissible purpose;
(for the purposes of this publication we will refer to these persons as "representatives of the entity"), and in many such cases there are grounds to assume that the conduct of such persons, classified as a punishable act, brought or could bring a financial or even non-financial benefit to the collective entity.
However, based on the provisions of the Act on the Liability of Collective Entities in their current form, bringing additional liability to bear on the collective entity itself, in the name and on behalf of which the perpetrator acted, was a multi-stage and highly complicated procedure.
It is therefore not surprising that the idea of amending these provisions is being brought up again, with the aim of improving the practical application of the Act and making these provisions an effective means of combating economic crime, including organised crime .
An analysis of the draft amending act clearly indicates that its goal is to introduce a completely new model of liability for collective entities for criminal offenses into the Polish legal system. However, the question remains: does the Minister of Justice's draft of August 29, 2022, actually offer modifications and tools aimed at achieving this goal?
What key innovations does the project provide?
Changing the definition of a collective entity
So far, this term (for the purposes of the discussed Act) meant a legal person and an organizational unit without legal personality to which separate provisions grant legal capacity, including a commercial company with the participation of the State Treasury, a local government unit or an association of such units, a capital company in organization, an entity in liquidation and an entrepreneur who is not a natural person, excluding the State Treasury, local government units and their associations.
According to the draft amending act, the following collective entities would be included in the circle of exclusions of entities subject to the provisions of the act:
- which employ fewer than 500 employees in at least one of the last two financial years or achieve an annual net turnover from the sale of goods, products and services and from financial operations not exceeding the equivalent of EUR 100 million and are not micro-enterprises, small enterprises or medium-sized enterprises within the meaning of the provisions of the Entrepreneurs' Law;
- whose main statutory or statutory purpose is not to conduct business activity.
In short: the limitation of entities that may be subject to liability under the provisions of the Act is significant, de facto limiting it to large entrepreneurs, and further excluding from this circle, among others, foundations, universities, church legal entities and cooperatives.
Changing the directory of "representatives"
The proposed changes replace the current catalogue of “representatives” mentioned at the beginning of our article, whose behavior could result in the liability of the collective entity, with a new, two-fold regulation.
Firstly, the draft provides for the repeal of Article 3, which contained the above-mentioned list of “representatives”.
In its place, the following would be introduced into the Act:
Article 5a, according to which "A collective entity is liable for a prohibited act, the characteristics of which were exhausted by the action or omission of a body of that entity , which is directly related to the activity conducted by that entity"
Article 5b, according to which a collective entity would also be liable for a prohibited act directly related to the activity conducted by that entity, if it was committed by:
- member of the body of this entity
- a natural person authorized to represent an entity, make decisions on its behalf or exercise supervision in connection with its actions in the interest or on behalf of that entity
- a natural person permitted to act by the entity's body, a member of its body or the person referred to above as a result of abuse of powers or failure to fulfil obligations
- a person employed by a collective entity in connection with the provision of work for that entity.
In the case of the persons indicated in the proposed Article 5b, however, the condition remains that the act brought or could bring a benefit to the collective entity, even a non-pecuniary one.
Introducing an open definition of prohibited acts. Abolishing the closed catalogue of crimes.
The Act in its current form establishes in Article 16 a closed list of offenses for which, if committed by persons acting on behalf of and for the benefit of a given collective entity, the collective entity could incur liability specified by law. The draft provides for the repeal of Article 16 and, in its place, the introduction of a definition of a prohibited act, which is defined as an act prohibited by law under penalty as an offense prosecuted at the public prosecutor's office or as a fiscal offense, excluding acts committed by publishing press material and other violations of the law related to the communication of human thought, to which the provisions on legal liability and procedure in press matters specified in the Press Law apply.
Elimination of the requirement of a prior final conviction of the representative of the collective entity
The previous provisions of the Act allowed for holding a collective entity liable provided that the fact of committing a prohibited act by a representative of the collective entity had been previously confirmed by a final judgment convicting that person, a judgment conditionally discontinuing criminal proceedings or proceedings in a tax offence case against that person, a decision "to grant that person permission to voluntarily submit to liability" or a court decision to discontinue proceedings against that person due to circumstances excluding the punishment of the perpetrator .
This provision would be repealed by the proposed amendment, so it should be assumed that under the new legal status (if the provisions are adopted in their currently proposed form), the decision on the liability of a collective entity could be taken independently of the criminal proceedings of the "representative" .
Additionally, the amended provisions are to explicitly specify that a collective entity is also liable in the event of the death of the perpetrator of a prohibited act or the occurrence of another circumstance excluding his criminal liability, and in a situation where the identity of the perpetrator or the person who allowed the perpetrator to act has not been established.
As can be seen, the proposed amendment envisages significant changes, which, according to experts, will result in a more widespread application of the Act on the Liability of Collective Entities. This state of affairs – especially in light of the announcement of the imminent introduction of the amendment, which, according to initial forecasts, was to take place as early as the third quarter of 2022 – should prompt entities with large enterprise status to review their internal organization and consider the need for potential changes in this regard in a way that would minimize the risk of a collective entity being found liable for criminally prohibited acts committed by its "representatives .
This seems justified, especially in the light of the proposed possibility of incurring liability for the acts of employees in connection with the provision of work, which in the case of large entrepreneurs (which are often employers of a large group of people) significantly increases the risk of events that may constitute the basis for such liability.
This article is for informational purposes only and does not constitute legal advice.
Legal status as of November 15, 2022
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