Corporate Liability in Belgium

By Arne Gutermann and  Koen De Winter  (Baker McKenzie Belgium)

I.              Corporate liability deriving from criminal activity

1.             What it is the nature of corporate liability deriving from criminal activity? What is its legal basis?

Belgian law initially rejected the concept of corporate criminal liability. It was generally believed that corporations could not commit crimes since corporations could not fulfil the mens rea requirement of the crime (ie, criminal intent or societas delinquere non potest). At a later stage, the Belgian Supreme Court reconsidered and ruled that corporations could commit crimes; however, these could not be criminally punished (societas delinquere potest sed non puniri). Only the natural person who actually committed the crime could be held criminally liable.

The Act of 4 May 1999, which entered into force on 2 July 1999, however, established in Belgian law the criminal liability of legal persons. As of then, in accordance with Article 5 of the Belgian Criminal Code, “a legal person is criminally liable for criminal offenses which either are intrinsically linked to the realisation of the corporation’s corporate purpose or the corporation’s interests, or which, according to the circumstances, were committed on the corporation’s behalf.”

In addition to criminal liability, the corporation can be civilly or administratively liable for criminal offenses.

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

The Belgian legislator has opted for a general application of corporate criminal liability. Insofar as the criminal act is either intrinsically linked to the realization of the corporation’s corporate purpose or the corporation’s interests, or was committed on behalf of the corporation, the corporation can potentially be held liable for all criminal offenses under Belgian law. However, some criminal offenses, by their nature, can only be committed by natural persons (eg, bigamy).

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

In principle, any legal corporation, whether public or private, can be held criminally liable.

Furthermore, in accordance with Article 5, paragraph 3 of the Belgian Criminal Code, certain entities with no legal personality, as follows, are also considered legal persons for the purpose of attributing criminal liability:

  1. Temporary associations and joint ventures
  2. Undertakings as referred to in Article 2, paragraph 3 of the coordinated acts on commercial undertakings (ie, undertakings that have not yet filed their articles of association with the clerk’s office of the court of commerce), as well as commercial undertakings in the course of incorporation
  3. Undertakings that have not taken the form of a commercial undertaking

The explanatory memorandum clarifies that this assimilation is limited to entities that, in essence, carry out economic activities.

Certain public bodies are excluded from the scope of Article 5 of the Belgian Criminal Code and cannot be held criminally liable, in particular: the federal state, the regions, the communities, the provinces, rescue zones, prezones, agglomeration of Brussels, municipalities, multiple municipality zones, intra-municipal territorial bodies, the French Community Commission, the Flemish Community Commission, the Common Community Commission and the public social welfare centers.

Moreover, associations without legal form and nonprofit organizations in the course of incorporation cannot be held criminally liable.

 

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

In principle, Belgian criminal law applies when a criminal offense is committed on Belgian territory by Belgian or foreign entities.

Article 4 of the Belgian Criminal Code determines the extraterritorial application of Belgian criminal law. Except when provided for by law, criminal offenses that have been committed outside the Belgian territory will not be punished in Belgium.

The cases in which Belgian criminal law can be extraterritorially applied are set out in Articles 6 to 12bis of the Preliminary Title of the Code of Criminal Procedure (PTCCP). In most cases, additional procedural requirements are imposed for prosecution.

The main cases where Belgian criminal law is applicable to crimes committed abroad are as follows:

  1. Crimes and offenses against state security
  2. Crimes and offenses against public order (including counterfeiting of currency; counterfeiting and falsification of public securities, shares, debt instruments, interest coupons and other lawful bank notes; and counterfeiting and falsification of seals, stamps, marks, etc.)
  3. Crimes and offenses by a Belgian entity outside the Belgian territory
    1. General rule — crimes and offenses that are punishable under Belgian law that have been committed by a Belgian entity outside the Belgian territory when the act is punishable in the country where the crime or offense was committed
    2. Specific crimes — predominantly significant violations of international human rights and terrorist crimes
  4. Crimes against Belgians outside the Belgian territory, when the act is punishable in the country where the crime was committed by more than five years of imprisonment
  5. International crimes (including corruption)

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

In principle, the end of the existence of a legal person results in the discontinuation of the criminal procedure. In particular, in accordance with Article 20 of the PTCCP, a criminal procedure is irrevocably discontinued upon closure of liquidation, judicial dissolution or dissolution without liquidation (eg, mergers and demergers).

