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Criminal proceedings against companies in Switzerland: still no deferred prosecution agreement

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Jürg Wernli
Wernli Biedermann Partner, Bern
jw@wbp-law.ch

Déborah Carlson-Burkart
Wernli Biedermann Partner, Bern
dcb@wbp-law.ch

 

Switzerland could have the opportunity to implement legal grounds to defer prosecution for companies under criminal investigation. Unfortunately, it looks likely that this opportunity will be missed.

Background

Switzerland does not have the legal basis, similar to a deferred prosecution agreement, to defer criminal prosecution against companies and to subsequently discontinue criminal investigations if the company has successfully passed the probation period.

A criminal investigation against companies in Switzerland, inter alia, can only be discontinued (Article 319 of the Swiss Criminal Procedure Code (SCC))[1] if the investigation has not confirmed any suspicion of a criminal offence, no criminal offence has been fulfilled or there is a case of reparation payment (Article 53 of the SCC). If there are no legal reasons to discontinue the investigation, a summary penalty order must be issued or charges must be brought.

Reparation payment

Article 53 of the SCC[2] allows the prosecutor to discontinue criminal investigations (‘grounds for exemption from punishment/reparation’) if the offender[3] has made, inter alia, reparation payments for the loss, damage or injury that they have caused and if the general public’s interest in the offender’s prosecution is negligible. The offender must further have admitted the facts of the offence.

Such a discontinuance of proceedings is equivalent to an acquittal.[4]

Consequences of a conviction or an acquittal

The consequence of a conviction is a fine[5] and the forfeiture of the illegally obtained profits. Whether or not a company is convicted or acquitted will have a bearing on whether the company will continue, inter alia, to have access to public contracts or whether it will be excluded for several years from contracts awarded by public procurement bodies, will receive better financing conditions, receive a more favourable rating or have a better reputation. These are sufficient reasons for a company to have a strong interest in ensuring that a criminal investigation is brought to a close without a conviction. Therefore, any company would prefer to make reparation payments even if the reparation payment is the same or a higher amount as the fine and the surrendered profits together.

The Alstom case

In 2011, two criminal investigations that the Office of the Attorney-General (OAG) had pursued against two Alstom Group companies were concluded. One of those companies was sentenced to a fine of CHF 2.5m for having been insufficiently organised internally and therefore not having prevented the payment of bribes abroad in order to secure contracts. The company had to surrender the respective profits obtained in the amount of approximately CHF 36m to the Swiss Federation. The criminal investigations pursued against the other Alstom company, the group holding and direct parent company, was discontinued based on Article 53 of the SCC after the company had made reparation payment of CHF 1m to the International Committee of the Red Cross.[6]

Points of criticism

Discontinuing proceedings after reparation is highly controversial since this measure is suited to offend people’s sense of justice – offenders are able to buy freedom from prosecution and the potential conviction if they have the financial means.[7]

The Organisation for Economic Co-operation and Development report of 2018, regarding Switzerland’s Phase 4 Monitoring in respect to the implementation and the enforcement of the OECD Anti Bribery Convention mentioned, referring to the Alstom case:

‘Although this need for alternatives to prosecution must be taken into account, such procedures must offer sufficient guarantees in terms of the predictability of the criminal prosecution, its transparency and publicity. These guarantees are essential in order not to give the impression of justice being dispensed outside the courts without suitable controls.’[8]

The OECD examiners recommended that Switzerland ensure that the law enforcement authorities do not have recourse to Article 53 of the SCC in foreign bribery cases.[9]

Practice of the OAG: non-application of Article 53 to international companies

According to the OAG Annual Report for 2017, and in line with the OECD’s recommendations, the OAG stated that it would no longer allow reparation payments serving as grounds for exemption from punishments (Article 53 of the SCC) in the event of criminal investigations against internationally operating companies.[10] The OECD supported this approach in its 2018 Report and stated that it is ‘clear and undisputed that, as far as foreign bribery is concerned, there is no reason for applying article 53 SCC’ even in the case of self-reporting. In the view of the OAG, the criterion in Article 53 of the SCC that the public interest in prosecution should be ‘of little importance’ is incompatible with foreign bribery cases.[11]

Subsequently, companies being subject of a criminal investigation in Switzerland, for example, for having failed in their operation to prevent acts of corruption being committed in foreign countries (which makes the company liable to punishment under criminal law pursuant to Article 102 of the SCC[12]), will never have the opportunity, from the perspective of the OAG, to evade conviction by making reparation payments. Were this practice to take hold, only international companies would have to be convicted in all cases in which they conducted themselves in a manner liable to prosecution.

