White Collar Crime: A Comparative Perspective 9781509917891, 9781509917921, 9781509917914

White collar crime has expanded significantly over the course of the past two decades. Yet, not only has the amount of n

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English Pages [439] Year 2019

Table of contents :
Foreword by John Vervaele
Contents
Table of Cases
Table of Legislation
Table of Treaties and Other International Instruments
Notes on Contributors
1. Challenges and Trends in Enforcing Economic and Financial Crime: Criminal Law and Alternatives in Europe and the US
I. The Need for Comparative Research in Economic and Financial Criminal Law
II. Investigating and Prosecuting Economic and Financial Crime: Where Does the Challenge Lie Today?
III. New Legal Responses
IV. The Legal Limits of New Control Systems
2. Enforcing Economic and Financial Policies in National Systems – Financial Markets Regulation, Environmental Law and Competition Law
2.1 France
Introduction: The Paradoxes of French Economic and Financial Criminal Law
I. Contemporary Challenges and Recent Reforms
II. Substantive Criminal Law
III. The Administration of Justice
IV. Criminal Procedure
V. Cooperation between Authorities and Jurisdictional Issues
2.2 Poland
Introduction
I. Contemporary Challenges and Recent Reforms
II. Substantive Criminal Law
III. Administration of Justice
IV. Criminal Procedure
V. Cooperation between Authorities and Jurisdictional Issues
2.3 Sweden
I. Contemporary Challenges and Recent Reforms
II. Substantive Criminal Law
III. Administration of Justice
IV. Criminal Procedure
V. Cooperation between Authorities and Jurisdictional Issues
2.4 The US
I. Introduction
II. Misconduct Affecting Financial Markets: Federal Securities Fraud
III. Environmental Crimes
IV. Federal Antitrust (Competition Law)
3. Regulating Instead of Punishing: The Senior Managers Regimein the UK
I. Introduction
II. Misconduct in Context
III. Personal Responsibility: Respondingto the Financial Crisis
IV. Identification of the Scope of Responsibility
V. Attribution of Responsibility
VI. Enforcement
VII. Conclusions
4. Economic Crime in the UK: Corporate and Individual Liability
I. Introduction
II. The Concept of Corporate Criminal Accountability
III. A Brief History of Corporate CriminalLiability in the UK
IV. The Example of Bribery
V. Methods and Rates of Enforcementof Economic Crimes
VI. Extending Failure to Prevent
VII. Corporate and/or Individual Prosecutions?
5. Corporate Criminal Liability and Groups of Corporations: A Need for a More Economic Approach?
I. Introduction
II. Corporate Criminal Liability: Some Common Features and Principles
III. Challenges to the Legal Approach
IV. Towards a More Economic Approach to Corporate Criminal Liability?
V. EU Competition Law as an Example? Punitive Liability of Undertakings
VI. Conclusion: The Advantages and Disadvantages of an Economic Approach
6. The Privilege against Self-Incrimination of Corporations
I. Introduction
II. Preliminary Challenges
III. Corporations and the Privilege against Self-Incrimination in the US
IV. Corporations and the Privilege against Self-Incrimination in the EU
V. Conclusion
7. The Criminalisation and Protection of Whistleblowers in the EU's Counter-Financial Crime Framework
I. Introduction
II. The General Legal Framework Governing High-Risk Sector Employees
III. The Role of High-Risk Sector Employees and the Risks They Face
IV. The Perspectives of EU Member States
V. Recommendations on How Whistleblowers Can Be Empowered to Report in the Financial Crime Context
Index

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WHITE COLLAR CRIME White collar crime has expanded significantly over the course of the past two decades. Yet, not only has the amount of national and international legislation in the field grown, but it has also endured changes driving it away from the classic criminal law. These trends have been reflected in changes to national legislation, not infrequently prompted by supranational law, for example, in the financial or the environmental sector. New punishing regimes have emerged, such as UN blacklisting, smart sanctions, civil asset forfeiture, financial supervisory powers, compliance law, and antimony laundering laws. Furthermore, the role of administrative sanctioning law has been growing as well as the role of private actors in the enforcement of punitive sanctions. The aim of this volume is to examine how various national criminal justice systems across Europe deal with the aforementioned challenges. In the first part, it takes a closer look at the following national systems: France, Germany, Poland and Sweden. Furthermore, it compares the European approach with the American one as a source of inspiration for unresolved difficulties and future developments. Further still, the authors explore those challenging issues regarding the field of economic and financial crime, including the Senior Managers Regime, corporate criminal liability, and whistle-blowers’ protection. Timely and pertinent, this is an important new work in a fast-moving field. Volume 7 in the series Hart Studies in European Criminal Law

Hart Studies in European Criminal Law Series Editors: Professor Katalin Ligeti, University of Luxembourg; Professor Valsamis Mitsilegas, Queen Mary University of London; Professor Anne Weyembergh, Brussels Free University Since the Lisbon Treaty, European criminal law has become an increasingly important field of research and debate. Working with the European Criminal Law Academic Network (ECLAN), the series will publish works of the highest intellectual rigour and cutting edge scholarship which will be required reading for all European criminal lawyers. The series is happy to consider both edited and single authored titles. The series defines ‘European’ and ‘criminal law’ in the broadest sense, so books on European criminal law, justice and policy will be considered. The series also welcomes books which offer different methodological approaches. Volume 1: EU Criminal Law after Lisbon: Rights, Trust and the Transformation of Justice in Europe by Valsamis Mitsilegas Volume 2: Challenges in the Field of Economic and Financial Crime in Europe and the US Edited by Vanessa Franssen and Katalin Ligeti Volume 3: Chasing Criminal Money: Challenges and Perspectives On Asset Recovery in the EU Edited by Katalin Ligeti and Michele Simonato Volume 4: Limits to EU Powers: A Case Study of EU Regulatory Criminal Law by Jacob Öberg Volume 5: The Needed Balances in EU Criminal Law: Past, Present and Future Edited by Chloé Brière and Anne Weyembergh Volume 6: Redefining Organised Crime: A Challenge for the European Union? Edited by Stefania Carnevale, Serena Forlati and Orsetta Giolo

White Collar Crime A Comparative Perspective

Edited by

Katalin Ligeti and

Stanisław Tosza

HART PUBLISHING Bloomsbury Publishing Plc Kemp House, Chawley Park, Cumnor Hill, Oxford, OX2 9PH, UK HART PUBLISHING, the Hart/Stag logo, BLOOMSBURY and the Diana logo are trademarks of Bloomsbury Publishing Plc First published in Great Britain 2019 Copyright © The editors and contributors severally 2019 The editors and contributors have asserted their right under the Copyright, Designs and Patents Act 1988 to be identified as Authors of this work. All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, or any information storage or retrieval system, without prior permission in writing from the publishers. While every care has been taken to ensure the accuracy of this work, no responsibility for loss or damage occasioned to any person acting or refraining from action as a result of any statement in it can be accepted by the authors, editors or publishers. All UK Government legislation and other public sector information used in the work is Crown Copyright ©. All House of Lords and House of Commons information used in the work is Parliamentary Copyright ©. This information is reused under the terms of the Open Government Licence v3.0 (http://www.nationalarchives.gov.uk/doc/ open-government-licence/version/3) except where otherwise stated. All Eur-lex material used in the work is © European Union, http://eur-lex.europa.eu/, 1998–2019. A catalogue record for this book is available from the British Library. Library of Congress Cataloging-in-Publication data Names: Ligeti, Katalin, editor. | Tosza, Stanisław, editor. Title: White collar crime : a comparative perspective / Edited by Katalin Ligeti and Stanisław Tosza. Description: Portland, Oregon : Hart Publishing, 2019. Identifiers: LCCN 2018028925 (print) | LCCN 2018030724 (ebook) | ISBN 9781509917907 (Epub) | ISBN 9781509917891 (hardback : alk. paper) Subjects: LCSH: White collar crimes. | Comparative law. Classification: LCC K5215 (ebook) | LCC K5215 .W55 2018 (print) | DDC 345/.0268—dc23 LC record available at https://lccn.loc.gov/2018028925 ISBN: HB: 978-1-50991-789-1 ePDF: 978-1-50991-791-4 ePub: 978-1-50991-790-7 Typeset by Compuscript Ltd, Shannon To find out more about our authors and books visit www.hartpublishing.co.uk. Here you will find extracts, author information, details of forthcoming events and the option to sign up for our newsletters.

FOREWORD The enforcement of economic and financial policies through criminal law has for a long time been a fairly exclusive domain of domestic criminal justice. The use of criminal law as an enforcement tool (additional to civil and administrative law), the definition of offences, the particularities of investigating and prosecuting these offences, the specific penalties and the specialised administration of justice (regulatory agencies, specialised prosecution services and specialised courts) were all features of domestic enforcement policy, resulting in a great variety from one jurisdiction to another, even within Europe. In the last couple of decades, economic and financial criminality has become more and more global and/or transnational in nature. This is not only related to the globalisation of the markets, but also to the increasing mobility of goods, services and capital in the digital era. Second, economic and financial offences are more often committed in an organised criminal network setting and combined with corruption practices in order to obtain contracts and/or to avoid effective enforcement and with money laundering operations in order to shield the proceeds and criminal assets. Third, in this transnational setting it has become more and more complex to identify the responsibilities of legal persons and natural persons that can trigger criminal liability. In complex business organisations it has become necessary to identify and attribute clear responsibilities to avoid breaches of criminal law (through compliance programmes) but also to identify criminal liability. In some cases this might also lead to the introduction of assumptions of liability based on rather strict liability norms (low mens rea requirements) or liability for abstract endangerment. Also for the investigation of offences and the gathering of evidence it will be necessary to rely on internal support within businesses, based on compliance officers or a whistle-blower mechanism, and on other private actors, such as service providers and financial institutions, for instance. This means that the domestic criminal justice systems have to face different new challenges, related to substantive criminal law, procedural criminal law and mutual legal assistance. This book is the second volume1 summarising the outcome of comparative research conducted at the University of Luxembourg on how various national criminal justice systems across Europe and the US deal with the challenges in the area of white-collar crime.

1 See for the first volume: Katalin Ligeti, Vanessa Franssen (eds), Challenges in the Field of Economic and Financial Crime in Europe and the US (Hart 2017).

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Foreword

This book starts with a chapter entitled ‘Challenges and trends in enforcing economic and financial crime – criminal law and alternatives in Europe and the US’ by the project leaders and editors Katalin Ligeti and Stanisław Tosza. This chapter offers a very interesting and useful comparative and transversal analysis of the challenges and tendencies in this field and covers such topics as the interaction between individual and corporate liability, new punishment strategies and the use of compliance programmes, alternatives to criminal procedure, and the increased role of private actors in criminal procedure, as well as the application of criminal law guarantees in administrative proceedings, including the newest developments regarding ne bis in idem. The chapter is based on the findings of the studies which constitute the remainder of the book. In that respect, the book has two parts. The first one consists of four national chapters, which provide an in-depth analysis of the enforcement of three policy areas: the financial markets (eg market abuse and underground banking), the environment (eg waste trafficking and wildlife crime) and competition. In order to allow the reader to have an efficient comparison, these policy areas have the same structure and cover substantive, procedural and institutional aspects of enforcement in France (by Juliette Tricot and Maxime Lassalle), Poland (by Stanisław Tosza and Witold Zontek), Sweden (by Vladimir Bastidas and Maria Bergström) and the US (by Sara Sun Beale). The second part of the book covers a number of issues which have a great significance as regards liability for infringements in the area of economic and financial crime. Three themes can be distinguished. The first one concerns alternatives to criminal law. A contribution on the UK approach to regulating managers’ duties and clarifying responsibilities in the financial sector presents a sophisticated model, which aims at guaranteeing the correct management of the financial institutions based on regulation, but not on criminal sanctions (‘Regulating instead of punishing: the Senior Managers Regime’ by Iain MacNeil). Secondly, three contributions analyse different aspects of corporate criminal liability. Celia Wells presents the shortcomings of the UK approach to imposing criminal liability and attempts to make this model more functional (‘Economic Crime in the UK: corporate and individual liability’). Vanessa Franssen examines the recent tendencies of dealing with groups of corporations as economic entities rather than a conglomerate of legal persons, which provides for a solution to the notorious problem of eluding corporate liability by terminating the life of the company in question (‘Corporate Criminal Liability and Groups of Corporations: Need for a More Economic Approach?’). Eventually, Stijn Lamberigts analyses the possibilities and limitations for the company to claim the nemo tenetur privilege (‘The privilege against self-incrimination of corporations’). The book closes with a third theme concerning the protection of whistle-blowers. In recent years, we have seen a number of high-profile scandals unravel due to whistle-blowers (eg, Panama leaks, Luxleaks). While the societal importance of their acts is difficult to overestimate, their protection is limited, as demonstrated

Foreword

vii

by the (later overturned) conviction of the Luxleaks whistle-blower. Umut Turksen comparatively analyses the potential fate and safeguards on which these persons can rely (‘Criminalisation and protection of whistleblowers in the EU’s counterfinancial crime framework’). The combination of comparative in-depth research into 3 substantive police fields, combined with transversal reports on specific issues, introduced by the comparative conceptual and functional umbrella proves to be a good methodology. The book contains very valuable results and provides an insight into how member states are elaborating enforcement strategies to deal with the new challenges. These strategies are not without danger, as there is a clear shift from court decisions to out of court settlements, an increasing use of punitive administrative enforcement, a greater use of private actors and a decrease in procedural guarantees. This raises questions concerning the legal limits of these strategies in the light of the rule of law and due process. This excellent volume, edited by Katalin Ligeti and Stanisław Tosza, provides very valuable analysis of the challenges and developments in the field of whitecollar crime, both for academia and legal practice. John Vervaele Professor of European and Economic Criminal Law Utrecht Law School

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CONTENTS Foreword by John Vervaele��v Table of Cases�� xi Table of Legislation�� xix Table of Treaties and Other International Instruments�� xxxvii Notes on Contributors�� xliii 1. Challenges and Trends in Enforcing Economic and Financial Crime: Criminal Law and Alternatives in Europe and the US��1 Katalin Ligeti and Stanisław Tosza 2. Enforcing Economic and Financial Policies in National Systems – Financial Markets Regulation, Environmental Law and Competition Law��35 2.1. France��37 Juliette Tricot and Maxime Lassalle 2.2. Poland��83 Stanisław Tosza and Witold Zontek 2.3. Sweden��111 Vladimir Bastidas Venegas and Maria Bergström 2.4. The US��149 Sara Sun Beale 3. Regulating Instead of Punishing: The Senior Managers Regime in the UK��225 Iain MacNeil 4. Economic Crime in the UK: Corporate and Individual Liability��253 Celia Wells 5. Corporate Criminal Liability and Groups of Corporations: A Need for a More Economic Approach?��277 Vanessa Franssen 6. The Privilege against Self-Incrimination of Corporations��307 Stijn Lamberigts

x Contents 7. The Criminalisation and Protection of Whistleblowers in the EU’s Counter-Financial Crime Framework��333 Umut Turksen Index��369

TABLE OF CASES I. International Tribunals Court of Justice of the European Union (CJEU) Åklagaren v Hans Åkerberg Fransson, C–617/10 [2013] EU:C:2013:105, 26 February 2013�� 30, 31, 32 Akzo Nobel NV and others v Commission, CC–97/08, EU:C:2009:536, 10 September 2009��120, 299–303 Akzo Nobel NV and others v Commission, CC–97/08, EU:T:2007:381, 12 December 2007��299, 301, 303 Buzzi Unicem SpA v Commission, C–267/14 P, ECLI: EU:C:2016:151 (Opinion of AG Wahl delivered on 20 October 2016)�� 312, 331 Buzzi Unicem SpA v Commission, T-297/11, EU:T:2014:122, 14 March 2014��311 Commission v Parker, C–434/13 P, EU:C:2014: 2456, 18 December 2014��300 Commission v SGL Carbon AG, Tokai Carbon Co Ltd, Nippon Carbon Co Ltd, Showa Denko KK, GrafTech International Ltd, SEC Corp, The Carbide/Graphite Group Inc, C–301/04 P [2006] ECR I-5915, EU:C:2006:432, 29 June 2006�� 314, 331 Compagnie maritime belge SA v Commission, T–276/04 [2008] EU:T:2008:237, 1 July 2008��30 Elf Aquitaine SA v Commission, C–404/11 P, EU:C:2012:56, 2 February 2012��300–1, 303 Elf Aquitaine SA v Commission, T-299/08, EU:T:2011:217, 11 May 2011��300–1, 303 Höfner and Elser v Macroton GmbH, C–41/90, EU:C:1991:161, 23 April 1991��299 Hüls v Commission, C-199/92 P ECR I-4336, EU:C:1999:358 (8 July 1999)�� 29–30 Jean-Bernard Lafonta v AMF, C–628/13, EU:C:2015:162, 11 March 2015��43 KME Germany v Commission, C–272/09 P, ECLI:EU:C:2011:63 (Opinion of AG Sharpston delivered on 10 February 2011)��30 Knauf Gips KG v Commission C–407/08 P, EU:C:2010:389, 1 July 2010��300 Limburgse Vinyl Maatschappij NV and Others v Commission, Joined Cases T-305/94 to T-307/94, T-313/94 to T-316/94, T-318/94, T-325/94, T-328/94, T-329/94 and T-335/94, EU:T:1999:80, 20 April 1999��303 Luca Menci, C–524/15, [2018] EU:C:2018:197 (Opinion of AG Campos Sánchez-Bordona delivered on 12 September 2017)�� 31, 32, 32n159, 33, 34

xii Table of Cases Łukasz Marcin Bonda, C–489/10 EU:C:2012:319, 20 October 2012��29, 30–1, 327 Marián Baláž, C, 524/15 [2018] EU:C:2018:197, 20 March 2018��31 Orkem v Commission C–374/87[1989] ECR 3283, EU:C:1989:388, 18 October 1989�� 311, 313, 314, 330–1 Panasonic/MTPD, T-82/13, Samsung SDI, T-84/13, LG Electronics, T-91/13, Philips, T-92/13 and Toshiba, T-104/13: EU:T:2015:612, EU:T:2015:611, EU:T:2015:609, EU:T:2015:605 and EU:T:2015:610, 9 September 2015��301 Papierfabrik August Koehler AC, Bolloré SA and Distribuidora Vizcaína de Papeles SL v Commission, C–338/07 P, EU:C:2009:500, 3 September 2009��303 Schenker, C–581/11 EU:C:2013:126 (Opinion of AG Kokott, delivered on 28 February 2013)��30 Schindler v Commission, C–501/11, ECR I-4336, 8 July 1999��30 Stora Kopparbergs Bergslags v Commission, C–286/98 P, EU:C:2000:630, 16 November 2000��301 Tokai Carbon Co Ltd and Others (Joined Cases T-236/01, T-239/01, T-244/01 to T-246/01, T-251/01 and T-252/01) [2004] ECR II-1181, EU:T:2004:118, 29 April 2004��311 Vinyl Maatschappij et al v Commission Joined Cases Joined Cases C-238/99 P, C-244/99 P, C-245/99 P, C-247/99 P, C-250/99 P, C-251/99 P, C-252/99 P and C-254/99 P, [2002] ECR I-8375, EU:C:2002:582, 15 October 2002��331 Volkswagen v Commission, C–338/00 P, EU:C:2003:473, 18 September 2003��30 Opinion of AG Ruiz-Jarabo Colomer delivered on 17 October 2002��30 European Commission Case COMP/38.695 – Sodium Chlorate, C(2008) 2626 final, 11 June 2008��300 Case COMP/38.866 – Animal Feed Phosphates, C(2010) 5004, 20 July 2010��301 European Court of Human Rights A and B v Norway App Nos 24130/11 and 29758/11 (ECHR, 15 November 2016)�� 32, 33, 34, 57 AP, MP and TP v Switzerland App No 19958/92 (ECHR, 29 August 1997)��208 Bendenoun v France App No 12547/86 (ECHR, 24 February1994)��29 Bernh Larsen Holding AS and Others v Norway App No 24117/08 (ECHR, 14 March 2013)�� 310, 328 Bucur and Toma v Romania, App No 40238/02 (ECtHR, 8 January 2013)��347 Chambaz v Switzerland App No 11663/04 (ECHR, 5 April 2012)�� 329–30 Connolly v 15 Member States of the European Union��29n134 Delta Pekarny AS v Czech Republic App No 97/11 (ECHR, 2 October 2014)��328 Desde v Turkey App No 23909/03 (ECHR, 1 February 2011)��312 Deweer v Belgium App No 6903/75 (ECHR, 27 February 1980)��286 Diennet v France App No 18160/91 (ECHR, 26 September 1995)��29

Table of Cases xiii Engel v The Netherlands App Nos 5100/71, 5101/71, 5102/71, 5354/72, 5370/72 (ECHR, 8 June 1976)��28–33, 286, 327 Funke v France App No 10828/84 (ECHR, 25 February 1993)��328 G.I.E.M. S.R.L. v Italy App Nos 1828/06, 34163/07 and 19029/11 (ECHR, 28 June 2018)��286 Grande Stevens v Italy App No 18640/10 (ECHR, 4 March 2014)�� 32, 57 Guja v Moldova, App No 14277/04 (ECtHR, 12 February 2008)��347 Heaney and McGuinness v Ireland App No 34720/97 (ECHR, 21 December 2000)��314 Heinisch v Germany, App No 28274/08 (ECtHR, 21 July 2011)�� 347, 351 Jalloh v Germany App No 54810/00 (ECHR, 11 July 2006)��314, 329–30 Janosevic v Sweden App No 34619/97 (ECHR, 23 July 2002)��28 JB v Switzerland App No 31827/96 (ECHR, 3 May 2001)��329 Jussila v Finland App No 73053/01 (ECHR, 23 November 2006)�� 29, 30 Kalneniene v Belgium App No 40233/07 (ECHR, 31 January 2017)��310 Kammerer v Austria App No 32435/06 (ECHR, 12 May 2010)��29 Kapetanios and Others v Greece App Nos 3453/12, 42941/12 and 9028/13 (ECHR, 30 April 2015)��310 Krumpholz v Austria App No 13201/05 (ECHR, 18 March 2010)��310 Le Compte and Others v Belgium App No 6878/75 (ECHR, 23 June 1981)��29 Marttinen v Finland App No 19235/03 (ECHR, 21 April 2009)��309, 310, 314 Menarini Diagnostics SRL v Italy App No 43509/08 (ECHR, 27 September 2011)��29n134, 30n144, 328 Messier v France App No 25041/07 (ECHR, 30 June 2011)�� 53–4 Öztürk v Germany App No 8544/79 (ECHR, 21 February 1984)��29, 30n135 PG and JH v UK App No 44787/98 (ECHR, 25 December 2001)��309 Quinn v Ireland App No 36887/97 (ECHR, 21 December 2000)��310 Ravon v France App No 18497/03 (ECHR, 21 February 2008)�� 41, 42 Rubins v Latvia, App No 79040/12 (ECtHR, 13 January 2015)��347 Salabiaku v France App No 10519/83 (ECHR, 7 October 1988)�� 286, 302 Saunders v UK App No 19187/91 (ECHR, 17 December 1996)��310, 314, 328 Sergey Zolotukhin v Russia App No 14939/03 (ECHR, 10 February 2009)��32 Shlychkov v Russia App No 40852/05 (ECHR, 9 February 2016)��310 Soros v France App No 50425/06��44 Talaber v Hungary App No 37376/05 (ECHR, 29 September 2009)��29 Truten v Ukraine App No 18041/08 (ECHR, 23 June 2016)��312 Varvara v Italy App No 17475/09 (ECHR, 29 October 2013)�� 286–7 Virabyan v Armenia App No 40094/04 (ECHR, 2 October 2012)��286 Vulakh and Others v Russia App No 33468/03 (ECHR, 10 January 2012)��286 Weh v Austria App No 38544/97 (ECHR, 8 April 2004)��286 X and Y v France App No 48158/11 (ECHR, 1 September 2016)�� 53–4 Zachar and Cierny v Slovakia App Nos 29376/12 and 29384/12 (ECHR, 21 July 2015)��312

xiv Table of Cases II. National Tribunals Belgium Constitutional Court, Case No 54/2017 (2017) Nieuw Juridisch Weekblad��649–50, 298 France AdlC 07-D-15 (on practices used in public procurement concerning the high schools of Île-de-France) (9 May 2007)��61 15-D-04 (28 March 2015)��67 AMF Enforcement Committee M A (1 June 2006)��49 M Julien Quistrebert, Mme Nathalie Pelras, M A, Mme B, la société C, M D, M E et la société F (18 January 2010)��48 Société AAZ Finances et MM Olivier Avit and Jean-Jacques Rabineau (21 June 2007)��43 Competition Council 06-D-07 (21 March 2006)��61 Constitutional Council Alec W (2016-545 QPC) (24 June 2016)��78 Association France Nature Environnement (2014-416 QPC) (26 September 2014)��78 EADS (2014-453/454 QPC and 2015-462 QPC) (18 March 2015)�� 42, 57 Jérôme C (2016-546 QPC) (24 June 2016)��78 Loi pour la croissance, l’activité et l’égalité des chances économiques (2015-715 DC) (5 August 2015)��74 Loi relative à la consommation (2014-690) (13 March 2014)��51 Loi relative à la lutte contre la fraude fiscale et la grande délinquance économique et financière (2013-679 DC) (4 December 2013)��51 M Alexis K (2017-646/647 QPC) (21 July 2017)��74 M Jacques R (2017-634 QPC) (2 June 2017)�� 43n23 M John L (2014-453/454 QPC and 2015-462 QPC) (18 March 2015)�� 41–2 Société Brenntag (2016-552 QPC) (8 July 2016)��70 Société Groupe Canal Plus (2012-280 QPC)��67 Council of State 300619, CM CIC Securities (6 June 2008)��47 Court of Appeal (Paris) 08/02551 (29 October 2008)��66 Eiffage (2 April 2008)��61 Court of Cassation, Criminal Chamber (in case number order) S 1839 1 87, B no 313 (27 September 1839)��48 53-02879, B no 205 (28 February 1956)��48 53-02879 B no 205 (28 February 1956)��47

Table of Cases xv 71-91756, B no 81 (14 February 1973)��47 72-90.894, B no 289 (17 October 1973)��75 88-86756, B no 248 (8 June 1989)��50 92-82-263, B no 113 (15 March 1993)��46 92-84.745, B no 352 (3 November 1992) (Péchiney)�� 42, 77 94-83.780, B no 324 (26 October 1995)��60 98-87.869 (26 April 2000)��63 01-85176, B no 224 (11 December 2002)��64 04-20.360 (31 January 2006)��76 07-11677, 07-12132 and 07-12357, B no 5 (15 January 2008) (Enrobés bitumineux)��61 08-18224, B IV no 124, no 125 (13 October 2009)��61 09-14316, B no 1 (7 January 2011)��81 12-18.410 QPC (28 November 2012)��61 Tribunal de Grande Instance (TGI) (Paris) Vivendi Universal�� 48–9 Germany Federal Constitutional Court (Bundesverfassungsgericht (BVerfG)) Case 2 BvL 1/15��5 Federal Court of Justice (Bundesgerichtshof (BGH)) Case 2 StR 602/76��5 Case 4 StR 71/11��6 Higher Regional Court Koblenz Case 1 Ss 113/07, 5 SEC v Mozilo No CV 09-3994-JWF (MANx) (CD Ca 2010)�� 3–4, 177 Netherlands Hoge Raad, Case No 11/04190, ECLI:NL:PHR:2012:BW9244��356 Poland Constitutional Tribunal P 50/13 OTK ZU 2014 no 9A Item 103 (21 October 2014)��107 Supreme Administrative Court II OSK 538/09 (15 April 2010)��96 Sweden Market Court A 3/99 (Swedish Rail) MD 2000:2��120 A 7/00 (Telia AB) MD 2001:31��120 MD 1999:22 (SAS v Konkurrensverket)��120 Supreme Court NJA 2005, s 33��5, 118, 129–30 NJA 2013, s 502�� 129–30

xvi

Table of Cases

United Kingdom Adams v Cape Industries [1990] Ch 433��244 Attorney-General v Guardian Newspapers Ltd (No 2) [1990] 1 AC 109��350 Attorney General’s Reference (No 2 of 1999) [2000] QB 796 Tesco Stores Ltd v Brent London Borough Council [1993] 1 WLR 1037��258 Re Barings plc (No 5) [1999] 1 BCLC 433, 489��241 Hivac Ltd v Park Royal Ltd [1946] Ch 169��350 Meridian Global Funds Management Asia Ltd v Securities Commission [1995] 2 AC 500��257 R (ex parte British Bankers’ Association) v FSA [2011] EWHC 999 (Admin)��228 R v BAE, Case No S2010565 (21 December 2010)�� 268–9 R v Director of Serious Fraud Office ex parte Smith [1993] AC 1, 31��309 R v Hayes [2015] EWCA Crim 46�� 234, 248 R v Innospec Ltd [2010] Lloyd’s Rep F.C. 462 (26 March 2010)�� 258–9 Salomon v Salomon [1897] AC 22��244 Serious Fraud Office FO v Rolls-Royce plc, Case No U20170036 (17 January 2017)��270 Tesco Stores Ltd v Brent London Borough Council [1993] 1 WLR 1037��257 Tesco Supermarkets Ltd v Nattrass [1972] AC 153, 15��257 United States Abbate v US 359 US 187, 195–96 (1959)��155 Bandimere v SEC 844 F3d 1168 (10th Cir 2016)��159n72 Bartkus v Illinois 359 US 121, 138–39 (1959)��155 Bell Atlantic Corporation v Twombly 550 US 544 (2007)��204, 212, 214 Blue Cross, Blue Shield of Ohio v Klein 117 F3d 1420 (6th Cir 1997)��218 Boyd v US 116 US 616, 633 (1886)�� 313, 320 Brady v US 397 US 742, 752 (1970)��129 Braswell v US, 487 US 99, 101 (1988)�� 312, 323 Carpenter v US 484 US 19 (1997)��164 Chiarella v US 445 US 222, 228 (1980)�� 165–6 Citizens United v Federal Election Commission 130 S Ct 876, 903 (2010)��322 Curcio v US 354 US 118, 123–24 (1957)��322 Dirks v SEC 463 US 646 (1983)��159 EEOC v Arabian American Oil Co 499 US 244, 248 (1991)��157 F Hoffman-La Roche Ltd v Empagran SA 542 US 155, 161 (2004)��219 Fischer v US 425 US 391 (1976)�� 313, 320 Gilman v Marsh & McLennan Cos, Inc 826 F3d 69, 74 (2d Cir 2016)��217 Pet of Gold Bond Stamp Co 221 FSupp 391, 393 (D Minn 1963)��218 Gold Bond Stamp Co v US 325 F2d 1018 (8th Cir 1964)��218 Gustafson v Alloyd Co 513 US 561 (1995)��164 Hale v Henkel 201 US 43, 69 and 70 (1906)��315, 320–3 Helvering v Mitchell 303 US 391, 399 (1938)��155

Table of Cases xvii Herman and MacLean v Huddleston 459 US 375, 380 (1983)��165 Ill Brick v Illinois 431 US 720 (1977)��214 Kastigar v. US 406 US 441 (1972)��323 Kiobel v Royal Dutch Petroleum 133 S Ct 1659, 1669 (2013)��157 Leegin Creative Leather Products, Inc v PSKS, Inc 551 US 877 (2007)��204 Lotes Co, Ltd v Hon Hai Precision Industry Co 753 F3d 395, 398 (2d Cir 2014)��219 Lucia Companies v SEC 832 F3d 277, 285-97 (DC Cir 2016)��159n72 Miranda v Arizona 384 US 436, 460 (1966)��310 Missouri v Frye 132 S Ct 1399, 1407 (2012)��149 Morrison v National Australia Bank Ltd 561 US 247, 255 (2010)�� 157, 176 Motorola Mobility LLC v AU Optronics Corporation 775 F3d 816, 826 (7th Cir 2014) (Posner)��222 Murphy v Waterfront Commission of New York Harbor 378 US 52, 55 (1964)��309n13 New York Cent RR Co v US 212 US 481 (1909)��207 New York Central Railroad Company v US 212 US 481 (1909)��320 North Carolina State Board of Dental Examiners v FTC 135 S Ct 1101 (2015)��204 Pennsylvania v Muniz 496 US 582, 596 (1990)��308 Rapanos v US 547 US 715, 733 (2006)��188 RJR Nabisco, Inc v European Community 136 S Ct 2090 2100 (2016)�� 157, 197 Salman v US 137 S Ct 420 (2016)��159 State v Marsh and McLennan Co Inc 944 A2d 315 (Conn 2008)��211 Stoneridge Investment Partners, LLC v Sci-Atlanta, Inc 552 US 148, 157 (2008)��172 Texas v Allan Construction Co Inc 851 F2d 1526 (5th Cir 1988)��211 US v Alvarez-Machain 504 US 655, 669 (1992)��222 US v Balsys 524 US 666, 692 (1998)��309 US v Bank of New England, NA 821 F 2d 844, 856 (1st Cir 1987)��152 US v Booker 543 US 220, 246 (2005)��156 US v Bowman 260 US 94 (1922)��157 US v BP Exploration & Production, Inc, No 2:12-cr-00292-SSV-DEK (ED La 29 January 2013)��153 US v Ionia Management SA 555 F3d 303 (2d Cir 2009)��152 US v LSL Biotechnologies 379 F3d 672, 677 (9th Cir 2004)��219 US v LSL Biotechs 379 F3d 672, 680 (9th Cir 2004)��219 US v Morton Salt Co 338 US 632, 651 (1950)��216 US v Neil 312 F3d 419, 421 (9th Cir 2002)��157 US v Newman 773 F3d 438 (2d Cir 2014)��159 US v Oceanpro Indus Ltd 674 F3d 323, 332 (9th Cir 2012)��196 US v O’Hagan 521 US 642, 652 (1997)��166 US v Pruett 681 F3d 232, 241–43 (5th Cir 2012)��188 US v Stein 440 F Supp 2d 315 (SDNY 2006)��325

xviii

Table of Cases

US v Tonawanda Coke Corporation 5 FSupp3d��343, 350–51 (WD NY 2014), 196 US v Weimart 819 F3d 351, 355 (7th Cir 2016)��207 US v White 322 US 694 (1944)�� 320, 322 Wilson v US 221 US 361, 382–83 (1911)��322 In re Winship 397 US 358, 364 (1970)��154, 175, 207, 217

TABLE OF LEGISLATION

Australia Crimes Act 1900 (ACT), Part 2A��260 Criminal Code Act 1995 (Commonwealth)�� 258, 260 s 12.3(6)��261 Criminal Code Act 2002 (ACT)��260 Belgium Civil Code, art 1384��294 Criminal Code art 3��296 art 50bis�� 294–5 Criminal Procedure Code Preliminary Title, art 20(2)�� 297–8 art 61bis�� 297–8 Provincial Act, art 71��294 Provincial Act (Flanders) art 73(1)��294 Road Traffic Act 1968, art 67��294 France Anti-Corruption Act 2007��360 Banking and Financial Regulation 2010��71 Commercial Code art L225-120 I��64 art L420-1�� 44–5, 56 art L420-2�� 44–5, 56 art L420-2-2�� 44, 56 art L420-3��64 art L420-4��56 art L420-6��44, 45n32, 47, 60–1, 72 art L420-7�� 52, 76

xx Table of Legislation art L423-17��64 art L432-14��52 art L450-1��80 art L450-3�� 74, 80 arts L450-3 et seq��74 art L450-4�� 74, 80 art L450-5��54 art L462-3��62 art L462-5 III��67 art L462-6�� 61, 79 art L462-8, para 3��71 art L463-4��61 art L464-2�� 49, 71, 75 art L464-2, para 3��71 art L464-2 IV��69 art L464-6-1��67 art L464-6-2��67 art L464-7, subpara 1��76 art L464-8��41 art L464-8, subpara 1��76 art L464-8, subpara 4��76 art L464-8, subpara 5��76 art L464-9�� 71, 76 art R450-1, subpara 2��80 art R463-9��79 art R464-5 IV��69 art R464-9–R464-9-3��52 Consumer Code, art L541-1(2)��42 Criminal Code�� 9–10, 15 art 113-2��77 art 121-2��47 art 132-20�� 48–9 art 132-66��51 art 132-78��69 art 222-38�� 48, 51 art 321-3�� 48, 51 art 324-3�� 48, 51 art 432-14��52 art 433-1�� 48, 51 art 462-3��61 art 462-7, subpara 2��60 Criminal Procedure Code art 2��75 art 12��55

