Corporate Liability in Argentina

By Vanina Caniza and Fernando Goldaracena (Baker McKenzie Argentina)

I.              Corporate liability deriving from criminal activity

1.             Nature of the liability (criminal, administrative) and basis (crimes committed by directors or representatives, in the interest of or for the advantage of the company)

Argentine criminal law is based on the principle of culpability, whether by negligence (culpa) or specific intent (dolo), which can only be attributed to the individuals who were directly involved in the offense.

“Objective criminal liability” is not contemplated in the Argentine Criminal Code (ACC). Therefore, if the individuals are not personally involved in a given wrongdoing, they will not be subject to criminal liability.

In general terms, criminal liability is attributed to individuals. Nevertheless, specific laws have established economic criminal sanctions on legal entities.

Therefore, a corporation may be held liable only for the crimes listed in paragraph 2 below, whenever they have been perpetrated in the name, with the intervention, or for the benefit, of such legal entity.

2.             Types of crimes/administrative offenses from which, according to the legislature, corporate liability may arise

As explained, certain laws in Argentina establish criminal sanctions for corporations:

  • Criminal tax evasion: Section 14 of the Tax Criminal Law No. 24,769, as amended by Law No. 26,735
  • Money laundering: Section 304 of the ACC
  • Environmental crimes: Sections 14, 49, 50 and 54 of Law No. 24,051
  • Exchange control violations: Sections 1, 2 and 5 of Law No. 19,359
  • Customs crimes: Section 903 of Law No. 22,415
  • Supply Law: Section 8 of Law 20.680
  • Retirement & Social Security System: Section 144 of Law 24,241
  • Antitrust Law: Sections 46 and 47 of Law 25,156

With regard to the anti-corruption offenses, which will be explained in question VI.2 below, there is a Draft Bill currently at the National Congress, by which corporations could be held criminally liable for such offenses.

3.             Identification of companies and entities to which liability may apply

Any kind of legal entity could be held criminally liable for the abovementioned crimes if after an investigation, the wrongdoing is demonstrated and an individual is identified as being responsible for such offense. However, it could be also the case that even when the individual has not yet been identified, the corporation could be found criminally liable if the offense appears to be committed in its name, or for the benefit of such legal entity.

4.             Corporate liability for crimes committed abroad by its representatives or subsidiaries

Based on Section 1 of the ACC, criminal liability would arise only from crimes committed, or from those the effects of which are produced, in Argentine territory or in a place subject to its jurisdiction.

5.             Corporate liability in the case of transactions taking place after the commission of a crime (acquisitions, mergers, demergers, etc.)

In case of transformations, mergers, demergers, etc., a company resorting to such processes will continue to be liable for the crimes committed before the date on which these processes occurred. Therefore, comprehensive due diligence must be conducted in order to reduce such risk.

On the other hand, any new director or officer appointed by the new legal entity must not respond to any offense committed by the prior management, before their appointment, provided that such new director did not participate or collaborate in such offense either as an employee of the legal entity or as third party.

II.            Applicable sanctions

1.             Types of sanctions applicable to the company

In general terms, the laws that establish criminal sanctions on legal entities include the following penalties, among others:

    1. fines of up to 10 or 20 times the amount of the alleged violation, depending on the crime
    2. suspension of activities
    3. prohibition to participate in public tenders or bids
    4. cancellation of corporate legal status/legal personality

2.             Interim measures, cease and desist orders, bans and confiscatory measures

In any stage of the judicial process, the intervening judge could impose on both the corporation and the accused individuals any preventive measure, such as embargo, freezing of the assets, and seizure of any profit or revenue deriving from the crime, as stated in Sections 23 and 305 of the ACC.

3.             Liability of directors or managers for not having adopted (intentionally or negligently) measures for the prevention of the crime

Criminal liability could arise either from acts or omissions. Therefore, the directors, officers and/or employees of the legal entities will be held criminally liable if they took part in the criminal activity. In any event, it has to be proven that the individual has had the knowledge that the crime was being committed or has been negligent in preventing the crime. This depends on the levels of criminal intent or mens rea required.