This practice, however, generates a whole new set of issues: Article 53 of the SCC does not preclude international companies from making reparation payments and the Swiss Criminal Code does not provide for the selective preclusion of certain companies from this option. Insofar as it is essential for companies, reparation payment is to remain available under Article 53 SCC in criminal proceedings being pursued against companies.[13]

The OAG’s refusal, as a principle, to preclude international companies from making reparation payments, without reviewing each individual case to see whether the prerequisites are met or not, constitutes a case of discrimination.

Revision of the Criminal Procedure Code

The Criminal Procedure Code (CPC) is in the process of being revised.[14] In the course of the process, the OAG submitted a formulated proposal in March 2018, as to add Article 318bis to the CPC. Based on existing legal concepts abroad – similar to a deferred prosecution agreement – the proposal suggested that prosecutions in criminal investigations against companies be deferred if certain requirements were met. According to the proposal, the company concerned would have to participate in the investigation to determine the relevant facts and could then conclude an agreement with the prosecutor. This agreement would generally include that the company acknowledges the relevant facts, pays a fine, regulates which assets are confiscated and the compensation payments, describes how to correct the organisational deficiencies, agrees on a trial period of two to five years and stipulates that a monitor is installed. If the company fulfils the agreement, the proceedings will be discontinued, if not, charges will be brought.

The proposal might also have been motivated by the OECD’s recommendations whereas:

‘The examiners understand the need of prosecution authorities for a simple and effective procedure for resolving foreign bribery cases. They recommend that Switzerland consider, where necessary taking existing procedures as a basis, the introduction of an alternative procedure to prosecution which has a strict framework, allows for the application of effective, proportionate and dissuasive sanctions and respects the necessary rules of predictability and transparency that are essential in this type of procedure. Such a procedure could be used in relation to economic crime, including cases of foreign bribery.’[15]

However, the Federal Council did not include the proposal in its presented draft Criminal Procedure Code in August last year, as, according to the Federal Council, the proposed regulation would lead to inconsistencies and raise questions. Specifically, the following was criticised:[16]

  • the prosecutor’s already strong position would further increase without a counterweight or control mechanisms (eg, court approval or legal remedies);
  • the system of the criminal law would suffer an inconsistency if a law violation would not lead to prosecution but a discontinuance could be ‘bought’;
  • it would be against the current legal framework that a company would be sentenced to a fine without a guilty verdict;
  • agreements between the accused and the prosecutor regarding sanctions, secondary consequences and civil claims would be possible without a court being able to review the adequacy of the agreements reached; and
  • as the company concerned must participate in the investigation and hence share relevant information with the law enforcement authorities, it is not clear what would happen to the gained information if charges would have to be brought against the company.

The Federal Council's criticism seems only partially justified. Instead of completely disregarding the proposal, some adjustments could have remedied the criticised shortcomings and thus, addressing the justified and important concerns. As proven in many foreign states, it is possible to successfully implement a legal basis to defer prosecution.

Next steps in the revision process

The Federal Council's draft of the revised Code of Criminal Procedure – without the deferred prosecution agreement in criminal investigations against companies – will be discussed by the relevant parliamentary commissions at the earliest in autumn this year, and then later by parliament. It would be possible to resume the deferred prosecution agreement, in a modified and improved form, and to make it applicable law.

If this opportunity is missed, there are likely to be the following consequences:

  • companies that are subject to a criminal investigation in Switzerland will remain disadvantaged and hence, Switzerland confirms its current practice to disadvantage international companies; and 
  • the OAG will have to surrender its practice of excluding international companies from reparation payments. International companies will have to have recourse to Article of the 53 SCC, due to the lack of alternatives, if the legal requirements are met. The Swiss law enforcement authorities will therefore continue to face the OECD’s criticism that the discontinuance of criminal investigations after reparation payments is not transparent and does not comply with international regulations.