Table of Legislation xxi art 15��55 art 40�� 60, 63 art 41��60 art 41-1-2�� 16, 70 art 41-1 5°�� 70–1 art 41-2�� 70–1 art 76-74��57 art 77-1-1��61 art 99-3��57 art 132-23-1��79 art 495��70 art 495-7��70 art 704��56 art 705-1��56 art 705��56 art 706-2��55 arts 706-107 et seq��76 art D47-13��57 Customs Code (Code des douanes) art 38��55 art 38, subpara 4��56 art 59undecies��79 art 411-1��51 art 414�� 15, 51, 56 art 426��56 Environmental Code�� 62–3 art L141-1��67 arts L171-1–L174-1��55 art L171-7��53 art L171-7, para 1��45 art L171-8-1��45 art L172-2�� 56, 81 art L172-4–15��55 art L172-9��81 art L172-10��81 art L172-16�� 62, 73 arts L173-1–L173-4��65 art L173-4��45 art L173-5��50 art L173-6��50 arts L173-6–L171-12��50 art L173-7��50 art L173-8��50 art L173-8 II��50

xxii Table of Legislation art L173-9�� 49–50 art L173-12��72 art L216��45 art L415-1��55 art L415-2��79 art L415-3��41 art L415-6�� 40–1, 49n64 art L432-2��45 art L541-1 II��56 art L541-3�� 50, 53 art L541-41��50 art L541-46�� 42, 53 art L541-46, para 1, no 11��68 art L1351-1��69 art R173-1–R173-4��72 Financial Markets Authority General Regulation, arts 622–1 et seq��43 General Regulation of the AMF art 142-2��54 art 144-1��66 art 315-46��68 art 622-2��44 art 632-1��44 art 633-1��44 Labour Code 2007��360 Law No 85-661 of 3 July 1985 relating to Classified Installations for Environment Protection��51 Law No 89-351 of 2 August 1989 (transposing Council Directive 89/592/ EEC of 13 November 1989)��41 Law No 89-531 on the Security and Transparency of Financial Markets��52 Law No 2001-420 of 15 May 2001 on New Economic Regulations (NRE Law)��40 Law No 2004-204 adapting Justice to the Evolution of Criminality��47 Law No 2005-811 of 20 July 2005 (revised in 2010)��68 Law No 2005-842 of 26 July 2005 for the Trust and the Modernisation of the Economy��41 Law No 2007-1774 of 17 December 2007 on the Implementation of EU law in the Economic and Financial Fields��41 Law No 2008-757 of 1 August 2008 relating to Environmental Liability��42 Law No 2008-776 of 13 November 2008 on the Modernisation of the Economy��40 Law No 2010-1249 of 22 October 2010 on Banking and Financial Regulation��41

Table of Legislation xxiii Law No 2013-316 of 16 April 2013 on Independence of Scientific Expertise and Alert regarding Health and the Environment��69 Law No 2013-619 of 16 July 2013 on the Implementation of Various EU Instruments Relating to Sustainable Development�� 40–1 Law No 2013-672 of 26 July 2013 on the Separation and Regulation of Banking Activities�� 40, 41 Law No 2013-907 of 11 October 2013 on Transparency in Public Life�� 69, 360 Law No 2013-1115 of 6 December 2013 on the Financial Prosecutor of the Republic��38 Law No 2013-1117 on the Fight against Tax Evasion and Serious Economic and Financial Crime�� 69, 360 art 3��51 Law No 2014-344 of 17 March 2014 on Consumer Rights (Hamon Law)�� 40, 42, 64, 74 Law No 2015-990 of 6 August 2015 for the Growth, Activity and Equal Economic Chances (Macron Law)��40 Law No 2016-819 of 21 June 2016 Reforming the System of Repression of Market Abuses�� 40, 44, 71, 78 Law No 2016-1087 of 8 August 2016 for the Reconquest of Biodiversity��41 Law No 2016-1691 of 9 December 2016 on Transparency, Fight against Corruption and Modernisation of Economic Life (Sapin II)�� 69, 70–1, 74, 358–60 art 1��359 arts 4–15�� 358–9 art 6�� 69, 71 art 16��69 art 43��71 Macron Law (Law No 2015-990 of 6 August 2015 for the Growth, Activity and Equal Economic Chances)��40 Ministerial Order No 2017-564 (19 April 2017)��359 Monetary and Financial Code art L452-1��64 art L465-1�� 43, 44 art L465-1, para 1��48 arts L465-1 et seq (pre-2016)�� 48n52 art L465-2��43 art L465-3-6�� 52, 64, 78 art L465-3-6 I��58 art L465-3-6 II��58 art L465-3-6 III��58 art L466-1��60 art L533-9��68

xxiv

Table of Legislation

art L621-1�� 43–4 art L621-6�� 43–4, 54 art L621-7��54 art L621-7-1��68 art L621-9��54 art L621-9-1��66 art L621-10��74 art L621-10–L621-12��74 art L621-11�� 41n12 art L621-12��74 art L621-14��54 art L621-14-1��71 art L621-15�� 39, 54, 66 art L621-15 II��43 art L621-15 III��43 art L621-16-1��60 art L621-17-2��68 art L621-18-2��68 art L621-18-4��68 art L621-18–L621-18-4��74 art L621-20��60 art L621-20-4��60 art L632-1–L632-6��80 art L632-6-1–L632-6-3��80 art L632-7��80 art L634-1–634-4��69 art L642-2��74 art R621-33��66 art R621-37-1–R621-37-4��71 Ordinance No 2008-1161 of 13 November 2008 on the Modernisation of Competition Regulation�� 41n12 Ordinance No 2009-233 of 26 February 2009 Strengthening the Right of the Defence�� 41n12 Ordinance No 2010-1579 of 17 December 2010 on the Implementation of Various Instruments of EU Law in the Field of Waste Management��40 Ordinance No 2012-34 of 11 January 2012 Simplifying, Reforming and Harmonising Provisions of the Environmental Code Regarding the Police Judiciaire and the Police Administrative�� 40, 42 Public Health Code, L5311-1��57 Sapin II: see Law No 2016-1691 of 9 December 2016 on Transparency, Fight against Corruption and Modernisation of Economic Life (Sapin II) above

Table of Legislation xxv Germany Administrative Offences Act (Ordnungswidrigkeitengesetz) (OWIG)��297 AML Act (Geldwäschegesetz)�� 362–3 s 12��363 s 13��363 Banking Act (KWG)�� 362–3 s 29��363 Criminal Code (StGB)�� 362–3 s 264(4)��6 Data Protection Act (BDSG)��362 General Equal Treatment Act (AGG)��362 Labour Protection Act (ArbSchG)��362 Regulatory Offences Act (Ordnungswidrigkeitengesetz) s 30��11 ss 84–86��20 s 130��6 Securities Trading Act (Wertpapierhandelsgesetz), s 6(15)��22 Stock Exchange Act (Börsengesetz), s 22��16 Works Constitution Act (BetrVG)��362 Italy AML Decree (Legislative Decree 231/2007), art 13�� 353–4 Anti-Corruption Act (Law No 190/2012)�� 352, 353 Civil Code 2635��353n997 art 319 quarter��353 Consolidated Banking Act (Legislative Decree No 385 of 1 September 1993)��354 Netherlands Civil Code art 2:1–2:3��295 art 51(3)�� 295–6 Civil Servants Act 2001�� 357–8 Corporate Governance Code��357 House for Whistleblowers Act 2016�� 356–8 Prevention of Money Laundering and Financing Terrorism Act 2008 (AML Act), s 16��358

xxvi

Table of Legislation

Reporting of Suspected Malpractices Decree 2010 as amended 2014 (Whistleblower Regulation)�� 356–8 Poland Administrative Procedure Code, art 83(2)��102 Banking Law 1997�� 83, 85 arts 105–106d��108 art 106a��100 art 106b��110 art 170(2)��92 Capital Market Supervision Act 2005��83 Combating of Unfair Competition Act 1993�� 83–4, 92 art 24�� 88–9 Competition and Consumer Protection Act 2007�� 83–4, 94–5, 101–2 art 12��103 art 91(1)��110 arts 106 et seq�� 93–4 art 106a�� 13, 15, 91, 98 art 113a��101 art 113b��101 art 113c��101 art 113d��101 art 113h��101 Criminal Code�� 84–5 art 37a��91 art 39��16 art 46�� 105, 107 art 58(1)�� 90–1 art 60(3)��101 art 114��108 art 114(1)��107 art 114(3)(3)��107 art 116��84 art 165a��100 art 175(1)��102 art 183�� 83, 86, 87–8, 89–90, 92 art 183(1)��88 art 231��100 art 240��100 art 299��100 art 304(2)��100

Table of Legislation xxvii Criminal Procedure Code (CPP) art 5��105 art 10��96 art 15��109 arts 31–4��106 art 31��106 art 32��106 art 32(1)�� 106. 76 art 49��105 art 49a��105 art 74(1)��102 art 183��102 art 229a��105 art 291�� 104–5 art 304(1)��100 art 304(2)�� 96, 100 art 335�� 102–3 art 338a��103 art 343a��103 art 387��103 Disclosure of Information on the Environment and its Protection, Civil Participation in Environment Protection and Assessment of Impact on Environment 2008��109 Environmental Inspection Act 1991��93 art 2(1)(17)��108 art 2(2)��108 art 15��100 Environmental Protection Act 2001��83 arts 128a–129��92 arts 194–7��93 arts 376 et seq��93 Financial Instruments Trading Act 2005 (FITA)�� 83, 85–6, 89, 90–1 art 1��94 art 154��99 art 172�� 92–3 arts 178–84�� 87–8, 92 art 179a�� 87–8 art 183��88 art 183(1)��88 Financial Market Supervision Act 2006��83 art 6(2)��100 art 17��108 art 17d��109 art 168��93

xxviii

Table of Legislation

Fiscal Criminal Code 1999�� 84, 89 Law of 28 October 2002 providing Quasi-criminal Liability for Entities, art 26��105 Liability of Collective Entities for Acts Prohibited under Penalty 2002�� 10–11 Liability of Collective Entities for Prohibited Acts Act 2002, art 2��295 Nature Protection Act 2004 including 2015 amendments�� 83, 86 Prevention and Restoration of Damages to the Environment Act 2007��83 Regulation of 14 June 2007 on Permissible Noise Levels in the Environment��83 Regulation of 1 September 2016 on Environmental Damages Registry��88 Regulation of 1 September 2016 on Restoration Activities��83 Regulation of Ministry of Justice – rules of the internal office organisation of public prosecution��106 Waste Act 2012��83, 86–7, 92 art 195��93 Portugal AML Law No 25/2008��355 art 20��355 Criminal Procedure Code�� 354–5 Labour Code 2003 (as amended in 2011 and 2914)��354 Spain Law 22/2015 (Auditing of Accounts) (implementation of EU Directive 2006/43/EC)��361 Organic Law 5/2010 of 22 June 2010 amending the Penal Code��284 Royal Decree 304/2014 (AML Law) art 23��361 art 46��361 Sweden Competition Act (1993:20) (Unfair Competition Act 1993)��92, 115, 122, 127 Lag (2005:598) (Law amending)��113 Prop 1992/93:56 (preparatory work)��120 Competition Act (2008:579) (Konkurrenslag (KL) 2008)�� 113, 115–16, 125–7, 129–30, 144 Chapter 2, s 1��119

Table of Legislation xxix Chapter 3 s 1��125 s 3�� 139–40 s 4�� 139–40 s 5�� 125, 141 s 8��122 ss 8–11��113 s 10��145 s 11��144 s 16��113 s 24�� 113, 125 s 25��140 Chapter 5��133 s 3��139 Chapter 7, s 1��141 Lag (2015:402) (Amending Law)��113 Prop 2007/08:135 (preparatory work)�� 115–16, 120, 137 Criminal Code Chapter 1, s 2��119 Chapter 2 s 1��125, 141–2 s 4,��125, 141–2 Chapter 36 (as amended 2006) Prop 2005/06, 32–33 (preparatory work)��122 s 7��122 Criminal Code (Brottsbalken (1962:700)), Chapter 2 s 1��141 s 4��141 Environmental Code (1998:808)��125, 143–4 amendments SFS 2006:1014��114 SFS 2010:210��114 SFS 2016:782��114 Part One, Chapter 2 (general rules), s 2��119 Part Six (penalties), Chapter 29�� 114, 129 s 4a�� 114, 115, 116–17, 132 s 11(2)�� 143–4 Part Six (penalties), Chapter 30��114 ss 1–2��132 s 2(3)��135 Prop 1997/98:4 (preparatory work)��132 Prop 2005/06:182 (preparatory work)�� 115, 118

xxx Table of Legislation Judicial Procedure Code (Rättegångsbalken (1942:740)) Chapter 17 s 1��144 s 13��144 Chapter 20, s 6��115 Chapter 27:1��124 Lag (1986:223) (Administrative Act 1986), s 6��144 Lag (1991:980) (Trading in Financial Instruments Act 1991)��111 ch 6, ss 1–2��134 Lag (1998:31) (Standards on Radio and TV Broadcasts Act) (LSSRT), ss 7–8��127 Lag (2000:562) (Law on International Assistance in Criminal Matters), Chapter 3��146 Lag (2000:1087) (Reporting Duty on Possession of Certain Financial Instruments Act 2000) (Reporting Act)�� 111–12 Lag (2000:1225) (Smuggling Penalties Act 2000)��125, 129, 143–4 Lag (2002:599) (Collective Actions Act 2002)��140 Lag (2003:389) (Electronic Communications Act 2003) (LEK)�� 126–7 ch 4, s 4��127 ch 7, s 17��130 Lag (2004:519) (Railway Law 2004) (Järnvägslagen (2004:519) (JL))��127 Lag (2005:377) (Market Abuse Penalties Act 2005) (market abuse when trading in financial instruments)�� 111–12 Prop 2004/05:142 (preparatory work)�� 111, 135 Lag (2008:586) (block exemption for anti-competitive technology transfer agreements), s 3��118 Lag (2009:62) (Measures to Prevent Money Laundering and Terrorist Financing Act) (amended 2010) (AML Act)��356 Lag (2010:1045) (Postal Act 2010) (PL), Chapter 4 s 5��127 s 19��130 Lag (2010:1350) (Disclosure of Market and Competitive Conditions 2010) s 1��135 s 4��135 Lag (2012:194) (amendments to the 2005 Market Abuse Penalties Act)��112 Lag (2014:836) (Trading Prohibition Act 2014)��113 s 9��136 s 17��130 Lag (2016:749) (Special Protection against Victimisation of Workers Who are Sounding the Alarm about Serious Wrongdoings) (‘Whistleblower Act’)��356 Lag (2016:1306) (Administrative Sanctions Act 2016)�� 111–12, 128, 130, 141, 148 Chapter 2, s 11��136

Table of Legislation xxxi Chapter 3��124 Chapter 4��125 Chapter 5�� 122, 137 s 19�� 112, 124 Prop 2016/17:22 (preparatory work)��120, 124, 136, 139 Lag (2016:1307) (Market Abuse Penalties Act 2016) (market abuse on the securities market)��111, 112, 130 Chapter 2, s 7��124 Chapter 3 s 1��128 s 7��141 Public Access to Information and Secrecy Act (2009:400)��131 Regulation (2003:396) on Electronic Communication s 23��129 s 24��129 Regulation (2011:13) (Environmental Inspection Regulation), Chapter 2, s 28a��125, 145, 146–7 Regulation (2012:259) on environmental sanctions (Förordning (2012:259)), Chapter 11 (EU Waste Shipment Regulations)��124 Regulation (2014:1553) (transposition of Council Framework Decision 2009/948)��142 Regulation (2015:657) (Cross-Border Waste Transport)��147 United Kingdom Bank of England and Financial Services Act 2016 s 21, sch 4��233 s 24��242 s 25��245 Bribery Act 2010��256, 258–68 s 1��261, 264–5 s 2��261, 264–5 s 6��261, 264–5 s 7�� 10–11, 12–13, 258, 261–4, 271, 273–4 s 7(1)��263 s 7(2)��10–11, 261 s 7(5)��262 s 8�� 261–2 s 8(1)��263 s 8(3)��262 s 8(4)��263 s 8(5)��262 s 12(2)�� 265–6

xxxii Table of Legislation s 13��262 s 14��265 s 15��295 Companies Act 1985 s 232��231 s 234��231 Companies Act 2006, ss 171–77�� 242, 247 Corporate Manslaughter and Corporate Homicide Act 2007 s 1��258 s 14��295 Crime and Courts Act 2013 s 45��268 sch 17 s 5(3)�� 269–70 s 5(4)�� 269–70 s 7��268 s 8��268 Criminal Finances Act 2016, s 45�� 273–4 Criminal Justice Act 1967��253 Employment Rights Act 1996, s 43B(1)�� 350–2 Finance Bill 2016��343 Financial Services Act 2012, ss 89–91��233 Financial Services (Banking Reform) Act 2013��233, 242–3 s 28(5)��250 s 36��233 Financial Services and Markets Act (FSMA) 2000 (as amended by the Financial Services Act 2012 and the Bank of England and Financial Services Act 2016)��229–32, 234, 241–2, 244, 245–8, 254 s 59 (as amended)��236 s 59ZA��239 s 60��239 s 63E(1) (as amended)��237 s 64A (as amended)��242 s 66 (as amended)��250 s 66A (as amended)��245 s 71A�� 242–3 s 168��246 s 397 (old)��233 s 398��233 s 399��233 Human Rights Act 1998��365 Interpretation Act 1978, sch 1��257 Public Interest Disclosure Act 1998 (PIDA)��249, 350–2 Serious Crime Act (SCA) 2015 (SCA)��352

Table of Legislation xxxiii United States Antitrust Criminal Penalty Enforcement and Reform Act 2004 (15 USC §§ 1–3 (2012))�� 204, 216 antitrust laws, enforcement 15 USC § 15(a) (2012) (suits by persons injured), 15 USC § 15(a) (2012)��213 15 USC § 18(a) (2012) (premerger notification and waiting period)��214 15 USC § 22 (2012) (jurisdiction)�� 210–11 Hart-Scott-Rodino Antitrust Improvements Act 1976, Pub L No 94-435, 90 Stat 1383 (1976)��215 Banks and Banking (Title 12) 12 USC § 1833a (civil penalties)��324 12 USC § 1833a (Financial Institutions Reform, Recovery, and Enforcement Act 1989) (FIRREA)��324 12 USC §§ 5301–5641 (Dodd-Frank Wall Street Reform and Consumer Protection Act)�� 158–9, 174, 216, 342 Clayton Act (15 USC §§ 12–27 (2012); 29 USC §§ 52–53 (2012))��208, 209–10 Clean Water Act (2008) (CWA) (33 USC §§ 1251–1387)��184, 187–93 33 USC § 1319 (2006) (enforcement)�� 188–9 33 USC § 1319(b) (2008)��191–2, 193 33 USC § 1319(c)(1) (2008)��189 33 USC § 1319(c)(2) (2008)��189 33 USC § 1319(c)(3) (2008)��189 33 USC § 1319(c)(6)��188 Section 404��202 Code of Federal Regulations (CFR) 17 CFR § 201.410 (2016) (appeal of initial decisions by hearing officers)��162 17 CFR § 202.12 (2016) (policy statement concerning cooperation by individuals in its investigations and related enforcement actions)��161 17 CFR § 240.21F-3 (payment of awards)��174 17 CFR § 240.24c-1(b) (access to non-public information)��182 Conservation (USC Title 16) 16 USC §§ 3371–3378 (2008) (Lacey Act)��184, 185, 187, 189, 191–9, 202–3 16 USC § 3372 (2012) (prohibited acts)��197 16 USC § 3372 (f)(1) (2008)��195 16 USC § 3372(2)(A–B) (2012)��191 16 USC § 3372(f)(1) (2008)��195 16 USC § 3372(f)(1), (2) and (6) (2008) (plant declarations)��199 16 USC § 3373 (2008) (penalties and sanctions)��189 16 USC § 3373(a) (2008)��193 16 USC § 3373(a)(1) (2008)��189

xxxiv

Table of Legislation

16 USC § 3373(d)(1) (2008)��189 16 USC § 3375 (d)(1) (2008)��195 16 USC § 3375(c) (2012)��191 16 USC § 3375(d)(1) (2008)��195 16 USC § 3375(d)(2) (2008)��195 Executive Order No 13648, 78 FR 40621 (5 July 2013)�� 202–3 Constitution Fourth Amendment�� 321–2 Fifth Amendment�� 155–6, 217, 320–2 Crime Victims’ Rights Act (18 USC § 3771 (2015))��218 Crimes and Criminal Procedure (Title 18) 18 USC § 77r(c)(1)(A)(i) (2012) (exemption from State regulation of securities)�� 1776–7 18 USC § 77r(c)(1)(A)(i) (2012) (preservation of authority)�� 176–7 18 USC § 1341 (frauds and swindles) (2016)�� 207, 208 18 USC § 1343 (2012) (fraud by wire, radio, or television)�� 207, 208 18 USC § 1348 (2012) (securities and commodities fraud)�� 166, 167 18 USC § 1349 (2012) (attempt and conspiracy)��166 18 USC § 1956(c)(7) (2012)��186n269 18 USC § 1961 (1)(B) (2012) (Racketeer Influenced and Corrupt Organizations Act (RICO))��186n269, 201n387 18 USC § 3231 (2012) (jurisdiction)��191 18 USC § 3363a(A)(1) (2012) (mandatory restitution)�� 175, 218 18 USC § 3771 (2015) (Crime Victims’ Rights Act)�� 175, 218 18 USC §§ 1342 (2012) (fictitious name or address)��207 Dodd-Frank Wall Street Reform and Consumer Protection Act 2010 (with amendments) (12 USC 5301)�� 158–9, 174, 216, 342 False Claims Act (31 USC §§ 3729–33 (2012))��151 31 USC § 3730(b)(2) (2012)�� 151, 158 31 USC § 3730(c)(5) (2012)��151 Federal Rules of Criminal Procedure Fed R Crim P 6(e)(3)(A)(i) (disclosure of evidence to a federal grand jury)��183 Fed R Crim P 60 (victim’s rights)��218 Federal Trade Commission Act (15 USC §§ 41–58 (2012))��203 15 USC § 45(l) (2012) (penalty for violation of FTC cease and desist order)��210 15 USC § 57b-1 (2012) (civil investigative demands (CIDs))�� 217–18 Foreign Corrupt Practices Act 1977 (as amended) (FCPA)��156, 168, 173–4, 181, 201n387, 264, 266–7 Foreign Trade Antitrust Improvements Act of 1982 (FTAIA) (15 USC § 6a)�� 218–19

Table of Legislation xxxv Internal Revenue Code (Title 26), 26 USC § 7623(b)(1) (expenses of detection of underpayments and fraud etc)��151 NY General Business Law §§ 352 et seq (2012) (Martin Act)�� 179–80 Sarbanes-Oxley Act 2002 (SOX) (116 Stat. 745)�� 158–9, 339, 342, 349 Securities Act 1933 (15 USC §§ 77a et seq (2012)), section 17 (fraudulent interstate transactions)�� 158–9, 179–80 Securities and Exchange Act 1934 (15 USC §§ 78a et seq (2012))��158 15 USC § 2 (2012) (monopolizing trade a felony; penalty)��208 15 USC § 77r(a), (b) (2012) (exemption from State regulation of securities offerings)�� 176–7 15 USC §§ 77v(c) (jurisdiction of offenses and suits)��176 15 USC § 77v(c) (jurisdiction of offenses and suits)��176 15 USC § 78aa(b) (extraterritorial jurisdiction)��176 15 USC § 78c(a)(8) (‘issuer’)��267 15 USC § 78dd-1(a) (prohibited foreign trade practices by issuers)�� 266–7 15 USC § 78dd-2(h)(1) (‘domestic concern’)��267 15 USC § 78ff(a) (penalties for wilful violations)��167 15 USC § 78j (section 10)��165–6, 178, 179 15 USC § 78u, 3B (investigations and actions: civil monetary penalties against a corporation)��324 15 USC § 78u-6 (2012) (Securities Whistleblower Incentives and Protection)��174 15 USC § 78u-6(b)(1) (2012) (awards)��174 15 USC § 80b-14(b) (jurisdiction of offenses and suits)��176 Sherman Act (15 USC §§ 1–7 (2012))��203–10, 218–19, 221–2 15 USC § 1 (2012) (penalty)��204 15 USC §§ 1–3 (2012) (Antitrust Criminal Penalty Enforcement and Reform Act 2004)�� 204, 216 15 USC § 2 (2012)��207 15 USC § 6a (Foreign Trade Antitrust Improvements Act of 1982 (FTAIA))�� 218–19 Uniform Act 1956��170 Uniform Securities Act 2002��170 Wildlife Trafficking Enforcement Act 2015, s 27��186

xxxvi

TABLE OF TREATIES AND OTHER INTERNATIONAL INSTRUMENTS Treaties 1950 Nov. 4 European Convention for the Protection of Human Rights and Fundamental Freedoms (ECHR) (213 UNTS 221 [UNTS 2889])�� 14, 113 art 6��28–34, 281, 327 art 6(1)�� 286–7 art 6(2)��130–1, 286–8, 302–3, 327–30 art 7�� 286–7 art 10��347 Protocol No 7 art 4��144 1973 Mar. 3 Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES) (Washington Convention) (993 UNTS 243)�� 55, 194 1982 June 22 Termination of Employment Convention (ILO Convention No 158) (1412 UNTS 159) art 5(c)��338 1989 Mar. 22 Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and Their Disposal (1673 UNTS 126)�� 115, 146 1990 June 19 Convention Implementing the Schengen Agreement of 14 June 1985 between the Governments of the States of the Benelux Economic Union, the Federal Republic of Germany and the French Republic on the gradual abolition of checks at their common borders, ([2000] OJ L239/19, 22 September)�� 107, 144

xxxviii

Table of Treaties and Other International Instruments

1995 July 26 Convention drawn up on the basis of Article K.3 of the Treaty on European Union on the protection of the European Communities’ financial interests (PIF Convention) ([1995] OJ, 17 November C316/49) Second Protocol, art 2(d)��282n27 1997 Dec 17 OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (http://www.oecd.org/daf/anti-bribery/ ConvCombatBribery_ENG.pdf)�� 156, 256, 259–61, 267 1999 Jan. 27 Criminal Law Convention on Corruption (CrimLCC) (ETS 173) art 22��339 Oct. 4 Civil Law Convention on Corruption (CLCC) (ETS 174) art 9��339 2003 Oct. 31 UN Convention against Corruption (UNCAC) (UNTS 42146) art 33��339 2007 Dec. 13 Treaty of Lisbon amending the Treaty on European Union (TEU) (OJ 2010 C83/1) art 4(3)��109 Dec. 13 Treaty of Lisbon on the Functioning of the European Union (TFEU) (OJ 2012 C326/47) art 82(2)(b)��326 art 83(1)�� 7–8 art 83(2)��8 art 101�� 101n56, 118–19, 298–303 International Instruments Other Than Treaties Council of Europe Committee of Ministers, Recommendation No R (88) 18 (liability of enterprises having legal personality for offences committed in the exercise of their activities)��279 Council of Ministers Recommendation CM/Rec (2014) 7 (protection of whistleblowers)�� 337, 340 Parliamentary Assembly, Resolution 1729 (2010) (protection of whistleblowers)��337

Table of Treaties and Other International Instruments xxxix EU Charter of Fundamental Rights (CFR) (26 October 2012 [2012] OJ C326/191)�� 130–1 art 50�� 32, 107, 144 art 52(3)�� 32–3 EU Council Framework Decision 2009/948/JHA of 30 November 2009 on Prevention and Settlement of Conflicts of Exercise of Jurisdiction in Criminal Proceedings [2009] OJ L328/42��142 EU Directives Capital Requirements Directive IV (CRD IV), 242: see also Directive 2013/36/EU on prudential requirements [2013] OJ l76/1, 27 June (Capital Requirements Directive) below and EU Regulations, Regulation 575/2013 [2013] OJ L176/1, 27 June (Capital Requirements Regulation) Commission Directive 2003/124/EC of 22 December 2003 on Insider Dealing and Market Manipulation [2003] OJ L339/70, 24 December (Market Abuse)��112, 114, 145 Commission Directive 2003/125/EC of 22 December 2003 (investment recommendations) [2003] OJ L339/73, 24 December��112, 114, 145 Commission Directive 2004/72/EC of 29 April 2004 on market practices [2004] OJ L162, 30 April��112, 114, 145 Commission Directive 2006/70/EC of 1 August 2006 on money laundering [2006] OJ L214/29, 4 August��333, 334, 365 Commission Directive 2015/2392 of 17 December 2015 on Regulation (EU) No 596/2014 of the EP and Council [2015] OJ L332/126 (Whistleblowing and Market Abuse Directive)��25 Directive 89/592/EEC of 13 November 1989 on insider dealing [1989] OJ L334��41 Directive 2001/42/EC of 27 June 2001 (Environmental Impact Assessment (EIA) Directive) [2001] OJ L197, 21 July��109 Directive 2003/6/EC of 28 January 2003 on Insider Dealing and Market Manipulation (Market Abuse Directive) [2003] OJ L96/16, 12 April��41, 112, 114, 115 Directive 2005/60/EC of 26 October 2005 on the prevention of money-laundering and terrorist financing (Anti-MoneyLaundering Directive) (Third AML Directive) [2005] OJ L309/15, 25 November, Recital 5��336 Directive 2006/43/EC of 17 May 2006 on statutory audits [2006] OJ L157/87, 9 June (Audit Directive)��361 Directive 2008/98/EC of 19 November 2008 on waste [2008] OJ L312/3 (Waste Directive)��86 Directive 2008/99/EC of 19 November 2008 on protection of the environment through criminal law [2008] L328/28 (Environmental Crime Directive)�� 42, 86

xl Table of Treaties and Other International Instruments Directive 2009/138/EC of 25 November 2009 on insurance and reinsurance [2009] OJ L335, 17 December (MiFID II), art 42��242 Directive 2010/64/EU of 20 October 2010 on the right to interpretation and translation in criminal proceedings [2010] OJ 280/1, 26 October, art 1��326 Directive 2011/36/EU of 5 April 2011 (trafficking in human beings) [2011] OJ L101/1, 15 April art 5��11 art 6��11 Directive 2011/92/EU of 13 December 2011 (Environmental Impact Assessment (EIA) Directive) [2012] OJ L26/1, 28 January��109 Directive 2012/13/EU of 22 May 2012 on the right to information in criminal proceedings [2012] OJ L142/1, 1 June art 1��326 art 2��326 Directive 2013/36/EU on prudential requirements [2013] OJ l76/1, 27 June (Capital Requirements Directive)�� 237, 354 art 13��242 art 88��242 art 91��242 Directive 2014/42/EU of 3 April 2014 on freezing of proceeds of crime [2014] OJ L127/39, 29 April��287 Directive 2014/56/EU of 16 April 2014 amending Directive 2006/43/EC on statutory audits [2014] OJ L158/196, 27 May��339 Directive 2014/57/EU of 16 April 2014 on criminal sanctions for market abuse [2014] OJ L173/179, 12 June (Market Abuse Directive)�� 21, 41, 85–6, 87, 112–13 Directive 2014/65/EU of 15 May 2014 on markets in financial instruments [2014] OJ L173/349, 12 June (MiFID II), art 9��242 Directive 2015/849 of 20 May 2015 on the prevention of moneylaundering and terrorist financing [2015] OJ 141/73, 5 June (Anti-Money-Laundering Directive) (Fourth AML Directive)��333–4, 337, 340–1, 365–6 art 48(10)��337 art 61��341, 366–7 art 67��341 Directive 2016/343 of 9 March 2015 on the presumption of innocence and the right to be present at the trial [2016] OJ L65/1, 11 March (Presumption of Innocence Directive)��31, 312, 326–7 Preamble Recital 11��31 Recitals 13–15��326 Recital 13�� 327–30 art 2��326

Table of Treaties and Other International Instruments xli EU Regulations Commission Delegated Regulation EU 604/2014 of 4 March 2014 supplementing Directive 2013/36/EU on criteria to identify material risk takers [2014] OJ L167/30, 6 June��237 Regulation 537/2014 of 16 April 2014 on specific requirements regarding statutory audit of public interest entities and repealing Commission Decision 2005/909/EC [2014] OJ L158/77��339 Commission Implementing Regulation (EU) 2016/1245 Annex 1 to Council Regulation (EEC) 2658/87 [2016] OJ L294/1, 28 October��116 Commission Implementing Regulation (EU) 2016/1245 Setting out a Preliminary Correlation Table between Codes of the Combined Nomenclature Provided for in Council Regulation (EEC) No 2658/87 and Entries of Waste listed in Annexes III, IV and V to Regulation (EC) No 1013/2006��116n37 art 11��126 art 13��126 Commission Regulation 2273/2003 of 22 December 2003 Implementing Directive 2003/6/EC [2003] OJ L336, 21 December��114 Council Regulation EC 338/97 of 9 December 1996 on the Protection of Species of Wild Fauna and Flora by Regulating Trade Therein [1997] OJ L61/1, 3 March�� 83, 99 Council Regulation EC No 1/2003 of 16 December 2002 on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty art 23(2)(a)��115 art 23(5)��30 Council Regulation (EC) No 139/2004 of 20 January 2004 on the control of concentrations between undertakings [2004] OJ L024, 29 January (EC Merger Regulation)��115 Council Regulation No 17 of 6 February 1962, First Regulation implementing Articles 81 and 82 of the Treaty OJ 013, 21/02/1962 p. 0204–0211��30 Regulation 1/2003 of 16 December 2002 on the enforcement of TEC 81 and 82 [2003] OJ L1/1, 4 January art 3(2)��143 art 11��142 art 12��80 art 20��80 art 22�� 60, 80 art 22(1)��60 art 22(2)��80 art 22(4)��80 art 23(5)�� 30–1 Regulation 17/1962 of 6 February 1962 Regulating Articles 85 and 86 of the Treaty [1962] OJ P013/0204, 3 April��30

xlii Table of Treaties and Other International Instruments Regulation EC 1013/2006 on Shipments of Waste [2006] OJ L190/1, 12 July (Waste Regulation)��115, 124, 125, 145, 146–7, 148, 174 art 30��126 art 34��142 art 36��142 art 50�� 116–17 art 52��146 Regulation EU 236/2012 of 14 March 2012 on short selling and credit default swaps [2012] OJ L86/1, 24 March (ESMA Regulation), art 34��85 Regulation EU 575/2013 [2013] OJ L176/1, 27 June (Capital Requirements Regulation)��362 Regulation EU 596/2014 of 16 April 2014 on market abuse repealing Directive 2003/6/EC of the European Parliament and of the Council and Commission Directives 2003/124/EC, 2003/125/EC and 2004/72/ EC [2014] Ll73/1, 12 June (Market Abuse Regulation)�� 21, 41, 112, 145 art 30��112 art 32(4)��26 Regulation EU 648/2012 of 4 July 2012 on OTC derivatives [2012] OJ L201/1, 27 July (EMIR Regulation), art 83��85 Regulation EU 660/2014 of 15 May 2014 Amending Regulation (EC) 1013/2006 on shipments of waste [2014] OJ L189/135 (Waste Shipment Regulation)�� 116–17 EU Resolutions Resolution of the Council of 30 November 2009 on a Roadmap for strengthening procedural rights of suspected or accused persons in criminal proceedings [2009] OJ C295/1��326 OECD Good Practice Guidance on Internal Controls, Ethics, and Compliance, 18 February 2010, www.oecd.org/investment/anti-bribery/ anti-briberyconvention/44884389.pdf, art 2�� 261, 264 Recommendation of the Council for Further Combating Bribery of Foreign Public Officials in International Business Transactions (26 November 2009, https://www.oecd.org/daf/anti-bribery/ 44176910.pdf)��261 Standard for Automatic Exchange of Financial Account Information in Tax Matters (21 July 2014, https://www.oecd-ilibrary.org/taxation/ standard-for-automatic-exchange-of-financial-account-informationin-tax-matters-second-edition_9789264267992-en�� 336, 348

NOTES ON CONTRIBUTORS Vladimir Bastidas Venegas is Associate Professor of European Law, Faculty of Law, Uppsala University. Maria Bergström is Associate Professor of European Law and Senior Lecturer in EU Law, Faculty of Law, Uppsala University. Vanessa Franssen is Associate Professor of Criminal Law at the University of Liège and Affiliated Senior Researcher at the KU Leuven. Stijn Lamberigts is an attorney at the criminal enforcement and compliance department of Eubelius (Brussels) and a senior affiliated researcher at the Criminal Law Institute of the KU Leuven. Maxime Lassalle is a PhD student at the University of Luxembourg and at the University of Paris Nanterre. Katalin Ligeti is Professor of European and International Criminal Law at the University of Luxembourg. Iain MacNeil is Alexander Stone Professor of Commercial Law at the University of Glasgow. Sara Sun Beale is Charles L.B. Lowndes Professor of Law at Duke University. Stanisław Tosza is a postdoctoral researcher at the Utrecht Centre for Regulation and Enforcement in Europe (RENFORCE) and an assistant professor at the Willem Pompe Institute for Criminal Law and Criminology, Utrecht University. Juliette Tricot is Associate Professor of Criminal Law at the University of Paris Nanterre. Umut Turksen is Professor in law at the Research Center for Financial and Corporate Integrity, Coventry University and an executive of Commonwealth Legal Education Association. Celia Wells is Emerita Professor of Criminal Law, University of Bristol. Witold Zontek is Assistant Professor at the Jagiellonian University in Kraków and a law clerk at the Supreme Court of Poland.

xliv

1 Challenges and Trends in Enforcing Economic and Financial Crime Criminal Law and Alternatives in Europe and the US KATALIN LIGETI AND STANISŁAW TOSZA

I. The Need for Comparative Research in Economic and Financial Criminal Law The aim of this chapter is to synthesise the findings of the comparative research project of which this book is the product. Economic and financial criminal law has expanded significantly over the course of the past two decades. Yet not only has the amount of national and international legislation in the field grown, but it has also endured changes driving it away from the classic criminal law. These trends have been reflected in changes to national legislation, not infrequently prompted by supranational law, eg, in the financial or the environmental sector. New punishing regimes have emerged, such as United Nations (UN) blacklisting, smart sanctions, civil asset forfeiture, financial supervisory powers, compliance law and anti-money laundering laws. Furthermore, the role of administrative sanctioning law has been growing as well as the role of private actors in the enforcement of punitive sanctions. All these trends require scrutiny and a coherent and comprehensive analysis in the light of procedural guarantees. All systems that have been subject to the comparative analysis for this book (France, Germany, Poland, Sweden and the US) introduced reforms in recent years. Reforms in European countries are due to three main reasons: first, compliance with European requirements to regulate or criminalise certain behaviour; second, responding to crisis situations; and, third, compliance with requirements stemming from national and/or supranational courts as regards the level of fundamental rights protection, in particular the procedural safeguards applicable during administrative proceedings.

