Corporate Liability in Peru

By Teresa Tovar (Baker McKenzie Peru)

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).

Legislative Decree No. 1352 (hereinafter, “LD 1352”), dated January 2017, provides that legal entities will be held liable for certain crimes when these are committed on their own behalf or for their direct or indirect benefit by the following individuals: (i) their partners, directors, managers or legal representatives, including those of their affiliates or subsidiaries; and (ii) individuals who, being subjected to the control of the abovementioned individuals, committed the crime under their instructions or authorization, or as a consequence of the lack of supervision, monitoring and control over them. LD 1352 will be effective on 1 January 2018.

It must be noted that legal entities will not be liable if the abovementioned individuals commit a crime exclusively on their own benefit or in favor of a third party (different from the legal entity), as well as if those individuals committed the crime by fraudulently avoiding a duly implemented prevention model (see Section III below).

The liability of the company will be autonomous from the criminal liability that corresponds to the individual who committed the crime.

Although LD 1352 states that corporate liability has an administrative nature, it must be noted that the authorities in charge of the enforcement of this legal framework are the Criminal Judges and Courts, who will use all criminal principles, guarantees, proceedings and regulations for the investigation, prosecution and sanction of legal entities.

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

According to LD 1352, legal entities will be held liable for the following crimes:

  • Corruption of public officials
  • Bribery of public officials in general, regulated in Article 397 of the Peruvian Criminal Code
  • Bribery of public officials who are in a particularly relevant position (eg, judges, prosecutors, arbitrators, members of courts), regulated in Article 398 of the Peruvian Criminal Code
  • Bribery of public officials of foreign countries or of international organizations, regulated in Article 397-A of the Peruvian Criminal Code
  • Money laundering
  • Acts of conversion and transference, regulated in Article 1 of Legislative Decree No. 1106
  • Acts of concealment and tenure, regulated in Article 2 of Legislative Decree No. 1106
  • Acts of transportation, transfer, entry or exit of money or securities of illicit origin through the national territory, regulated in Article 3 of Legislative Decree No. 1106
  • Financing of terrorism, regulated in Article 4-A of Law Decree No. 25475

 

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

LD 1352 is applicable to all private legal entities, such as companies, associations, foundations, non-governmental organizations, committees (including the ones not registered), as well as to irregular partnerships, entities that manage an autonomous equity, public companies and mixed-economy companies.

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

As already indicated in answer to question 2, Peruvian law also sanctions acts of bribery that involve public officials of foreign countries, as well as officials from international organizations.

In addition to the abovementioned, as a general rule, Peruvian criminal laws are applicable to all crimes committed within the national territory, regardless of the nationality of the offender. However, by exception, Peruvian criminal laws can be applicable to crimes committed abroad in case of money laundering crimes or other crimes that adversely affect the Peruvian state and the national defense (eg, financing of terrorism) according to Article 2 of the Peruvian Criminal Code, which regulates the principle of extraterritoriality of criminal laws.

Furthermore, according to Article 3 of LD 1352, parent companies will be liable for crimes committed by the individuals of their affiliates or subsidiaries when these have acted under the instructions or authorization of the parent company or with its consent. LD 1352 does not distinguish between national or international affiliates or subsidiaries, so this rule is applicable to both situations.

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

As a general rule, Article 2 of LD 1352 provides that corporate reorganization, transformation, spin-off, merger, dissolution, liquidation or any other act that may affect the “personality” of the legal entity does not impede the corresponding authority to assign responsibility to it.

In the case of mergers or spin-offs, the acquiring legal entity will be not held liable if, prior to the merger or spin-off, it has performed due diligence that included the adoption of reasonable measures to verify that the acquired company has not committed a crime.

