[1]Given the differences in corporate criminal liability in the United States and Brazil, companies making investments in both countries might not be aware of specific risks that apply to them.
This is particularly relevant considering the levels of investment between these countries. For decades, United States companies have been operating in Brazil, taking advantage of Brazil’s generally open and encouraging foreign investment climate. In fact, the United States is the lead foreign investor in Brazil, with an accumulated foreign direct investment [2] stock of around $80 billion per year. More recently, Brazilian companies have been making their own investments in the United States, where they are also establishing operations. Companies making these foreign investments should keep in mind certain key aspects of corporate criminal liability.
I recently published an article entitled Corporate Criminal Liability in the United States and Brazil (Responsabilidade penal das pessoas jurídicas nos Estados Unidos e no Brasil), available in Portuguese here [3], which compares both system. Below I highlight three important aspects discussed in the article.
Legal tradition. In the United States, the concept of corporate criminal liability has existed for over a century. In 1909, the Supreme Court, when deciding the case New York Central & Hudson River Railroad v. United States, authorized the application of criminal sanctions on corporations for the first time. This allowed authorities to hold companies liable for the acts of their agents, including the employees and third parties acting on their behalf.
In Brazil, however, the concept is relatively new. Criminal liability was introduced by the Brazilian Constitution of 1988 and instituted only ten years later with the Environmental Criminal Law (9.605/1998 [4]). But Brazilian courts were initially unwilling to impose criminal liability on corporations. Until the early 2000s, it was still possible to find court decisions from superior courts rejecting such application based on the theory that legal entities cannot have culpability. In the mid-2000s, corporate criminal liability in connection with environmental-related offenses became more accepted. Nonetheless, Law 9.605/98 has been criticized for not establishing specific procedural provisions for corporations. Courts have faced difficulties in applying Brazilian criminal procedure to corporations, since procedures are designed to apply to individual defendants instead.
Applicability. In Brazil, with the exception of environment-related offenses, corporations cannot be held criminally liable for the acts and omissions of their employees and third parties. However, they still might be subject to civil and/or administrative liability for those acts. For example, Law 12.846/2013 [5] (Brazil’s Clean Companies Act) imposes civil and administrative liability on legal entities for acts committed against local and foreign public administrations, especially those related to corrupt practices.
In contrast, in the United States corporate criminal liability has much broader application. As a general proposition, it is applicable to federal criminal statutes, whether or not they expressly impose liability on legal entities except if a different legislative intent appears in the statute. It might also apply under certain state laws. While legal entities cannot be prosecuted under statutes that provide only death or imprisonment as sanctions, modern statutes usually have provisions for corporations allowing the imposition of fines or other sanctions to them.
Elements of corporate liability. In the United States, legal entities may be held criminally liable under the doctrine of respondeat superior. In simple terms, the respondeat superior doctrine imposes criminal liability for acts committed by corporate agents, which may be employees and third parties (regardless of name or time). For liability to arise, the agent must be acting: (i) within the scope of the agent’s authority (note that this element does not require the agent to have the authorization of the company to commit the wrongdoing); and (ii) on behalf of the corporation (even if the corporation only partially or indirectly benefits from the conduct). These two elements have been examined in further detail here [6].
In Brazil, Article 3 of Law 9.605/98 sets forth two specific conditions required for the legal entity to be held criminally liable. First, the act or omission must be committed by decision of the corporation’s legal or contractual representative, or its collegiate body. Second, the wrongdoing must be committed in the interest or to the benefit of the corporation.
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