2 Katalin Ligeti and Stanisław Tosza These three reasons are not of equal importance in each of the investigated countries or in all areas of economic and financial misconduct. They are also intertwined. For instance, in the area of competition law enforcement, the relevance and role of EU standards is more decisive than in environmental law or financial markets regulation. Similarly, the call for stronger fundamental rights protection in administrative proceedings is present in all areas, but the analysis of the national systems has clearly shown that it is mostly evoked in relation to financial crimes.1 This high importance of the influence of EU law can be attributed to the harmonising and standard-setting of the EU in order to achieve a level playing field in the common market. This is certainly the case for competition law and is increasingly the case for the financial markets. However, the EU legislator is often rather reactive. In particular, the legislative intervention on market abuse and insider dealing has allegedly been triggered by the fact that prior to the financial crisis of 2008, national regulation and supervision of the financial markets have been too weak. Furthermore, in addition to the above three reasons, there might be further motives that brought about change in the legislative framework or policies, such as the needs to simplify, modernise or rationalise the existing solutions. A good example of this tendency is the enforcement of environmental crimes in France, where the main reason for major recent reforms has been the outdated and overly complicated regulations in relation to environmental irregularities and offences.2 And sometimes there has been a long doctrinal discussion at the national level, irrespective of EU policy or crisis situations, that eventually led to changes. For instance, Sweden, after decades of scholarly reflection, has introduced trading bans for competition law infringements.3 However, the search for more adequate ways to enforce economic and financial policy does not necessarily mean criminalisation. The study has demonstrated that within several national systems, the national legislator may explicitly opt for decriminalisation, especially in order to reinforce the ultima ratio nature of criminal law, maintaining criminal sanctions for the gravest infringements and moving minor infringements towards administrative sanctions. A good example of this is the area of environmental enforcement in Sweden.4 While the developments noted above have been the subject of countless publications, no comprehensive comparative research focusing on these changes has been produced since the seminal works led by Mireille Delmas-Marty5 and Klaus Tiedemann.6 This book is the second volume summarising the outcome of 1 See eg, Chapter ‘France’ in this volume, 42. 2 ‘France’, 42. 3 Chapter ‘Sweden’ in this volume, 115. 4 ‘Sweden’, 115. 5 Mireille Delmas-Marty and John AE Vervaele (eds), The Implementation of the Corpus Iuris in the Member States (Intersentia, 2000). 6 Klaus Tiedemann, Wirtschaftsstrafrecht, 5th edn (Verlag Franz Vahlen, 2017). The first edition was published in 2004.

Challenges and Trends in Enforcing Economic and Financial Crime 3 comparative research conducted at the University of Luxembourg on how various national criminal justice systems across Europe and the US deal with the challenges in economic and financial criminal law. The first volume was based on the papers presented at the ‘Global Challenges in the Field of Economic and Financial Crime in Europe’ conference, which took place on 2–3 December 2014 in Luxembourg.7 It dealt with a number of highly relevant topics, such as corporate monitors, compliance programmes, whistleblowing and leniency, negotiated justice, transnational multi-agency and multi-disciplinary investigations, and integrated enforcement models. This volume is composed of two parts. The first part presents the findings of systematic comparative research into the five selected national systems, four of which are European (France, Germany, Poland and Sweden), with the fifth (the American approach) serving as a source of inspiration for unresolved difficulties and future developments. The four following chapters present the findings in each of these systems according to the following methodology.8 The field of economic and financial crime being vast and diverse, the research focused on three specific types of misconduct where the aforementioned challenges are clearly tangible and likely to receive varied answers: • misconduct affecting the financial markets (in particular, securities fraud, insider dealing, market abuse and underground banking); • misconduct affecting the environment (in particular, waste trafficking) and the trade in protected fauna and flora (also referred to as wildlife crime); • misconduct affecting competition (in particular, cartel offences). Within these types of misconduct, the analysis centred on special policies, rules and practices for economic and financial crime, in particular: • substantive law, including the general and special parts of criminal law as well as the sanctions (eg, criteria for criminal liability, the adoption of new offences and special sanctions); • criminal procedure (eg, a lower burden of proof, special investigative techniques and specific preventive measures); • the administration of justice (eg, the interplay between different public enforcement mechanisms, the establishment of specialised investigative or prosecutorial authorities and the use of negotiated justice techniques); and • cooperation between administrative and judicial authorities at the national and international levels (including jurisdictional issues).

7 Katalin Ligeti and Vanessa Franssen (eds), Challenges in the Field of Economic and Financial Crime in Europe and the US (Hart Publishing, 2017). 8 The research into the German system was conducted according to the same methodology. The authors are extremely grateful to Professor Martin Böse (University of Bonn) and Dr Sandra Schmitz (University of Luxembourg) for the vast body of information provided.

4 Katalin Ligeti and Stanisław Tosza The second part of the book is devoted to highly topical transversal issues in the field of economic and financial crime and the enforcement of economic policy, which provides more focused insight into issues shaping the field: substantive and procedural issues regarding corporate criminal liability and the use and protection of whistleblowers, as well as the senior managers regime. This chapter provides a synthesis of the findings in both parts of the book and also draws upon the research published in the first volume. It will start by presenting the challenges in investigating and prosecuting economic and financial crime (section II) The analysis of the four national systems complemented by the information provided in the transversal chapters led to the identification of four major tendencies in the field in response to these challenges (section III): the swinging of enforcement strategies between prosecuting individuals or/and corporations (section III.A); the extension of punitive sanctions and the use of compliance programmes as punishment (section III.B); the extensive use of alternatives to criminal proceedings (section III.C); and the increased role of private actors in controlling economic and financial crime (section III.D). These responses will be scrutinised from the perspective of the human rights regime in the final section (section IV).

II. Investigating and Prosecuting Economic and Financial Crime: Where Does the Challenge Lie Today? Rapid technological evolutions and socio-economic developments together with difficulties with attributing liability have been considered to be the most typical challenges that economic and financial criminal law has to face. Over the years, legal systems developed various techniques of overcoming these challenges, which, although controversial, were scrutinised and eventually accepted. They would affect the way in which offences are defined as well as the problems of attributing liability in a corporate context. The fast pace of technological and socio-economic changes mostly affects the definition of misconduct. In response, legislators tend to use either vague notions or cross-references to non-criminal rules of conduct (blanket offence definitions), which give the authorities greater flexibility (to prevent or) to react to harmful behaviour. Especially in Europe, the internationalisation and Europeanisation of criminal law considerably contributed to the use of vague notions and cross-referencing in economic and financial criminal law. Many of the provisions in this area stem from transposing EU legislation into national law. This practice encourages the use of cross-referencing as well as broad offence descriptions. Although transposing EU legislation is not exclusive to economic and financial criminal law, what one can observe in this area in some countries is a simple copy and paste of EU provisions. The problems linked with this technique are not limited to the field of

Challenges and Trends in Enforcing Economic and Financial Crime 5 economic and financial crime and raise a number of questions beyond this field (such as the discretionary margin available to the national legislator when implementing EU law and the question of ‘minimum’ harmonisation).9 However, highly technical aspects of this field exacerbate the use of this technique.10 Instead of rethinking or rewriting national law in light of EU law, simple copying allows the national legislator to save resources. It also helps to prevent discrepancies with EU law and to prevent conflicts with EU institutions. The use of cross-references has several downsides, the fundamental one being that it may violate the principles of legal certainty and foreseeability as it renders the scope of the legal norm difficult to understand for its addressee. Furthermore, on a more practical level, it also requires the legislator to keep up with amendments of the provisions which the criminal offence incorporates by the reference. For instance, in the German system, if the criminal offence refers to a prohibition which has ceased to be in force, the nullum crimen sine lege principle bars criminal punishment, even if a similar prohibition exists in a newly adopted law.11 Nevertheless, the use of this technique has been pointed out in all four chapters on European national systems, even if it is subject to certain limitations.12 Its use may be justified by arguments that the addressees of the norms are professionals who should be able to understand more complex legal constructs (or should enlist the help of lawyers) and that the nature of the regulated domain requires such techniques. The alternative to this technique is the use of very detailed and technical provisions. Not only do these provisions not necessarily add to legal certainty, but they also carry the risk of becoming outdated too quickly. Furthermore, provisions using cross-referencing may indeed be sufficiently precise and the vague terms may be explained by prosecutorial guidelines.13 Another typical aspect of economic and financial criminal law is the criminalisation of a conduct irrespective of its consequences in the single case (abstract

9 On the problem of ‘minimum rules’ see in particular: Hans G Nilsson, ‘How to Combine Minimum Rules with Maximum Legal Certainty?’ (2011) Europarattslig Tidskrift 663; and André Klip, European Criminal Law: An Integrative Approach, 2nd edn (Intersentia, 2012) 166–67. See also: Valsamis Mitsilegas, ‘EU Criminal Law Competence after Lisbon: From Securitised to Functional Criminalisation’ in Diego Acosta Arcarazo and Cian C Murphy (eds), EU Security and Justice Law: After Lisbon and Stockholm (Hart Publishing, 2014) 122ff. 10 See eg ‘France’, 42–45. 11 See, with regard to references to EU law: Federal Court of Justice (‘Bundesgerichtshof ’), judgment of 13 May 1977— case 2 StR 602/76, BGHSt 27, 181 (182); Higher Regional Court Koblenz, Decision of 11 May 2007 – case 1 Ss 113/07, Neue Juristische Wochenschrift 2007, 2344. For instance, the German Federal Constitutional Court also recently declared unconstitutional, by reason of imprecision, references to EU law in relation to the labelling of beef produce, Decision of the Federal Constitutional Court of 21 September 2016, case 2 BvL 1/15, Neue Juristische Wochenschrift 2016, 3648. 12 eg, the Swedish Supreme Court declared illegal the use of cross-references to norms of lower constitutional standing than what is required for criminal law provisions (Supreme Court Judgment NJA 2005 s 33; see ‘Sweden’, 118. 13 See, for, instance regarding the German financial regulation, Christian Schröder, ‘Straf- und Bußgeldtatbestände im BörsG und WpHG’ in H Achenbach, A Ransiek and T Rönnau (eds), Handbuch Wirtschaftsstrafrecht, 4th edn (CF Müller, 2015), marginal number 7.

6 Katalin Ligeti and Stanisław Tosza endangerment offences), which may also take the form of omnibus offences designed to cover any form of (potentially) dangerous conduct.14 This feature is also linked to the legal interests that this sort of offence aims to protect. For instance, insider dealing does not require a financial loss (or an individual victim) as its aim is to protect the integrity of the financial markets (and not individual investors from losses). As regards the difficulties in attributing liability, considering the fact that economic and financial crime is often committed in a corporate or organisational context and that it is difficult to identify the culpable individual(s) in a large(r) organisation, legislators tend to create and/or to multiply special criminal liability regimes for legal entities and for heads of businesses or other persons with a leading position. The threshold for such liability tends to be lower than for the actual perpetrator (ie, the person who physically commits the offence) due, for instance, to a lower standard of mens rea, the use of factual presumptions and/or a partial shift in the burden of proof. In the case of administrative or civil liability, which may also result in punitive sanctions, the threshold for liability is even lower. This questions the scope and the relative proportionality of the respective liability regimes. The comparative analysis shows that in economic and financial criminal law, the legislator follows a rather extensive concept of criminal liability. Although the nulla poena sine culpa principle and the presumption of innocence apply to all forms of criminal liability in all of the countries analysed (in Germany also including administrative fines), there has also been a tendency to criminalise negligent behaviour.15 In France, one could even speak of a gradual shift from intent to almost strict liability, given the role of presumptions in establishing the mens rea of the offence (eg, presumption of knowledge for insiders).16 Furthermore, the criminal liability of managers for crimes committed by employees can result from a lack of supervision.17 According to German law, in cases involving a lack of supervision, managers may be held criminally liable for company-related crimes committed by an employee.18 Violations of obligatory supervisory measures may result in an administrative fine if the threshold for criminal liability cannot be established.19 In France, the liability of employers (eg, a director) stems from the case law.20 This type of attribution of liability is not 14 cf Tiedemann (n 6) 77ff. 15 In France (see ‘France’, 46–47), Germany (eg § 264 para 4 Criminal Code) and Sweden (see ‘Sweden’, 118); less so in Poland. 16 ‘France’, 48–51. 17 Federal Court of Justice (‘Bundesgerichtshof ’), judgment of 20 October 2011 – case 4 StR 71/11, Neue Juristische Wochenschrift 2012, 1237 (1238). If a causal nexus between the crime and the manager’s failure to supervise his employees properly cannot be established, an administrative fine can be imposed (§ 130 of the Regulatory Offences Act (Ordnungswidrigkeitengesetz)). 18 Federal Court of Justice, judgment of 20 October 2011 – case 4 StR 71/11, (2012) Neue Juristische Wochenschrift 1237, 1238. 19 § 130 of the Regulatory Offences Act (Ordnungswidrigkeitengesetz). 20 ‘France’, 46–47 and cases cited there.

Challenges and Trends in Enforcing Economic and Financial Crime 7 devoid of problems. For instance, in cartel cases in Sweden, the exact degree of supervision that must be exercised by those in management positions in order to trigger liability is uncertain. The above-described challenges have been known in the field and the analysis demonstrates that they have been accommodated by the legislators to a large extent, with better or worse results. Besides these, several factors have been more recently been gaining influence in challenging and shaping economic and financial criminal law. First, the most recent financial crisis has demonstrated the extent to which the markets are interconnected and the systemic influence of many financial institutions, in particular when they are in trouble because of mismanagement. The aftermath of the global financial crisis showed that the traditional approach to criminal liability with its ex post retributive condemnation might not be the best solution in light of the gravity of potential or effectively occurred consequences.21 The response of criminal justice has also been deemed insufficient as many highprofile culprits avoided justice. As a result, there has been a quest for more flexible and more proactive tools to fight economic and financial misconduct. Second, economic and financial crime is becoming increasingly transnational. The comparative analysis of the four systems demonstrates that the main peculiarities of economic and financial criminal law nowadays concern the administration of justice encompassing the creation of specialised investigating authorities of administrative or judicial character. The combination of these two factors creates extensive need for cooperation between (national and supranational) administrative and judicial authorities, which also includes cooperation with EU institutions (eg, the European Anti-Fraud Office (OLAF)) or the help of EU bodies (eg, Eurojust). As has been demonstrated, this cooperation is not necessarily frictionless and effective.22 In this context, the EU also comes into play on the legislative level, although where intervention is a question of competence. While the EU (formerly the Communities) for a long time had no competence to adopt criminal law, this has been changing in the past two decades. According to Article 83(1) of the Treaty on the Functioning of the European Union (TFEU), the EU may adopt 21 Katalin Ligeti and Vanessa Franssen, ‘Current Challenges in Economic and Financial Criminal Law Europe and the US’ in Ligeti and Franssen (n 7) 1, 5. 22 See, for instance, Lothar Kuhl, ‘Cooperation between Administrative Authorities in Transnational Multi-agency Investigations in the EU: Still a Long Road Ahead to Mutual Recognition?’ in Ligeti and Franssen (n 7) 135ff. Regarding these problems, see also the chapters by John Vervaele, ‘Jurisdictional Issues in Transnational Multi-agency and Multi-disciplinary Investigations of Economic and Financial Crimes’ 167ff; Michiel Luchtman, ‘Transnational Multi-disciplinary Investigations and the Quest for Compatible Procedural Safeguards’ 191ff; Martin Böse, ‘The Consecutive Application of Different Types of Sanctions and the Principle of Ne Bis in Idem: The EU and the US on Different Tracks?’ 211ff in the same volume, as well as Michiel Luchtman, ‘Inter-state Cooperation at the Interface of Administrative and Criminal Law’ in Francesca Galli and Anne Weyembergh (eds), Do Labels Still Matter? Blurring Boundaries between Administrative and Criminal Law: The Influence of the EU (Editions de l’Université de Bruxelles 2014) 191ff.

8 Katalin Ligeti and Stanisław Tosza ‘minimum rules concerning the definition of criminal offences and sanctions’ in a number of areas, including money laundering and corruption. For economic and financial policy, even more relevant is Article 83(2), according to which: ‘If the approximation of criminal laws and regulations of the member states proves essential to ensure the effective implementation of a Union policy in an area which has been subject to harmonisation measures, directives may establish minimum rules with regard to the definition of criminal offences and sanctions in the area concerned.’ However, the threshold for triggering this legal basis (‘essential to ensure the effective implementation’) is not devoid of controversy in view of the principles of proportionality and subsidiarity.23 Third, while corporations became increasingly important in comparison to individual perpetrators as a result of the growing size and power of the former, the law enforcement authorities have disproportionately fewer resources available to them when investigating misconduct linked to the corporate environment. Corporations are able to assemble highly qualified defence teams focused only on the particular case, while law enforcement agents deal with a (usually excessive) number of ongoing cases. This is also true for high-profile individual defenders. Perhaps even more importantly, corporations hold the key to crucial information for the investigation, access to which is possible using intrusive investigative means, but may be highly resource-intensive. The more sophisticated the organisation and the more complex the case, the bigger the obstacle these problems pose.24 This third challenge is linked to the fourth, namely the doubtful effectiveness of criminal sanctions. While a prison sentence may be a very harsh consequence for a white-collar offender, its limited likelihood in this field makes it an unlikely deterrent. Combined with the cumbersome enforcement procedure, which may last many years, there is a need for swifter, more flexible and more targeted ways of enforcement. Fifth, it is becoming increasingly difficult in the field of the enforcement of economic and financial policy to delineate what is right and what is wrong. Criminal law focused traditionally on malum in se offences. However, its increasing use for enforcing rules of conduct created a category of malum prohibitum offences. This division has encountered mounting criticism.25 In particular, as regards economic and financial policy, the lack of clarity becomes evident, with blurry boundaries 23 Jeroen Blomsma, ‘Challenges in the Field of Economic and Financial Crime from a European Perspective’ in Ligeti and Franssen (n 7) 227; Vanessa Franssen, ‘EU Criminal Law and Effet Utile: A Critical Examination of the Union’s Use of Criminal Law to Achieve Effective Enforcement’ in Joanna Beata Banach-Gutierrez and Christopher Harding (eds), EU Criminal Law and Policy: Values, Principles and Methods (Routledge, 2016) 84ff; Dominik Brodowski, ‘Supranationale europäische Verwaltungssanktionen: Entwicklungslinien – Dimensionen des Strafrechts – Legitimität’ in Klaus Tiedemann, Ulrich Sieber, Helmut Satzger, Christoph Burchard and Dominik Brodowski, Die Verfassung moderner Strafrechtspflege: Erinnerung an Joachim Vogel (Nomos, 2016) 141ff. 24 cf Ligeti and Franssen (n 21) 2. 25 See, for instance, Klaus Lüderssen, ‘Soziale Marktwirtschaft, Finanzmarktkrise und Wirtschaftsstrafrecht’ in Eberhard Kempf, Klaus Lüderssen and Klaus Volk, Die Handlungsfreiheit des Unternehmers (De Gruyter, 2009) 21.

Challenges and Trends in Enforcing Economic and Financial Crime 9 between what should be criminal and what should remain within the realms of administrative enforcement. Unlike ‘traditional’ criminal law that criminalises behaviour generally regarded as being most harmful, specific actions of undertakings in the competition law context may be harmful or have positive economic effects on the market depending on the legal and economic context of the given case. For instance, an agreement and its content may restrict competition if the parties to the agreement have large market shares, if competitors are weak and if there are impediments for potential competitors entering the market. The same agreement may be deemed beneficial for competition if the parties are small and if competitors are strong. In light of the foregoing challenges, legislators and law enforcers are confronted with the substantive, procedural and jurisdictional boundaries of existing policies, norms and practices. In search of more adequate responses to combat economic and financial crime, they adapt the existing policies, norms and practices, and create new enforcement mechanisms.26 What appears clear from this research is that in response to these challenges, legislators and law enforcement bodies are looking for solutions which give them more flexibility, more ability to apply measures tailored to the offence in question (as regards the offender and the sanction) as well as more practical ways to gain access to the necessary information. Four such tendencies can be identified, which will be analysed in turn below: swinging between prosecuting individuals, corporations or both (see section III.A); a gradual extension of punitive sanctions (see section III.B); the increasing use of parallel enforcement regimes, both criminal and administrative, combined with searching for alternatives to criminal enforcement (see section III.C); and the increasing role of private actors in detecting and investigating economic and financial misconduct (see section III.D).

III. New Legal Responses A. Prosecuting Individuals, Corporations or Both: Swinging between Two Poles Whilst this is nothing new to the UK and the US, the past few decades have seen the increasing introduction of corporate criminal liability regimes in continental Europe.27 Different models of designing this liability mushroomed and it seemed to be the future of criminal law in the field of (at least some) economic offences.

26 This chapter will not analyse all these challenges or all the responses to them, but mainly those that have been reflected in the comparative research. In particular, as regards the second challenge, the reader is invited to consult the referred articles and the literature cited therein. 27 The term ‘corporate criminal liability’ is used in this chapter as a synonym of the expression ‘criminal liability of legal persons’.

10 Katalin Ligeti and Stanisław Tosza France introduced it into its Penal Code in 1992 for a limited number of crimes and opened it to all offences in 2004. Poland introduced it through the law of 2002. One of the most recent cases was Spain in 2010. Corporate criminal liability was a response to the growing role of corporations, their power and thus resulting capacity to damage legal interests more significantly than individuals. As mentioned above, it also meant addressing difficulties in attributing liability to individuals in the corporate environment. Making a corporation criminally liable was a paradigm shift for continental criminal law doctrine and required the adaptation of the substantive and procedural law instrumentarium, in particular adapting the sanctioning system (imprisonment being the most common sanction for a physical person) as well as the procedural rights to the specificities of a construct that is legal personality. One of the most problematic rights is the privilege against self-incrimination, which is at the core of the status of the accused when this is an individual. Yet, as regards a corporation, the right to invoke this privilege and its scope are questionable. It is also debatable who may invoke the privilege in the name of the corporation.28 While its importance among the tools of economic and financial criminal law is obvious, the underuse of corporate criminal liability also remains its constant feature, both among the European national systems and in the US. With the exception of Germany and Sweden, the analysed systems have introduced proper corporate criminal liability.29 However, its application is subject to various doctrinal and practical difficulties. For instance, the Polish law enforcement authorities are reluctant to apply the respective law due to the deficiencies of the legislative text, in particular after the Constitutional Tribunal declared part of it unconstitutional and the subsequent amendments of the law, meant to repair the identified flaws, did not provide a convincing system of liability.30 Difficulties in attributing liability may lead the legislators to circumvent the limitations of the legal framework, as occurred in the UK. Given a restrictive application of the ‘identification’ model, section 7 of the Bribery Act 2010 introduced the offence of failure to prevent bribery, which is applicable only to commercial organisations and makes them liable for the conduct of persons associated with them that would amount to bribery unless the organisation can prove that it had 28 See Stijn Lamberigts, ch 6 in this volume. 29 Germany still resists incorporating this sort of liability into its criminal liability system. The discussions on its introduction, reignited due to the initiative of the state of North Rhine-Westphalia in 2013, have not come to any concrete conclusion so far. See ‘Entwurf eines Gesetzes zur Einführung der strafrechtlichen Verantwortlichkeit von Unternehmen und sonstigen Verbänden (Verbandsstrafgesetzbuch)’, www.strafrecht.de/media/files/docs/Gesetzentwurf.pdf. 30 Chapter ‘Poland’ in this volume, 89–90. For more details on the deficiencies of this law, see, for example, Tomasz Razowski, ‘Odpowiedzialność podmiotów zbiorowych po nowelizacji’ [2006] 9 Prokuratura i Prawo 128; Stanisław Tosza and Włodzimierz Wróbel, ‘Odpowiedzialność podmiotów zbiorowych w hiszpańskim i polskim prawie karnym’ in J Jakubowska-Hara, C Nowak and J Skupiński (eds), Reforma Prawa Karnego. Propozycje i Komentarze. Księga pamiątkowa Profesor Barbary Kunickiej-Michalskiej (Wydawnictwo Naukowe SCHOLAR, 2008) 620–32.

Challenges and Trends in Enforcing Economic and Financial Crime 11 adequate procedures in place designed to prevent such persons from undertaking such conduct (section 7(2)).31 Yet again, this provision is also an example of using a presumption to transfer the burden of proof onto the corporation. The trend to make companies liable was reflected in EU legislation, where EU directives on approximating offence descriptions stipulate that legal persons may be held liable according to national law for offences set out in the respective directive. Yet the EU has never obliged EU Member States to introduce criminal liability for legal persons and only required that legal persons should be subject to ‘effective, proportionate and dissuasive sanctions’, whether criminal or not.32 Most notably, Germany has never introduced corporate criminal liability and continues to use administrative sanctioning mechanisms to impose penalties on legal persons.33 Furthermore, corporate criminal liability presents significant problems for criminal justice theory and practice. Besides the above-mentioned issues of the choice of sanctions and guaranteeing sufficient procedural rights, one of the main questions is the admission of guilt to a legal construct, which is also connected to the question of how to link the behaviour of an employee (or an aggregation of such behaviours) with the corporation. In France, for instance, it is difficult in practice to identify the representative(s) of the legal person whose act or omission can serve as a basis for the criminal liability of the corporation. Conversely, French jurisprudence had accepted presumptions of liability in view of quasistrict liability34 – an approach which was later significantly limited by the Court of Cassation. Although doctrine and practice on corporate criminal liability is far from being settled in continental criminal law, there is already a novel tendency to move away from a strictly legal approach (ie, approaching each legal entity separately) to a more economic approach, particularly for cartel offences, but potentially also in other areas of economic and financial crime. This approach focuses on the liability of a group of corporations or of the ‘undertaking’, ie, on the economic reality, contrary to the legal approach, which focuses on a legal entity (a company). It aims to prevent the avoidance strategy sometimes used by corporations or groups of corporations. According to this strategy, the corporation or the group can avoid criminal liability if the legal entity responsible for the offence ceases to exist. However, this more economic approach to attributing liability raises concerns in light of the principles of personal liability and personal punishment.35

31 See Celia Wells, ch 4 in this volume. 32 See, for instance, Directive 2011/36/EU of 5 April 2011 on preventing and combating trafficking in human beings and protecting its victims [2011] OJ L101/1, 15 April, arts 5 and 6. 33 § 30 of the Regulatory Offences Act (Ordnungswidrigkeitengesetz). For more details, see Martin Böse, ‘Corporate Criminal Liability in Germany’ in Mark Pieth and Radha Ivory (eds), Corporate Criminal Liability: Emergence, Convergence, and Risk (Springer, 2011) 227ff. 34 ‘France’, 46–47. 35 See Vanessa Franssen, ch 5 in this volume.

12 Katalin Ligeti and Stanisław Tosza Other dilemmas are linked with the effectiveness of sanctions. Whereas an individual cannot escape criminal liability (except by effectively hiding), a company may simply dissolve and reappear under a different name. This problem is admittedly no different from any sort of liability leading to a penalty for a corporation, and measures are being taken to avoid evading liability in this way. However, one of the main objectives of criminal law is to attribute blame to the guilty person and, by naming, shaming and punishing, to reinforce the validity of the rule broken by the offence. This goal cannot be achieved if the object of the measure disappears. Lastly, more on a practical level, a company may be a formidable opponent for an underfunded prosecutor’s office with little experience in such cases, so the latter may choose not to prosecute a corporation if given a choice. The reports demonstrate that despite high expectations linked with the introduction of corporate criminal liability, its use has been very limited and it has not become a significant means of shaping criminal policy as regards economic or financial misconduct in Europe.36 Even in the US, which has a much longer tradition of criminal liability for corporations, there are relatively very few actual criminal convictions for corporations. Corporate liability is used as a threat to assure a deferred prosecution agreement (DPA) or a non-prosecution agreement (NPA).37 In this regard, three tendencies can be distinguished. First, the task of imposing sanctions on corporations remains chiefly the domain of administrative law. Even in those countries where corporate criminal liability is available, it is rarely used and administrative sanctions are imposed on companies. Second, attempts to make the legal framework more easily applicable for corporate criminal liability may not be systematic, but piecemeal. As already mentioned above, the UK, instead of changing its restrictive ‘identification’ model, introduced a targeted offence of failure to prevent bribery,38 which is only applicable to commercial organisations, but sufficiently broadly describes the scope of individuals that may trigger liability of corporations and their connection to the latter.39 Third, one can notice a trend to shift the focus back to the individual liability of managers. This tendency can be explained not only by the limitations and hindrances described in the two previous points; it is also linked to the relationship between the individual liability of those in leading position and the liability of the entity. In practice, corporate liability might result in shielding individuals from criminal liability, also frustrating the societal need for punishment. A significant illustration of this tendency is the Yates memorandum. In September 2015,

36 In France (‘France’, 47–48), Poland (‘Poland’ 89–90); Sweden provides for corporate fines, which are technically not criminal sanctions, but have a significant repressive element (‘Sweden’, 122). Germany has no corporate criminal liability. 37 Sara Sun Beale, ‘The Development and Evolution of the US Law of Corporate Criminal Liability and the Yates Memo’ [2016] 46 Stetson Law Review 41ff; Sara Sun Beale, ‘Die Entwicklung des US-amerikanischen Rechts der strafrechtlichen Verantwortlichkeit von Unternehmen’ (2014) 126 Zeitschrift für die Gesamte Strafrechtswissenschaft 27. 38 Section 7 of the Bribery Act 2010. 39 See Wells, ch 4 in this volume.

Challenges and Trends in Enforcing Economic and Financial Crime 13 Deputy Attorney General Sally Yates directed Department of Justice (DOJ) attorneys (both civil and criminal) to focus on individual liability in cases of corporate misconduct.40 The increased focus on prosecuting individuals in addition to prosecuting the corporation is seen as a reaction to a failure to pursue individual liability in the aftermath of the financial crisis of 2008.41 Another example is the so-called Dieselgate case. In 2015, it was discovered that Volkswagen (VW) had been altering emission tests by equipping cars with a device detecting that they were being tested and artificially lowering emissions. The scheme concerned various VW models as well as Audi models sold all over the world, including in the EU, the US and China.42 It raised a number of legal issues in many jurisdictions (in terms of consumer, corporate, criminal and environmental law),43 with the US leading the legal response, including damages for owners and criminal prosecution. What is worth noticing in particular regarding punitive action is that the DOJ is aiming at potentially responsible individuals no less than the company. The two convictions already issued targeted individuals: a general manager of the company’s engineering and environmental office and an engineer.44 This increased focus on individual liability is not limited to criminal law. For instance, the Polish legislator added individual liability for cartel offences in the form of an administrative fine.45 A much more sophisticated system has been introduced in the UK in the shape of the Senior Managers and Certification Regime. This not only aims at defining liability of managers, but also provides for standards and a certification system, which is supposed to guarantee the aptness of individuals for managerial positions.46 It may be assumed that in the search for efficiency in enforcing economic and financial policy, the pendulum will continue to swing between individual and corporate as well as criminal and administrative liability, potentially combining them in different configurations.

B. The Extension of Punitive Sanctions and the Use of Compliance Programmes as Punishment In the field of economic and financial criminal law, the traditional approach to sanctions is being questioned as regards the use of the penalties criminal law offers 40 Memorandum from Sally Quillian Yates, Deputy Attorney General for all United States Attorneys, 9 September 2015, www.justice.gov/enrd/file/800431/download. 41 On low number of criminal convictions, see the analyses provided in N Ryder, J Tucker and U Turksen (eds), The Financial Crisis and White Collar Crime: Legislative and Policy Responses (Routledge, 2017), in particular, Mark Button and Martin Tunley, ‘The 2008 Financial Crisis and Fraud: The Roles of Immoral Phlegmatism Deviancy Attenuation and De-labelling’ at 7–22. 42 Marco Frigessi di Rattalma (ed), The Dieselgate: A Legal Perspective (Routledge, 2017) ix. 43 See detailed analyses of these different aspects in ibid. 44 Bill Vlasic, ‘Volkswagen Official Gets 7-Year Term in Diesel-Emissions Cheating’ New York Times, 6 December 2017, https://www.nytimes.com/2017/12/06/business/oliver-schmidt-volkswagen.html. 45 Article 106a of the Competition and Consumer Protection Act 2007. 46 See Iain MacNeil, ch 3 in this volume.