II.            Applicable sanctions

1.             Types of sanctions applicable to the company

If a legal entity is found liable for any of the crimes detailed in the answer to question I.2, the criminal judge would be entitled to impose the following sanctions:

    1. Fines not lower than neither the double nor greater than six times the benefit obtained or expected to be obtained with the commission of the crime
    2. Disqualification in the form of:
  • Temporary (up to two years) suspension to conduct corporate activities
  • Temporary (up to five years) or definitive prohibition to conduct future activities of the same kind or nature as those that were performed in order to commit, favor or cover up the crime
  • Definitive prohibition to contract with the government
  1. Cancellation of licenses, concessions, rights and other administrative authorizations
  2. Temporary (up to five years) or definitive closure of the company premises.
  3. Dissolution of the company

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

According to Article 313 of the Peruvian Criminal Procedural Code, the criminal judge, upon request of a legitimate party, can order the following preventive measures against the legal entity:

    1. Partial or total temporary closure of its premises
    2. Temporary suspension of all or some of its activities
    3. Appointment of a judicial representative or manager
    4. Submission to judicial supervision
    5. Annotation or registration of the criminal prosecution in the legal entity’s public records

In addition to the referred measures, according to Article 313-A of the Peruvian Criminal Procedural Code, the criminal judge can order the following precautionary measures:

    1. Prohibition to conduct in the future activities of the same class or nature of those by which the crime was committed, favored or covered up
    2. Temporary prohibition to contract with the government
    3. In addition, according to Article 316 and following of the Peruvian Criminal Procedural Code, the public prosecutor or the police are entitled to order the seizure of the effects resulting from the commission of the crime, the instruments with which it was executed, as well as the objects related to a crime, in case there is a risk that these would be destroyed or eliminated.

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

There is no specific criminal consequence provided by law in case directors or managers did not adopt (intentionally or negligently) measures for the prevention of a crime.

However, it has been established by criminal jurisprudence that directors and managers of a legal entity can be criminally liable for a crime in the modality of “commission by omission” when these have not adopted preventive measures in situations or activities under their control.

In order to attribute criminal liability to directors and managers, they must first hold a guarantor position, that is, they have actual control over the development of certain business activities that represent a risk. Directors or managers who hold a guarantor position but fail to manage, in a diligent manner, the risk under their supervision will be considered criminally liable. The analysis on whether a director or manager holds a guarantor position is performed on a case-by-case basis.

On the other hand, it must be noted that Article 27 of the Peruvian Criminal Code provides, as a general rule, that the individual who acts as an authorized representative of a legal entity or as an authorized representative partner of a company and commits a crime will be held liable as the author of the crime, even when the elements of the crime are referred to the legal entity.

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)

According to Article 17 of LD 1352, having a compliance or prevention model – that is to say, having implemented adequate monitoring and control measures to prevent crimes or to significantly reduce the risk of their commission – has the following benefits:

    1. Exemption from liability — If the legal entity adopts and implements within its organization, prior to the commission of any of the crimes, a prevention model (appropriate to its natures, risks, needs and characteristics), then it will be exempted from liability.
    2. Mitigation of the sanction — If the legal entity (i) adopts and implements a prevention model after the commission of a crime and before the start of the oral trial, or (ii) proves to have partially implemented the minimum elements of the prevention model, then the fine to be imposed on such legal entity will be reduced.

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.)

LD 1352 provides the minimum elements that all prevention models should have in order to apply for the exemption of liability:

    1. The designation of a person in charge of the prevention functions
    2. Measures for the identification, evaluation and mitigation of risks for the prevention of the crimes
    3. Implementation of internal complaint proceedings
    4. Dissemination and periodic training on the prevention model
    5. Continuous evaluation and monitoring of the prevention modelThe content of the prevention model, according to the characteristics of the legal entity, will be developed in the Regulations of LD 1352, which are pending approval.

It must be noted that, in the case of micro, small and medium-sized companies, the prevention model will be limited to their nature and characteristics, so it could only have some of the abovementioned minimum elements and still be effective.

Upon request of the public prosecutor, the evaluation of the suitability of the implementation and functioning of the prevention model will be performed by the Superintendence of Capital Markets (SMV). If the SMV report determines that the prevention model is adequate, then the public prosecutor will order the conclusion of the investigation and/or proceeding.

 

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

According to LD 1352, the prevention model must include the designation of a person in charge of the prevention functions (ie, a compliance officer) by the maximum managing body of the legal person or equal. The compliance officer’s functions must be exercised with autonomy and independence. In the case of micro, small and medium-sized companies, the role of the compliance officer can be directly assumed by the managing body of the legal entity.

