One of the noteworthy new contents of the 2015 Criminal Code (“Criminal Code”) is the criminal liability of the corporate legal entity which has been added to the Criminal Code.
The provisions of criminal liability of the corporate legal entity are set out in Chapter XI of the Criminal Code, comprising 16 articles (from Article 74 to Article 89) and other 8 articles in the General Provisions of the code as well as 33 articles in the Crimes part of the code. This is an outstanding point of innovation in the criminal policy, changing the traditional awareness on crimes and punishments.
Necessity of the provision on criminal liability of the corporate legal entity
Under current Vietnamese law, the handling of violations by the corporate legal entity is mainly based on administrative sanctions and fines for civil damages. Under legislation on sanctioning administrative violations, besides fines, the enterprise may also be deprived of the right to use the license, subject to suspension of its operation for a definite period or application of some measures to alleviate consequences. However, as shown by reality, the current law provisions on administrative sanctions are neither deterrent enough nor sufficient to deal with violating corporate legal entities. In addition, the handling request for damage compensation under civil law is complicated, requiring the injured party to prove actual damages which are often not immediately apparent, but would be seen only in the long run, not to mention the procedures for initiating civil cases which would take a lot of time and expenses. As a result, this causes obstacles to the victims when claiming for compensation.
Therefore, it can be seen that criminal measures to deal with the corporate legal entity are quite different from administrative and civil ones. Criminal treatment will be carried out by highly professional bodies conducting the proceedings with strict transparent legal procedures, strong punishment and deeply professional measures (which are not seen in the administrative and civil treatment) in proving acts of violation and verifying the extent of the damage caused by the corporate legal entity.
Provisions on criminal liability of the corporate legal entity
1. Conditions for criminal liability of the corporate legal entity
a. Under the new provisions, recently effective, in the 2015 Criminal Code, a corporate legal entity will only bear criminal responsibility if all of the following conditions are satisfied:
(i) The criminal offence is committed in the name of the corporate legal entity;
(ii) The criminal offence is committed in the interests of the corporate legal entity;
(iii) The criminal offence is under instructions or approval of the corporate legal entity;
(iv) The time limit for criminal prosecution specified in the Crimical Code has not expired.
b. A corporate legal entity must bear criminal responsibility only for the following criminal offences: Smuggling; illegal trafficking of goods or money across the border; manufacture or trading of banned commodities; storage or transport of banned commodities; manufacture or trading of counterfeit goods... (Specified in Article 76 of the 2015 Criminal Code).
2. Form of punishment
Sanctions applicable to the wrongdoing legal entity are set out in Article 33 and Article 46 of the 2015 Criminal Code, comprising (i) 3 primary sentences: fine, suspension of operation, and permanent shutdown; (ii) 3 additional sentences: prohibition from operating in certain fields, prohibition from raising capital, fine if no administrative penalties are imposed and (iii) 4 judicial measures (under Article 46.2 of the 2015 Criminal Code: Confiscation of money and items directly related to the crime; return, repair of property or provision of compensation; restoration of original state, implementation of other measures for mitigation and prevention of consequences.
3. Remedial measures: Clearly and specifically defined in Article 82.3 of the 2015 Criminal Code with 7 main measures.
4. Mitigating and aggravating factors applied to the corporate legal person: Specified in Article 84 and Article 85 of the 2015 Criminal Code.
The Criminal Code is effective from 1 January 2018. Up to now it has been only 5 months from the date the provisions on criminal liability of the corporate legal entity are brought in application; therefore, all difficulties and problems in practical application cannot be adequately assessed. However, in can be seen that the incorporation of the provisions on criminal liability of the corporate legal entity into the Criminal Code is a major improvement in the Vietnamese legal system in line with the realities of Vietnam's process of integration into and development of the market economy, given that fact that Vietnam is one of the potential markets for foreign investors.
One of the salient points in the provisions of penalties to applied the corporate legal entity is that such provisions focuses on the interests of the legal entity, stemming from its primary purpose being its operation for profit making, which influences the very existence and development of the legal entity. Monetary fines applied to the legal entity have been and are being stipulated in the legal documents on administrative sanctions. However, these old regulations are not tough enough in terms of deterrence and education with respect to the corporate legal entity in violation, thereby not bringing about effects in punishment as well as in preventive fighting to violating legal entities. Therefore, if placed in the category of penalties prescribed in the Criminal Code bearing the character of the strictest and highest State coercion, these provisions will make the corporate legal entity abstain itself from committing violations and conduct proper behavior. This change, on the one hand, brings greater pressure to businesses, but on the other hand it significantly contributes to effectively preventing violations.
In addition, it should be noted in Article 75.2 of the 2015 Criminal Code stipulates that “The fact that corporate legal entity has criminal responsibility does not exempt criminal responsibility of individuals”. This is to ensure fairness in the criminal handling between individual and legal entity. As a result, individuals violating the law via the legal entity cannot avoid criminal responsibility for their own acts of performance, despite that fact that such entity may also be subject to criminal liability for the very violation of its own.