14 Katalin Ligeti and Stanisław Tosza as well as the very justification for applying criminal sanctions. Based on the analysis of the four national systems, two general tendencies have been identified: the infrequent use of imprisonment for economic offences and the intertwining of fines of criminal and administrative nature. As regards the first tendency, one may observe a general reluctance of the criminal judge to impose imprisonment, the only penalty that he is solely entitled to impose. If prison sentences are pronounced, they are rather short. The US system is an exception to this trend, with much longer potential prison sentences. The comparison of penalties in two well-known post-financial crisis cases illustrates this difference. While Jérôme Kerviel was sentenced to five years’ imprisonment, of which two were suspended, Bernard Madoff was sentenced to 150 years.47 A prison sentence is a typical criminal sanction which represents the retributive character of penal law. Its limited use in the domain of economic and financial law may indicate that retribution is less relevant in sanctioning in these fields than in more classic areas of criminal law. The use of fines and other pecuniary consequences as well as other types of sanctions indicates the increased importance of prevention and restoration as objectives of sanctions in the field.48 In relation to the second tendency – the intertwining of administrative and criminal fines – it has to be underlined in the first place that fines in general are the most common sanctions used to enforce economic and financial policy.49 While criminal fines clearly have a punitive character, they point – contrary to imprisonment – much more towards prevention than retribution.50 What is most characteristic is that the difference between a sanction being administrative or criminal is becoming less evident. While the criminal sanction is becoming more preventive and its level and calculation are increasingly inspired by solutions developed for administrative enforcement, the administrative sanction is becoming more punitive. The latter is also linked to the increased judicialisation of administrative enforcement and applicability of the European Convention on Human Rights (ECHR) standards to administrative penalties (see below). The analysis of national systems demonstrates that criminal fines in the economic and financial field are higher than those provided for classic offences (eg, in France and in Poland; the threshold in the latter system may be even five 47 ‘Jérôme Kerviel condamné à 5 ans de prison dont 3 ferme et à 4,9 milliards d’euros de dommages et intérêts’, Le Figaro, 24 October 2012, www.lefigaro.fr/flash-actu/2012/10/24/9700120121024FILWWW00471-jerome-kerviel-condamne-a-5-ans-de-prison-dont-3-ferme.php; Diana B Henriques, ‘Madoff is Sentenced to 150 Years for Ponzi Scheme’, New York Times, 29 June 2009, www. nytimes.com/2009/06/30/business/30madoff.html. 48 cf also the reflection of Pedro Caeiro on the purpose of punishment in ‘The Influence of the EU on the “Blurring” between Administrative and Criminal law’ in Galli and Weyembergh (n 22) 173, 174. 49 The US system provides for ‘civil penalties’, which in nature are similar to what in Europe is called an administrative sanction (a sanction imposed by a government agency in order to enforce a policy). 50 This does not mean that pecuniary sanctions cannot have a retributive effect. Kerviel was ordered to pay back to the Société générale a sum of almost €5 billion in damages. Given his very limited ability of earning such an amount of money, especially after his conviction, this consequence seemed to be purely retributive. The sentence was eventually quashed in this part by the French Cassation Court.

Challenges and Trends in Enforcing Economic and Financial Crime 15 times the threshold provided for in the Penal Code).51 This is certainly linked with the type of offender who might be subject to them. However, it calls into question the consistency of the penal system. Moreover, while traditionally the thresholds for criminal fines are expressed either in sums of money or in daily fines, the French legislator links the maximum level of the fine more and more frequently to the resulting profit. While it can be calculated as a proportion (eg, to the value of the goods being the object of a tax fraud),52 as regards the criminal liability of corporations, it may also be linked to the company’s turnover. However, a connection between the offence and the turnover is required, as the Constitutional Council rejected a bill which would allow the imposition of a penalty amounting to 10 per cent of annual turnover for any offence subject to the punishment of imprisonment of five years or more, and which brought any sort of profit to the company.53 As to the administrative sanctions, they may become highly punitive. For instance, the Polish system provides for an administrative sanction in the form of a fine, which may be imposed on a head of business (an individual) who intentionally caused the company to enter into a prohibited agreement.54 Such a hefty administrative sanction may be much more significant a consequence than what the traditional criminal law system would impose on a white-collar offender (eg, a suspended prison sentence and a comparably small fine). Another key aspect in the economic and financial sphere is that the restorative aim gains much more importance. Considering that certain offences in this field are qualified as ‘victimless’ (eg, market abuse, wildlife crime and waste trafficking), private enforcement may be less adequate than public enforcement and there is a need for special reparatory sanctions. As a consequence, it seems that public enforcement mechanisms are being increasingly aimed at achieving reparation (including restitution and compensation) in addition to more traditional goals of prevention and punishment. This type of sanctions is especially used for environmental offences where restitution (if possible in nature) and reparation are crucial.55 For instance, in France, a judge may defer the penalty ordering restitution of a place (which may be linked to a daily penalty until the obligation is fulfilled). The French system also contains a penalty called sanction-réparation, which was added to the Penal Code in 2007 and allows the judge to order restitution or compensation. Its application diminishes or replaces the potentially applicable imprisonment sentence, hence giving priority to reparatory over punitive aims of criminal justice.56

51 ‘Poland’,

90–91; ‘France’, 48–51. 414 of the French Customs Code (Code des douanes). 53 ‘France’, 51. See also the Decision of Constitutional Council, 13 March 2014, no 2014-690. 54 Article 106a of the Competition and Consumer Protection Act 2007. 55 eg, in the American, French and Polish systems. 56 ‘France’, 51. 52 Article

16 Katalin Ligeti and Stanisław Tosza Furthermore, there is a tendency to flank – or even replace – criminal sanctions with highly intrusive administrative sanctions or collateral consequences: withdrawal of a licence, trading prohibitions for managers involved in cartel offences (eg, in Sweden)57 or for misconduct relative to the financial markets (in Germany)58 or professional bans in Poland.59 Even if some of these sanctions and consequences are not treated as formal criminal sanctions, they may nonetheless have an equally if not stronger deterrent effect on corporations and individuals than actual criminal sanctions. In light of the potentially widespread or systemic consequences of economic and financial crime, prevention and control are key concerns. To this end, legislators, administrative and judicial authorities increasingly rely on compliance programmes and pre-conviction measures as substitutes for actual punishment.60 This practice increases the importance of adequate safeguards at the pre-trial stage.61 Setting up compliance programmes may play a role when deciding on the appropriate sanction for a company. It may be taken into account while fixing the fine in French competition law, although, on the contrary,62 the Swedish system considers that given the fact that its effectiveness cannot be assessed, it should not influence the decision on the punishment.63 More importantly, introducing a compliance programme may be part of a settlement, for example in France,64 as well as with the US environmental authorities or federal prosecutors in different fields.65 US prosecutors have been entering into DPAs and NPAs, which allow corporations to avoid conviction if they agree to sanctions and measures aiming at preventing future misconduct. The procedure was also recently adopted by the Securities and Exchange Commission’s Enforcement Division in its (administrative) sanctioning proceedings.66 These agreements have allowed the prosecutors to apply sanctions, which they would not otherwise have at their disposal, but which are applicable if the defendant accepts them. Sanctions that may be imposed can include setting up a compliance programme and also mandating independent monitors to oversee if the agreed measures are being correctly implemented. The French system contains a procedure called the convention judiciaire d’intérêt public,67 which is similar to the DPA,

57 ‘France’, 51–52. 58 § 22 of the Stock Exchange Act (Börsengesetz). 59 Article 39 of the Polish Penal Code. 60 cf also on compliance programmes: Alexander Cappel, ‘The Necessity of Compliance Programmes under German Law: “Burden” or “Blessing”?’ in Ligeti and Franssen (n 7) 57ff. 61 cf Ligeti and Franssen (n 21) 1, 5. 62 ‘France’, 71–72. 63 ‘Sweden’, 139–40 and footnote 135. 64 France, 70–73. 65 Chapter ‘USA’ in this volume, 150–51. 66 USA, 151. 67 Article 41-1-2 of the French Code of Criminal Procedure.

Challenges and Trends in Enforcing Economic and Financial Crime 17 does not require a declaration of the culpability of the defendant and imposes the adoption of a compliance programme. While the purpose of these measures is the improvement of corporate culture and the prevention of further misconduct, their imposition can be considered to be a sanction, but not equally punitive as fines (not to mention imprisonment for individuals). However, it has been pointed out that imposing a monitor can be considered punishment (as part of DPAs or NPAs), especially if it is impossible or counterproductive to impose other sanctions, such as fines, because their proportional level would have detrimental consequences (eg, leading to the collapse of the company and consequently undesired collateral effects).68 Yet even then, the ‘monitorship’ would have the aim to guarantee that the goals of compliance are achieved.69

C. Alternatives to Criminal Proceedings In order to avoid and combat the potentially widespread consequences of economic and financial crime, new regulatory and public enforcement mechanisms have been put in place in many countries with the aim of increasing efficiency. This diversification is characterised mainly by moving away from criminal sanctions and increasingly using parallel enforcement regimes, in particular of an administrative law nature (see section III.C.i) as well as strengthening the powers of administrative enforcement agencies, while enhancing their procedural framework, including the protection of defendants’ rights (see section III.C.ii). Another phenomenon which limits the role of a criminal judge or of a criminal sanction is the extensive use of negotiated justice (see section III.C.iii).

i. Parallel Enforcement Regimes In all of the European countries, the most distinguishing feature of economic and financial criminal law lies today in the enforcement mechanisms. This is particularly true of the system of parallel administrative and criminal – and sometimes even civil – enforcement, which may result in cumulative proceedings and sanctions.70 The diversification of the enforcement tools depends on the country and the specific sector. However, one can find parallel administrative and criminal enforcement with dual procedures and sanctions in several countries in several fields. Whereas in the US the diversification of the enforcement system has been driven 68 Bruce Zagaris, ‘Prosecutors and Judges as Corporate Monitors? The US Experience’ in Ligeti and Vanessa Franssen (n 7) 39–40. 69 ibid. 70 As regards the interaction between administrative and criminal law in the EU context, see Galli and Weyembergh (n 22).

18 Katalin Ligeti and Stanisław Tosza by pragmatism, in Europe there are manifold rationales behind the emergence of dual or sometimes even three-pronged enforcement systems. In Germany, the reason for the dual sanctioning regime is to adapt the sanction to the gravity of the misconduct. Criminal punishment ought to be limited only to the most serious offences and where administrative sanctions are neither appropriate nor sufficient for effective law enforcement (according to the ultima ratio principle). In Sweden, the main reason is to increase the effectiveness of the sanctions. The use of criminal sanctions is limited to cases where they can be assessed to be appropriate and effective. In particular, they may be considered appropriate if the material act harms protected interests and the required degree of mens rea is present (intent or a certain degree of negligence).71 In Europe, the influence of EU law and, in particular, the initially lacking competence of the EU to adopt criminal law provisions had a considerable impact in terms of moving away from criminal law enforcement. Due to its lack of competence in the criminal law domain, the EU generally required Members States to introduce effective, proportionate and dissuasive sanctions for enforcing various EU policies. This often led to introducing new types of sanctions which were deemed to be more effective than criminal penalties sensu stricto. A paradigm example of European influence is European competition law, where the EU legislator relies heavily on the concept of efficient deterrence by administrative penalties which led to decriminalising competition enforcement all over Europe. However, especially in the area of competition law, several countries report that some of the administrative investigative powers are perceived as very intrusive. For instance, the extensive inspections by the competition authorities may be perceived as equivalent to home searches made by prosecutors.72 Ideally, different enforcement mechanisms ought to be part of a comprehensive and coherent enforcement policy or strategy. This seems to be the case for the enforcement of the cartel offences, where criminal and administrative enforcement are combined and executed by one authority (the UK Competition and Markets Authority).73 However, such a policy or strategy often appears to be lacking. In fact, most European legal systems demonstrate considerable difficulties in terms of designing and implementing a coherent enforcement policy; for example, this is the case for the French and Polish enforcement of environmental crimes. The example of Poland demonstrates that coherence of enforcement within one sector may greatly depend on practical aspects such as the decentralisation of competences and authorities.74 Although legally obliged to do so, it is possible that

71 ‘Sweden’, 128. 72 ‘Sweden’, 139, ‘France’, 63; 74. 73 See Stephen Blake, ‘Strategy of Integrated Enforcement: The UK Competition and Markets Authority’ in Ligeti and Franssen (n 7) 265. 74 ‘Poland’, 93.

Challenges and Trends in Enforcing Economic and Financial Crime 19 the administrative authority does not in practice inform the public prosecutor of detected misconduct (for fear that it may prolong the administrative case or add a significant amount of work) or even does not perceive that the conduct in question might potentially lead to criminal liability. Lack of coherent practice may result in highly detrimental consequences. A striking example of lack of coherent enforcement is the so-called ‘Amber Gold Affair’ in Poland. It is also an example of a situation where even the best efforts of the administrative authority might be insufficient where the prosecutors are unwilling to act. As early as 2009, the Polish Financial Supervision Authority informed the District Prosecutor in Gdańsk that the Polish company called Amber Gold may be committing shadow banking, providing the prosecutor with comprehensive information. Up until 2012, the public prosecutor refused to prosecute despite court orders to do so. Soon afterwards, when it eventually opened an investigation, Amber Gold went bankrupt and thousands of people lost their savings.75 Had there been more coherence between the efforts of different law enforcement agencies, such an adverse result could have been avoided. The co-existence of parallel enforcement systems raises several questions as to the relationship among them. Parallel systems naturally risk parallel proceedings and double sanctioning. In the framework of such parallel enforcement, the specificity of the criminal offences is often limited to a difference in mens rea. For instance, in France and Poland, the elements of the regulatory and the criminal offence regarding financial markets are often identical, with the exception that the criminal offence requires intent. Furthermore, there is a tendency to label certain enforcement mechanisms ‘administrative’ even though the investigative powers and sanctions may be as coercive and intrusive as the powers and sanctions under (formal) criminal law.76 Parallel enforcement systems may not only lead to inconsistencies in the practice of the various law enforcement authorities but are also open to abuse by parties to the proceedings, in particular, victims. For instance, in Poland, criminal investigations may start on request of the victim. In the field of unfair competition, victims (competitors or individual consumers) can trigger criminal investigations in addition to an already ongoing administrative investigation in order to force the allegedly unfair competitor to cease the illegal activities.77 National systems attempt to curb the possibilities of dual sanctioning for practical and legal reasons, in particular, in view of the ne bis in idem, lis pendens and ultima ratio principles and the subsidiarity of criminal law. Germany traditionally prohibits the accumulation of criminal and administrative sanctions; a criminal sanction precludes an administrative one and vice versa. Although the ne bis in

75 ‘Poland’,

97–98. 89 and ‘France’, 43–46. 77 ‘Poland’, 97–98. 76 ‘Poland’,

20 Katalin Ligeti and Stanisław Tosza idem principle (Article 103(3) of the Basic Law) is only applicable in criminal law, the German doctrine considers that it should apply analogously to regulatory offences.78 In France, the dual enforcement of the policy regarding the financial markets provoked intense debates which were seemingly resolved by the ruling of the Constitutional Council (March 2015) and subsequent legislative changes maintaining dual enforcement, but making it mutually exclusive.79 The US doctrine of double jeopardy is even less strict than the above and does not preclude that one misconduct be prosecuted at the federal and state levels, by several states or by criminal or administrative authorities. However, practical and legal solutions have been implemented in order to limit the duality.80 Both Poland and France consider criminal law enforcement as subsidiary to other (civil and administrative) enforcement mechanisms.81 Subsidiarity taken seriously would mean that criminal law and penalties should only play a secondary role, whereas administrative and civil law and enforcement play the first and main role. Administrative authorities could implement their primary role by proactive monitoring, especially through administrative authorisation procedures, followed by ex post enforcement. The subsidiary role of criminal enforcement should lead to the use of criminal law only where the initial administrative procedure does not achieve the expected results. However, such subsidiarity is not proclaimed in most countries. The Polish courts consider that pending criminal proceedings do not constitute a reason to suspend the administrative proceedings in a particular case.82 Due to the fact that both administrative and criminal law enforcement authorities are obliged to investigate and prosecute alleged misconduct within their sphere of competence, in practice many cases are dealt with in parallel and independently both by administrative authorities and the prosecutor. Similarly, France adheres to the principle of independence between administrative and judicial enforcement mechanisms, which opens the way for parallel proceedings.83 The analysed countries have developed a number of rules and practices aiming at avoiding this duality. In the most straightforward way Germany did that providing for clear rules of delineation between criminal and administrative liability;84 France did so recently as regards the financial markets (see above). However, there are also examples of existing duality, such as in Swedish environmental law, where the use of one or the other way depends on the assessment of the public interest.85

78 E Schmidt-Aßmann, ‘Art. 103 Abs. 3 GG‘ in Theodor Maunz and Günter Dürig (eds), GrundgesetzKommentar (C.H. Beck, 73rd supplement, 2014) para 289. 79 ‘France’, 52. 80 ‘USA’, 155–57. 81 ‘Poland’, 91–92 and ‘France’, 45. 82 ‘Poland’, 96–97. 83 ‘France’, 51–53 and 78. 84 §§ 84–86 of the Regulatory Offences Act (Ordnungswidrigkeitengesetz). 85 ‘Sweden’, 143–44.

Challenges and Trends in Enforcing Economic and Financial Crime 21

ii. Enforcement Agencies One may observe in several European countries a continuous effort over the past decade to strengthen, on the one hand, the powers of the regulatory authorities (for instance, the French Autorité des Marchés Financiers (AMF)) and, on the other hand, the procedural safeguards applicable in the proceedings of these regulatory authorities. This has been clearly the case in European competition law and we can see a similar evolution in the field of financial regulation. In France, one can even speak of the ‘judicialisation’ of administrative sanctions concerning stock market infringements in order to strengthen respect for the guarantees of disclosure, impartiality, adversarial process and fair trial. In parallel to increasing the level of severity of sanctions and the power of the AMF to enter into administrative settlements, safeguards are also reinforced by the obligation to publish the sanctions imposed and the introduction of new avenues of review for the affected person. This gradual introduction of criminal procedural safeguards in administrative enforcement made the administrative penalty system a direct competitor of criminal sanctions.86 As regards strengthening of the powers of the administrative authorities, the Polish example of enforcement of financial misconduct shows that administrative enforcement may actually be more intrusive than criminal enforcement in a given field. Due to the specific character of financial supervision, which aims at the immediate protection of clients, the Polish Financial Supervisory Authority may, without prior court authorisation, undertake several intrusive actions towards banks or other financial market entities.87 Whereas the prosecutor may impose measures only against natural persons (for instance, by issuing a decision that a particular board member, proxy or chief executive officer (CEO) of a company may not exercise his functions during the investigation or freeze some assets deemed to be deriving from the alleged crime and eligible for potential forfeiture), the Financial Supervisory Authority may undertake investigative measures against the entire corporation. This gives the Financial Supervisory Authority disproportionately broader competences compared to those of the prosecutor.88 The French AMF has even stronger powers. Information may not be withheld from investigators on professional secrecy grounds (with exceptions including reasons of national security). Investigators have the power to request any document, to interview anyone who may be useful for the progress of the investigation, to enter business premises, to carry out house searches and to seize documents based on a reasoned order from a judge with territorial jurisdiction.89

86 ‘France’, 39–40. 87 Most of these acts may be challenged before a court ex post, but the authority is supposed to act fast. 88 ‘Poland’, 104–05. 89 ‘France’, 68; ‘France’, 74.

22 Katalin Ligeti and Stanisław Tosza The diversification of enforcement tools leads to a continuous marginalisation of the criminal judge to the benefit of the administrative authorities, which are endowed with important detection and punishment powers. This marginalisation may occur de jure, as for instance in Swedish environmental protection enforcement, where certain offences were turned into administrative infringements.90 However, it may simply be a de facto decriminalisation as a result of the expansion and sophistication of the powers of the administrative authorities, as was the case for the enforcement of competition policy in France.91 It is worth highlighting that all countries report that criminal prosecutions of offences remain low and exceptional in all of the three analysed sectors. The diminishing role and importance of the criminal judge is a consequence of the tendency to withdraw from technical and sensitive areas (the stock market, competition and audio-visual sectors) in favour of administrative sanctioning procedures deemed to be more efficient. The underlying idea is often that these areas should be dealt with by authorities composed of professionals of the sector concerned. This creates a strong imbalance in favour of administrative penalties. The shift to punitive administrative law not only leads to quasi-criminal investigative powers for administrative agencies – it may also lead to the emergence of administrative agencies which do not respect the separation of powers. An example is the French AMF, which plays a role of a legislator (by defining the regulatory offences), an investigator (by conducting the administrative investigations) and a judge (by pronouncing the penalty for regulatory offences).92 In addition, some countries in certain fields grant both administrative and criminal law powers to the very same authority. Major problems arose in Germany from such an accumulation of merely administrative tasks and powers (supervising of economic activity) and the punitive-repressive function of the very same authority. This so-called ‘double hat model’ allows for a more efficient handling of both administrative and criminal cases, but raises problems for the rights of the defendant who is confronted with an authority having significant powers under both administrative law and criminal law. Therefore, some laws in Germany require that the individual be informed of his rights to silence and to consult with a lawyer,93 which shall guarantee a sufficiently high standard in administrative proceedings with the potential to trigger a criminal investigation. The non-fulfilment of these standards renders information inadmissible as evidence in criminal proceedings.94 In order to avoid even further marginalisation of the criminal law enforcement of economic and financial crimes, France has lately shown renewed interest in 90 ‘Sweden’, 114. 91 ‘France’, 44–45. 92 ‘France’, 53–54. 93 § 6(15) of the Securities Trading Act (Wertpapierhandelsgesetz). 94 Daniel Zimmer and Matthias Cloppenburg, in Eberhard Schwark and Daniel Zimmer (eds), Kapitalmarktrechts-Kommentar, 4th edn (C.H. Beck, 2010), § 40 WpHG para 2.

Challenges and Trends in Enforcing Economic and Financial Crime 23 criminal sanctions and a certain tendency to enhance the role of criminal sanctions (especially imprisonment) along with that of the criminal judge.95 The financial crisis and tax evasion-related scandals have given rise to a first reform in France in this regard with the creation of a Procureur national financier (National Financial Public Prosecutor). The above-mentioned decision of the French Constitutional Council of March 2015 also offers a new opportunity in this direction. National tendencies aiming to bring criminal law back to the forefront of enforcement might be backed by European law in the future. This new evolution is marked by recent EU legislation in the field (such as the Market Abuse Directive) requiring that certain behaviour be criminalised. Moreover, the jurisprudence of the Court of Justice of the European Union (CJEU) and the European Court of Human Rights (ECtHR) declared that the accumulation of different types of penalties may be in violation of the European framework of procedural safeguards (see below), which may prompt further reforms.

iii. Negotiated Justice The use of negotiated justice has been a growing phenomenon in criminal law in the past few decades. Its importance is even stronger in the sphere of economic and financial crimes. Overburdened criminal justice systems in general tend to dispose of cases out of court instead of resorting to lengthy trials. Some legal systems provide for plea bargaining at trial. But what is even more relevant and present is the use of possibilities to avoid trial (and its nuisances) altogether by dealing with the case without engaging the criminal judge or only with his final approval of a deal which has already been struck. Furthermore, forms of negotiated settlement are not limited to criminal enforcement, but are also widespread when imposing administrative sanctions. For instance, in the US, the DPAs and NPAs are not only used in criminal cases, but also recently by the Securities and Exchange Commission’s Enforcement Division in administrative proceedings.96 The use of negotiated justice techniques in administrative law cases is also widespread in Europe.97 Forms of negotiated justice are widespread in all the analysed countries with the exception of Sweden.98 They are particularly important in the enforcement of competition policy and regarding misconduct affecting the financial markets. The use of negotiated justice has grown to such an extent that it has become the main

95 ‘France’, 57–59. 96 ‘USA’, 150–51. 97 In the competition law area, all four EU countries provide for leniency programmes or other forms of negotiated justice (eg ‘France’, 71); negotiated justice can be present also in other domains, eg regarding the financial markets (‘France’, 71). 98 ‘Sweden’, 136–37.

24 Katalin Ligeti and Stanisław Tosza form of dealing with misconduct in certain domains, as is the case in Germany in both the competition and financial markets.99 Settlements can lead to the final closure of the case, but may also consist of the conditional non-pursuit of prosecution, which terminates upon the complete execution of the agreed conditions (eg, the US DPAs). Sweden is the only one of the analysed legal systems where plea bargaining is not permitted. However, it provides for a comparable system of so-called summary penal orders, which are generally available for criminal offences (if no graver sanction than fines or conditional imprisonment is foreseen) and for certain administrative offences. The particularity of the system consists in the lack of any possibility of negotiations: the authorities offer a summary penal order together with its conditions (usually a fine) and the defendant may only accept it or refuse it. If accepted, the order also precludes ordinary remedies. Out of the three analysed domains, the orders are mostly used in environmental law.100 There are several reasons for the use of forms of out-of-court settlements. First, settlements are used in order to expedite proceedings and to efficiently deal with a growing number of cases. Second, they allow the authorities to avoid complexities in areas where gathering of evidence is difficult, the law is unclear and the defendants are able to build strong defence teams with high expertise.101 Third, negotiated justice has been used to agree on penalties for companies, which were so large and so important for the national or global economy that it was deemed counterproductive to prosecute them due to the large collateral consequences. Finally, out-of-court settlements are used in order to focus more on controlling and improving the functioning of the company by means of compliance and monitorship instead of merely punishing the entity.102 The extensive use of out-of-court settlements creates significant problems for the viability of justice executed this way. From the perspective of the defendant, it may significantly hinder procedural guarantees of the latter, creating a situation where he becomes inclined to forsake those guarantees in order to avoid the risk of even harsher penalties. Furthermore, negotiated justice has been criticised for a lack of transparency. While it seems to be an inherent part of the system,103

99 For detailed information about the use of negotiated justice regarding financial markets, see 2016 Annual Report of the Federal Financial Supervisory Authority, available at https://www.bafin.de/ SharedDocs/Downloads/EN/Jahresbericht/dl_jb_2016_en.html?nn=9648460 177ff; for the statistics on insider dealing, see 180ff; in the field of competition law, see Report of the Federal Cartel Office for the years 2013 and 2014, Document of the Parliament (‘Bundestags-Druckssache’) No 18/5210, 27. 100 ‘Sweden’, 137. 101 For example, complex cases of environmental crime in Germany, see F Saliger, Umweltstrafrecht (Vahlen, 2012) para 542. The reasoning is similar for the use of summary orders in Sweden in the domains of competition and the environment (‘Sweden’, 137). 102 Sabine Gless and Nadine Zurkinden, ‘Negotiated Justice: Balancing Efficiency and Procedural Safeguards’ in Ligeti and Franssen (n 7) 124. 103 ibid 132.

Challenges and Trends in Enforcing Economic and Financial Crime 25 transactions negotiated behind closed doors cannot guarantee that justice has been done and limit the communicative function of the sanctioning system. From a systemic point of view, negotiated justice in the areas of economic and financial offences further erodes the monopoly of the judicial authorities to prosecute, given the even stronger function of the competent administrative body.

D. The Increased Role of Private Actors in Detecting and Investigating Economic and Financial Misconduct The disproportion between corporations, in particular large multi-nationals, and the capacities of law enforcement authorities results in an increasingly significant role for private actors in performing tasks belonging to law enforcement as well as in aiding the authorities in administrative proceedings and in the investigation and prosecution of economic and financial crime. As regards individuals, this need is translated into the status and the protection of whistleblowers. Although whistleblowers have played a crucial role in bringing to light a number of high-profile cases,104 it goes without saying that their role is not limited to well-known affairs. While law enforcement relies increasingly on their cooperation, they do not enjoy uniform protection in all sectors or in all analysed legal systems. For instance, their protection in Poland is limited only to basic labour law rules of non-discrimination and hence is considered insufficient.105 Besides whistleblowers, there seems to be an increasing significance of notifications coming from citizens. For instance, in Poland following the Amber Gold affair,106 there has been a noticeable increase of individual notifications as regards negative experiences with certain financial entities. There is no uniform standard of whistleblower protection in the EU, with the exception of market abuse.107 Consequently, protection in this field is the widest. For instance, Sweden has created a framework allowing employees of financial institutions to inform the Swedish supervising authority (Finansinspektionen) of irregularities within their institutions, which also includes labour law protection.108 The French legislator has created a comprehensive framework including a special procedure to be followed in order to be granted protection together with an obligation to implement respective internal procedures for most of the entities under French stock market authority supervision.109 In January 2017, the German Federal Financial Supervisory Authority introduced an online platform allowing 104 See Umut Turksen, ch 7 in this volume. 105 ‘Poland’, 102. 106 See ‘Poland’, 97–98. 107 Commission Implementing Directive (EU) 2015/2392 of 17 December 2015 on Regulation (EU) No 596/2014 of the European Parliament and of the Council as regards reporting to competent authorities of actual or potential infringements of that Regulation. 108 ‘Sweden’, 135–36. 109 ‘France’, 69.

26 Katalin Ligeti and Stanisław Tosza whistleblowers to declare irregularities whilst guaranteeing their anonymity.110 In some legal systems, protection is also granted in other investigated fields. For example, a similar platform is also employed by the German Federal Cartel Office. Protection is also granted in the field of environmental law enforcement in France. A broader framework is the subject of work conducted at the EU level, which are, however, still at a fairly early stage.111 The fact that the EU wishes to address this issue in a comprehensive manner indicates that there is an important need and potentially a legislative gap resulting in divergent approaches (the same person in a similar setting may be given protection in France, but be sentenced in Luxembourg). However, due to questions related to the EU’s competence to legislate in this field, the EU standard-setting might take longer. The US system also protects whistleblowers, especially in financial and environmental cases. Moreover, it provides for monetary awards, which may reach very substantial amounts.112 In Europe, whilst financial incentives are also possible according to Article 32(4) of the Market Abuse Regulation of 2014, the countries analysed have not introduced them so far. In general, cooperation is much broader, more formalised as regards legal entities and appears under various forms. First of all, corporations have far-reaching duties to report misconduct and to disclose information to the authorities. Different actors, including financial institutions, have obligations stemming from the recently revised anti-money laundering framework. The latter is complemented by the duties of financial institutions to report any suspicious transactions that might constitute insider dealing or market manipulation. These two EU-wide legal frameworks go together with obligations imposed at the national level. For instance, French investment firms have to provide the regulator with the details of all transactions executed by them.113 In addition, the new Swedish Act on Reporting Duty on Possession of Certain Financial Instruments requires the setting up of registries of persons with inside information, the obligation to disclose possession of inside information for individuals and the disclosure by companies of such persons.114 There are no such general reporting obligations in the fields of competition or environmental law. However, the latter contains piecemeal obligations, for instance, concerning the transport of waste. Reporting and disclosure duties of the corporations are at the core of the proper functioning of financial supervision. Without the mandatory obligation of reporting and disclosure provided for in several Polish statutes regarding the financial markets, the ability of the Financial Supervisory Authority to effectively supervise the market would be severely impaired.115

110 See

https://www.bkms-system.net/bkwebanon/report/clientInfo?cin=2BaF6&language=ger. also http://ec.europa.eu/newsroom/just/item-detail.cfm?item_id=54254. 112 ‘USA’, 174; also in antitrust cases, ‘USA’, 216. 113 ‘France’, 68. 114 ‘Sweden’, 126. 115 ‘Poland’, 98–99. 111 See

Challenges and Trends in Enforcing Economic and Financial Crime 27 Another form of cooperation of corporations with law enforcement a gencies is the leniency programme, which is typically present in competition law in all of the countries, but less so in other areas of economic and financial crime. Nonetheless, Sweden reports that in the environmental area, a corporate fine can be adjusted if the trader has been helpful and has tried to prevent, remedy, limit the damage or admitted the offence. Similarly, an environmental sanction does not need to be charged if it would be unreasonable in view of what the person has done in order to prevent a breach from occurring. As noted above, competition law does not contain obligations to inform. However, the application for leniency implies an obligation to cooperate, which includes duties as regards providing information and documents.116 All these reporting and disclosure duties are obviously very useful for the authorities, but they also put a strain on the suspect’s privilege against self- incrimination. Hence, one may wonder how far-reaching these obligations should be and how important they should be in relation to the fact-finding by the authorities. Leniency and whistleblower programmes put huge pressure on corporations and individuals to cooperate with the authorities, and create serious tensions between the rights of individuals and corporations.117 For instance, questions arise as to who may exercise the corporation’s privilege against self-incrimination (unless the corporation is not entitled to this privilege) and how ‘free’ corporate officials and lower-level employees are to exercise their own right to remain silent when the corporation decides to cooperate with the authorities and conducts an internal investigation. These tensions between individuals and corporations are exacerbated in cases of parallel or consecutive administrative and criminal proceedings, and the situation becomes even more complex in cases of parallel investigations in different countries.

IV. The Legal Limits of New Control Systems The tendencies analysed above generate, as shown above, a number of questions regarding adequate defence rights and the balancing of the positions of law enforcement and the defendant. The extensive use of non-criminal ways of sanctioning as well as the intertwining of criminal and administrative enforcement raise two crucial, more general questions. First, to what extent do procedural rights developed within criminal law apply in relation to administrative sanctions? Second, can the overall proportionality of the public reaction to an act of

116 ‘Sweden’, 133–34. 117 See also the analysis of the profile of the whistleblower and a leniency applicant from a criminological perspective in Christopher Harding, ‘The Role of Whistleblowing and Leniency in Detecting and Preventing Economic and Financial Crime: A Game of Give and Take?’ in Ligeti and Franssen (n 7) 108ff.

