15 December 2017

Following the reform put into place by Organic Act 5/2010, of 22 June 2010, which introduced into Spanish law the criminal liability of legal entities, the Spanish Courts have ordered various convictions against different legal entities for their participation in criminal activities.

We should first recall two precedents delivered in the matter, already examined by Sánchez-Cervera Abogados in earlier articles: Supreme Court Judgment of 29 February 2016 and the Judgment delivered by the Criminal Chamber of the National Court on 15 July 2016.

Although it is true that Spanish law contemplates a prevention measure, which may potentially act as an exculpatory circumstance (very much in vogue at present: “criminal compliance”), not all corporations actually implement it and it is a fact that legal entities are increasingly being held criminally liable.

Below are some recent convicting judgments that have held legal entities criminally liable and thus contributed to the creation of jurisprudence in this evolving hot topic:

One of the most noteworthy Supreme Court resolutions in this sphere was Judgement 668/2017, delivered on 11 October 2017. The case involved the inconvenience caused to some neighbours by excessive noise coming from a nearby old people's home. When the claimants appealed to the Supreme Court, the legal person (the owner of the retirement home) was acquitted.

The importance of this ruling resides in its arguments for acquittal. Responsibility for one’s own acts is one of the principal sine qua non prerequisites for declaring the commission of a criminal offence, and any verdict convicting legal persons should be based on non-renounceable principles of law. One such principle is the prior corroboration that an offence has been committed by at least one individual belonging to the organization, either through negligent acts or through failing to observe due diligence. In this case, the judge considered that the defendant attempted to remedy the cause of the reported damage – that is to say, «the excessive noise made by activity taking place in the old people’s home» - on several occasions, in good faith, and that the elements which typify the crime of noise pollution denounced by the claimants did not therefore apply.

Criminal Court Number 4 of Valencia, in Judgment No. 73/2017 of 20 February, has examined the incorporation of merely instrumental or “dummy” companies to the detriment of their creditors, as a way of evading their obligations vis-à-vis the latter. As a result, the company’s management team was punished with up to two years’ imprisonment and the corporation was held criminally liable as an accessory before the fact for a punishable insolvency offence, with a 2-year fine of 60 euros/day.

Supreme Court Judgment 827/2016 of 3 November.

The merits of the case involved the drafting of a fictitious bill of exchange, drawn up by the sole director of the issuer company along with one of the majority shareholders of the damaged corporation, in an attempt to collect a non-existing debt.

After the other two shareholders of the damaged corporation brought a criminal complaint against the accused, the latter, seeking their acquittal, submitted before the court three invoices and a debt recognition document, all created ex novo. Finally, the company was found guilty as the criminally liable offender of an attempted crime of procedural fraud, and was ordered to pay a fine consisting of twice the amount for which the bill of exchange had been issued, plus a third of all procedural costs.  

Another decision with broad media coverage was the Judgment delivered by the Provincial Appellate Court of Barcelona on 14 December 2016, convicting Football Club Barcelona, referred to by the media as the “Neymar Case”. The Club was accused of executing contracts with companies linked to the football player’s family, simulating the real purpose behind the payments, which was to conceal the remuneration actually paid to the player. This remuneration should have been eventually taxed as working income under non-resident income tax, not under corporations tax. 

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Recorded in the Madrid Companies Register in volume 34.303, of the 8th Section, sheet 131, page number M-617104.