To prevent abuses, however, prosecution remains possible: (i) when the liquidation, judicial dissolution or dissolution without liquidation aims to evade prosecution; or (ii) when the legal person has been accused of loss of legal personality by the investigating judge in accordance with Article 61bis of the Belgian Code of Criminal Procedure (CCP).

Except for these cases of specific intent, the new entity that has been established after the merger or demerger is thus not criminally liable for criminal offenses that have been committed before the restructuring. As opposed to criminal liability, the principle of continuity applies in relation to the civil liability of the legal person.

All other transactions (transformations, acquisitions, partial demergers, contributions, etc.) do not automatically result in the discontinuation of the criminal procedure. Since the criminal procedure will not be discontinued in these events, the legal person in principle remains liable for criminal offenses that have been committed before the transaction.

II.            Applicable sanctions

1.             Type of sanctions applicable to the company

Criminal sanctions

Criminal sanctions with respect to corporations include fines, the confiscation of goods, dissolution, prohibition from conducting a specific activity, closure of one or several establishments, and publication and distribution of the conviction (Article 7bis of the Belgian Criminal Code).

Furthermore, Article 41bis, Section 1 of the Belgian Criminal Code provides for a conversion mechanism regarding sanctions that, by their nature, cannot be imposed on legal persons (eg, imprisonment). When the law imposes one of the following sentences, the corporation that has been convicted for a criminal offense must only pay a fine, calculated as follows:

  • Life sentence — Fine will range from EUR 240,000 to EUR 720,000.
  • Life sentence and/or fine — The minimum fine is EUR 500, multiplied by the number of months of the minimum prison sentence. This amount may not, however, be lower than the minimum fine determined for that offense. The maximum fine is EUR 2,000, multiplied by the number of months of the maximum prison sentence. This amount may not, however, be lower than double the maximum fine determined for that offense.
  • Fine — Same as for natural persons.
  • In the case of police matters (infringements) — Fine will range from EUR 25 to EUR 250.

Please note that the fines have to be multiplied by 8 (ie, the applicable multiplication factor).

Administrative sanctions

In addition to criminal sanctions, criminal offenses might also result in administrative sanctions (administrative fines or administrative transactions). Administrative sanctions, which are imposed by the government and are not subject to the principles governing criminal law (eg, no registration in the criminal record and no application of the multiplication factor), need to be differentiated from criminal sanctions.

Civil sanctions

Liability for criminal offenses might also result in civil sanctions. The victim can request damages and restitution by a tort action.

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

During the preliminary investigation, the investigating judge can impose certain interim measures on the corporation if they find compelling evidence of guilt against the corporation concerned and if special circumstances so require. Please refer to Section 4.2 for a more detailed analysis thereof.

Once the corporation is found liable for a criminal offense, the criminal judge can impose the measures indicated in Section 2.1.

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

Belgian criminal law is governed by the principle of individual criminal liability. Consequently, any person who commits a criminal offense will be individually liable, and prosecuted and convicted accordingly.

Insofar as the constituent elements of the criminal offense have been established (ie, criminal conduct and criminal intent), the corporation’s managers and directors can be held criminally liable. In principle, only intentional acts are punishable: the offender is criminally liable if they acted knowingly or if the criminal offense resulted from the fact that they intentionally disregarded their obligations (omission).

In addition to general criminal law, the Belgian Criminal Code provides for specific grounds of criminal liability applicable to directors, such as abuse of corporate assets and private bribery. Moreover, other legislation may provide for specific criminal offenses (eg, the Belgian Companies Code criminally sanctions the failure to submit the annual accounts to the shareholders’ meeting within six months following the closing of the financial year).

The corporation’s directors and managers can be held criminally liable for intentionally not having adopted measures to prevent the crime by the corporation.

Article 5 of the Belgian Criminal Code deals with the situation where both the legal and the natural persons could be liable for the same criminal offense. When the legal person is criminally liable solely for the intervention of an identified natural person (eg, director or manager), only the person who committed the most severe misdemeanor may be convicted. In the case the identified director, however, committed the misdemeanor knowingly and willingly, the director can be convicted together with the legal person.

The conviction of a director for certain criminal offenses may result in the prohibition on their exercise of the function of director or any other function that grants the power to represent a company.

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

Belgian criminal law does not provide for measures or models of prevention by means of which a corporation can avoid corporate liability. The corporation can incur criminal liability as soon as all constituent elements of the criminal offense are established (ie, criminal conduct (actus reus) and criminal intent (mens rea)). In addition, the criminal offense must either be intrinsically linked to the realization of the corporation’s corporate purpose or the corporation’s interests, or according to the circumstances, be committed on the corporation’s behalf. Only the acts listed in the Belgian Criminal Code can constitute a criminal offense.