28 Katalin Ligeti and Stanisław Tosza misconduct that may qualify both as an administrative irregularity and a criminal offence be assessed (which translated in particular into the ne bis in idem issue)? The more the use of parallel sanctioning system increases, the more pertinent these questions are. However, that is not to say that the parallel track is forbidden, but that the coordination in the application of both ways should ensure that human rights guarantees are respected.118 The two questions – the application of the criminal law guarantees to administrative sanctions and ne bis in idem – were tackled by the ECtHR as well as the CJEU.119 The positions taken by both courts are not in full agreement, nor do they seem to be definitive.120 As to the first problem, it has been analysed by the ECtHR within the framework of Article 6 ECHR regarding the applicability of the guarantees provided by this and the following articles of the Convention in administrative proceedings. The problem comes down to the understanding of the concept of a criminal charge. Starting with the judgment in Engel, the ECtHR developed an autonomous interpretation of the term. Accordingly, an offence is to be classified as ‘criminal’, resulting in the application of the ECHR guarantees linked with criminal charges, if the following criteria (the so-called ‘Engel criteria’) are fulfilled: (1) classification of a norm under domestic law as criminal; (2) the nature of the offence in question; and (3) the degree of severity of the penalty.121 The first criterion is necessarily of lesser importance as regards administrative sanctions.122 In principle, it is sufficient that only one criterion points towards the charge being criminal, although there are judgments requiring an accumulation of at least two of them.123 As a consequence, the same rights provided for criminal offences by the ECHR have to apply to administrative offences if they ‘are punishable with sanctions that pursue a deterrent and punitive aim, except if the norm does not have a general character’ 118 This section is not meant to present a comprehensive analysis of these problems, which have generated a vast body of jurisprudence and scholarly writing. It only sketches out the debate, which has significant impact on the issues demonstrated by the comparative analysis. The quoted literature is also only a selection of what has been written on the topic. 119 Galli and Weyembergh (n 22); Franssen (n 23) 84ff; Anne Weyembergh and Nicolas Joncheray, ‘Punitive Administrative Sanctions and Procedural Safeguards: A Blurred Picture That Needs to Be Addressed’ (2016) 7(2) New Journal of European Criminal Law 190ff; Brodowski (n 23) 141ff; Vanessa Franssen ‘La notion “pénale”: mot magique ou critère trompeur? Réflexions sur les distinctions entre le droit pénal et le droit quasi pénal’ in Delphine Brach-Thiel (ed), Existe-t-il encore un seul non bis idem aujourd’hui? (L’Harmattan, 2017) 57ff; John AE Vervaele, ‘Ne Bis in Idem: Towards a Transnational Constitutional Principle in the EU?’ (2013) 9(4) Utrecht Law Review 211ff; Michele Simonato, ‘Two Instruments But a Difficult Relationship? Some Upcoming Decisions of the CJEU on the Ne Bis in Idem’, European Law Blog, 15 November 2017, https://europeanlawblog.eu/2017/11/15/two-instruments-but-a-difficult-relationship-some-upcoming-decisions-of-the-cjeu-on-the-ne-bis-in-idem. 120 Franssen (n 119) 76; Weyembergh and Joncheray (n 119) 191. 121 Engel and Others v The Netherlands, App Nos 5100/71, 5101/71, 5102/71, 5354/72 and 5370/72 (ECHR, 8 June 1976) 82ff. 122 Christoph Grabenwarter, European Convention on Human Rights: Commentary (CH Beck; Hart Publishing; Nomos; Helbing Lichtenhahn Verlag, 2014) Article 6, marginal number 20. 123 Janosevic v Sweden, App No 34619/97 (ECHR, 23 July 2002) 67; Ziliberberg v Moldova, App No 61821/00 (ECHR, 1 May 2005) §31.

Challenges and Trends in Enforcing Economic and Financial Crime 29 and/or ‘are punishable with sanctions that, due to their severity, are analogous to penal sanctions/criminal penalties’.124 The ECHR has over the years developed a body of jurisprudence applying these criteria in concrete cases, while extending the scope of application of criminal law guarantees. As to the second criterion – the nature of the offence – the following elements are to be taken into account: the general character of the obligation the infringement of which is subject to the sanction in question, the character of protected interests, the goal of the sanctions, and the similarity of the procedure to the criminal procedure.125 The retributive or preventive aim of the sanction is taken into consideration under this criterion.126 As to the nature and the degree of the sanction, it should be assessed according in particular to the following criteria: the nature and type of the punishment, its impact on the offender, the maximum penalty to which the subject could be sentenced as well as the modalities according to which it can be enforced.127 More concretely, fines can be considered criminal depending on the amount.128 A ban on the exercise of a profession as a sanction should also incur the application of Article 6.129 The movement towards ever-expanding protection changed with the judgment in Jussila v Finland. In this judgment, the ECtHR decided that not every offence that could fulfil the above criteria for a criminal charge must be subject to the full protection of Article 6 ECHR. Instead, a distinction should be made, within the criminal category, between a ‘core’ and a ‘periphery’, with the significant degree of stigma being the criterion dividing the two subcategories.130 This judgment was followed by jurisprudence applying the distinction between the core and peripheral criminal law.131 While it is to be expected that this line will be continued, the application of this approach has so far been limited.132 While the CJEU was receptive to the Engel jurisprudence overall,133 it was less so regarding competition law sanctions.134 The CJEU, after briefly signalling 124 Pedro Caeiro, ‘The Influence of the EU on the “Blurring” between Administrative and Criminal Law’ in Galli and Weyembergh (n 22) 177. 125 Franssen (n 119) 66ff. 126 ibid 73. 127 Grabenwarter (n 122) 23. 128 eg, Öztürk v Germany, App No 8544/79 (ECHR, 21 February 1984); Bendenoun v France, App No 12547/86 (ECHR, 24 February1994). 129 Grabenwarter (n 122) 26; Le Compte and Others v Belgium, App No 6878/75 (ECHR, 23 June 1981); Diennet v France, App No 18160/91 (ECHR, 26 September 1995) 27. 130 Jussila v Finland, App No 73053/01 (ECHR, 23 November 2006) 43. 131 eg, Talaber v Hungary, App No 37376/05 (ECHR, 29 September 2009) 27 (deciding that charges for disorderly conduct and vandalism belong to the core of criminal law, in particular as imprisonment as a sanction was possible, even if it was not applied in this case); Kammerer v Austria, App No 32435/06 (ECHR, 12 May 2010) 28 (deciding that non-compliance with the obligations of registered owners to have their cars duly inspected did not belong to the core). 132 Franssen (n 119) 79 133 Case C‑489/10 Łukasz Marcin Bonda [2012] ECLI:EU:C:2012:319. 134 The ECtHR has not addressed the status of EU competition law sanctions and most likely will not do so until the accession of the EU to the Convention. See Antoine Bailleux, ‘The Fiftieth Shade of Grey: Competition Law, “Criministrative Law” and “Fairly Fair Trials”’ in Galli and Weyembergh

30 Katalin Ligeti and Stanisław Tosza potential reception of the ECtHR approach in Hüls,135 rejected the criminal nature of competition law.136 In the first place, the rejection was based on the legal provision in Article 23(5) of Regulation 1/2003, which, like the preceding one,137 denied the criminal nature of decisions imposing fines for breaches of competition law. However, another argument was put forward, namely that the effectiveness of competition law would be imperilled should the criminal law label be applied to it.138 This reasoning merits criticism as it could be used to hamper any legal limitations on state power; moreover, it does not reflect the reality of competition law sanctions, which are not infrequently applied to ailing companies.139 It appears that the reception of the ECtHR approach regarding competition law sanctions can be more positive after Jussila.140 For instance, two opinions of Advocates General attest to this change of attitude. AG Kokott in Schenker and AG Sharpston in KME Germany and Others v Commission indicate that antitrust law has a ‘character similar to criminal law’141 or ‘falls under the “criminal head” of Article 6 ECHR’,142 while making reference to it not being part of the core of criminal law – a clear reference to Jussila.143 Furthermore, the CJEU suggested in Schindler v Commission, with reference to Menarini, that large fines might fall under the ‘criminal head’.144 It is fair to assume that the CJEU will also be cautious not to label competition law fines as criminal, since to do so would open the door to claims of rights and guarantees.145 However, even if the language of Article 23(5) of Regulation 1/2003 is clear, antitrust law is claimed to be a perfect example of a domain in between criminal and administrative law – a ‘criministrative’ law, as it has been termed.146 The issue of administrative sanctions being of a criminal nature has also appeared in other fields of law, such as taxation147 or agriculture.148 At the (n 22) 140; Connolly v 15 Member States of the European Union, App No 73274/01 (ECHR, 9 December 2008). However, it has declared national competition law to be of a criminal character for the purposes of Article 6 ECHR (A Menarini Diagnostics SRL v Italy, App No 43509/08 (ECHR, 27 September 2011) 38ff). 135 Case C-199/92 P Hüls v Commission, ECR I-4336, para 150, which itself refers to Öztürk. 136 General Court: Case T-276/04 Compagnie maritime belge SA v Commission of the European Communities [2008] ECLI:EU:T:2008:237, para 66; CJEU: Volkswagen, CJ, 18 September 2003; Case C-338/00 P Volkswagen v Commission, ECLI:EU:C:2003:473, para 96. 137 Regulation no 17. 138 Volkswagen v Commission (n 136) para 97. cf also the opinion of AG Ruiz-Jarabo Colomer in that case, delivered on 17 October 2002, para 66. 139 Bailleux (n 134) 142. 140 ibid 143ff. 141 Opinion delivered on 28 February 2013 in C-681/11, Schenker ECLI:EU:C:2013:126, para 40. 142 Opinion delivered on 10 February 2011, in C-272/09 P, KME Germany and Others v Commission ECLI:EU:C:2011:63, paras 64 and 67. 143 Bailleux (n 134) 143. 144 Case C-501/11 P [2013] Schindler v Commission ECLI:EU:C:2013:522, para 33. It is worth noting that in Menarini, the ECtHR did not state whether competition law would be part of the periphery or the core of criminal law. 145 Bailleux (n 134) 144. 146 ibid 138. 147 Case C-617/10 Åklagaren v Hans Åkerberg Fransson [2013] ECLI:EU:C:2013:105. 148 Łukasz Marcin Bonda (n 133).

Challenges and Trends in Enforcing Economic and Financial Crime 31 beginning, the CJEU seemed to follow the approach of the ECtHR by analysing the nature of the offence using the following two criteria: the general nature of the rule the violation of which is being punished and the goal of the sanction.149 The reception of the Engel jurisprudence was even clearer in Bonda, where the CJEU used the Engel reasoning and expressly quoted from that judgment.150 Yet, some authors indicate that further development of the jurisprudence may be showing the will of the CJEU to take its own path. In Åkerberg Fransson, the CJEU used the same criteria, but without quoting the ECtHR jurisprudence – instead referring to Bonda.151 However, this may be more a question of the Court’s technique of referencing its own judgments than an indication of a real change, since Bonda clearly makes reference to the Engel jurisprudence. Åkerberg Fransson also suggested that the national court, while assessing whether tax law sanctions are of a criminal nature, does not have to conclude positively, whereas the ECtHR already considered such sanctions to be criminal.152 This may be taken to suggest that the CJEU wishes to develop a more autonomous approach.153 The judgment in Balaz goes even further in this direction. Instead of using the Strasbourg criteria or making reference to the rights guaranteed in the ECHR, as suggested by AG Sharpston in her opinion, the Court is significantly silent on these matters.154 Clear use of the Engel criteria (without reference to the core-periphery distinction) was suggested more recently by AG Campos Sánchez-Bordona in his opinion in Menci.155 It should not be forgotten that the notion of ‘criminal’ has an additional function in EU law, which is to delimit the competences of the EU and the Member States, and the latter have typically invited a more cautious approach to extending its boundaries.156 The debate also influences the legislative process. While preparing the Directive of 9 March 2016 concerning the presumption of innocence, the European Parliament introduced amendments which were meant to take into account the Engel jurisprudence as regards the scope of the Directive.157 However, the amendments were not adopted and a compromise wording limiting the influence of the Strasbourg approach remains as a testament to this attempt.158 The problem of ne bis in idem has a particular place in this debate. This rule should prevent the abuse of power through punishing twice for the same criminal act. The issue becomes relevant for this reflection if administrative sanctions are assimilated with the criminal sanctions according to the reasoning presented 149 Franssen (n 119) 81. 150 Łukasz Marcin Bonda (n 133) paras 37ff. 151 Åklagaren v Hans Åkerberg Fransson (n 147) para 35. 152 ibid para 37. 153 Franssen (n 119) 84. 154 Case C‑60/12 Marián Baláž [2013] ECLI:EU:C:2013:733, paras 36ff. See also Franssen (n 119) 85–87. 155 Opinion of AG Campos Sánchez-Bordona, delivered on 12 September 2017 in Case C‑524/15 Luca Menci [2018] ECLI:EU:C:2018:197, para 126. 156 Franssen (n 119) 89. 157 Weyembergh and Joncheray (n 119) 202–03. 158 Recital 11 of the Preamble.

32 Katalin Ligeti and Stanisław Tosza above (ie, the Engel jurisprudence). Hence, the judgments in ne bis in idem cases influenced the debate on the criminal charge and were cited above. The application of this right is crucial given, as was demonstrated by the comparative analysis, the numerous possibilities for parallel or subsequent proceedings of criminal and administrative nature. The ‘right not to be tried or punished twice’ was introduced by Article 4 of Protocol No 7 annexed to the ECHR (signed in Strasbourg on 22 November 1984). The subsequent jurisprudence contributed to clarifying the meaning of this right, including limiting the effects of reservations and declarations made by the Member States.159 This right had been extended to administrative sanctions considered ‘criminal’ according to the Engel meaning,160 until the judgment in A and B v Norway developed a significant and controversial exception:161 the right might not be breached if the duplicated proceedings – both criminal and administrative – are ‘sufficiently closely connected in substance and in time’.162 The judgment offers some criteria according to which the link between the two types of sanctioning procedures can be considered to be sufficiently close.163 The EU guarantees the right not to be tried or punished twice in criminal proceedings for the same criminal offence in Article 50 of the Charter of Fundamental Rights, and it applies at the transnational level as well as the national level if the latter is dealing with EU law. The understanding of Article 50 was aligned in the judgments in Bonda164 and Åkerberg Fransson165 with the interpretation given to the right in the Strasbourg case law before the A and B v Norway judgment.166 Hence, the latter judgment gave rise to the question of how to align the EU approach to ne bis in idem with this now less protective approach of the ECtHR.167 It should be borne in mind that Article 52(3) of the Charter of Fundamental Rights requires that for rights which correspond to rights guaranteed by the Convention (including those granted in additional protocols), the interpretation of those rights should lead to an equal or higher standard of protection. While the

159 In particular, Sergey Zolotukhin v Russia, App No 14939/03 (ECHR, 10 February 2009); Grande Stevens v Italy, App No 18640/10 (ECHR, 4 March 2014). For the case law history, see the summary in the opinion of AG Campos Sánchez-Bordona, delivered on 12 September 2017 in Luca Menci (n 155) paras 35ff. It is also instructive to note that Germany and the Netherlands have not ratified this protocol. 160 Opinion of AG Campos Sánchez-Bordona, delivered on 12 September 2017 in Luca Menci (n 155) para 44. 161 The judgment was fiercely criticised in the dissenting opinion of Judge Pinto de Albuquerque. See also Simonato (n 119). 162 A and B v Norway, App Nos 24130/11 and 29758/11 (ECHR, 15 November 2016) 130. 163 ibid 132. 164 Łukasz Marcin Bonda (n 133). 165 Åklagaren v Hans Åkerberg Fransson (n 147). 166 Opinion of AG Campos Sánchez-Bordona, delivered on 12 September 2017 in Luca Menci (n 155) para 34. 167 See the analysis of Simonato (n 119).

Challenges and Trends in Enforcing Economic and Financial Crime 33 current approach respects this duty, the CJEU faced the question of whether to lower the level of protection by aligning it with the new approach of the ECtHR or to keep the current high level of protection, as it may also do within the framework of Article 52(3). This question was the subject of three pending cases at the CJEU: Menci, Garlsson et al and Di Puma. The September 2017 opinion of AG Campos Sánchez-Bordona suggested the latter option.168 In the recently issued judgments in these cases, the CJEU opted not to preclude the use of criminal sanction for facts that have already been subject to sanctions of a different kind. However, the criteria chosen by the Court in order to make this permissible were different. The ECtHR had focused on the foreseeability of the duality reflecting different aspects of social misconduct, procedural coordination as well as taking into account the sanction imposed in the first proceeding.169 The CJEU’s approach, on the other hand, requires the fulfilment of the following criteria: the general interest pursued by the legislation in question has to justify such a duplication of proceedings and penalties; the legislation must contain ‘rules ensuring coordination which limits to what is strictly necessary the additional disadvantage which results, for the persons concerned, from a duplication of proceedings’ and provide ‘for rules making it possible to ensure that the severity of all of the penalties imposed is limited to what is strictly necessary in relation to the seriousness of the offence concerned’.170 It remains to be seen whether the discrepancy between the CJEU and the ECtHR will widen or disappear in the following judgments and whether EU legislation might address further the Engel approach. The extensive use of punitive administrative law or criminal administrative law has also generated conceptual criticism. Individual authors have even suggested that punitive law, including administrative law, should be properly labelled as criminal.171 While there are very good reasons to call for sufficient protection of subjects who may incur significant sanctions, this opinion might be going too far. There are also good reasons for using administrative law, such as the need for efficiency and promptness in legal reaction. It might also be impractical as regards ne bis in idem to preclude criminal investigation of organised crime by virtue of the existence of previous administrative proceedings.172 This comparative research demonstrated the degree of intertwining of the use of administrative and criminal sanctions as well as the significance of the use of administrative sanctions. The analysis of national systems indicates that parallel proceedings are not rare173 and it does not seem realistic to expect that states

168 Opinion of AG Campos Sánchez-Bordona, delivered on 12 September 2017 in Luca Menci (n 155) para 126. See also the analysis of this opinion by Simonato (n 119). 169 A and B v Norway (n 162) 132. 170 Luca Menci (n 155) para 65. 171 Brodowski (n 23). 172 Simonato (n 119); A and B v Norway (n 162) 95. 173 ‘Sweden’, 111–12; ‘Poland’, 89 and 96; France, 51–53.

34 Katalin Ligeti and Stanisław Tosza will abandon this practice. As a consequence, there is a need to guarantee that the operation of parallel tracks does not hamper the human rights of defendants. While the double-track solution is as such permissible, the crucial element is the form of coordination between the two routes, which is not yet clear (eg, the offsetting of penalties).174 In sum, it has to be ensured that a serious and not illusory level of protection is guaranteed when applying administrative sanctions.175

174 Opinion of AG Campos Sánchez-Bordona, delivered on 12 September 2017 in Luca Menci (n 155) para 123. 175 Separate opinion of Judge Pinto de Albuquerque in A and B v Norway (n 162) para 80.

2 Enforcing Economic and Financial Policies in National Systems – Financial Markets Regulation, Environmental Law and Competition Law

36

2.1 France JULIETTE TRICOT AND MAXIME LASSALLE

Introduction: The Paradoxes of French Economic and Financial Criminal Law Financial markets, environment and competition are emblematic sectors of modernity. The responses deployed to tackle illicit misconduct affecting them are determined in particular by the globalisation of the economy and the law. These responses are more particularly a reflection of the new forms of state intervention, within which punitive power occupies a special place and plays a peculiar role. These particularities are reflected in a first paradox that can be summarised as follows: the place of criminal law is residual, meaning that classical criminal law is not as central as it used to be, yet the role of criminal law remains essential. In these sectors, the shift from the welfare state to the regulatory or co-regulatory state has encouraged a profound movement of de jure or de facto decriminalisation. Thus, the place of criminal law has been reduced. This withdrawal of criminal law is particularly significant in France, where criminal law occupies a traditionally extended place, but it must not mask the redeployment and an expansion of repression. In other words, the partial and relative retreat of criminal law in these sectors does not mean a reduction in repression; quite the contrary. This is due to a renewal of the modalities of repression, which give a very large place to administrative forms of enforcement, whether through the intervention of regulatory authorities, ie, independent authorities such as the French competition authority1 (hereinafter AdlC) and the French stock market authority2 (hereinafter AMF), or through special ‘police administrative’,3 as is the case in the environmental field. But – and 1 Autorité de la concurrence. 2 Autorité des marchés financiers. 3 The French ‘police administrative’ as opposed to ‘police judiciaire’ refers to law enforcement authorities which are mostly dealing with regulatory matters and do not deal in theory with criminal investigations. There is no unity in the ‘police administrative’, as it is an umbrella concept covering different administrative authorities specialising in addressing specific regulatory matters. They can investigate administrative offences, but their investigations can of course reveal criminal misconduct

38 Juliette Tricot and Maxime Lassalle this is an essential characteristic of the French system – the rise of administrative enforcement does not mean the disappearance of criminal law. On the contrary, its permanence is a key element of the system. Administrative repression needs penal repression, sometimes as a threat, sometimes as a relay. The result is a situation of ‘double dependency’: if, as will be seen, the criminal law system is highly dependent on administrative repression, the efficiency of administrative repression is in turn largely dependent on the existence and/or implementation of criminal law. This double dependency is now reinforced by a renewed interest towards criminal law. Such ‘comeback’ is especially illustrated in France at the institutional level by the creation of the Financial Public Prosecutor (FPP).4 But this comeback of criminal law enforcement must be well understood. It does not call into question the process evoked at the moment of redeployment of the public (punitive) enforcement, largely based on the administrative approach. It is part of this movement with the effect of renewing the question of the interplay of punitive modalities and punitive strategies. This latter question has thus become one if not the major challenge. The second paradox relates to what distinguishes the sectors studied, namely their claim to autonomy and to the recognition of their specificity. Today, we are seeing developments that are apparently contradictory. On the one hand, this specificity is reinforced. Initially linked to the very subject matter to be regulated, insofar as their subjects are eminently technical and the actors are largely undertakings, this specificity has become rooted in the increasing specialisation of the authorities in charge of enforcement. As a result, the claim to specificity and even autonomy is maintained by the very actors responsible for ensuring compliance with the law, which results in the development not only of specific functions assigned to enforcement, but also of peculiar modalities and forms of enforcement. And yet, on the other hand, this specificity is doubly tempered. This results from the fact that different forms of enforcement influence each other through reciprocal borrowing: criminal law enforcement is thus inspired by negotiated procedures or compliance programmes that are widely used in the administrative field. But at the same time, criminal law principles and safeguards penetrate administrative procedures. Indeed, as we know, the supranational development of fundamental rights leads to the development of a common law of punitive enforcement. This common law certainly does not eliminate the specificities and they then refer the case to the judicial authorities. These authorities tend to play an important role in detecting and conducting the first steps of the investigations, and can even be simultaneously a ‘police administrative’ organ addressing regulatory matters and a ‘police judiciaire’ organ addressing criminal misconducts in their field. Moreover, ‘police administrative’ authorities may be granted investigative powers which are usually considered to be ‘police judiciaire’ powers. The distinction between ‘police administrative’ and ‘police judiciaire’ therefore tends to be blurred. For the sake of clarity, this chapter indicates which one is competent in a given context. 4 Law No 2013-1115 of 6 December 2013.

France 39 (as administrative, civil and penal law enforcement mechanisms are not equivalent), but it attenuates them and relativises them in large part. This is why this second paradox of a specificity that is both consolidated and relativised also highlights the challenge of the combination of different punitive strategies. These two paradoxes and this central challenge form the backdrop to this presentation of the French enforcement system in economic, financial and environmental matters.

I. Contemporary Challenges and Recent Reforms A. Major Recent Reforms to the Criminal Justice System Affecting the Three Areas Reforms over the last decade in the financial, economic and environmental sectors have been part of a common process, a general trend of the gradual rationalisation of the ways and forms in which public authorities monitor and enforce compliance with the law. This rationalisation is reflected in three related processes: first, a continuous increase of the empire (extent) and magnitude (power and severity) of administrative (punitive) enforcement; second, the simultaneous preservation of criminal law enforcement, possibly tightened in its fields of action but reinforced in its means of intervention, in particular through the specialisation of the public authorities in charge (the example of the FPP is significant in this respect); and, third, the general reinforcement of procedural safeguards, a prerequisite for the legitimacy not only of the variety of different types of punitive enforcement but even more so of their co-existence. However, this rationalisation differs depending on the sector concerned. As far as misconduct affecting financial markets is concerned, several texts have been adopted, following two directions: first, strengthening enforcement, via the expansion of the scope of application of both criminal and administrative laws, the increase of the severity of criminal and administrative sanctions, and the consolidation as well as the restructuring of the powers of both administrative and criminal enforcement authorities; and, second, strengthening procedural safeguards applicable before the administrative authority. In this respect, three major reforms stand out in particular. Law No 2010-1249 of 22 October 2010 on banking and financial regulation introduced several important developments, which reinforced the shift towards a ‘judicialisation’ of administrative enforcement.5 5 The ‘judicialisation’ is understood as a movement towards a more adversarial procedure allowing defendants to challenge the decisions and findings of the investigative body of an administrative authority before another division of the same administrative authority as if it were a court (art L621-15 of the Monetary and Financial Code).

40 Juliette Tricot and Maxime Lassalle It strongly increased the levels of severity of sanctions and introduced new avenues of recourse, while providing the AMF with the power to offer an administrative settlement procedure. Anticipating EU reform proposals, Law No 2013-672 of 26 July 2013 on the Separation and Regulation of Banking Activities significantly strengthened repression of market abuse offences through the expansion of their scope and the strengthening of the AMF’s powers. Finally, Law No 2016-819 of 21 June 2016 Reforming the System of Repression of Market Abuses completed this framework specifically on the definition of certain offences in order to comply with EU requirements and more importantly created a new regime on the choice between the administrative and the criminal tracks. In competition law, reforms tend to follow one and only one objective: consolidate the enforcement powers of the administrative authority while taking into account the increasing requirements regarding procedural safeguards. The reform introduced by law on New Economic Regulations (hereinafter referred to as the ‘NRE Law’) No 2001-420 of 15 May 2001 set this process in motion. It is the largest reform since the passage of Ordinance No 86-1243 of 1 December 1986, which is considered to be the inception of the modern French competition law by its decriminalisation and the creation of a regulatory authority with decision-making powers, initially named the Competition Council. The modernisation process continued with Law No 2008-776 on the Modernisation of the Economy of 13 November 2008. It converted the Competition Council into the present-day AdlC conferring upon the latter expanded and enhanced powers, and contributed to establishing the pre-eminence of the administrative control. Law No 2014-344 of 17 March 2014 on Consumer Rights (hereinafter referred to as the ‘Hamon Law’) introduced the class action procedure for ‘competition’ litigation, while expanding the powers of AdlC officials. Law No 2015-990 of 6 August 2015 for the Growth, Activity and Equal Economic Chances (hereinafter referred to as the ‘Macron Law’) strengthened the powers of AdlC officials and modified the negotiated justice techniques. Finally, in environmental matters, several reforms have been adopted recently, pursuing two main objectives: first, to streamline a system based on 25 different special organs of ‘police administrative’, with their own administrative and judicial enforcement mechanisms; and, second, to adapt French law to international and European requirements. The first objective is pursued by Ordinance No 2012-34 of 11 January 2012 Simplifying, Reforming and Harmonising Provisions of the Environmental Code Regarding the ‘Police Judiciaire’ and the ‘Police Administrative’ (hereinafter referred to as the Ordinance of 2012). This harmonises the powers and tools available to the various competent authorities. It also harmonises the sanctions system. The second is pursued by Ordinance No 2010-1579 of 17 December 2010 on the Implementation of Various Instruments of EU Law in the Field of Waste Management and by Law No 2013-619 of 16 July 2013 on the Implementation of Various EU Instruments Relating to Sustainable Development, which introduced a new Article L415-6 of the Environmental

France 41 Code in the field of wildlife crime and increased penalties where the offence is committed by an organised group. Law No 2016-1087 of 8 August 2016 for the Reconquest of Biodiversity is the most recent development.6 This increased criminal penalties applicable to illicit trafficking in protected species.7 It also created a legal basis for the exchange of information and for enhanced cooperation between investigative authorities. This law reformed the system of ‘criminal transaction’ and reduced its scope.8

B. Reasons for Introducing the Reforms and Problems Related to the Lack of Them The main reason for the reforms in the three fields considered is indisputably compliance with European requirements. Most of the reforms have been triggered as a result of EU law. They have also been the result of the necessity to take account of the European standards derived from the case law of the ECtHR. In financial matters, compliance with EU law has been accomplished either by anticipation9 or by obligation within the scope of the transposition processes.10 The second reason for the reforms, which also explains the fact that it has often anticipated the European reforms, is France’s will to draw conclusions from the financial crisis.11 The third reason consists of the national or supranational requirements issued by the French or European courts in connection with compliance with fundamental rights, particularly procedural safeguards which should be complied with during the administrative proceedings12 and more recently because of the

6 [2016] Revue de Science Criminelle et de Droit Pénal Comparé 814. 7 Article L415-3 of the Environmental Code. 8 ibid art L173-12. 9 This has been the case for Law No 89-351 of 2 August 1989 (transposing Council Directive 89/592/ EEC of 13 November 1989), Law No 2010-1249 on banking and financial regulation and Law No 2013672 on the separation and regulation of banking activities, which anticipated in part the content of Directive 2014/57/EU and EU Regulation 596/2014. 10 This is the case for Law No 2005-842 of 26 July 2005 for the trust and the modernisation of the economy and Law No 2005-811 of 20 July 2005 on the implementation of EU law in the field of financial markets, which have transposed Directive 2003/6/EC. This is also the case for Law No 2007-1774 of 17 December 2007 on the implementation of EU law in the economic and financial fields. 11 Law No 2010-1249 of 22 October 2010 on banking and financial regulation; Law No 2013-672 of 26 July 2013 on the Separation and Regulation of Banking Activities. 12 The influence of the case law of the ECtHR is indisputable, although the most significant decisions did not concern proceedings applicable to market abuses. For instance, as a result of the Ravon decision, which concerned tax procedures (Ravon and Others v France, App No 18497/03 (ECHR, 21 February 2008)), Ordinance No 2008-1161 of 13 November 2008 on the Modernisation of Competition Regulation modified Article L464-8 of the Commercial Code and Ordinance No 2009-233 of 26 February 2009 strengthened the rights of the defence and reformed art L621-12 of the Monetary and Financial Code (search of premises by AMF agents).

42 Juliette Tricot and Maxime Lassalle existence of a system based on the accumulation of prosecutions and sanctions of a different nature.13 In addition to these three reasons, reference should also be made to the impact of major scandals caused by cases such as Péchiney14 and EADS15 that stimulated the legislative and case law evolution. Unsurprisingly, EU law constitutes the main driver for the reforms of competition law. The influence of the EU model can be seen not only with regard to the determination of the different infringements, but also, and particularly today, through the development of tools intended for the implementation of the competition policy such as leniency or even incentives to resort to private action.16 As for stock exchange matters, compliance with the fundamental rights is also an essential reason for evolution, initiated by case law17 and furthered by the legislator. As mentioned above, the two main objectives of the reforms in the area of environmental criminal law are the rationalising of the system composed of 25 different policies by harmonising the inspection and sanctioning powers of the competent authorities and compliance with EU requirements.18 These reforms affect both waste trafficking19 and wildlife crime,20 but they also have a much more comprehensive scope.

C. Reforms Planned in the Near Future There are no reforms planned in the three fields examined here. However, debates in relation to the respective roles of administrative and criminal sanctions are still ongoing.

13 Decision of the Constitutional Council, 18 March 2015, no 2014-453/454 QPC and 2015-462 QPC, M John L et autres (Cumulative prosecutions for the offence of insider dealing and prosecutions for insider misconduct). 14 Cass crim, 3 November 1992, no 92-84.745, B no 352; Geneviève Giudicelli-Delage [1993] Revue de Science Criminelle et de Droit Pénal Comparé 787 (note). 15 The influence of the EADS case is noteworthy with respect to the aforementioned reforms of 2010 and 2013. This case was also the cause of the 2016 reform imposed by the Decision of the Constitutional Council of 18 March 2015. 16 This is the case, for example, for the aforementioned Hamon Law, including within the scope of class action ‘the damages resulting from anti-competition practices in accordance with Title II of Book IV of the Commercial Code or Arts 101 and 102 of the Treaty on the Functioning of the European Union’ (art L423-1(2) of the Consumer Code). 17 Besides the Ravon decision mentioned above (n 12), see the abundant case law of the Cour de cassation relating to the practice of ‘global seizure’: Laurent Saenko, ‘Les saisies globales en droit de la concurrence: perspectives nouvelles’ (2013) 10 Droit pénal 16. 18 See the Ordinance of 2012. 19 See the aforementioned Ordinance No 2010-1579 that transposed Directive 2008/99/EC and has modified accordingly art L541-46 of the Environmental Code. 20 Law No 2008-757 of 1 August 2008 relating to environmental liability; Law No 2013-619 of 16 July 2013 on the implementation of various EU instruments relating to sustainable development.

France 43

II. Substantive Criminal Law A. The Legislative Technique Used for Offence Definitions As far as the offences concerning financial markets are concerned,21 the legislative technique can be considered to be a combination of several elements. The use of vague, undefined or poorly defined notions is very well developed. This is the case of the key concept of inside information. In this regard, the role of the EU law, including case law, which is itself vague, is undeniable.22 The use of cross-referencing is the second specific feature, resulting in (uncertain) criminal provisions left blank, such as offences for non-compliance with professional obligations defined by applicable laws and regulations, and therefore not addressing a very specific conduct.23 The third and final characteristic of the legislative technique is that criminal offences are distinguished by being drafted as a result of successive amendments. This results in very dense and complex texts, the extent of which is largely defined by case law.24 However, the legislative technique, ie, the way of drafting or designing the offences, is not the main feature of financial criminal law. The legislative strategy, characterised by the duplication of criminal offences as administrative misconducts, is the main feature. This double regulation of stock market behaviours is the result of different legislative powers. In accordance with Article 34 of the Constitution of 1958, it falls within the realm of statutory law to criminalise and punish stock market offences. However, it is in fact the responsibility of the AMF

21 Articles L465-1 and L465-2 of the Monetary and Financial Code and the relevant infringements according to European regulations punished under art L621-15 III of the Monetary and Financial Code. 22 See, most recently, Case C-628/13 Jean-Bernard Lafonta v AMF EU:C:2015:162; Laetitia Avia, ‘Imprécisions autour de la notion d’information privilégiée : une occasion manquée?’ (2015) 106 Revue Lamy Droit des Affaires 23. 23 See, for instance, Decision of the Enforcement Committee of the AMF, 21 June 2007, Société AAZ Finances et MM Olivier Avit and Jean-Jacques Rabineau; Thierry Bonneau [2008] Revue Droit des sociétés 37 (note); Dominique Bompoint, ‘Les beaux cadeaux du 10ème anniversaire de l’Autorité des Marchés financiers’ [2013] Bulletin Joly Bourse 607. Article L621-15 II of the Monetary and Financial Code in relation to the competences of the AMF was at stake. In 2017, the Constitutional Council, addressed the question of the compatibility of the use of such a large reference: Decision of the Constitutional Council, 2 June 2017, no 2017-634 QPC, M Jacques R and Others: ‘The requirement for a definition of an offence is satisfied in administrative matters where the relevant texts refer to the obligations to which the persons concerned are subjected by reason of the activity they engage in, the profession in which they are employed, by the institution to which they belong or the quality which they have’ (para 6). The Council justified it by asserting that ‘the contested provisions punish breaches of the obligations laid down in order to protect investors in financial markets and to ensure the proper functioning of these markets. The persons subject to these obligations are so because of their intervention in these markets’ (para 9). 24 Jérôme Lasserre Capdeville, ‘Le délit d’initié: une infraction modelée par les juges’ [2011] AJ Pénal 58. This can be explained by the fact that these successive revisions are of a purely European origin.