[1] Art 319 Grounds - The public prosecutor shall order the complete or partial discontinuance of the proceedings if:

  1. a) no suspicions are substantiated that justify bringing charges; b) the conduct does not fulfil the elements of an offence; c) grounds justifying the conduct mean that it does not constitute an offence; d) it is impossible to fulfil the procedural requirements or procedural impediments have arisen; and e) a statutory regulation applies that permit the public prosecutor to dispense with bringing charges or imposing a penalty.
  2. It may also discontinue the proceedings by way of exception if: a) this is essential in the interests of a victim who was under the age of 18 at the time of the offence and this interest clearly overrides the interest of the state in a prosecution; and b) the victim or in the event that the victim lacks legal capacity, his or her legal agent consents to the discontinuance.

[2] Art 53 Grounds for exemption from punishment/Reparation

If the offender has made reparation for the loss, damage or injury or made every reasonable effort to right the wrong that he has caused, the competent authority shall refrain from prosecuting him, bringing him to court or punishing him if: a) a suspended custodial sentence not exceeding one year, a suspended monetary penalty or a fine are suitable as a penalty; b) the interest in prosecution of the general public and of the persons harmed are negligible; and c) the offender has admitted the offence.

[3] Art 53 of the SCC does not expressly list companies. The Criminal Code makes mention only of the ‘offender.’ However, according to Riklin, Art applies to companies; Riklin, Basler Kommentar zum Strafgesetzbuch I [Commentary on the Criminal Code] (2019), Article 53 n 19. ‘By including a fine in Article 53 SCC, the Commission intends to make it clear that reparation is to be an option also in the case of contraventions and of fines imposed on enterprises pursuant to article 102 SCC’ (Corporate Criminal Liability); Report of the Kommission für Rechtsfragen des Nationalrates (Commission of the National Council on Legal Issues) (3 May 2018) cl 4.1. (BBl 2018 3764).

[4] Article 320 para 4 Criminal Procedure Code.

[5] According to Art 102 para 1 SCC the maximum fine is CHF 5m.

[6] ‘Criminal proceedings against Alstom entities are brought to a close’ Office of the Attorney General (22 November 2011)                 www.admin.ch/gov/de/start/dokumentation/medienmitteilungen.msg-id-42300.html accessed 8 June 2020.

[7] See n 3 above, Report of the Kommission für Rechtsfragen des Nationalrates, Overview (BBl 2018 3758).

[8] Switzerland’s Phase 4 Monitoring Report, OECD (27 March 2018) p 38 www.oecd.org/corruption/switzerland-oecdanti-briberyconvention.htm accessed 25 August 2020.

[9] Ibid, p 42.

[10] Annual Report 2017: Report of the Office of the Attorney General of Switzerland on its activities in 2017 for the attention of the supervisory authority (January 2018) p 8, para 43 www.bundesanwaltschaft.ch/mpc/en/home/taetigkeitsberichte/taetigkeitsberichte-der-ba.html accessed 25 August 2020.

[11] See n 8 above, p 40.

[12] Art 102Liability under the criminal law

  1. 1 If a felony or misdemeanour is committed in an undertaking in the exercise of commercial activities in accordance with the objects of the undertaking and if it is not possible to attribute this act to any specific natural person due to the inadequate organisation of the undertaking, then the felony or misdemeanour is attributed to the undertaking. In such cases, the undertaking is liable to a fine not exceeding 5 million francs.
  2. If the offence committed falls under Articles 260, ter 260, quinquies 305,bis 322, ter 322, quinquies 322, septies paragraph 1 or 322, octies the undertaking is penalised irrespective of the criminal liability of any natural persons, provided the undertaking has failed to take all the reasonable organisational measures that are required in order to prevent such an offence.
  3. The court assesses the fine in particular in accordance with the seriousness of the offence, the seriousness of the organisational inadequacies and of the loss or damage caused, and based on the economic ability of the undertaking to pay the fine.
  4. Undertakings within the meaning of this title are: a) any legal entity under private law; b) any legal entity under public law with exception of local authorities; c) companies; and d) sole proprietorships.

[13] ‘By including a fine in Article 53 CC, the Commission intends to make it clear that reparation is to be an option also in the case of contraventions and of fines imposed on enterprises pursuant to Article 102 StGB’; see n 3 above, Report of the Kommission für Rechtsfragen des Nationalrates cl 2.2. (BBl 2018 3761).

[15] See n 8 above, p 42.

[16] Botschaft Federal Council of 28 August 2019, BBL 2019 6722.