The Criminal Code does not provide guidance on the application of the mens rea requirement to legal persons. The explanatory memorandum to the Act of 4 May 1999 clarifies that the prosecutor will have to prove that the criminal offense results from an intentional decision within the corporation, or negligence at the level of the corporation that is causally linked to the criminal offense. The latter aims at, for example, an inadequate internal organization of the legal person, insufficient safety measures or unreasonable budgetary limitations that created an environment which enabled the criminal offense to be committed. The criminal liability of the corporation, however, is not limited to the criminal offenses committed by its legal or statutory bodies. The corporation can also incur criminal liability as a consequence of the acts of its employees, agents or mandataries.

The corporation can therefore only avoid corporate liability by asserting that one of the constituent elements of the criminal offense has not been established.

The corporation can establish mitigating circumstances (eg, proper internal control systems) that the judge can take into account when determining the sentence. However, the judge is not under any obligation to take these circumstances into account.

IV.          Judicial proceedings to determine corporate liability

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

The criminal courts penalize, by means of sentences prescribed by law, the legal persons that commit punishable acts. The competence of the respective criminal courts depends on the seriousness of the crime:

  • Police courts for minor criminal offenses
  • The (criminal) court of first instance for major criminal offenses
  • The Assize Court for the most serious crimes

The judgments of the police court can be appealed before the criminal court of first instance. The judgments of the court of first instance can be appealed before the court of appeal. The court of appeal’s judgment can subsequently be appealed before the Supreme Court, but only with regard to issues of law (not relating to the facts).

2.             Possibility of the application of interim measures

The investigating judge can impose the following interim measures during the preliminary investigation if they find compelling evidence of guilt against the corporation concerned and if special circumstances so require:

  • Suspension of the procedure of dissolution or liquidation of the legal person
  • Prohibition on specific financial transactions that might result in the insolvency of the legal person
  • Seizure of real property
  • Bail for an amount determined by the investigating judge, as a guarantee for compliance with the interim measures imposed

3.             Plea bargains and related effects on corporate liability

The concept of “guilty plea” has been introduced to Belgian law by the Act of 5 February 2016, “amending criminal law and criminal procedure and introducing various provisions concerning justice.” In accordance with the provisions of the new Article 216 of the CCP, the public prosecutor can enter into a plea bargain with the suspected or accused person who pleads guilty if they consider that the offense does not appear to be punishable by imprisonment of more than five years. The plea bargain is subject to review and homologation by the court.

The CCP also provides for three out-of-court settlement mechanisms:

  • Dismissal (Article 28quater CCP) – Criminal action is governed by the principle of prosecutorial discretion. The public prosecutor decides, at its own discretion, whether to prosecute or close the case.
  • Settlement (Article 216bis CCP) – The public prosecutor can propose a settlement to the offender if they consider that: (i) the offense does not appear to be punishable by imprisonment of more than 2 years or a heavier sentence, including confiscation of goods; and (ii) the offense does not constitute a severe impairment of physical integrity. The amount to be paid by the offender may not exceed the maximum of the fine provided for by law, and must be proportionate to the severity of the offense. If the amount has been paid, the confiscated goods have been deposited and all damages have been compensated, the criminal action will be discontinued.
  • Mediation (Article 216ter CCP) – The public prosecutor can invite the offender to compensate or repair all damages and provide proof thereof if they consider that the offense does not appear to be punishable by imprisonment of more than 2 years or a heavier sentence. When all conditions are complied with, the criminal action will be discontinued.

4.             Persistence of corporate liability if the crime is extinguished

Belgian criminal law is based on the principle of guilt. A criminal offense requires both a material element (criminal conduct/actus reus) and a moral element (criminal intent/mens rea) to be present. In addition, in accordance with Article 5 of the Belgian Criminal Code, a legal person is criminally liable for criminal offenses that are either intrinsically linked to the realization of the corporation’s business purpose or the corporation’s interests, or which, according to the circumstances, were committed on the corporation’s behalf.

In the explanatory memorandum to the Act of 4 May 1999 (nr. 1-1217/1), which introduced the concept of corporate criminal liability to Belgian law, it is clarified that the criminal liability of the legal person is not to be regarded as a derivative of the criminal liability of the natural person. The criminal liability of a corporation is an autonomous liability, the prosecution of which does not require proof of the crime being committed by an identified natural person whose behavior can be attributed to the legal person.