44 Juliette Tricot and Maxime Lassalle to adopt ‘a general regulation that is published in the Official Journal of the French Republic, following approval by order issued by the Minister for the Economy’.25 The particularities of stock market offences are therefore traditionally and mainly associated with the choice of the French legal system in favour of a dual regulation. Stock market offences have a twofold dimension: a criminal dimension and a ‘para-criminal’26 (administrative) dimension. Every crime is associated with an administrative offence that defines, either identically or very closely, the forbidden conduct. The General Regulation of the SMF does not contain administrative offences anymore, having been replaced in European law by the dispositions of regulation 596/2014.27 This choice was confirmed by Law No 2016-819 of 21 June 2016, the most recent one in this field. The rationalisation undertaken to ensure compliance with the ne bis in idem principle has not been an opportunity to differentiate substantive rules (on the contrary, criminal and administrative provisions have become even more similar). The legislature has merely provided for a procedural regime that precludes prosecution and sanctions from being accumulated. The overlap between jurisdictions makes the applicable regulation too complex to be compatible with the clarity and foreseeability requirement resulting from the principle of legality. By contrast, taken individually, the violations and offences are deemed to be clear and precise enough to meet the constitutional and treaty requirements.28 In competition law, the administrative offences of Article L420-1 of the Commercial Code are a transcription of community law. The criminal offence29 is based at the same time on the cross-referencing mechanism (reference is made to the above-mentioned administrative offences) and on the use of vague notions, such as the requirement of a ‘personal’ and ‘decisive part’ taken fraudulently in the commission of a cartel offence or of an abuse of a dominant position. The purpose of criminalisation is not to duplicate the administrative offence, but to punish the natural persons (ie, the ‘masterminds’ responsible for the anti-competitive practices).30 It has a residual value and should play a complementary role, but it is rarely applied.31 Poor application of the offence leads to reinforcing the decriminalisation

25 Articles L621-1 and L621-6 of the Monetary and Financial Code. 26 Frédéric Stasiak, Droit pénal des affaires (LGDJ, 2009); Renaud Salomon, ‘Le particularisme des infractions boursières (partie 1)’ (2003) 1 Droit pénal 4. 27 Together with directive 2014/57, this regulation is another example of this twofold dimension, transposed at the European level. The details are beyond the scope of this chapter. 28 See, for instance, Soros v France, App No 50425/06 (ECHR, 6 October 2011). 29 Article L420-6 of the Commercial Code: ‘If any natural person fraudulently takes a personal and decisive part in the design, organisation or implementation of the practices referred to in Arts L420-1 [cartel], L420-2 [abuse of a dominant position], and L420-2-2, such person shall be punished by a prison sentence of four years and a fine of €75,000.’ 30 Wilfrid Jeandidier, Droit pénal des affaires, 6th edn (Dalloz, 2005) para 360. 31 Out of 25 cases from 1986 to 2002, only six resulted in conviction. For the trend before 2006, see the tables annexed to the analysis of Éric David, ‘Les poursuites pénales contre les auteurs de pratiques anticoncurrentielles’ (2006) 2 Concurrences 175; see also David de Giles, ‘Droit Pénal de la Concurrence’ (2003) 1 La Semaine Juridique Edition Entreprises 20.

France 45 de jure and adds a de facto decriminalisation of anti-competitive practices.32 This is construed as the result of the reluctance of the criminal judges towards Articles L420-1 and L420-2 of the Commercial Code, which rely on overly general and economic concepts; similarly, the requirement of a ‘personal’ and ‘decisive part’ considerably restricts the applicability of the text. Environmental criminal law is characterised by the fragmentation of the definitions and the use of cross-references both within the same text and towards several different texts issued by different authorities. This constitutes an inseparable or congenital characteristic derived from the normative strategy, which consists of relying on the subsidiary function of criminal law in this sector. In this field, the technique of cross-references is not only used because it is convenient, but because it is inherent to this area of criminal law. Because criminal penalties are subsidiary, they punish a failure to comply with administrative measures or orders and they tend to multiply.33 Consequently, there is an extensive application of the so-called ‘nœud coulant administratif ’ (administrative slipknot), which is a criminal sanction imposed for not complying with an administrative order.34 It also entails the offence of obstruction to the course of duties of environmental inspectors.35 There are very few ‘autonomous’ offences36 as criminal provisions are mostly ancilliary to the administrative rules, but these accessory provisions are very numerous, creating situations of concurrence of offences.37 Moreover, the types of cross-references employed shows specific features. It is not unusual for them to be ‘cascading’ references or ‘domino’ references38 and it is also not unusual that references are made to annexes or lists. There is no evidence of contamination of classical criminal law by the methods used in these three fields. However, it is indisputable that criminal law has, now more than ever, a greater presence outside the Penal Code. It is then mostly defined and conceived as ancillary to other matters from which it takes their distinguishing features. And such, a process of trivialisation is also fuelled by the internationalisation and particularly the Europeanisation of criminal law. Indeed, the transposal 32 Out of the 3,976 economic and financial offences punished in 1999, only 0.6 per cent (that is, 24 convictions) concerned ‘damages to market and financial institution operation’, therefore including the potential application of art L420-6. See Dominique Delabruyère, Jocelyne Hermilly and Nadine Ruelland, ‘La délinquance économique et financière sanctionnée par la Justice’ (2002) 62 Infostat Justice 1, www.justice.gouv.fr/art_pix/infostat62.pdf; Jacques Azema, ‘La dépénalisation du droit de la concurrence’ [1989] Revue de Science Criminelle et Droit Pénal Comparé 651; see also Jean Larguier and Philippe Conte, Droit pénal des affaires, 11th edn (Armand Colin, 2004) para 500. 33 Evelyne Monteiro, ‘Les orientations de la politique criminelle actuelle en matière d’atteintes à l’environnement’ (2014) 1 Revue de Sciences Criminelles et de Droit Pénal Comparé 49. 34 Articles L171-7, para 1 and L171-8-I of the Environmental Code. 35 ibid art L173-4. 36 Offences, the elements of which are entirely and exclusively defined by the criminal provision; see arts L432-2 and L216 of the Environmental Code (water pollution). 37 See Véronique Jaworski, ‘L’état du droit pénal de l’environnement français entre forces et faiblesses’ (2009) 3–4 Les Cahiers de droit 889. 38 For instance, regarding protected species, see arts L411-1 and L415-3 of the Environmental Code.

46 Juliette Tricot and Maxime Lassalle exercise or adaptation of domestic law favours the use of the aforementioned techniques, including within the field of traditional criminal law.

B. Criteria for Criminal Liability (Both for Individuals and Corporations) It is commonly noted that the requirement of intent for criminal offences in whitecollar crime is often inferred from objective factual circumstances. This general trend can also be observed with respect to environmental and stock markets offences.39 The result is an approximation of criminal and administrative offences. Regarding criminal financial law, some academic commentators find that criminal law relating to the stock market forms the basis for a revival of the old strict liability offence, called ‘material offences’ in the French tradition (ie, offences having only actus reus – the material element – and lacking any mental requirement).40 In the case law, there is a tendency to distort the intentional element of the offences, especially when they have been committed by a public officer or company officer; gross negligence is sufficient.41 Regarding the administrative offences, a moral element still seems to be present at an embryonic stage, either expressly through the use of the term ‘knowingly’ or implicitly by virtue of the interpretation by the implementing authorities.42 Another characteristic feature, which accentuates the poor role given to the mental element, is the reliance on presumptions. The case law imposes on those persons referred to as internal insiders or insiders by nature a presumption of knowledge of the inside information because of the duties they perform at the issuing firm.43 Such a presumption is sometimes presented as a de facto irrebuttable presumption.44 Similarly, with respect to waste trafficking, case law tends, subject to rare exceptions, to treat these offences as if they were strict liability offences or to be satisfied with presumptions, considering that by requiring that the infringement is committed knowingly, ‘a legal or regulatory provision implies the intent required’ (abundant and constant case law). In this area, the poor role given to mental element is coupled with the quasiautomatic attribution of liability to company directors. The argument put forward is that environmental liability is based on administrative rather than criminal mechanisms.45 This liability is indeed often based on the identification by the legal 39 Agathe Lepage, Patrick Maistre du Chambon and Renaud Salomon, Droit pénal des affaires (LexisNexis, 2010) 1047. 40 Haritini Matsopoulou and Jacques-Henri Robert, Traité de droit pénal des affaires (PUF, 2004) para 279. The concept of ‘material offences’ dates from the time prior to the New Penal Code. 41 Wilfrid Jeandidier, ‘L’élément moral des infractions d’affaires ou l’art de la métamorphose’ in André Decocq (ed), Une certaine idée du droit. Mélanges André Decocq (Litec, 2004) 369. 42 Lepage et al (n 39) 1052. 43 Cass crim, 15 March 1993, no 92-82263 B no 113; Claude Ducouloux-Favard [1993] Dalloz 610 (note); Bernard Bouloc [1993] Revue des sociétés 847 (note). 44 Salomon (n 26). 45 Coralie Courtaigne-Deslandes, ‘L’adéquation du droit pénal à la protection de l’environnement’ (DPhil thesis, University Paris II, 2010) 351.

France 47 provisions of the person, the ‘representative’ of a legal person likely to being held criminally liable. Most of the time, it is the director. Besides, case law holds the employer liable for the offences committed by his or her employees.46 With respect to the attribution of liability to legal persons, administrative and criminal laws tend to differ strongly. Though criminal liability is incurred for any criminal offence, corporate criminal liability for business crime (especially intentional crimes) is still rare. In practice, the criminal liability of legal persons essentially relates to unintentional or administrative offences within the scope of labour law.47 By contrast, companies frequently incur administrative liability for business-related offences. Criminal law does not apply to groups lacking legal personality, contrary to the administrative punitive law applicable to misconduct affecting competition and financial markets. As far as the former are concerned, due to the reference to ‘undertakings’ (as opposed to the notion of legal persons used in criminal law), obstacles to the attribution of liability under criminal law to groups of companies and/or to parent companies for the conducts of an affiliated company may be more easily removed. It should be noted that in the 1970s, the example of competition law had been put forward to introduce the criminal liability of ‘groups’ into French law. This trend was eventually abandoned in favour of a liability that was conditional on legal personality, finally adopted in 1992. Currently, the criminal liability of a legal person for the offence referred to in Article 420-6 of the Commercial Code is discussed. The wording of the aforementioned article refers to natural persons and in practice, to date, no legal person has been prosecuted on its basis, but it would theoretically be possible on the basis of Law No 2004-204, which extended the scope of criminal liability of legal persons to all criminal offences. Finally, unlike the classical rules of criminal business law, the requirement of a ‘personal part’ (Article L420-6) rules out the possibility of the offence being attributed to the company director as a result of his or her sole capacity of director. Within the scope of administrative proceedings for market abuse, it is accepted that ‘misconducts committed not only by the directors and representatives of these companies but also by their employees are likely to be directly attributed to them in their capacity of legal entities, without the constitutional principle of personal liability being ignored, provided that such employees have acted within the scope of their duties’.48 Within the scope of criminal prosecutions, Article 121-2 of the Penal Code in principle precludes a comparable approach, especially since the criminal division of the Cour de cassation has considerably reduced the prospects of direct attribution of liability on the legal entity based on presumptions of liability.49 In this area, another divergence 46 Cass crim, 28 February 1956, no 53-02879, B no 205; Cass crim, 14 February 1973, no 71-91756, B no 81. 47 Dominique Baux and Odile Timbart, ‘Les condamnations de personnes morales en 2005’ [2008] Infostat Justice 103, www.justice.gouv.fr/art_pix/1_stat_infostat103_20081013.pdf. 48 CE, 6 June 2008, no 300619, CM CIC Securities; Frédéric Stasiak, ‘Imputation à la personne morale des infractions commises par ses préposés’ [2009] Revue de Science Criminelle et Droit Pénal Comparé 120. 49 Juliette Tricot, ‘Le droit pénal à l’épreuve de la responsabilité des personnes morales: l’exemple français’ [2012] Revue de Science Criminelle et de Droit Pénal Comparé 19.

48 Juliette Tricot and Maxime Lassalle between the administrative and the criminal law approach concerns the liability of company directors. When (administrative) insider misconduct committed by the company’s employees occurs, the AMF decides that such misconduct should not lead, in itself, to holding the company’s director personally liable, as long as he or she has not been charged with any breach of his or her due diligence and surveillance obligations.50 This solution seems to be less punitive than the one adopted for a long time by criminal judges who generally presume the employer’s lack of surveillance or precaution when an offence has been committed by one of his or her employees.51

C. Sanctions (for Individuals and Corporations) The criminal penalties applicable in stock market criminal law show certain specificities. Until recently, the level of criminal penalties appeared relatively low compared to administrative penalties (with respect to fines) and in comparison with the sentencing scale (with respect to imprisonment).52 The 2016 reform on market abuse has led to an approximation of punitive levels. Administrative penalties and penal sanctions are now largely comparable. Their common point is in particular to provide for very high fines following a recent trend in economic and financial criminal law.53 This amount may be further increased depending on the fine calculation method based on the profit which may have been earned; thus, the fine can be 10 times the amount of the profit. This mechanism – referred to as twofold ceiling (one fixed, the other a percentage) – is not a one of a kind. However, it is still rarely used.54 A number of academic commentators recommend its generalisation to all crimes against property.55 The important point is that it provides for a lower limit as the fine may in no circumstances be lower than the profit which may have been earned.56 However, because of the uncertainty of 50 For instance, see the Decision of the Enforcement Committee of the AMF, 18 January 2010, M Julien Quistrebert, Mme Nathalie Pelras, M A, Mme B, la société C, M D, M E et la société F. 51 Cass crim, 27 September 1839, B no 313, S 1839 1 87; Cass crim, 15 January 1841; Cass crim, 2 August 1859; Cass crim, 28 February 1956, no 53-02879, B no 205. 52 See the former arts L465-1 of the Monetary and Financial Code et seq: two years’ imprisonment for an insider dealing offence committed by a primary insider and one year’s imprisonment for secondary and tertiary insiders. All of these offences are now punishable by five years’ imprisonment. 53 Reforms are deemed to be inspired by competition law and in order to align French sanctions with those incurred in the US or the UK; see Michel Storck and Nicolas Rontchevsky, ‘Une tentative de réponse française à la crise financière: commentaire de la loi de régulation bancaire et financière du 22 octobre 2010’ [2011] Revue trimestrielle de droit commercial 138. 54 For instance: concealment (art 321-3 of the Penal Code); money laundering (art 324-3 of the Penal Code); false justification of the origin of the assets or income of the perpetrator of drug trafficking (art 222-38 of the Penal Code); and bribery (art 433-1 of the Penal Code). 55 Frédéric Stasiak and Guillaume Royer, ‘Pour une efficacité optimale de l’amende pénale. Les apports de l’analyse économique du droit à la réforme pénale’ in Valérie Malabat, Bertrand de Lamy and Muriel Giacopelli (eds), La réforme du Code pénal et du Code de procédure pénale. Opinio doctorum (Dalloz, 2009) 289. 56 See art L465-1, para 1 of the Monetary and Financial Code.

France 49 the nature of this provision and on the basis of the general power enshrined in Article 132-20 of the Penal Code, criminal judges have allowed for situations where the penalty imposed was lower than the profit earned.57 Administrative proceedings before the AMF have resulted in comparable outcomes,58 which can be explained by the absence of lower limit for administrative penalties. With respect to competition cases, the criminal penalties incurred, including the level of fines, have never been modified since the ordinance issued in 1986.59 Sentences of imprisonment are in practice non-existent. The administrative fines are clearly different from the traditional criminal penalties because of their calculation method, which is based on a percentage of the turnover. However, the difference in the approach to fines decreases in view of the development of so-called ‘proportional fines’ in criminal law and the application of criteria largely inspired from criminal law for the determination of the administrative penalty.60 Furthermore, due to strong criticism in relation to their unforeseeability,61 the AdlC published in 2011 more explanations regarding the way it determines sanctions.62 The AdlC has the possibility to reduce these penalties by half if the objections are not disputed. When deciding the amount of the penalty, the AdlC may take into account the declaration of leniency or the acceptance of commitments. Moreover, the decision can be published by the AdlC and this is considered to be a part of the sanction.63 Criminal penalties incurred for misconduct affecting the environment64 show notable peculiarities in that, above all, they pursue a restorative aim. In this sense, the following sanctions are remarkable: deferment of penalties with injunctions

57 Case Vivendi Universal: TGI Paris, ch corr, 21 January 2011; Jean-François Barbiéri [2011] Bulletin Joly Sociétés 210 (note); Jérôme Lasserre Capdeville [2011] Bulletin Joly Bourse 236 (note); Frédéric Stasiak [2012] Revue de Science Criminelle et de Droit Comparé 571 (note). 58 For instance, Decision of the Enforcement Committee of the AMF, 1 June 2006, M A, where the AMF took into account ‘the special circumstances under which the violation was committed and the efforts undertaken inside the company from the beginning of the investigation, to prevent facts of this nature from being repeated’, it imposed a financial penalty of €50,000, thus allowing the insider to earn a profit of €83,300. 59 Four years’ imprisonment and a €75,000 fine. 60 Four criteria are used: the seriousness of the facts, the extent of the damage to the economy, the specific situation of the undertaking and the situation of reiteration. Apart from the simplified procedure assumption, where the amount of the penalty may not exceed the sum of €750,000 for each of the perpetrators of the prohibited practices, the financial penalty applicable to a company corresponds to a percentage of the amount of its turnover. Since the adoption of the NRE Law, the percentage went from five per cent to 10 per cent of the worldwide turnover of the prosecuted company or its group. Thus, the amount of the fine may reach amounts unknown in criminal law. 61 Jean Martin Folz, Christian Raysseguier and Alexander Schaub, ‘Rapport sur l’appréciation de la sanction en matière de pratiques anticoncurrentielles’ (AdlC, 2011). 62 AdlC, ‘Communiqué relatif à la méthode de détermination des sanctions pécuniaires’ (AdlC, 2011). 63 Article L464-2 of the Commercial Code. 64 As for criminal sanctions, the illicit trafficking of waste is punishable by two years’ imprisonment and a fine of €75,000. The illicit trafficking of protected species is punishable by one year’s imprisonment and a fine of €15,000. Both offences are punishable by seven years’ imprisonment and a fine of €150,000 if they are committed by an organised group (art L541-46, final subparagraph; art L415-6 of the Environmental Code).

50 Juliette Tricot and Maxime Lassalle (the penalty is not executed and is replaced by the injunction to comply with laws or regulations within a set time limit)65 and the restoration of places.66 The restorative aim in practice faces important difficulties because, for instance, rehabilitation or deferment with injunctions requires technical follow-up.67 Aware of these difficulties, the Minister of Justice, in a circular of 2015,68 asked public prosecutors to request precise and detailed measures, the implementation of which they will be able to monitor in order to guarantee a better execution of these alternative and restorative measures. These sanctions are complemented by administrative measures and sanctions, which are unknown or uncommon in criminal law, and have been extended and consolidated in the ordinance of 2012.69 The imposition of any administrative sanction must be preceded by a formal notice issued by the competent administrative authority ordering that the applicable obligations be complied with within a certain deadline.70 If, upon the expiry of such a deadline, the operator has not complied with an order imposing the undertaking of works or operations, the administrative authority may resort to one or more of the following measures:71 (1) it may oblige the operator to deposit a sum corresponding to the amount of the work to be carried out; (2) it may enforce the required measures ex officio and at the expense of the operator; (3) it may order the suspension of the operation of the facilities and related activities until the imposed obligations have been fulfilled, and take the necessary provisional measures; and (4) it may order the payment of a pecuniary sanction and a daily pecuniary sanction which will be due until compliance with the first order to comply with the applicable obligations. With respect to waste, Article L541-3 provides for specific environmental administrative offences and sanctions.72 There are also specific provisions regarding the cross-border shipment of waste.73 65 Article L 173-9 of the Environmental Code. 66 The rehabilitation of places can be ordered with a periodic penalty payment; especially in the waste sector, this sanction has been extended to all environmental offences (art L173-5 of the Environmental Code). This sanction is not considered to be a criminal sanction, its only purpose being to put an end to an illicit situation; see Cass crim, 8 June 1989, no 88-86756, B no 248. 67 Coralie Courtaigne-Deslandes, ‘La portée des nouvelles dispositions pénales du Code de l’environnement applicables aux activités industrielles’ (2012) 39 Bulletin du droit de l’Environnement Industriel 5. 68 Relating to the criminal policy orientations in the field of offences against the environment, CRIM/2015-9/G4 (21 April 2015), www.justice.gouv.fr/publication/circulaire_21042015_close.pdf. 69 See arts L171-6–L171-12 of the Environmental Code. 70 ibid arts L171-7 and L171-8. 71 ibid art L171-8 II. 72 Such as the suspension of the operation of the facilities and related activities until the imposed obligations have been fulfilled, and the target takes the necessary provisional measures; the payment of a daily pecuniary sanction until the imposed obligations have been fulfilled; and the payment of a pecuniary sanction. 73 The administrative authority may order those who have contributed to the export to have the waste returned to the national territory. In the event of a failure to do so, the authority may take all necessary measures to have it returned. The corresponding expenses are to be borne by the producer or persons who have contributed to the export of this waste (see art L541-41 of the Environmental Code).

France 51 It can be said that there is some kind of contamination from these specific forms of sanction to other areas of the criminal law. The possibility for the court to defer the sentence imposed and give the convicted person an injunction to observe determined prescriptions was first introduced in 1985 within the specific framework of registered and listed sites for the purpose of environmental protection.74 It has been further extended and enshrined in the Penal Code, together with the possibility to attach a periodic penalty payment to the injunction.75 Likewise, though they differ to some extent, the penalty called ‘sanction-réparation’ introduced in 2007 in the Penal Code may be considered a distant parent of the sanction of rehabilitation, a characteristic feature of environmental law and especially waste legislation. In addition, as far as business offences are concerned, the law maker links more and more frequently the maximum amount of the fine to the resulting profits. This amount is indeed increasingly fixed on a proportional basis76 and as far as legal persons are concerned, it is increasingly based on a percentage of the turnover. However, the Constitutional Council77 censured the law maker’s attempt to extend the application of a penalty against legal persons that would have equalled up to 10 per cent of the annual turnover and could be used for all offences punishable by five years’ imprisonment where it was proved that the legal person earned a direct or indirect profit from the offence.78 In order for this method of calculation to be allowed, the Council requires the existence of an admissible connection between the offence and the turnover.79

III. The Administration of Justice A. Public Enforcement Mechanisms i. Overview of the Different Public Enforcement Mechanisms In the three areas, law enforcement is mainly conducted by the administrative authorities, while the criminal justice system plays a secondary or marginal role (although historically first). However, while the three sectors have the combination of administrative and criminal law mechanisms in common, they differ not only in terms of how this combination is designed, but also with respect to how the administrative repression is organised – sometimes through a single independent 74 Law No 85-661 of 3 July 1985 relating to classified installations for environment protection. 75 Article 132-66 of the Penal Code. 76 See aforementioned articles of the Penal Code in n 54 above; arts 411-1 and 414 of the Customs Code; art L121-6 of the Commercial Code; arts L3512-2 and L3351-7 of the Public Health Code. 77 Decision of the Constitutional Council, 4 December 2013, no 2013-679 DC, Loi relative à la lutte contre la fraude fiscale et la grande délinquance économique et financière. 78 Article 3 of Law No 2013-1117 on the fight against tax evasion and the serious economic and financial crime. 79 Decision of Constitutional Council, 13 March 2014, no 2014-690, Loi relative à la consommation.

52 Juliette Tricot and Maxime Lassalle administrative authority with investigating and sanctioning powers (financial and competition law), and sometimes with a variety of special authorities of ‘police administrative’ (environmental law). Financial proceedings rely on a dual enforcement mechanism,80 since the Law of 2 August 1989 granted the administrative regulatory authority the powers to sanction any breaches of its regulation while maintaining the jurisdiction of the criminal judge over stock market offences.81 Until very recently, it used to be referred to as accumulation of proceedings and penalties (‘cumul répressif ’) because it allowed the same person to be subject for the same facts to parallel or subsequent administrative and criminal prosecutions, leading, as the case may be, to both administrative and criminal sanctions. However, following a ruling by the French Constitutional Council in March 2015 that, pursuant to the principle of necessity, repealed the system of cumulative penalties, Law No 2016-819 of 21 June 2016 has maintained the dual enforcement mechanism, but on the basis of an original procedural organisation called ‘aiguillage’,82 according to which administrative and criminal prosecutions are mutually exclusive. Similarly, the French competition law enforcement system is based primarily on the investigating and sanctioning powers of a single independent administrative authority. Though it must share jurisdiction in the matter with the national judicial83 and administrative courts, the EU courts and the Minister for the Economy (as far as local practices are concerned),84 in practice, its direct sanctioning powers give the AdlC a quasi-monopoly with respect to enforcement in this sector. However, in contrast to misconduct related to financial markets, criminal law provisions are not a mere duplication of regulatory provisions. Criminal penalties supposedly play a complementary role. The ability to hold natural persons criminally liable is conceived as a complementary element to the enforcement system as the AdlC only has the power to sanction legal persons. Yet, in practice, criminal penalties play only a very marginal role – the criminal offence is rarely applied, which reflects a de facto decriminalisation.85 80 In addition to administrative and criminal proceedings, civil proceedings may be instituted for the purposes of compensation and disciplinary proceedings may be brought before the professional authorities. 81 Law No 89-531 on the Security and Transparency of Financial Markets. 82 See art L465-3-6 of the Monetary and Financial Code. 83 Apart from the jurisdiction of criminal courts, civil or commercial courts may determine the nullity of any agreements or clauses implementing such practices (art L420-3 of the Commercial Code). The courts that have jurisdiction are the district courts (Tribunaux de Grande Instance) and the commercial courts (art L420-7 of the Commercial Code). In addition, these special provisions do not preclude the application of common civil liability in the event of any damage caused to a competitor. However, actions for compensation are quite rare in practice. 84 These powers are directly implemented by the DIRECCTE (Regional Directorates for companies, competition, consumer affairs, labour and employment) under the coordination of the DGCCRF (General Directorate for Competition, Consumer Affairs and Prevention of Fraud); see arts L464-9 and R464-9–R464-9-3 of the Commercial Code. 85 However, with respect to public procurement, the offence of ‘favouritism’ (art 432-14 of the Penal Code) also serves to sanction breaches of competition law, particularly by public officials, and somewhat increases the role of criminal law.

France 53 The enforcement mechanism related to environmental law is a complex structure. There is not a single administrative authority responsible for detecting, investigating and sanctioning misconduct affecting the environment and it is organised in the form of a combination of several special ‘polices administratives’. Each of these is based on a set of both administrative and criminal offences, penalties and procedures. Very often, misconduct may be subject to administrative and criminal penalties. Their co-existence is the result of the principle of independence between administrative and judicial enforcement mechanisms.86 Each authority of ‘police administrative’, having a judicial and an administrative dimension, has a specific material scope and its enforcement involves different administrations and agents with specific powers, qualities and attributions. In 2012, this heteroclite system has been intensively modified in order to ensure greater consistency and to improve the legal framework. In particular, the aim was to harmonise legal proceedings relating to the investigation and detection of infringements and the penalties to be applied. However, the variety of the environmental administrative authorities (‘polices de l’environnement’) remains, as they co-exist and are independent from each other. Waste legislation falls under the policing of ‘pollution and nuisance’.87 The fight against illicit trafficking, primarily based on provisions related to importation, exportation and transit, is also based on other policing, such as ‘classified installations’ or water policing. Environmental criminal law is specific in the sense that it tends to play a subsidiary or secondary role. If the initial administrative procedure does not achieve the expected results, then a criminal procedure may be instituted. Such a chronology is not imposed by law, but reflects common practice. However, in the presence of criminal networks or organisations, or on the basis of the competence of Service National de Douane Judiciaire (SNDJ), criminal investigations can play a primary role. However, these cases are statistically rare.

ii. Competent Authorities Investigations and prosecutions relating to stock market offences are the responsibility of the AMF and of the FPP. The AMF is the authority responsible for investigating, prosecuting and placing sanctions on administrative misconduct. It is not a court, but an independent public authority. It has the peculiarity of being at the same time a legislator (it defines the offences), an investigator (it conducts the investigations) and a judge (it punishes the offences according to its own regulations). But in order to ensure the principle of separation of functions, the AMF is organised into a plurality of bodies.88 The Enforcement Committee is 86 For instance, art L171-7 of the Environmental Code states that ‘irrespective of criminal prosecutions … the administrative authority serves official notice’. 87 Article L541-46 of the Environmental Code provides for criminal penalties, while art L541-3 of the Environmental Code provides for administrative measures and penalties. 88 The Board, the Chairman and the Secretary General of the Authority, as well as the Enforcement Committee.

54 Juliette Tricot and Maxime Lassalle therefore considered as impartial.89 The AMF is invested with regulatory powers. In particular, in its General Regulation90, it defines the professional obligations in this sector91. It used to define the elements forming the different administrative offences, but is now in charge of applying European regulations By contrast, the penalties are provided for by the law (Article L621-15 of the Monetary and Financial Code). The General Regulation also provide for an outline of the control and inquiry rules,92 competing with the provisions of the Monetary and Financial Code.93 In order to ensure the enforcement of its General Regulation, the AMF has the power to issue injunctions to stop activities which are not in compliance with the law and regulations as a first move before initiating sanctions.94 On the other hand, the FPP is responsible for the prosecution of stock market criminal offences. It is a special public prosecutor, having national jurisdiction over economic and financial matters. He can rely on a new investigative department: the Central Office for the Fight against Corruption and Financial and Tax Offences. In competition law, administrative investigations and enforcement proceedings are primarily conducted by the AdlC. The Minister for the Economy, assisted by the Direction Générale de la Concurrence, de la Consommation et de la Répression des Fraudes (DGCCRF) agents, has a residual power relating to local practices. No action has been taken with respect to the proposal made in 2008 by the Coulon Report to give exclusive jurisdiction to the specialised interregional courts.95 The AdlC is provided with a large investigation service directed by the Rapporteur général, who is also informed of all indicators collected by the territorial structures96 under the authority of the Minister for the Economy in order to be able to decide about addressing any cases requiring the intervention of the competition authority. The French system of administrative authorities in the environmental field is based on a central authority, the Ministry for Ecology, Sustainable Development and Energy, and on territorial authorities, particularly the Regional Departments of the Environment, Planning and Housing,97 and the Préfets.98 Moreover, the 89 Messier v France, App No 25041/07 (ECHR, 30 June 2011); X and Y v France, App No 48158/11 (ECHR, 1 September 2016). 90 Article L621-7 of the Monetary and Financial Code. The Regulation was published in the Official Journal of the French Republic following approval by order of the Minister for the Economy. 91 Compliance with these professional obligations can also be sanctioned by the AMF, and the ECtHR considers that these sanctions are clear enough, X and Y v France, App No 48158/11 (ECHR, 1 September 2016). 92 Article 142-2 of the General Regulation of the AMF. 93 In particular art L621-9 of the Monetary and Financial Code. 94 ibid art L621-14. 95 Jean-Marie Coulon, La dépénalisation de la vie des affaires (La documentation française, 2008), www.ladocumentationfrancaise.fr/var/storage/rapports-publics/084000090.pdf. 96 DGCCRF, art L450-5 of the Commercial Code. 97 Direction régionale de l’environnement, de l’Aménagement et du Logement (DREAL). 98 State representatives at the local level: mostly Départements, but sometimes Régions.

France 55 Environmental Inspectors, in addition to their ‘police judiciaire’ functions, also play a key role in carrying out administrative controls. According to Article 15 of the Code of Criminal Procedure, the ‘police judiciaire’ includes ‘the civil servants and agents to whom the law assigns certain powers of “police judiciaire”’. Most environmental laws confer investigative powers on civil servants or agents of the competent branch of the administration.99 These individuals have special skills and technical or scientific expertise. With respect to investigations of the illicit trafficking of waste, two investigation services in practice play a major role. First, OCLAESP100 is a specialised inter-institutional unit created in 2004 as a ‘police judiciaire’ service with national competence, which is in charge of investigations of environmental crime, public health crimes and doping.101 In cases involving organised crime, OCLAESP may draw on special investigation powers. Second, the National Judicial Customs Service (SNDJ) created in 2002 is a ‘police judiciaire’ service with national competence. Its remit includes the illicit trafficking of waste and protected species through the offence of trafficking of prohibited goods.102 With respect to investigations of illicit trafficking of protected species, in addition to these two national services, the BMI CITES – Capture103 of the National Agency for Hunting and Wildlife104 also intervenes. Since the ordinance of 2012, Articles L 171-1–L 174-1 of the Environmental Code provide for a set of common repressive provisions that are applicable, without exception, to all areas covered by the Code. It provides uniform rules on criminal penalties and police controls applicable to all offences contained in the Environmental Code. It creates the ‘label’ of environmental inspectors.105 Although the role of criminal law remains residual, one can notice the existence of special investigation and prosecution services. The Code of Criminal Procedure provides for specific provisions concerning the prosecution, investigation and trial of offences in health matters,106 including environmental offences, namely the Health Units. Furthermore, there is a procedure applicable to organised crime under the jurisdiction of ‘specialised inter-regional courts’ (hereinafter referred to as ‘JIRS’).

99 For instance, with respect to waste, see art L541-44 of the Environmental Code; concerning the illicit trafficking of protected species, see art L415-1. 100 Office Central de Lutte contre les Atteintes à l’Environnement et à la Santé Publique (OCLAESP). 101 The task of OCLAESP is to conduct and coordinate criminal investigations, to observe and analyse the most typical behaviour of offenders, to centralise information, to participate in training and information exchange, and to handle international requests for assistance (Europol and Interpol) relating to the areas of crime it covers. 102 Article 38 of the Customs Code. 103 A national mobile unit with special expertise on the CITES Convention. 104 Office National de la Chasse et de la Faune Sauvage (ONCFS). 105 They shall be entitled to investigate and detect administrative and criminal offences. They carry out their investigations under the direction of the district prosecutor (art 12 of the Code of Criminal Procedure). They have a wide range of administrative and ‘police judiciaire’ powers, such as inspecting and accessing places, vehicles, premises and homes, and requesting information and documents (art L172-4 to 15 of the Environmental Code). 106 Article 706-2 of the Code of Criminal Procedure.

56 Juliette Tricot and Maxime Lassalle

iii. Material and Territorial Jurisdiction of the Respective Authorities As regards financial law, the Enforcement Committee of the AMF may impose a penalty against ‘any person’ who has committed in French territory or abroad any misconduct likely to undermine investor protection or the orderly operation of the market. The jurisdiction of the Enforcement Committee is limited to the sole finding of the administrative misconduct and to the punishment of the perpetrator. For the criminal prosecution, investigation and trial of insider dealing, price manipulation and related offences, the FPP and the Paris investigating and trial courts have exclusive jurisdiction over the whole national territory.107 For the other areas of white-collar crime such as economic and tax crime, the FPP has a concurrent competence with common public prosecutor offices whose territorial jurisdiction is that of the Tribunal de Grande Instance.108 Regarding competition law, the AdlC’s material jurisdiction mainly covers the enforcement of Article L420-1 and L420-2 of the Commercial Code r elating to cartels and abuses of a dominant position,109 as well as to their European equivalents.110 The AdlC’s jurisdiction is limited to undertakings regardless of their legal status – whether they have legal personality or not, and whether they are public or private.111 The AdlC has jurisdiction over all practices that have an anti-competitive effect in French territory and over micro-anti-competitive practices after the action of the Ministry for the Economy.112 Any action against a decision adopted by the AdlC or by civil, administrative and commercial courts dealing with claims for damages in this field is brought before the Paris Court of Appeal. Environmental inspectors are entitled to investigate and detect both administrative and criminal environmental offences. In principle, their territorial jurisdiction may differ. It is dependent on the remit of the department to which they are assigned, unless they are given enlarged jurisdiction for the fulfilment of their mission.113 The jurisdiction of the SNDJ includes the illicit importation of prohibited goods114 and its territorial jurisdiction extends to the national territory.

107 ibid art 705-1. 108 ibid arts 704 and 705. 109 See also art L420-2-2 relating to anti-competitive practices in the public transport sector and art L420-4 of the Commercial Code relating to the exemptions for certain of anti-competitive practices. 110 Articles 101 and 102 of the Treaty on the Functioning of the European Union. 111 Article L420-1 of the Commercial Code and, more explicitly, art L420-2 of the Commercial Code. Like EU case law, national case law requires the identification of an economic actor: the economic nature of the activity conducted and the independence of decision are the two required criteria. 112 Article L464-9 of the Commercial Code. 113 Article L172-2 of the Environmental Code. 114 Article 38, subpara 4 of the Customs Code qualifies as prohibited goods all waste defined in art L541-1 II of the Environmental Code and the implementing regulations adopted to give it effect. As a result, the importation of waste from an EU Member State, apart from the cases laid down in art 34-1 of the Decree of 23 March 1990, simultaneously constitutes a criminal offence under Article L541-46 of the Environmental Code and a customs offence of illicit importation of prohibited goods provided for in arts 38, subpara 4, 414 (smuggling) and 426 of the Customs Code.

