What is Corporate Criminal Liability?

Globalization has turned into a buzzword to sheath a portion of our bewilderment and apprehension as we move into a new millennium where everything is changing at a petrifying rate.

As a result of these myriad changes, it raises a question on the rule of law in which corporate policies interact with the government, environment and society. Particularly, several states have tried to determine as to how corporations can be held responsible for wrongful conduct. Whereas, the major issue regarding corporate criminal liability is creating a cognizant connection between the corpus of criminal law and the harsh realities of corporate entities which is a mixed bag of individuals and corporate hierarchies and structure. Companies can just ever act through individuals, yet the activities of employees or specialists dependably happen inside the framework of these corporate structures and policies.

Respondeat Superior is the underlying principle behind criminal liability of corporations. Essentially, an entity is entirely responsible for the actions of their employees committed during the course of the employment. Often, entities are shocked to be involved criminally, when the officials are under the impression that companies are acting according to the laws. However, the fact of being unaware of the law will not excuse them from a penalty. Criminal Lawyers of Dubai have shed some light on matters which can assist corporations in UAE when facing criminal charges.

Legislation Governing Corporate Criminal Liability

UAE has an unusual approach towards criminal liability for corporations differing from other jurisdictions. Federal Law Number 3 of 1987 concerning UAE Penal Code (the Penal Code), is the key legislation which is applicable throughout UAE including the free zones. Apart from the Penal Code, there are numerous other legislation which may govern specific criminal matters undertaken by the entities or their employees, highlighted below:

• Federal Law Number 5 of 2012 regarding Combatting Cybercrime, which governs aspects of IT security, online financial and commercial matters. The concerned legislation imposes penalties for unauthorized access of networks or data, misuse of IT to commit an IT offence and tampering of confidential information available online.
• Federal Law Number 4 of 2002 regarding Anti-Money Laundering punishes the entities or individuals for money laundering, financial terrorist or failure of any entity to report such crime to the competent authorities.
• Federal Law number 18 of 1993, UAE Commercial Transaction Code criminalizes the directors of the company who commit acts of concealing information, destroying relevant documents, acknowledging debts not due during the time of bankruptcy.
• Federal Law Number 2 of 2015, Commercial Companies Law under which the directors may be punished for distributing profits violating the regulation of the companies.
• Federal Law Number 8 of 1980 the Labor Law impose a penalty on the company who hire foreign expatriates without a relevant work permit.

Pertinently, for each criminal action, the entity may be punished under one or more legislation, and that penalty for such action is without prejudice to the much greater penalty available under other laws.

The traditional approach under Penal Code for corporate criminal liability can be located under Article 65 of the Penal Code which states that Corporations, except government agencies, will be held responsible for any criminal act committed from their account or by their director or agent. The penalty for such action would be imprisonment or a fine of maximum AED 50,000. The provisions explicitly impose a financial penalty of the corporate offender and simultaneously penalizes the individual by way of imprisonment.

Competent Authority

Police, Public Prosecutor, Criminal Courts are some principal authorities involved acting upon criminal matters of corporate entities. Additionally, numerous other government authorities are empowered to gather evidence on such criminal activities:

1. Immigration officer;
2. Inspectors of the municipality;
3. Ministry of Labor;
4. Ministry of Health;
5. Border Guards.

Upon a criminal complaint, the police and the public prosecutor will initiate the criminal investigation to collect evidence and witness for determining whether or not the issue constitute a criminal action. The Criminal Procedure Law under Article 7 exclusively authorizes the Public Prosecutor to initiate criminal proceedings any individual or corporate entity unless otherwise specified.

Once the report is drafted the Public Prosecutor usually transfers the file to the Court of First Instance except in the cases of extradition which will be referred to Court of Appeal. The accused or the public prosecutor, post receiving an unfavourable judgment has the right to file an appeal before the Court of Appeal within 15 days for the accused and 30 days from the Prosecutor.

Corporate Crimes

The series of criminal activities undertaken by the company which can be subjected for criminal action or penalty as defined under Article 65 of the Penal Code is as follows:

1. Bribery;
2. Corruption;
3. Money laundering;
4. Breach of trust;
5. Embezzlement of funds;
6. Bounce cheque;
7. Forgery;
8. Fraud;
9. Cybercrime;
10. Criminal acts by directors;
11. Labor Complaints.

Epilogue

The emergence of multinational corporations had its own negative impact on the economic, social and legal aspect and must be carefully considered in order to resolve the issue of criminal liability undertaken by corporations. As noted above, there are numerous laws which a company must abide before conducting business within UAE and one blunder can expose them to hefty criminal penalties. Ergo, to maintain clean criminal records companies must seek the assistance of Lawyers in UAE to maintain adequate corporate governance and corporate compliance.

Dr. Hassan Elhais is a legal consultant in Dubai, specializing in the drafting of all statements of claim, memos and consultation on litigation of all manner.