The Criminal Code provides for specific rules dealing with the situation where both the legal and the natural persons are liable for the same criminal offense. When the legal person is criminally liable solely for the intervention of an identified natural person, only the person who committed the more severe misdemeanor may be convicted. In the case the identified natural person, however, has committed the misdemeanor knowingly and willingly, the natural person and the legal person can be convicted cumulatively.

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

Belgian criminal law is governed by the principles of individual criminal liability and territoriality.

The focus is on individual entities. There are no specific rules dealing with “collective liability” or the liability of corporations that are part of a group. Each member of the group is regarded as an individual entity and is treated accordingly.

In addition, Belgian criminal law is applicable to all criminal offenses that have been committed on Belgian territory, irrespective of the nationality of the offender or the victim. From a procedural point of view, crimes that have been committed in Belgium can, in principle, only be prosecuted in Belgium.

Since the parent company and the local company are separate legal entities, the parent corporation is not liable as such for the acts of its subsidiaries. The parent corporation will only incur liability insofar as all constituent elements of the crime are present (criminal conduct/criminal intent/Article 5 of the Belgian Criminal Code).

The rules on complicity are applicable to corporations. Therefore, the liability of the parent corporation could be at stake when the parent company has instructed its subsidiary to commit the criminal offense, or when the parent corporation has performed certain acts that were necessary for the criminal offense, provided that the criminal offense is either intrinsically linked to the realization of the parent company’s corporate purpose or the parent company’s interests, or was committed on behalf of the parent company.

2.             Basis of liability and applicable sanctions

Corporations that are part of a group are regarded as separate legal entities. Therefore, each legal entity can be held criminally liable on the basis of Article 5 of the Belgian Criminal Code. In accordance with this article, a corporation is criminally liable for criminal offenses that are either intrinsically linked to the realization of the corporation’s corporate purpose or the corporation’s interests, or which, according to the circumstances, were committed on the corporation’s behalf.

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

1.             Significant case law, if any

  • Supreme Court, AR 8109, 23 May 1990: “Criminal liability for offenses committed in the management of a company can fall on the actual administrators even if they are not the company’s bodies.”
  • Supreme Court, AR P.05.1220.N, 20 December 2005: “Article 5 of the Criminal Code has established an individual responsibility for corporations, which is autonomous and distinct from the responsibility of the national persons who acted on behalf of the legal person or neglected to do so.”
  • Supreme Court, AR P.08.0587.N, 23 September 2008: “The criminal liability of the corporation will be established if the criminal offense results from a decision which was taken knowingly and willingly within the corporation, or from negligence within the corporation. For determination of the moral element the judge can rely on the actions of the administrative bodies of the corporation or its leaders, who can be natural persons.”
  • Supreme Court, AR P.10.2026.F, 20 April 2011: “When the criminal act has been committed by a corporation, the intent is sufficiently established by determining that the leading bodies were aware of the intent to commit the act and agreed to it.”
  • Supreme Court, AR P.12.1864.N, 9 September 2014: “The criminal liability of a corporation is autonomous. The assessment of the moral attribution to a corporation is factual. This assessment requires a specific investigation and a nuanced evaluation by the judges in order to avoid that the criminal culpability would be merely derived from the criminally culpable actions of natural persons.”
  • Supreme Court, AP P.13.0655.N, 21 October 2014: “The autonomous nature of the criminal liability of the corporation does not prevent the judge from taking into account the actions of the natural persons acting in name or on behalf of the corporation when assessing the moral element of the offense. The corporation, as fictitious entity, necessarily acts through the natural persons who manage it (in law or in fact) or who act on its behalf. As such, the actions of the natural persons, whether or not identified, can be taken into account when assessing the moral element of the offense with regards to the corporation.”

2.             Proposed or contemplated new legislation

A legislative proposal has been submitted to revoke paragraphs 2 (“cumulative liability of legal persons and natural persons”) and 4 (“immunity for certain public bodies”) of the Belgian Criminal Code:

  1. Paragraph 2: “When the legal person is criminally liable solely for the intervention of an identified natural person, only the person who committed the most severe misdemeanour may be convicted. In the case the identified natural person, however, has committed the misdemeanour knowingly and willingly, the natural person and the legal person can be convicted cumulatively.”
  2. Paragraph 4: “The following entities are not considered to be criminally liable legal persons for the purposes of this article: the federal state, the regions, the communities, the provinces, rescue zones, prezones, agglomeration of Brussels, municipalities, multiple municipality zones, intra-municipal territorial bodies, the French Community Commission, the Flemish Community Commission, the Common Community Commission and the public social welfare centres.”

This proposal is pending.