France 57 OCLAESP’s material jurisdiction covers all environmental criminal offences. Its territorial jurisdiction extends to the national territory. It is the French contact point of Interpol and Europol with respect to environmental issues. The health units115 and the JIRS116 have specific jurisdictions.

iv. Assessment of the Enforcement Policy Because the French system lacks criteria relating to the principle of necessity of offences and punishments, it relies on the quasi-systematic co-existence of several sets of penalties (both criminal and non-criminal in nature). In particular, the existence of two sets of penalties – administrative and criminal – is common. Their respective parts have evolved and are not definitely fixed in the three fields analysed, in particular as a result of the upheavals resulting from the case law of the Constitutional Council, the ECtHR and the CJEU on the meaning and scope of the ne bis in idem principle. Indeed, if this principle governs, first and foremost, how the different mechanisms interact and coordinate each other, it also has the effect of determining the balance on which the mix of enforcements mechanisms rests and in particular the role conferred on penal repression. Thus, as a result of the decisions in Grande Stevens (ECtHR), Akerberg Fransson (CJEU), EADS (Constitutional Council) and more recently A and B v Norway (ECtHR), the landscape of the repression of economic, financial and environmental offences is the subject of important debate, sometimes leading to reforms such as those in the area of repression of market abuse. Whatever the future developments in these three areas, it must first be noted that criminal law threatened with disappearance in the name of the ‘decriminalisation of business’ has retained its place. However, it has been marginalised in favour of administrative procedures, which are deemed to be more effective and better suited to technical disputes, requiring an expert and rapid response as well as new ways of conceiving the sanction of illicit conducts. However, the marginalisation of criminal law varies from one sector to another. It is most advanced in the field of anti-competitive practices such as cartels and abuses of a dominant position. It is more relative in the financial and environmental fields, where the criminal law retains a relatively important place. But here too differences can be observed. Thus, while environmental criminal law remains characterised by persistent 115 There are two of them in France; the material scope of competence in particular covers offences under the Environmental Code in cases involving health products as defined by art L5311-1 of the Public Health Code, or food products intended for humans or animals or of products or substances to which humans are regularly exposed over a long period of time and which are regulated due to their effects or their dangerousness, where these are or appear to be particularly complex. 116 See art 706-74 of the Code of Criminal Procedure, the main interest of which is to enlarge territorial jurisdiction. Article D47-13 of the Code of Criminal Procedure lists these jurisdictions and their territorial areas; they are composed of a section of the public prosecutor’s office and specialist investigation and judgment divisions to take cognisance of these offences.

58 Juliette Tricot and Maxime Lassalle weaknesses of a technical nature, and in terms of resources, financial criminal law has recently been considerably hardened and strengthened, which could lead to a more balanced distribution of tasks between administrative authorities and judicial authorities. Paradoxically, the challenge by the Constitutional Council to cumulative penalties may have resulted in a rebalancing of the respective roles of the administrative and criminal channels. Before the entry into force of the 2016 reform, the position of the criminal judge had gradually weakened to the point of leading to a strong imbalance in favour of the administrative procedure. As a result of the technical nature of the stock market infringements and given the specialisation and expertise of the AMF, the authority became the main body responsible for the detection of stock market misconduct, while having a response capacity that is not comparable to that of a criminal judge,117 who punished less frequently and much less heavily. Following the 2016 reform, there is not only a clearer division between administrative and criminal channels that can no longer be cumulative, but also an approximation of the two types of enforcement – in particular, in terms of the drafting of offences, the amount of penalties and the modalities of prosecution. This approximation, combined with the exclusive competence of the FPP, has the effect of considerably strengthening penal repression. Since 1986, French competition law has relied on gradual and almost total decriminalisation. As a result, the administrative authority exercises the majority of the sanctioning powers and controls all the proceeding stages from the inquiry to the sanction, even though appeals against the Competition Authority’s decisions are brought before judicial courts. However, the marginalisation of criminal law can also be explained by an improperly designed criminal mechanism, which is underused and too poorly coordinated with the administrative mechanism. Yet criminal law has not completely disappeared. In the field of environmental law, there is a limited number of criminal proceedings, particularly compared to the considerable number of criminal offences. According to professionals, the detection rate of criminal offences is very low.118 This also applies to the dismissal rate.119 The circular of 2015 notes a steady decrease in the number of criminal sentences in the field. One might be surprised by this trend because of the general context of the criminalisation of environmental law, but it is understandable in the sense that this de facto decriminalisation is linked to a transfer of powers to the administration, which can rely 117 Frédéric Stasiak, ‘Non bis in idem et droit pénal boursier’ in Bruno Deffains (ed), L’analyse économique du droit dans les pays de droit civil (Cujas, 2002) 339. 118 Dominique Guihal, ‘Les enjeux juridiques de l’environnement’ (Conseil d’Etat, 2013), www. conseil-etat.fr/Actualites/Colloques-Seminaires-Conferences/Dossier-Les-enjeux-juridiques-de-lenvironnement. Unfortunately, official statistical data does not exist. 119 ‘Mission interministérielle sur les polices de l’environnement’, 2 February 2005. In 2003, this study concerning seven public prosecutor’s offices of the Île-de-France Région showed that as regards cases where the perpetrator had been identified, the rate was 53 per cent (for the same period, it was 32 per cent for all criminal cases where the perpetrator had been identified).

France 59 on specific skills and expertise, a wide range of enforcement tools and the procedural tool of criminal transaction. The decriminalisation process is not complete, as large-scale trafficking in waste or protected species is dealt with by specialised investigative units with ‘police judiciaire’ powers falling under the authority of the Gendarmerie nationale or custom authorities. Similarly, in the field of marine pollution,120 criminal penalties imposed are high, decisions to close cases are nonexistent and multi-disciplinary cooperation is considered efficient. According to the circular of 2015, the main issue is the necessity to achieve better coordination with the competent administrations and ‘greater vigilance’ with respect to criminal prosecutions and the execution of sanctions, ‘especially within the framework of EU law’. The number of cases where there are findings of offences which are not followed by the enforcement of administrative measures and a fortiori criminal proceedings is high.121 Despite the harmonising efforts undertaken by the ordinance of 2012 and the adoption of a set of common provisions on controls and sanctions, which as such constitutes a significant improvement, environmental law remains highly segmented. Besides, regarding waste, special procedures inspired by EU directives apply and derogate from this set of common rules. Lastly, one can also note the lack of adequately trained and specialised judicial authorities.

B. Interaction between the Different Public Enforcement Mechanisms i. Description of the Interactions Since the reform of the market abuse enforcement system in 2016, administrative and criminal proceedings have become mutually exclusive.122 As a result, the need for coordination and cooperation between the AMF and the FPP has increased. Henceforth, as regards the allocation of cases, the AMF and the FPP have to inform each other about their will to initiate a procedure.123 Where they both want to do so, the general public prosecutor at the Paris Court of Appeal will have the final say.124 As regards cooperation for investigatory and prosecution purposes, the FPP may obtain from the AMF all the information it holds in connection with the performance of its duties. Before the entry into force of the 2016 reform, exchanges were limited in practice and the support from the AMF to the judicial authorities was considered insufficient.125 In turn, the FPP can forward 120 Discharge of oil or hazardous and noxious substances. 121 Guihal (n 120). 122 Article L465-3-6 I of the Monetary and Financial Code. 123 ibid art L465-3-6 II and III. 124 ibid art L465-3-6. Its decision may not be challenged. 125 See AMF, Annual Report 2015, 102. In 2015, the AMF forwarded to judicial authorities 15 inspection reports (five of them being subject to an enforcement proceeding before the AMF) and two control reports. In 2016, only three inspection reports were forwarded (AMF, Annual Report 2016 – Appendix, 19), but more cases were transmitted at an earlier stage (AMF, Annual Report 2016, 86).

60 Juliette Tricot and Maxime Lassalle to the AMF official records, investigation reports or any element of the case file having a direct link with facts susceptible to giving rise to proceedings before the Enforcement Committee of the AMF.126 As regards cooperation at the trial stage, the criminal judge has to request the opinion of the AMF before ruling on the offence of insider dealing; it is optional concerning the other criminal offences.127 The transfer of the AMF inspection report to the district prosecutor for the purpose of public prosecution constitutes the opinion required from the AMF.128 Similarly, civil, criminal or administrative courts may call upon the Chairman of the AMF or his or her representative to file an opinion and develop it verbally regarding any provisions falling within the scope of the competence of the Authority.129 Finally, where prosecutions are initiated concerning the offence of insider dealing, price manipulation or the dissemination of false information, the AMF may bring an independent action for damages.130 In competition law, criminal prosecutions based on Article L420-6 of the Commercial Code are independent of any proceeding brought before the AdlC. As a result, the continuation of the administrative procedure and the running of the statute of limitations for administrative action are not affected by the fact that the criminal procedure has been dismissed.131 Conversely, the annulment of the decision of the AdlC does not affect criminal proceedings.132 The principle of independence also applies in the case of a leniency procedure before the AdlC. However, in practice, the AdlC does not refer the case to the district prosecutor where a leniency programme has been implemented and the public prosecutor’s office may consider a public prosecution to be inappropriate.133 Besides, independence does not exclude coordination or cooperation. As far as coordination is concerned, attempts have been made to improve it, especially by reforming the rules on limitation periods. In 2001, the NRE Law revised Article L420-6 of the Commercial Code in order to take into account the consequences on criminal prosecutions of the length of the proceedings before the administrative authority. Hereafter, acts interrupting the running of the limitation period for actions

126 Article L621-20-4 of the Monetary and Financial Code. 127 ibid art L466-1. 128 Cass crim, 26 October 1995, no 94-83.780, B no 324. 129 Article L621-20 of the Monetary and Financial Code. 130 ibid art L621-16-1. However, in relation to the same entity and the same facts, the AMF cannot concurrently exercise the disciplinary powers it holds according to the Code and the right to take civil action. 131 Article L462-7, subpara 2 of the Commercial Code. See Decision of the AdlC, 21 March 2006, no 06-D-07 (on practices used in the public works sector in the Île-de-France Région); Paris Court of Appeal, 24 June 2008 (firm France Travaux); Cass com, 13 October 2009, no 08-18224, B IV no 124. 132 The district prosecutor may then open an investigation on the basis of any information addressed to him or her (arts 40 and 41 of the Code of Criminal Procedure); Cass crim, 17 June 2009, no 08-84.482, B no 125. 133 This does not preclude victims from bringing legal action, especially before the investigative judge. In practice, criminal prosecutions and civil actions are rare.

France 61 before the AdlC also interrupt the running of the limitation period for criminal prosecution134 in order to avoid a situation where the criminal offence is already time-barred when the file is transmitted to the district prosecutor. Since 2008, the reverse has been also true. Beyond this rudimentary coordination, cooperation in the form of the exchange of information between the AdlC and the judicial authorities is also foreseen. With respect to information exchange between the criminal proceedings and the administrative proceedings,135 in practice, the Rapporteur in charge of the case within the AdlC goes to the office of the investigating judge and is provided with specific elements of the case file or the whole case file,136 and may have access to elements seized by the investigating judge during the investigations. Hence, the Rapporteur often does not have to perform any further investigations in order to open the administrative enforcement proceedings. Repeatedly, undertakings have complained about the fact that it was the Rapporteur and not the investigating judge who selected himself or herself the documents he or she wanted from the case. They have challenged such practice as contrary to the principle of equality of arms enshrined in Article 6 ECHR. However, the Cour de cassation has continuously considered that this prerogative did not infringe fundamental rights,137 particularly because the companies were involved in criminal proceedings and were able to debate and to challenge the legality of the procedure,138 even though in one case the companies claimed that they were not involved in the criminal proceedings.139 Regarding the methods used to communicate the documents of criminal proceedings, the Cour de cassation pointed out that no particular form was specified by the text. With respect to the exchange of information between the AdlC and the judicial authorities, the general rules of the Code of Criminal Procedure concerning the communication of documents apply to documents held by the AdlC: the district prosecutor, the ‘police judiciaire’ officer or the investigating magistrate may require that any documents of interest to their enquiry or investigation be handed over to them.140 Civil judges have to face more difficulties as the AdlC may refuse the disclosure on the ground of business confidentiality.141 Finally, cooperation

134 The running of the limitation period is suspended when the AdlC is consulted (art 462-3 of the Penal Code) and when the Authority refers the case to the prosecutor (art L462-6 of the Commercial Code). 135 Article L463-5 of the Commercial Code. 136 See, for instance, Competition Council, Decision no 06-D-07, 21 March 2006. 137 Cass com, 13 October 2009, no 08-18224, B IV no 124, no 125; Cass com, 28 November 2012, no 12-18.410 QPC. 138 Decision of the AdlC, 9 May 2007, no 07-D-15 (on practices used in public procurement concerning the high schools of Île-de-France); Paris Court of Appeal, 3 July 2008 (Eiffage); Cass com, 13 October 2009, no 08-18224, B IV no 124, no 125. 139 See, for example, Cass com, 15 January 2008 (Enrobés bitumineux) no 07-11677 and 07-12132 and 07-12357, B no 5. 140 Articles 60-1, 77-1-1 and 99-3 of the Code of Criminal Procedure. 141 Article L463-4 of the Commercial Code.

62 Juliette Tricot and Maxime Lassalle may also take the form of referrals or opinions issued by the AdlC to the judicial authorities. In line with the principle of independence of proceedings, where the AdlC refers a case to the judicial authorities, the criminal judge is not bound by the legal classification given to the facts by the Authority. However, in practice, such classification is not called into question. Incidentally, this possibility for the AdlC to refer the case to the public prosecutor’s office gives it a strong dissuasive tool. However, on pain of nullity, the Authority assessment regarding the criminal nature of the facts must respect the presumption of innocence. All of the courts may consult the AdlC regarding anti-competitive practices,142 and the AdlC may make observations on its own initiative before a court. Its opinion is not binding. On this basis, from 1986 to 2010, the AdlC has responded to 46 requests for opinions from all courts. Most opinions have been asked by investigating judges. The AdlC confines itself to answering the very specific questions on the characterisation of the anti-competitive practices, excluding information related to leniency programmes, but sometimes it suggests the next step for criminal prosecutions.143 In environmental law, environmental inspectors are vested with both administrative and judicial powers to investigate administrative infringements as well as criminal offences, which are both provided for in the Environmental Code. Together with agents vested with powers of ‘police judiciaire’ (eg, SNDJ or OCLAESP officers), they forward their findings by means of an official record to the district prosecutor. In parallel, they also forward their records to the competent administrative authority.144 On this basis, the public prosecutor’s office decides on what action to take. However, the competent administrative authority also has the option of imposing administrative sanctions and proposing a criminal transaction; this transaction has to be approved by the public prosecutor. Due to their privileged position regarding supervision and the detection of infringements on the one hand and regarding the choice of the procedural track and the possibility of proposing a criminal transaction on the other hand, the competent administrative authorities are prominently responsible for the allocation of cases. However, according to the circular of 2015,145 the decision as to whether to prosecute should take into account the importance of the economic gain resulting from the infringement of environmental provisions, as well as the involvement of ‘European issues’, such as the infringement of a European legal provision or the context of EU litigation in the matter. Furthermore, with respect to a failure to comply with administrative regulations or decisions, public prosecutors are asked to make sure

142 ibid art L462-3. The Competition Authority may issue an opinion only after the conclusions of a procedure in which all parties were heard. However, if it already has information gathered during a previous procedure, it may give its opinion without having to implement such a procedure. 143 David De Giles, ‘Le droit pénal de la concurrence en Europe – Premier bilan et perspectives en France’ [2003] La Semaine Juridique Edition Entreprise 34. 144 Article L172-16 of the Environmental Code. 145 Ministère de la Justice, CRIM/2015-9/G4 (21 April 2015), www.justice.gouv.fr/publication/circulaire_21042015_close.pdf.

France 63 that alternatives to prosecution are used on a limited basis and that they do not lead to the continuance of an illegal situation. As a result of the structure of the enforcement system, a key issue concerns the transfer of cases from environmental inspectors (or other officers and agents given powers of ‘police judiciaire’ for the purpose of finding infringements to environmental law and regulations) to the public prosecutor’s offices. In this respect, the circular of 2015 mandates the district prosecutors to instruct environmental inspectors with precise guidelines in order to ensure that they draft their official records in accordance with the requirements of the criminal procedure and in a manner that adequately documents the findings of infringements, also facilitating the determination of the appropriate procedural track (criminal transaction, alternative to prosecutions, investigations by an investigative judge, prosecutions etc). Criminal prosecutions following an administrative investigation are widely accepted by case law as it does not raise any problem, except that administrative controls and inspections should not be intended to provide for ways to circumvent the different legal conditions set out for visits and searches in criminal procedure.146 As far as the SNDJ and OCLAESP are concerned, their agents act on the basis of the provisions of the Code of Criminal Procedure, so the transfer of cases is facilitated. Another key issue is the ‘traceability’ of cases. In this respect and more broadly as far as coordination between judicial and administrative authorities is concerned, information exchanges are made on an informal basis. Especially with respect to criminal transaction, coordination is ensured on the basis of mechanisms drawn from the practice of the public prosecutor’s office. These mechanisms are formalised by means of ‘protocols’ concluded with the relevant local administrative authorities.147 Finally, in all three areas, Article 40 of the Code of Criminal Procedure requires public servants to inform the district prosecutor of any criminal offence discovered in the performance of their duty and send him or her all the relevant information, records and other documents.

ii. The Interests of the Victim and the Choice of Public Enforcement Mechanisms Parties harmed by stock market misconduct do not have access to the Enforcement Committee of the AMF. However, the head of the legal department of the AMF 146 For instance, see Cass crim, 26 April 2000, no 98-87.869, unpublished. 147 With the extension of the scope of criminal transaction to all criminal offences provided for by the Environmental Code, these protocols are expected to develop and apply to all criminal offences of this Code. They are intended to recall and specify the role of directing and controlling investigation played by district prosecutors. The administrative authority is asked to inform the prosecutor of all actions it intends to take regarding the infringements founds, especially if it intends to propose the offender a criminal transaction. In addition, it is also asked to give opinions regarding the conditions for implementing alternative to prosecutions, and more generally the technical conditions and requirements to ensure a sound regularisation and rehabilitation through criminal proceedings.

64 Juliette Tricot and Maxime Lassalle recently highlighted the advantages of the settlement procedure for victims as far as indemnities are concerned.148 In criminal proceedings, victims of stock market misconducts were ‘superbly ignored’ for a long time.149 This situation changed to a certain extent as the Criminal Chamber of the Cour de cassation has indeed stated that ‘the insider dealing offence is susceptible to cause a personal and direct damage to the shareholders’.150 Since then, victims have the right to join or initiate public prosecutions by filing a complaint with a civil party petition, provided that they fulfil the conditions set out in the Code of Criminal Procedure. Hence, when the public prosecutor is not willing to open an investigation, victims may bring about an investigation, therefore breaking out of the inertia of the prosecution authorities. However, the latter possibility has become limited after the 2016 reform. If the general public prosecutor decides to favour the AMF and therefore to block criminal proceedings, the victim has no power to reverse that decision.151 In practice, civil proceedings for damages resulting from financial market cases may be brought by authorised shareholder defence associations or investors defence associations.152 With respect to compensation, civil proceedings are often disappointing due to difficulties concerning damage assessment.153 Parties adversely affected by a cartel offence may, in addition to the AdlC, bring the matter before civil or commercial courts with a view to obtaining damages or causing the agreement or the contractual clause to be declared invalid.154 They may also join or initiate public prosecutions by filing a complaint with a civil party petition. The Hamon Law of 2014 has extended the possibility of a class action to damages resulting from anti-competitive practices as determined by a national or European competition authority or jurisdiction.155 Although this possibility creates an additional risk factor for undertakings, it is unlikely that this new procedure will deter them from seeking leniency or a settlement. While it is true that these negotiated procedures trigger a waiver of their right to contest liability, consumers will have to prove that they suffered an actual prejudice as a result of the anti-competitive activity sanctioned by the competition authority, which can only be compensated if it is direct, actual and certain. 148 Anne Maréchal, ‘La Transaction de l’Autorité des marchés financiers: un premier bilan très positif ’ [2017] Recueil Dalloz 288. 149 Alain Viandier, ‘Observations sur le délit d’utilisation d’une information privilégiée’ [1992] Bulletin Joly Bourse 253. 150 Cass crim, 11 December 2002, no 01-85176, B no 224. 151 Article L465-3-6 of the Monetary and Financial Code. 152 Respectively art L225-120, I of the Commercial Code and art L452-1 of the Monetary and Financial Code. 153 Among others, see CREDA, Les sanctions des sociétés cotées. Quelles spécificités ? Quelle efficacité ? (LexisNexis, 2013) 212; Nicolas Spitz, La réparation des préjudices boursiers (Revue Banque, 2012) 319. It has been noted that the AMF, in an attempt to lower its costs, tends to consider its assessment to be complete once it has established that the alleged practices constitute an infringement; its analysis provides few or no useful indications for civil courts to determine the extent of the damages caused by the practices and quantify adequate compensation. 154 Article L420-3 of the Commercial Code. 155 ibid art L423-17.

France 65 In the field of environmental law, the interests of the victims are mainly protected by the provision of the circular of 2015, according to which district prosecutors should not approve any criminal transaction proposed by the competent administrative authority where a victim has filed a complaint or has brought a claim for compensation before the civil courts, as the purpose of the transaction is not to address victim’s requests.

iii. The Choice of Enforcement Mechanisms and Evidential or Other Practical Problems Preference for administrative enforcement is a common trend in the three sectors examined here. Where there is a choice to be made, it is generally in the hands of the administrative authorities, which have a ‘procedural advantage’ over judicial authorities: administrative proceedings offer a prompt response and are (deemed to be) consistent with the demands of the business sector. Consequently, although in principle the gravity of the facts (of the misconduct committed or the damage caused) should favour criminal prosecution, this procedural advantage may lead to a lowering of such gravity in order to ensure rapid processing and avoid the ‘hazard’ of a criminal trial. With respect to misconduct affecting the environment, the dismissal of cases by district prosecutors is a recurrent issue. The technical dimension of the investigations and the resulting need to invest significant resources, together with the low level of penalties and the absence of victims, are the main arguments put forward for such a situation. According to the circular of 2015, prosecutions shall be initiated where: there was direct harm to the living environment causing irreversible and serious damage to the environment; in the case of repeated misconducts or non-compliance with administrative obligations (formal notice, deposit, performance of work and precautionary measures); if there was obstruction to inspections; and if alternatives to prosecution did not work. However, these instructions are very general and very formal; they merely recall the provisions of the ordinance of 2012.156 Besides, some distrust may undermine cooperation and influence the choice of the procedural track: the respective competent administrative authorities tend to regard the criminal justice system as too slow and/or inadequate or, in some cases, useless. In parallel, they are viewed by the judicial authorities as poorly equipped against conflicts of interests and impartiality and, more in general, with respect to judicial safeguards. Again, the 2016 reform in the area of market abuse is perhaps the first sign of a more balanced distribution of procedural channels whose control is no longer so concentrated in the hands of the administrative authorities. However, while the power conferred on the general public prosecutor illustrates this rebalancing, the

156 Articles

L173-1–L173-4 of the Environmental Code.

66 Juliette Tricot and Maxime Lassalle absence of selection criteria exposes the reform to severe criticism as regards the foreseeability of the system and the rights of the defendants and the victims.

C. The Different Public Enforcement Mechanisms in Action i. How Do the Respective Competent Authorities Typically Build up Their Cases? In general, both administrative and criminal procedures applicable in the three sectors concerned are characterised by the very wide margin of manoeuvre available to the prosecuting authorities. As regards criminal prosecution, the principle of prosecutorial discretion applies. In cases where the affected party meets the requirements of the Code of criminal procedure, it is limited by the power of the latter to file a complaint and to initiate a procedure as a civil party. However, in these sectors, victims are often unknown or unaware of the illicit conduct. Besides, with respect to market abuse cases, such power is excluded where the AMF has been given precedence over the FPP. The way in which judicial authorities build up their cases shows no specificities in comparison to other fields of criminal law, except that the investigative authorities tend to rely, where possible, on the elements gathered within the administrative proceedings.157 As regard the dossiers drawn up by the AMF, most of the investigations are opened following reports from its own Market Surveillance Department. The AMF Secretary General takes the decision to open an investigation based on observations gathered during market supervision, on the monitoring of listed companies and on information sent to the AMF or at the request of foreign authorities. The Secretary General nominates the investigators158 and specifies the scope of the investigation. In 2016, the AMF opened 26 investigations on its own initiative and a further 49 investigations were opened within the framework of international cooperation between regulators.159 No provision requires that the decision to open an investigation be formally reasoned.160 After examining the investigation report, the Board may decide to open an enforcement proceeding or to drop the case.161 The decision to prosecute is formalised by means of the notification of the statement of objections, which is transmitted to the Enforcement Committee and to the persons concerned. 157 For instance, with respect to the insider dealing offence, see Cass crim, 6 April 2011, no 10-85.174, unpublished; Jérôme Lasserre Capdeville [2011] Bulletin Joly Bourse 424 (note); Frédéric Stasiak [2012] Revue de Science Criminelle et de Droit Pénal Comparé 578 (note). 158 Articles L621-9-1 and R621-33 of the Monetary and Financial Code; art 144-1 of the General Regulation of the AMF. 159 AMF, Annual Report 2016, 83. 160 Paris Court of Appeal, 29 October 2008, no 08/02551. 161 Article L621-15 of the Monetary and Financial Code.

France 67 In competition law, cases may be referred to the AdlC by a number of public national and local authorities, companies or representatives of consumers. Besides, the Rapporteur général may also propose to the AdlC that it should initiate an action of its own motion.162 Such decision is then entirely up to the AdlC.163 It does not need to be reasoned, since it is not considered as an ‘accusation’.164 The AdlC is not bound to explain the circumstances that lead to its decision to act of its own motion,165 or to indicate the information that convinced it to take such a decision, or the conditions in which it became aware of that information. The Constitutional Council has considered this possibility to be in accordance with the Constitution as it ‘does not involve any confusion between the functions of initiating legal proceedings and investigation and the power to impose penalties’ and therefore does ‘not cause any violation to the principles of independence and impartiality’.166 In 2016, with 21 complaints filed, undertakings still represent the main source of the 24 external referrals.167 The AdlC only acted on its own initiative eight times.168 There are few complaints from consumer organisations and regional or local authorities. The decision not to prosecute may be based on discretionary grounds.169 The AdlC may decide that there are no grounds for continuing the proceedings, despite the anti-competitive character of the practice, provided that the aforementioned practice is not likely to jeopardise competition in the market.170 Where an anti-competitive practice is not prosecuted by the AdlC because it is considered to have a limited anti-competitive effect, it does not mean that this practice is considered to be licit and it may well be subject to sanctions imposed by civil, commercial or criminal courts. About 20 criminal cases have been tried on the basis of Article L420-6 of the Commercial Code, between 1998 and 2005; in half of them, civil parties had either joined or commenced criminal prosecutions.171 In environmental law, cases are built up on the basis of the inspections and investigations conducted by the extensive territorial network of civil servants and officers vested with ‘police judiciaire’ powers. According to the circular of 2015, authorised associations172 often play a crucial role in detecting and reporting misconduct affecting the environment,173 either via complaints filed by civil

162 Article L462-5, III of the Commercial Code. 163 AdlC, Decision no 15-D-04, 26 March 2015. 164 Paris Court of Appeal, 27 November 2001. 165 Paris Court of Appeal, 27 May 2003 (BOCCRF, 11 July 2003, 441). 166 Decision of the Constitutional Council, 12 October 2012, no 2012-280 QPC, Société Groupe Canal Plus et autres. 167 AdlC, Annual Report 2016, 20. 168 ibid. 169 Articles L464-6-1 and L464-6-2 of the Commercial Code. 170 ibid art L464-6. 171 Statistical data from the DGCCRF, cited by Muriel Chagny and Jacqueline Riffault-Silk, ‘Actualité du contentieux des dommages concurrentiels’ (2007) 11 Revue Lamy Concurrence 165. 172 Article L141-1 of the Environmental Code. 173 Unfortunately, such a statement is not substantiated by figures and statistics.

68 Juliette Tricot and Maxime Lassalle parties or via summons before the trial court. Minor environmental offences may be treated in a simplified manner, but the circular of 2015 warns district prosecutors and specifies that they are in charge of defining the criminal policy relating to environment offences, and thus that administrative authorities should not be given complete discretional powers as to the procedures to be followed. This ‘warning’ seems to indicate that in practice, such discretion exists. Last but not least, the administrative authorities have the power to propose a transaction, subject to the approval of the district prosecutor, concerning all offences provided for by the Environmental Code.

ii. Reporting and Disclosure Duties for Corporations and Individuals In financial criminal law, Law No 2005-811 of 20 July 2005 (revised in 2010) implemented a reporting procedure of suspicious transactions, which is similar to the procedure for money laundering and applies to credit institutions, investment firms and members of the regulated markets not providing investment services, if they have reason to suspect that any transaction may constitute insider dealing or price manipulation.174 In a 2008 interview, the Chairman of the AMF confirmed the practical importance of these duties: ‘as a result, the problem for the AMF is not detecting irregularities, but proving and establishing legally their existence’.175 Furthermore, in order to facilitate the monitoring of the activities of investment firms by the regulator, these firms have to report to the regulator the details of all the transactions that they execute.176 This reporting obligation is considered as an effective way to detect irregularities and cases of market abuse, and is enforced very seriously by the AMF.177 In competition law, there is no general reporting duty; however, as part of an application for leniency, the company undertakes to comply with an obligation of cooperation, which includes a duty to disclose information and documents. Likewise, as far as misconduct affecting the environment is concerned, there is no general reporting duty; nevertheless, importation, exportation and transit of waste, in particular within the EU, require numerous reporting obligations which are subject to criminal penalties.178 174 Articles L621-17-2, L621-18-2 and L621-18-4 of the Monetary and Financial Code. See AMF, ‘Contrôles et enquêtes: le dispositif AMF’, 2012, www.amf-france.org/technique/proxy-lien. html?docId=workspace://SpacesStore/ae31dd1f-682b-4f3c-9eb4-98f8f02099a2&langue=fr. The AMF specified that it receives about 120 suspicious transactions reports per year. However, only 20 per cent result in the opening of investigations. 175 Gérard Rameix, ‘L’AMD, un gendarme bien armé?’ [2008] Regards Croisés sur l’économie 257. 176 Articles L533-9 and L621-7-1 of the Monetary and Financial Code; art 315-46 of the General Regulation of the AMF. 177 Michel Storck, ‘La Commission des sanctions de l’AMF prononce des sanctions pécuniaires particulièrement lourdes à l’encontre de deux PSI pour manquement à l’obligation de déclaration des transactions sur instruments financiers’ [2016] RTD Com 157. 178 Article L541-46, para 1, no 11 of the Environmental Code.

France 69

iii. Leniency and Whistleblower Programmes Competition law is the only sector where a leniency policy has been set out. It was introduced by law in 2001.179 Since the creation of this programme, 76 applications for leniency have been filed.180 The exemption from sanctions that the AdlC can grant to companies under the leniency programme does not guarantee natural persons immunity from sanctions in a criminal court. However, there are no known cases of anyone being subject to criminal prosecution after his or her company had requested leniency from the AdlC. In addition, the practice of the AdlC has been not to pass on those files to the district prosecutor in which the persons covered by leniency programmes seemed to be liable to criminal prosecution. Despite criticism from scholars, practitioners and the AdlC itself, law makers have failed to pass legislation aimed at allowing company managers who have provided key evidence enabling their companies to qualify for a leniency programme to then be eligible for a provision by which the criminal court will grant an exemption from penalty or reduce it by half. Concerning whistleblowers, a first sectoral protection was granted in 2013,181 but has been replaced by a comprehensive framework with Law No 2016-1691 of 9 December 2016 on transparency, fight against corruption and modernisation of economic life (hereinafter referred to as ‘Sapin II’). It created a definition of ‘whistleblower’ in its Article 6, including the criteria of personal disinterest, and extending not only to the disclosure of facts that are potentially criminal in nature, but also regarding serious threats to the public interest. In order to be granted protection, whistleblowers have to follow a specific procedure in terms of how to disclose information. Notably, Article 16 added Articles L634-1 to L634-4 to the Monetary and Financial Code in order to specifically address whistleblowing in the field of misconduct affecting financial markets. The AMF is in charge of implementing a procedure in order to process any disclosure about a misconduct revealed by whistleblowers and concerning European or national legislation relating to financial markets. Similarly, most of the professionals under the AMF’s supervision have to implement internal procedures allowing their staff to report similar misconduct. While the French system does not provide for pecuniary rewards for whistleblowers, it is nonetheless complemented by a ‘leniency system’ for those who repent.182 179 Section IV of art L464-2 and art R464-5 of the Commercial Code. Since 2006, the French Competition Authority has proposed and updated a procedural notice relating to the French leniency programme, which specifies the way in which it implements these provisions. The last one dates from 3 April 2015: www.autoritedelaconcurrence.fr/doc/cpro_autorite_clemence_revise.pdf. 180 AdlC, Annual Report 2016, 20. This does not take into account the applications filed in 2017. 181 Law No 2013-316 of 16 April 2013 on independence of scientific expertise and alert regarding health and the environment. This introduced into the Environmental Code provisions on the protection of whistleblowers (art L1351-1); Law No 2013-907 of 11 October 2013 on transparency in public life; Law No 2013-1117 of 6 December 2013 relating to the fight against tax fraud and serious economic and financial crime. 182 Article 132-78 of the Penal Code.

70 Juliette Tricot and Maxime Lassalle

iv. Reporting and Disclosure Duties, Whistleblower Programmes and the Privilege against Self-Incrimination There are no specific rules in relation to the privilege against self-incrimination. Generally speaking, this right applies at the investigation stage to the various administrative procedures studied as well as, a fortiori, within the framework of criminal investigations. However, it is narrowly conceived, as illustrated by the jurisprudence of the Constitutional Council.183 The latter seems to restrict this right to the prohibition of obtaining forced confessions. At the same time, the notion of confession is itself narrowly understood.184

v. Negotiated Justice As far as criminal proceedings are concerned, several procedures are available, but are rarely used. First, concerning the field of white-collar crime in general, the creation by the ‘Sapin II’ Law of the so-called ‘judicial convention of public interest’ should be noted.185 Seen as the French deferred prosecution agreement, its purpose is to propose a procedure which does not lead to a recognition of culpability and which can instead be based on the adoption of compliance programmes. However, its scope is limited to the offences of corruption and trafficking in influence. The second procedure is called appearance after prior admission of guilt.186 The district prosecutor may, of his or her own motion or at the request of the party concerned or its lawyer, use this procedure if the person concerned admits to the allegations of which he or she is accused.187 This procedure has been extended in 2011 to almost all misdemeanours.188 However, it does not apply to ‘offences for which the prosecution procedure is provided for by a special statute’. Due to the exclusive competence of the FPP, this might be the case for stock market offences.189 Until now it has never been applied to cases of market abuse. This procedure offers advantages (savings in terms of time and resources), but also constraints (admission of guilt, involvement of civil parties and publicity). The other possibilities

183 Decision of the Constitutional Council, 8 July 2016, no 2016-552 QPC, Société Brenntag, para 15. 184 Georges Decocq, ‘Constitutionnalité du droit d’obtenir communication des documents professionnels de l’entreprise lors d’une enquête’ [2016] Contrats Concurrence Consommation 221. 185 Convention judiciaire d’intérêt public; art 41-1-2 of the Code of Criminal Procedure. 186 Comparution sur reconnaissance préalable de culpabilité. 187 Created in 2004; art 495-7 of the Code of Criminal Procedure. A simplified procedure may be applied, but it only concerns petty offences (art 524 of the Code of Criminal Procedure) and certain specified misdemeanours, which do not include environmental offences (art 495 of the Code of Criminal Procedure). 188 With the exception of acts of violence and sexual offences punished by a principal penalty of a fine or a prison sentence exceeding five years, involuntary homicide, political offences and press offences. 189 In this sense, see Rémi Lorrain, ‘Le plaider coupable: une révolution textuelle?’ [2015] Dalloz Actualité, https://www.dalloz-actualite.fr/chronique/plaider-coupable-une-revolution-textuelle.