In some cases, reckless disregard could be interpreted as constructive criminal intent (dolo eventual).

III.           Measures and “models” of prevention and effects of the same on corporate liability and applicable sanctions

1.             Consequences of the adoption of a compliance “model” and effects on corporate liability for crimes committed by the company’s managers, directors or representatives (cases in which it is possible to obtain an exemption from liability or a mitigation of the sanction)

Corporate manuals could, in practice, put the company in a better position before the Court and/or the Prosecutor. However, any of the actual laws expressly provide reductions of penalties in case the company or legal entity have corporate manuals.

As mentioned in answer I.2) above, the Draft Bill, which covers corporate criminal liability for corruption crimes, expressly includes the possibility of reduced sanctions if an “adequate” compliance program was enforced at the moment of the alleged crime. In any case, this should be analyzed and confirmed once the Draft Bill enters into law.

2.             Modality according to which a compliance “model” must be adopted in order to benefit from exemption from responsibility or mitigated punishment (codes of ethics, procedures, etc.)

N/A

3.             Monitoring: independent person or body to control/supervise, with the purpose of verifying the correct application of the “model”; mode of operation of such person or body

N/A

IV.          Judicial proceedings to determine corporate liability

1.             Court competent to decide the liability of and penalties applicable to the company

It would depend on the type of crime. The investigations could take place either before a federal or an ordinary criminal court, in the jurisdiction where the crime was committed.

2.             Possibility of the application of interim measures

Please refer to answer II.2).

3.             Plea bargains and related effects on corporate liability

N/A

4.             Permanence of corporate liability if the crime is extinguished

The legal entity may face charges even if the directors or officers who would be responsible for such misconduct have not yet been identified at the time that the penalty is imposed.

V.           Corporate liability in multinational groups

1.             Liability of parent companies located abroad in the case of offenses committed by directors, managers or representatives of the local company

In Argentina, any legal entity that directly participates as perpetrator, abettor or accomplice of any of the abovementioned crimes could be held liable, taking into consideration the abovementioned provisions.

Therefore, if a parent company located abroad was involved in the crime, in any of the abovementioned roles, such parent company could also be subject to criminal sanctions. If that is not the case, and assuming that the parent company did not participate, by any of the means detailed, in the alleged offense, then the parent will not be liable for the offenses committed by the directors, managers or representatives of the local company.

2.             Basis of liability and applicable sanctions

If a parent company was involved in the crime, same sanctions as for perpetrators, abettors or accomplices of the local company will apply. Please refer to answers II.1) and V.1) above.

VI.          Significant case law concerning corporate liability arising from crimes and draft laws under discussion

1.             Significant case law, if any

Taking into consideration that the laws providing criminal sanctions for corporations in Argentina are quite recent, there are as yet no corporate convictions to highlight. However, several ongoing judicial proceedings may result in criminal sanctions on corporations in the near future.

2.             Proposed or contemplated new legislation

The Draft Bill for corporate criminal liability in corruption crimes contains, among others, the following main topics:

  • Criminal liability for corporations — This may arise from crimes against public administration and corrupt behaviors, including transnational bribery carried out on behalf of a corporation, representation, or the commission of a crime as a result of inadequate control and supervision.
  • Penalties — These pertain to fines, total or partial suspension of activities, suspension of the use of patents/trademarks, total or partial publication of a guilty verdict, and loss or suspension of benefits.
  • Confiscation — In case of a ruling against a legal entity, confiscation of the things or profits that are the result or the benefit of the crime can be ruled, regardless of other sanctions.
  • Attenuation for collaboration — A reduction of one-third to one-half of the penalty will apply if the legal entity had voluntarily cooperated with the investigation.
  • Adequate Integrity Program — Its objective is to prevent risks inherent to the activity carried out by the legal entity, considering its size and economic revenues.