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10 September 2018
According to Brazilian law, legal entities cannot be held criminally liable as a rule, except in the case of environmental crimes. In this sense, in terms of economic and corruption-related crimes, corporations cannot generally be held criminally liable for the conduct of their directors, officers or employees, as these individuals must respond personally for their acts, provided that they, by action or omission:
Historically, corporate criminal liability has not existed under Brazilian law. However, in 1998 Congress – inspired by the earlier French legal reform – passed the Law of Environmental Crimes.(1) Article 3 of the law provides for the sole provision regarding legal entities' liability:
Legal entities shall be administratively, civilly and criminally liable under the provisions of this law, provided that the infraction is committed by decision of the entity's legal or contractual representative or by its board and is aimed at its interest or benefit.
This clause intended to help to increase legal certainty by restricting the circumstances under which a company may be held criminally liable to those where there is evidence of wilful misconduct by its senior executives or board. Thus, a company should not be held liable for misconduct which takes place on its premises or refers to its activities or personnel.
However, an examination of court practice shows that many federal and state prosecutors have failed to comply with these legal requirements and there have been cases in which the mere existence of an environmental crime linked to a business activity was seen as grounds to indict a company, either alone or alongside a potentially culpable individual. As the courts have toughened their views on business crimes over the past decade, this has become another field (in addition to the notable cases relating to Operation Carwash and other anti-corruption investigations) that prosecutors have found ways to bend the laws to create what they consider to be a more efficient enforcement policy.
The indictment of corporations under the Law of Environmental Crimes was facilitated by an August 2013 Supreme Court decision (RE 548.181), which allowed prosecutors to charge companies without simultaneously charging the respective culpable individuals. However, what the justices could not foresee in that decision was the tendency of some prosecutorial agencies to disregard the legal criteria of imputations and ultimately distorted this strict liability against corporations – an activity which has by no means been accepted in Brazilian criminal law.
While the courts have accepted many of these improper indictments, there have been few criminal convictions of corporations to date. This suggests that these indictments are being used to encourage pre-trial settlements rather than to strictly apply the law.(2) Further, the negligent use of these settlements may harm defendants, as pre-trial settlements cannot be used within five years of an agreement(3) – something which should raise concern for companies that focus on risky activities.
This complex reality means that companies doing business in Brazil should not only be alert to what the law sets out in terms of corporate criminal liability, but also to:
Knowledge of their legal power – both on an advisory and litigation level – may enable companies to successfully challenge potential charges before the higher courts, reducing or preventing undue liabilities and adding significant value to their businesses.
For further information of this topic please contact Rogério Fernando Taffarello at Mattos Filho, Veiga Filho, Marrey Jr e Quiroga Advogados by telephone (+55 11 3147 7600) or email (firstname.lastname@example.org). The Mattos Filho, Veiga Filho, Marrey Jr e Quiroga Advogados website can be accessed at www.mattosfilho.com.br.
Both the company and its board members, auditors, managers and agents, as well as any in-house environment experts, can be indicted and convicted for an environmental crime. The penalties that can be imposed on legal entities under criminal law are:
Government entities, in turn, cannot be held criminally liable in whatever situation.
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Rogério Fernando Taffarello