LD 1352 does not specify a certain mode of operation for the compliance officer. However, this can be provided for in the Regulations, which are pending approval.

IV.          Judicial proceedings to determine corporate liability

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

Enforcement of LD 1352 will be the responsibility of criminal judges and courts, as well as of the attorney general’s office (ie, public prosecutors). The penalties are the ones described in II.1.

2.             Possibility of the application of interim measures

See the answer to question II.2. For the application of the preventive measures provided in Article 313 of the Criminal Procedural Code, the criminal judge must verify the following:

    1. The existence of sufficient evidence of the commission of a crime and its relation to the legal entity in question
    2. The need to end the adverse effects of the crime and the existence of a danger according to which the legal entity would obstruct the investigation or will commit similar crimes

For the application of the precautionary measures provided in Article 313-A of the Criminal Procedural Code (described in the answer to question II.2), the criminal judge must also verify that there is sufficient evidence of the legal entity’s liability for the commission of the investigated crime and determine if these measures are essential to prevent the risks of property concealment or insolvency, or to prevent the obstruction of the investigation.

3.             Plea bargains and related effects on corporate liability

LD 1352 provides that the objective, substantial and decisive cooperation of the legal entity in the clarification of the criminal acts, as well as the confession (duly corroborated) of the crime, among others, can be considered as mitigating factors of liability.

In the specific case that the legal entity is willing to reach an agreement or a plea bargain with the public prosecutor, the legal entity must initiate a special process of effective collaboration, which is regulated in Article 472 and following of the Peruvian Criminal Procedural Code.

4.             Imposition of sanctions against the company

For the imposition of the sanctions provided by LD 1352 (detailed in the answer to question II.1), the criminal judge must observe the following rules:

    1. For the application of fines, temporary disqualification and temporary closure of premises of the legal entity, the criminal judge must establish – in the first place – the extent of the measure to be applied and divide it in three parts. Then, depending on the mitigating or aggravating factors that may apply to the case, the judge will determine whether to apply one or more parts of the measure (ie, Article 15 of Law No. 30424).
    2. For the application of the sanction of disqualification, cancellation of authorizations and closure of premises of the legal entity, the criminal judge must use the following criteria: (i) the seriousness of the crime; (ii) the economic capacity of the legal entity; (iii) the extent of the damage or risk caused; (iv) the economic benefit obtained; (v) the purpose of the crime; and (vi) the position within the organization of the individual that committed the crime (Article 14 of LD 1352).
    3. The criminal judge must apply the sanction consisting of the definitive prohibition to contract with the government when the crime was committed in the context of a public procurement process (Article 8 of Law No. 30424).
    4. The criminal judge must apply the sanction consisting of the cancellation of licenses and authorizations of the legal entity when the crime was aimed or directed to obtain such licenses or authorizations (Article 9 of Law No. 30424).
    5. The criminal judge must apply the sanction of dissolution when the legal entity was constituted and operated in order to favor, facilitate or conceal the commission of the crime (Article 10 of Law No. 30424).

5.             Permanence of corporate liability if the crime is extinguished

There are no specific provisions in this regard.

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

As mentioned in the answer to question II.4, according to Article 3 of LD 1352, parent companies will be liable for crimes committed by the individuals of their affiliates or subsidiaries when these have acted under the instructions or authorization of the parent company or with its consent.

2.             Basis of liability and applicable sanctions

As already noted in the answer to the previous question, the basis of liability would be to have acted under the instructions or authorization of the parent company or with its consent. The sanctions are the ones indicated in the answer to question II.1.

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

1.             Significant case law, if any

Due to the fact that it has not yet entered into force, there is no significant case law under LD 1352.

2.             Proposed or contemplated new legislation

The Regulations of LD 1352 are pending approval by the Ministry of Justice. Meanwhile, the National Institute for Quality (INACAL) is preparing a technical norm, the Peruvian version of the ISO 37001 on anti-bribery management systems, which should be issued in the short term. This technical norm will not be mandatory.