Criminal liability of the company: an approach based on the absence of delegation of powers?

It is a principled judgment that went almost unnoticed, rendered by the Court of Cassation on October 17 2023, settling the issue of the impossibility for judges to identify the representatives and organs of the legal entity.

While the entity kept the identity of its representatives and organs secret, as required by the provisions of Article 121-2 of the Penal Code, the Criminal Chamber rejected the argument raised by the defense that, in the absence of such identification, the criminal liability of the legal entity could not be established.

The supreme judges noted that the trial judges had endeavored, at all stages of the procedure, to identify the legal representative of the company, but that this individual, keen to remain anonymous, had never come forward. They also noted that the Court of Appeal had relied on a judgment rendered in 2009 against the same individual by another chamber of the court, to establish the existence of an individual acting as legal representative.

The wording used by the High Court thus echoes the term « deliberate intent, » well known in legal circles, and qualifies this attitude as fraud, thereby ensuring a stronger foundation for the application of the law: « They [the trial judges] deduce the deliberate intent of company X to prevent the identification of its representative by rendering the true decision-maker obscure, which constitutes fraud. »

The novelty of this ruling lies in anticipating the judicial response to any maneuver aimed at circumventing the law: for the executive who sought to remain hidden, only delegation of power can exempt them from criminal liability.

Upon closer analysis of this decision, it is noted that the Court of Cassation adopts a position reconciling the two jurisprudential tendencies that legal experts had observed regarding Article 121-2 of the Penal Code, since its entry into force in 1994: a strict interpretation in line with the principle of strict application of criminal law, followed by a relaxation starting in 2006 bordering on an evidence-based justice, before a return to the letter of the text from 2011.

At the time of the entry into force of Article 121-2 of the Penal Code, the supreme judges had chosen to respect the principle of strict application of criminal law. They reaffirmed this principle in a 1997 judgment echoing the terms of Article 121-1 of the Penal Code. However, a judgment rendered in 2000 caused a stir when the Court of Cassation overturned the judgment of the Court of Appeal which had condemned the French railway company for the death of a child struck by a TGV train. The High Court criticized the Court of Appeal for not investigating « whether the negligence, recklessness, and breaches of security obligations had been committed by the organs or representatives of the French railway company within the meaning of Article 121 of the Penal Code. »

The Court of Cassation then became less demanding regarding the need to identify the representatives and organs of the legal entity. In cases of unintentional injuries and homicides, it held that the lack of identification could not constitute a grievance, « since this offense could only have been committed, on behalf of the company, by its organs or representatives. »

It did the same subsequently with intentional offenses, particularly offenses related to commercial advertising, by explicitly affirming the principle first and then implicitly by accepting the reasoning of the Court of Appeal.

From 2011, and facing criticism from legal scholars who pointed out legal uncertainty to the detriment of legal entities whose criminal liability was presumed in case of commission of an offense, the Court of Cassation decided to return to a strict interpretation of the provisions of Article 121-2 of the Penal Code. A Court of Appeal was thus reproached for not investigating « whether the shortcomings identified resulted from the abstention of one of the organs or representatives of the Gauthey company, and whether they had been committed on behalf of this company. »

In a 2016 judgment, the Court of Cassation reproached the trial judges for proceeding towards conviction with the same frivolity, whereas it was within their power to order, « if necessary (…) additional information. » This judgment resonates as a warning from the supreme judges to the trial judges, firmly reminding them of the rigor with which the text must be applied and the existence of procedural instruments to be implemented for the manifestation of the truth.

On October 31, 2017, called upon to rule on the criminal liability of the company in the context of a workplace accident, the Court of Cassation rendered a decision highlighting the absence of recourse by the executives to the technique of delegation of powers. Authors and practitioners may have thought that such reasoning was consistent given the subject matter involved. The organization and distribution of work within a company indeed implies the implementation of delegation of powers aimed at reallocating the criminal liability of executives to the collaborators on whom operational missions rest.

But considering the judgment rendered on October 17, 2023, the High Court seems to have initiated a new trend, with an approach to identifying the representatives and organs of the legal entity based on the existence or absence of delegation of powers.

Indeed, the judgment of October 17, 2023, does not deal with any subject related to work organization within a company. Nevertheless, it invokes delegation of powers to respond to this unusual situation where the justice system fails to identify the executives and organs behind the offenses committed in the interest of the legal entity. Here, delegation of powers is not a tool available to executives who wish to be exempt from criminal liability related to an activity they do not themselves undertake. It is a means of determining the existence or absence of legal representatives or organs, even if unidentified. It is therefore a vision in contrast to delegation of powers that allows the Court of Cassation to establish the responsibility of the hidden executive.

Moreover, as the jurisprudential trend is towards strict application of criminal law and judges do not consider allowing defendants to use this rigidity as an escape route, the Court of Cassation chose to qualify – without legal basis – this behavior as « fraud. »

Did the supreme judges intend to prevent subjects of law from dealing with criminal law as they would, for example, with the opportunities offered by tax law or labor law? It can be thought that they wanted to be particularly strict to emphasize that criminal law aims to repress disturbances to public order, and thus to deter anyone from engaging in them by any means.

Some will see in this judgment a new cause of confusion in the regime of corporate criminal liability, while others will see it as a strengthening of the law against the ingenuity of offenders. One certainty, however, is that the debate continues to be lively, and the reflections surrounding the provisions of Article 121-2 of the Penal Code are far from being exhausted.

By Sahand SABER – Lawyer at the Paris Bar

1 Cass. crim, October 17, 2023, n°22-84.021

2 Cass. crim., December 2, 1997, n° 96-85.484: « It follows from Article 121-2 of the Penal Code that legal entities can only be declared criminally liable if it is established that an offense has been committed, on their behalf, by their organs or representatives. »

3 Cass. crim., January 18, 2000, n°99-80.318

4 Cass. crim., June 20, 2006, no. 05-85.255; Cass. crim., June 26, 2007, no. 06-84821

5 Crim., June 25, 2008, no. 07-80.261: « Given the statements, from which it can be deduced that the offenses in question are part of the commercial policy of the companies concerned and therefore could only have been committed, on behalf of the companies, by their organs or representatives, the Court of Appeal justified its decision. »

6 Crim., March 24, 2009, no. 08-86.530, and no. 08.86.534: « It matters little that the offense cannot be attributed to a specific representative of the SNC, since it is established that it was committed in all its material elements by any natural person representing the accused; this circumstance cannot therefore oppose the recognition of the accused’s criminal liability. »

7 Cass. crim., October 11, 2011, no. 10-87.212; Cass. crim., April 11, 2012, no. 10-86.974

8 Cass. crim., March 22, 2016, no. 15-81484: « But considering thus, the Court of Appeal, after noting the materiality of the offense, was required, regardless of the mode of prosecution and, if necessary, by ordering additional information, to determine whether the failures identified resulted from the abstention of one of the organs or representatives of the accused company and whether they were committed on behalf of it, thereby disregarding the meaning and scope of the aforementioned text and the principle recalled above. »

9 Crim., October 31, 2017, no. 16-83.683: « But considering thus, in part irrelevant considerations, whereas it was incumbent upon it to ascertain whether the deficiencies it noted in the design and organization of the maintenance rules for the work equipment, on which the accident occurred, did not result, in the absence of delegation of powers in matters of safety, from a fault of an organ of the company, and notably from the violation of the prescriptions of articles R. 4322-1 and R. 4323-1 of the Labor Code imposing obligations on the employer, as mentioned by the labor inspectorate, the Court of Appeal did not justify its decision in light of the aforementioned texts and the principle recalled above. »