France 71 are conditional suspension190 and criminal mediation,191 but these are meant to address less serious offences than those analysed in this volume. In the administrative field, there are several further possibilities. As an alternative to sanction proceedings, the Board of the AMF may offer a settlement procedure to financial intermediaries that fail to meet their professional obligations. Settlement agreements are drawn up by the Secretary General and the respondent before being approved by the Board. They must then be ratified by the Enforcement Committee.192 The settlement procedure was made into law by the Banking and Financial Regulation of 2010. Its scope was extended first to market abuse by Law No 2016-819 of 21 June 2016193 and it was further extended in the Sapin II Law. Market infrastructure (central securities depositories, securities settlement system operators and market operators) is now eligible as other professionals were already before the law, and most administrative offences are now covered by the procedure, only excluding obstruction to a control or an investigation.194 According to the regulator, this procedure can be used only where the legal question raised by the case has already been addressed, even though for the legislator, the procedure was meant to deal with minor cases.195 Ten settlements were accepted in 2016.196 Concerning competition law there are three techniques of negotiated justice: leniency applications (see section III.C.iii above), commitments and settlement.197 The AdlC may accept commitments made by companies or bodies, which provide a certain guarantee of addressing the competition concerns. The purpose of this procedure is that undertakings voluntarily terminate or change their conduct, which led to ‘competition concerns’. When the entity involved does not dispute the objections raised against it, the Rapporteur général of the AdlC has the possibility of submitting to the company involved ‘a settlement proposal fixing the minimum amount and the maximum amount of the intended financial penalty’.198 This makes the procedure less uncertain than the previous ‘no challenge’ procedure (non contestation des griefs), which did not provide a maximum penalty.199 Where the undertaking or body agrees 190 Composition pénale; art 41-2 of the Code of Criminal Procedure. 191 Mediation pénale; ibid art 41-1 5°. 192 Articles L621-14-1 and R621-37-1–R621-37-4 of the Monetary and Financial Code. 193 Éric Dezeuze and Nicolas Rontchevsky, ‘L’élargissement du domaine de la composition administrative de l’Autorité des marchés financiers’ (2016) 4 RTDF 102. 194 Articles 43 and 6 of the Sapin II Law. See Régis Vabre, ‘Renforcement des pouvoirs de l’AMF’ (2017) 2 Droit des sociétés 54. 195 France Drummond, ‘À qui profite la composition administrative ?’ [2016] Bulletin Joly Bourse 449. 196 AMF, Annual Report 2016, 89. 197 Article L464-2 of the Commercial Code. Moreover, the Minister for Economic Affairs may propose a settlement if the practices concerned affect a market of local dimension (arts L464-9 and L462-8, para 3). 198 ibid L464-2, para 3. 199 The parties and the government representative were heard without a report being drawn up in advance, and the AdlC imposed a financial penalty taking into account the fact that no challenge was raised.

72 Juliette Tricot and Maxime Lassalle to alter its conduct in the future and, for instance, to set up or upgrade a compliance programme, the Rapporteur général may suggest to the AdlC that this also be taken into account in setting the amount of the penalty. In practice, the AdlC has gradually developed a practice whereby it accepts such commitments and takes them into account by granting a reduction in financial penalties, after having determined in each case if such commitments are relevant, credible and verifiable. In the Framework Document on Antitrust Compliance programmes of 2012,200 the AdlC describes its approach to compliance programmes. In particular, when an infringement has indeed been committed, the Competition Authority considers that the existence of a compliance programme should not be considered either as a mitigating circumstance or as an aggravating factor, even if it turns out that corporate officials or managers took part in the infringement despite their commitment to comply with competition law and support the company or organisation’s programme. The AdlC considers that this type of situation would be better served by holding the persons concerned criminally liable if the conditions for applying Article L420-6 of the Commercial Code are met. If the AdlC accepts a commitment to set up a compliance programme or to improve an existing programme, it will reduce the financial penalty of the concerned company or organisation and will check that this programme is effectively implemented. Within the framework of this procedure, the AdlC does not have the power to impose injunctions. In 2016, it issued three decisions under the no-challenge procedure and the settlement procedure was used four times.201 In environmental law, the possibility of using transactions, which was previously limited to offences concerning freshwater fishing, has been extended by the ordinance of 2012 to all offences provided for by the Environmental Code subject to up to two years’ imprisonment.202 It definitively bars further prosecution, provided that its terms are fully complied with. This precludes the reopening of prosecutions if further damages or new complainants are discovered. The transaction submission provides for a fine and, depending on the case, a number of obligations aiming at ending the illicit situation, preventing the recurrence of the infringements, repairing damages or rehabilitating the sites, which must be complied with within a determined period of time.203 The Préfet has the power to propose a criminal transaction, while the competent administrative authorities may transmit the file to him or her with the aim of proposing a plea agreement.204

200 AdlC, ‘Document sur les programmes de conformité aux règles de concurrence’ (2012), www. autoritedelaconcurrence.fr/doc/document_cadre_conformite_10_fevrier_2012.pdf. 201 AdlC, Annual Report 2016, 23. On settlements, see Chloé Mathonnière, ‘Transaction: et de deux pour l’autorité de la concurrence!’ (2017) 59 Revue Lamy de la concurrence 9. 202 Articles L173-12 and R173-1–R173-4 of the Environmental Code. 203 Certain measures and sanctions cannot be implemented within the framework of criminal transaction, in particular the confiscation of any object that was used in or intended for use in committing the offence or was the product of the offence. 204 Article L172-16 of the Environmental Code.

France 73 If the person concerned agrees to the terms of the proposal, it is transmitted to the district prosecutor for approval (without adversarial debate or the possibility of appealing against it). In the event of a refusal or failure, elements gathered during the proceeding may be used before criminal courts if prosecutions are initiated. In practice, according to the circular of 2015, use of criminal transaction must be limited to minor offences.205

IV. Criminal Procedure A. Burden and Standard of Proof206 As far as market abuse and anti-competitive practices are concerned, the administrative authorities have developed the so-called ‘faisceau d’indices’ method (method of concordant pieces of evidence) aimed at overcoming the absence of direct or tangible proof concerning the use or exploitation of inside information or the aforementioned anti-competitive practices. The method seeks to demonstrate by means of a series of serious and consistent indicia that the disputed stock exchange market transaction carried out by an individual can only be explained by the fact that the person concerned had access to inside information, or that the infringement of competition rules is necessarily due to the fact that there was a prohibited agreement. However, this presumption must be supported by facts established in the record and identified by the administrative authority. In environmental law, the finding of the offence by means of an official record remains the most frequently used form of evidence, as these records are considered as prima facie authentic evidence.207

B. Special Criminal Investigative Measures for the Three Areas Financial criminal investigations have not provided the opportunity to develop either specific or different investigative techniques than those that generally apply in the context of criminal proceedings. There are no special pre-conviction, preventive or remedial measures which can be imposed by public prosecutors. However, one new possibility has to be

205 It should be excluded when the facts have been committed deliberately, repeatedly or have caused important damages to the environment or a person. It should also be excluded when victims have filed a complaint and applied for compensation. 206 On the moral element in white-collar crime, see section II.B above. 207 Article L172-16 of the Environmental Code.

74 Juliette Tricot and Maxime Lassalle mentioned. Within the framework of the ‘Sapin II’ Law, the implementation of compliance programmes can be requested as part of a convention judiciaire d’intérêt public, but its scope is limited to corruption (see section III.C.v). As for the investigation conducted by the AMF, investigators are vested with a wide range of investigative powers.208 Following a similar decision in relation to the AdlC,209 the Constitutional Council decided that the possibility for AMF investigators to require telecommunications operators to provide traffic data was unconstitutional because the safeguards foreseen were incapable of sufficiently protecting the right to privacy.210 Obstructing the investigating powers of AMF agents constitutes a criminal offence.211 The obligation to comply with their request is also essential for the conduct of the investigations.212 The investigators have access to professional premises,213 but require judicial authorisation for searches and seizures.214 When proposing a settlement, the AMF can request commitments of compliance measures.215 Competition investigations have not led to developing either specific or different investigative techniques than those that generally apply in the context of criminal proceedings. The investigative powers of AdlC officials are very broad and are similar to those of the ‘police judiciaire’ criminal investigation.216 The Hamon Law has strengthened the powers of agents of the AdlC and the Ministry for the Economy in the event of ‘simple’ investigations (ie, investigations commenced without a requirement of judicial authorisation), including access to all premises or means of transport for professional use and to premises which serve both as a dwelling and as a place of business and, most significantly, access to software and computerised data.217 The investigators have access to professional premises,218 but require judicial authorisation for searches and seizures.219 The AdlC may, at the request of the Minister for Economic Affairs or the undertakings, and after having heard the parties in question and the government representative, adopt precautionary measures. These may include the suspension 208 Article L621-10–L621-12 of the Monetary and Financial Code. 209 Decision of the Constitutional Council, 5 August 2015, no 2015-715 DC, Loi pour la croissance, l’activité et l’égalité des chances économiques, para 137. 210 Decision of the Constitutional Council, 21 July 2017, no 2017-646/647 QPC, M Alexis K and Others. It reversed a former decision which accepted the constitutionality of the same text: Decision of the Constitutional Council, 27 December 2001, no 2001-457 DC, Loi de finances rectificative pour 2001. 211 Article L642-2 of the Monetary and Financial Code. 212 ibid art L621-18–L621-18-4. 213 ibid art L621-10. 214 ibid art L621-12; several procedural safeguards are provided. 215 Maréchal (n 150). 216 See arts L450-3 et seq of the Commercial Code as amended by the Hamon Law, especially in the case of an in-depth court authorised procedure. 217 Opposed to in-depth court-ordered investigations (‘enquêtes lourdes’). 218 Article L450-3 of the Commercial Code. 219 ibid art L450-4.

France 75 of the practice concerned and an order to the parties to return the situation to its prior state. They must be strictly linked to what is necessary to tackle the emergency. The AdlC or the Minister may order the companies or bodies concerned to cease their non-competitive practices within a specified period or may impose special conditions and impose daily coercive fines of not more than five per cent of the average daily turnover per day of delay in order to compel the parties concerned to comply with a decision which enjoined them to cease the noncompetitive practices or imposed special conditions, or to implement a decision making a commitment compulsory.220 Environmental investigations have not led to developing either specific or different investigative techniques than those that generally apply in the context of criminal proceedings. The peculiarity of such investigations is above all that various civil servants and agents are vested with far-reaching ‘police judiciaire’ powers, similar (or even greater in the case of SNDJ officers, for instance) to those conferred on AMF or AdlC investigators.

C. Rights of the Victim in Criminal Proceedings in the Three Areas Civil proceedings aimed at the reparation of damage suffered because of a felony, a misdemeanour or a petty offence are open to all those who have personally suffered damage directly caused by the offence.221 It may be exercised either before the civil or criminal courts. Provided that the civil proceeding is admissible, the victim may exercise the rights granted, in general, to the civil party. An application to join the proceedings as a civil party submitted before the investigating judge is admissible if it is based upon factual circumstances allowing the judge to rule that it is possible to establish a direct relationship between the alleged damage and an offence under criminal law.222 Authorised associations (for instance, investors, consumers or environmental associations and more recently anti-corruption associations) may exercise the rights granted to the civil party. Victims’ rights under criminal law still differ to a large extent from those provided within the framework of the administrative enforcement mechanisms applicable to the three fields analysed in this chapter, especially with respect to the right to initiate or join proceedings, the right to be informed and the right to ask for investigating measures to be taken. In addition to difficulties regarding the assessment of the damage caused, this is why in relation to market abuse and anti-competitive practices, victims prefer to bring

220 ibid

art L464-2. 2 of the Code of Criminal Procedure. crim, 17 October 1972, no 72-90.894, B no 289.

221 Article 222 Cass

76 Juliette Tricot and Maxime Lassalle their action before the criminal courts rather than the civil courts. However, as mentioned above, since the 2016 reform on market abuse, proceedings before the AMF block any possibility of initiating criminal p roceedings.

D. Specialised Criminal Courts There are no specialised criminal courts in the French system. This is considered to be an issue by some academics concerning misconduct affecting financial markets.223 When the establishment of a specialised court is recommended, it is primarily aimed at replacing and streamlining the existing dual system. In the aftermath of the adoption of the 2016 reform, the debate became much less lively. However, following the exclusive and national jurisdiction of the FPP over market abuse, the Tribunal correctionnel of Paris is the only criminal court that is called upon to make a decision in this area. The Paris Court of Appeal is the only appeal court that has jurisdiction over anti-competitive practices concerning civil claims as well as AdlC decisions.224 Only one jurisdiction is then in charge of both kinds of litigation, which is supposed to prevent conflicts between the decisions of the civil judge and the AdlC’s decisions regarding similar cases. An appeal ‘for annulment or for amendment’ may be brought against the AdlC’s decisions.225 The Court of Appeal may repeal the decision taken by the AdlC and may also amend the decision.226 The Cour de Cassation even considers it to be an obligation.227 The parties or the AdlC’s President as well as the Minister for Economy may apply for cassation (commercial chamber) against the decisions of the Paris Court of Appeal.228 As far as environmental offences are concerned,229 the circular of 2015 requires that a member of the public prosecutor’s office be appointed as the contact magistrate (‘magistrat référent’) for all proceedings concerning environmental offences. As regards the administrative jurisdiction, cases related to the environment are addressed by ordinary judges, who are also responsible for other cases. However, these cases are often assigned to one or exceptionally two chambers of an administrative court, so that in this sense, there is a de facto specialisation. 223 AMF, ‘L’application du principe ne bis in idem dans la répression des abus de marché – Proposition de réforme’, 2015, www.amf-france.org/Publications/Rapports-des-groupes-de-travail/Archives. html?docId=workspace%3A%2F%2FSpacesStore%2F7cb9fffa-2fc6-45ad-babc-aee62d3f2a17; Dominique Schmidt and Anne-Valérie Le Fur, ‘Pour un tribunal des marchés financiers’ [2015] Bulletin Joly Bourse 24. 224 Article L420-7 of the Commercial Code. 225 ibid arts L464-7, subpara 1 and L464-8, subpara 1. 226 ibid art L464-9. 227 Cass crim, 31 January 2006, no 04-20.360, unpublished. 228 Article L464-8, subparas 4 and 5 of the Commercial Code. 229 According to arts 706-107ff of the Code of Criminal Procedure, in cases of marine pollution by effluent from ships, a few Courts of Appeal (Le Havre, Brest, Marseille and Paris) have a special and extended jurisdiction for the investigation, prosecution and, in the case of misdemeanours, judgment of cases of pollution of marine waters and navigable waterways.

France 77

V. Cooperation between Authorities and Jurisdictional Issues A. Specific Localisation Criteria No criteria have been specifically developed in these areas. Nevertheless, the application of the extensive conception of territorial jurisdiction by the French criminal courts can be observed in these areas.230 In the field of misconduct affecting the financial market, if the offence is complex, the French courts can assume jurisdiction where one of its constituent elements was committed within the territory of the French Republic.231 In competition law, French courts have jurisdiction over anti-competitive practices that have been undertaken or that have effects within the French territory, regardless of the location of the entity in question.232 Tort actions can be commenced in France if the anti-competitive practice was implemented in France or the damage was suffered in France.233 For environmental offences, the principle of ubiquity applies.

B. Specific Rules or Practices to Address (Positive and/ or Negative) Jurisdictional Conflicts Concerning market abuse, given the exclusive jurisdiction of the FPP and the new system on the coordination between the criminal track and the administrative track, there is no possibility of jurisdictional conflicts. Appeals in competition law are in all cases brought before the Paris Court of Appeal, which plays a unifying role between the different components of one single case. As regards class actions, the judge hearing an action for damages as a result of anti-competitive practices may rule on the liability of the undertaking involved only on the basis of a final decision establishing such practices handed down by the competent national or European authorities. Civil proceedings may start before that final decision, but the civil court will have to stay proceedings until the latter decision is issued. 230 Didier Rebut, Droit pénal international, 2nd edn (Dalloz, 2014). 231 Pursuant to the rules of general criminal law (Article 113-2 of the Penal Code), the offence is deemed to have been committed within national territory. In the Péchiney case, for instance, the Cour de Cassation held that the French courts have jurisdiction when inside information is disclosed from Paris by telephone. The operation was performed on the New York Stock Exchange and dealt with securities of a foreign company; see Cass crim, 3 November 1992, no 92-84.745, B no 352; Giudicelli-Delage (n 14). 232 On this question, see Louis Vogel, Traité de droit économique – Droit de la concurrence (Bruylant, 2015) 1283. 233 There is no exception regarding conduct committed by foreign parties: the jurisdictional link to the French courts is formed once the practice is implemented in France or the damage from the practice is suffered in France. Thus, the individual’s nationality or the undertaking’s location is irrelevant.

78 Juliette Tricot and Maxime Lassalle

C. The Imposition of Various Sanctions of a Different Nature As an indirect consequence of the Grande Stevens ruling of the ECtHR and a direct consequence of the above-mentioned decision of the Constitutional Council of 18 March 2015 which repealed the provisions of the Monetary and Financial Code enabling the double prosecution in the field of market abuse, Law No 2016-819 of 21 June 2016 introduced a new mechanism for the coordination of administrative and criminal prosecutions. The new Article L465-3-6 institutes reciprocal obligations for the AMF and the FPP. Previously, in practice, the combination of sanctions was very rare.234 In the future, the new mechanism might become a model of effective coordination between independent administrative authorities and judicial authorities. However, such coordination is not always necessary. Indeed, the rather uncertain jurisprudence of the Constitutional Council shows that the accumulation of prosecutions and sanctions is far from being always prohibited.235 In cases of settlements with the AMF, the indemnity for victims is deduced from the amount of the penalty provided for by the settlement.236 In competition law, administrative proceedings against undertakings and legal persons brought before the AdlC and criminal prosecutions initiated against natural persons before the criminal courts were intended by the legislator to be totally independent of each other. The financial penalty imposed by the AdlC does not preclude criminal sanctions from being imposed by criminal courts in the event of fraudulent personal and decisive participation in a cartel offence, without this resulting in an accumulation of penalties as such. Indeed, the conducts prohibited differ and penalties are imposed on different persons. With respect to anti-competitive practices, most proceedings and penalties are of an administrative nature. Concerning misconduct affecting the environment, it is not uncommon that an offence is punished by criminal sanctions and administrative sanctions. Their co-existence is the result of the principle of autonomy of administrative and criminal enforcement mechanisms, according to which each mechanism is not bound by the other. However, the Constitutional Council has ruled that, on the basis of the proportionality principle, in the case of a criminal transaction that is executed only partially, the criminal jurisdiction must take into account the amounts already paid as well as the other obligations complied with by the perpetrator of the offence.237

234 AMF (n 225); Decision of the Constitutional Council, 26 September 2014, no 2014-416 QPC, Association France Nature Environnement, para 12. 235 Decision of the Constitutional Council, 24 June 2016, no 2016-545 QPC, Alec W; Decision of the Constitutional Council, 24 June 2016, no 2016-546 QPC, Jérôme C. 236 Maréchal (n 150). 237 Decision of the Constitutional Council, 26 September 2014, no 2014-416 QPC, Association France Nature Environnement, para 12.

France 79

D. The Relevance of Sanctions Imposed in Another (EU or Non-EU) Country Previous criminal convictions handed down in other EU Member States are taken into account. The equivalent legal effects are attached to them as to previous national convictions (Article 132-23-1 of the Penal Code). However, this provision was introduced in 2010 and so far, there is no known practice as regard misconducts affecting financial markets, competition or the environment. In the field of competition law, the running of the limitation period is suspended when the facts raised in the referral are the subject of a proceeding instituted by the European Commission or by a competition authority of another EU Member State.238

E. Cooperation between Administrative Authorities of a Different Kind within the Same Country Multi-agency cooperation in the financial sector mostly concerns authorities having jurisdiction on the banking and financial sectors.239 In 2016, 20 inspection reports were referred by the AMF to the French administrative or professional authorities.240 As far as competition law is concerned, the Commercial Code provides that only the AdlC shall notify certain administrative authorities of any referral concerning sectors falling within its jurisdiction.241 The law for the reconquest of biodiversity provides for a new legal basis for the exchange of information between customs officers, environmental inspectors and BMI CITES – Capture officers.242 All agents and officers have the power to exchange information on cases relating to wildlife offences. A bill was proposed to give customs authorities the right to use this information in the context of other proceedings, but this provision was not adopted.

F. Cooperation between Administrative Authorities of a Different Kind Either Cross-border or at a Supranational Level There are only a few developments in the field of international multi-agency cooperation. In financial law, there is an explicit legal basis for agreements with 238 Article L462-6 of the Commercial Code. 239 The cooperation and exchanges of information between authorities (ie, financial regulators and supervisors) are provided for in art L631-1 of the Monetary and Financial Code, while cooperation with other sectoral regulators is provided in art L621-21–L621-25. 240 AMF, Annual Report 2016, 86. 241 Article R463-9 of the Commercial Code. 242 Article L415-2 of the Environmental Code and art 59undecies of the Customs Code. There are also organs meant to favour information exchange and a multi-disciplinary approach, namely the interservices cooperation committees and OCLAESP.

80 Juliette Tricot and Maxime Lassalle foreign authorities, which are not counterparts of the AMF,243 but this is limited to authorities from countries outside the EU. The legal basis regarding the exchange of information with authorities within the EU is limited to counterparts.244 There is also a basis for exchange of information with supervision and resolution authorities.245 The Competition Authority can assist the European Commission or other authorities in their investigations.246 In 2015, six requests for the implementation of Article 22 of Regulation 1/2003 were received or issued by the AdlC.247 It has never been called upon to implement Article 22(2) of Regulation 1/2003 on behalf of the European Commission.248 With regard to the assistance that the French Competition Authority may provide to the European Commission under Article 20 of Regulation 1/2003, the Competition Authority received two requests in 2016 in the course of inspections conducted by the Commission.249 In 2012, the AdlC issued a document within the framework of the OECD on ‘International Co-operation in Cartel Investigations’.250 In this document, the Competition Authority analyses its own experience, in particular as regards cooperation within the EU, and concludes that ‘it would be beneficial to extend the mechanisms of Articles 12 and 22 of the regulation by instituting a legal basis for the mutual admissibility of evidence before competent jurisdictions, in view of the existing differential treatment of certain types of evidence such as telephone recordings’.

G. Cooperation between Police and/or Judicial Authorities with Administrative Authorities within the Same Country251 Multi-disciplinary cooperation within the framework of competition law is built around a bilateral communication mechanism, which has a legal basis in the Commercial Code and a broad scope of application.252 The main difficulties revolve around the access by the AdlC to the criminal proceedings files, which is due in particular to different standards of evidence. Before a criminal court, evidence that could be obtained unfairly is still admissible, while this is valid neither before the civil courts nor before the AdlC. This principle has been established in very clear

243 Article L632-7 of the Monetary and Financial Code. 244 ibid art L632-1–L632-6. 245 ibid art L632-6-1–L632-6-3. 246 Articles L450-1, L450-3, L450-4 and R450-1, subpara 2 of the Commercial Code provide for the different modalities of assistance established under Council Regulation (EC) 1/2003. 247 AdlC, Annual Report 2016, 38. 248 ibid 39. 249 ibid 19. 250 AdlC, ‘Improving International Co-operation in Cartel Investigations’, OECD, 2012, www.autoritedelaconcurrence.fr/doc/coop_cartel_oct12.pdf. 251 With respect to the AMF, see section III.B.i above. 252 On arts L462-6 and L463-5 of the Commercial Code, see section III.B.i above.

France 81 terms in civil proceedings by the Court of Cassation in 2011,253 which dealt with phone records that had been made in an unlawful manner. The Court of Cassation considered that this evidence should be excluded. The case law regarding proceedings relating to the AdlC could evolve towards a position which would be based on the current criminal procedure system, therefore accepting a less stringent application of the principle of procedural loyalty.254 In the field of environmental law, the main problems relate to a relative mistrust between authorities. As far as the administrative authorities are concerned, they sometimes fear losing control over the proceedings, which explains why cooperation is sometimes delayed, whereas early cooperation would be more efficient.255 For the needs of the investigation, agents vested with ‘police judiciaire’ powers and ‘police judiciaire’ officers may spontaneously exchange information and documents gathered within the framework of their judicial police activities, without professional secrecy precluding it.256 The public prosecutor’s offices are responsible for the coordination of services whose agents have judicial powers. This coordination and cooperation can take several forms: bilateral or multilateral meetings, an operational judicial unit, joint operations and joint referrals. As far as wildlife is concerned, a circular of 2013257 encourages systematic cooperation between district prosecutors and customs. Cooperation between custom services and judicial authorities is well established at the local and central levels, especially if the SNDJ is involved.

253 Cass plen, 7 January 2011, no 09-14316, B no 1. 254 Mustapha Mekki, ‘Le principe de loyauté probatoire a-t-il encore un avenir dans le contentieux de la concurrence?’ [2016] Recueil Dalloz 2355. 255 Court of Auditors, ‘L’action de la douane dans la lutte contre les fraudes et les traffics’ (Court of Auditors, 2015). 256 Articles L172-2, L172-9 and L172-10 of the Environmental Code combined provide for the legal basis for the setting-up of joint investigation teams. 257 Circular of 16 December 2013 on wildlife crime, JUSD1330992C.

82

2.2 Poland STANISŁAW TOSZA AND WITOLD ZONTEK

Introduction1 The main legal act regulating the financial markets is the Financial Instruments Trading Act of 2005 (FITA). It also contains provisions that are relevant for banking, although this has been comprehensively regulated in the Banking Law of 1997. Both statutes provide sanctions for shadow banking, while the FITA also addresses insider dealing and market manipulation. The Capital Market Supervision Act of 2005 as well as the Financial Market Supervision Act of 2006 regulate the instruments of supervision of these markets, in particular the Financial Supervision Authority (Komisja Nadzoru Finansowego, hereinafter ‘the Authority’). Regulation regarding the environment is embedded in a complex set of legal instruments including several statutes,2 regulations issued by the minister competent for environmental policy,3 as well as EU legal acts.4 Trade regarding the protected flora and fauna is regulated in particular by the Environmental Protection Act of 2001, which provides for sanctions requested by Article 16 of Regulation 338/97. As to waste trafficking, the comprehensive regulation of waste has been provided by the relatively recent Waste Act of 2012, while the most important criminal provisions can be found in Article 183 of the Criminal Code. Two statutes provide regulations that aim at ensuring fair competition between the actors on the Polish market: the Combating of Unfair Competition Act of 1993 and the Competition and Consumer Protection Act of 2007. The former contains a list of courses of conduct which are primarily considered to 1 The authors would like to thank Professor Sławomir Steinborn from the University of Gdańsk for his inspiring comments on this chapter. 2 In particular, the Environmental Protection Act of 27 April 2001, the Nature Protection Act of 16 April 2004, the Prevention and Restoration of Damages to the Environment Act of 13 April 2007 and the Animal Protection Act of 21 August 1997. 3 eg, the Regulation of 1 September 2016 on Restoration Activities, the Regulation of 1 September 2016 on Environmental Damages Registry and the Regulation of 14 June 2007 on Permissible Noise Levels in the Environment. 4 Council Regulation (EC) 338/97 of 9 December 1996 on the Protection of Species of Wild Fauna and Flora by Regulating Trade Therein [1997] OJ L61/1.

84 Stanisław Tosza and Witold Zontek be torts, for example, the use of misleading product descriptions or infringing business secrets of another person. Besides civil damages, some of these acts constitute crimes and thus may result in criminal liability. However, this statute does not tackle such classical issues of competition as mergers, cartels or abuse of a dominant position. The latter is the subject of the Competition and Consumer Protection Act of 2007. Yet, this statute does not provide for criminal liability, but only (at times severe) administrative sanctions. On the contrary, the Combating of Unfair Competition Act of 1993 does provide for criminal liability and may serve as an interesting example of interaction between different methods of legal enforcement. Before discussing the particularities of the legislation regarding these three domains, one general remark has to be made. The Polish substantive criminal law, which draws its inspiration mainly from the German legal system, follows the division into general and special parts. As to the general part, the legal system is subject to the ‘principle of unity’. According to this principle, the entire general part containing the rules of criminal liability (such as the definition of intention and negligence, defences, the statute of limitations, rules on the imposition of penalties and other penal measures) must be applied to all other offences provided for throughout the entire legal system.5 The only statute exempted from this rule is the Fiscal Criminal Code, which provides its own (slightly different) rules of criminal liability linked to the particularities of tax law.6 While the above rule remains uncontroversial, the relationship between the special part of the Criminal Code (providing for the definition of offences) and the offences provided for in other statutes is not fully clear. The inflation of the latter type of criminal provisions makes this issue even more pertinent. In theory, a question arises in a case where a statute regulating, for example, banking activities provides for its own, specific definition of fraud which would be slightly different from the general definition of fraud provided in the Criminal Code (eg, banking fraud containing some additional elements of the definition of the offence connected to the specificity of banking activities) – should the perpetrator be liable for both types of fraud or only if the provision regulating the special banking fraud applies as a lex specialis excluding the application of the general type of fraud? The issue becomes particularly important if the special provision cannot be applied (eg, because this additional element cannot be proved or in view of differences in the time limit of the statute of limitations in relation to prosecution). However, the above rule would not in any case exclude the application of the special part of the Criminal Code where the regulatory statute is silent. For instance,

5 Article 116 of the Criminal Code: ‘The provisions of the General Part of this Code apply to other statutes providing criminal liability, unless these statutes explicitly provide otherwise.’ All the translations from the Criminal Code are taken from Adam Wojtaszczyk, Włodzimierz Wróbel and Witold Zontek, Kodeks karny. Criminal Code: Bilingual Provisions (LEX legal database). 6 See, eg, Piotr Kardas, Grzegorz Łabuda and Tomasz Razowski, Kodeks karny skarbowy. Komentarz, 2nd edn (Wolters Kluwer, 2012) commentary to art 1.

Poland 85 if the latter does not provide any criminal offence of corruption, these offences would be applicable as described by the Criminal Code. Some authors advocate for the lex specialis approach, assuming that such statute provides a comprehensive regulation of a particular domain and a person conducting an activity regulated by this statute should be able to learn from such a statute the aspects of these activities that are forbidden.7

I. Contemporary Challenges and Recent Reforms A. Major Recent Reforms to the Criminal Justice System Affecting the Three Areas Since the FITA was enacted on 29 July 2005, no major changes with regard to criminal liability have been introduced, with one exception regarding securing professional secrets. Since 30 January 2015, Article 179 of this statute provides a clear reference to the definition of professional secrecy provided for in A rticle 83 of EU Regulation 648/2012 of the European Parliament and of the Council of 4 July 2012 on over-the-counter (OTC) derivatives, central counterparties and trade repositories, and Article 34 of EU Regulation 236/2012 of the European Parliament and of the Council of 14 March 2012 on short selling and certain aspects of credit default swaps. Poland has not yet implemented the Market Abuse Directive 2014/57/EU from 16 April 2014. The legislative work is still pending. On 13 February 2018, an amendment of the FITA was enacted by the lower house of the Parliament, although it still awaits the Senate’s approval and the President’s signature. Furthermore, there were no significant amendments to the provisions of either the FITA or the Banking Law regarding administrative liability of the financial sector that would change the current model or paradigm of that sort of liability. The implementation of Market Abuse Directive 2014/57/EU will necessarily change the FITA but not in a way that alters the paradigm of liability. However, some new ways of formulating pecuniary penalties will appear in the FITA (if it retains the current wording). The Polish legislator converted the fines expressed in euros in the Directive into the Polish zloty. This resulted in unusual numbers such as a maximum fine of PLN 2,072,800 for one of the criminal offences. The Polish legal system uses either the daily rate fine system or if it provides a lump sum, it is a rounder number (eg, PLN 2,000,000). What is even more relevant is that the FITA introduces a new maximum penalty of deprivation of liberty for some offences: four years. As the general part of the criminal law is designed without 7 Sławomir Żółtek, Prawo karne gospodarcze w aspekcie zasady subsydiarności (Wolters Kluwer, 2009); Stanisław Tosza, ‘Glosa do uchwały z 30 VI 2008, I KZP 8/08 [dot. art. 291, 292 k.k. i 305 prawa własności przemysłowej]’ (2010) 1 Państwo i Prawo 130–35.

86 Stanisław Tosza and Witold Zontek these types of penalties, this may lead to complications when applying its different provisions. Almost all criminal conduct with regard to the protection of the environment is provided for in the Criminal Code. Since its enactment in 1997, there has been one major amendment resulting from the implementation of Directive 2008/99/EC of the European Parliament and of the Council of 19 November 2008 on the protection of the environment through criminal law. Article 183 of the Criminal Code, which criminalises the inadequate handling of substances or waste threatening human life and health or the environment, would formerly apply only if the act resulted in a threat to the life or health of multiple persons or resulted in substantial destruction of plant or animal life. After the amendment, the scope of criminal liability has become significantly broader. It is now sufficient that the life or health of even one individual is threatened by the behaviour in question or that a substantive decrease of water, air or land quality occurs. In 2013, an entirely new Waste Act entered into force as a result of implementing Directive 2008/98/EC of 19 November 2008 on waste. The statute is the basic regulation referring to the issues of waste production, disposal, recycling and classification. It is an extensive piece of legislation (almost 250 provisions) and provides for a number of criminal (23) and administrative offences (three). Another important reform as to the liability for misconduct affecting the environment was introduced in 2015 by the Nature Protection Act and provided for an entirely new system of penalties for the destruction of forests (trees). The main reason for the reform was the ruling of the Constitutional Court of 1 July 2014 (SK 6/12) in which the inflexible technique of calculating fines for the removal of trees and bushes without a permit was questioned and the provisions were subsequently repealed, which resulted in the need of a reform. For administrative penalties for the unpermitted removal of trees, the new law takes into account the age, condition and type of tree, the circumstances of the removal (eg, danger to buildings or people) and the financial status of the perpetrator.

B. Reasons for Introducing the Reforms and Problems Related to the Lack of Them The main reason for the above-mentioned reforms was the requirement to align Polish law with the EU regulations. Furthermore, the Constitutional Court ruling was the reason for changes in the Nature Protection Act in terms of the scope of the administrative sanctions for removal of trees. The Waste Act, which was also inspired by European law, is a result of the decision to change the model of waste handling, which now focuses on the so called ‘on-site’ rule providing an obligation to recycle or dispose of waste in the location of its production. This is combined with a shift in responsibility for handling waste to the local government

Poland 87 a uthorities. Recycling and selective waste gathering and classification in households were introduced as a principle, a novelty in the Polish reality.

C. Reforms Planned in the Near Future The Market Abuse Directive 2014/57/EU from 16 April 2014 entered into force in January 2018. There seem to be no initiatives which would introduce changes regarding misconduct affecting the environment or competition.

II. Substantive Criminal Law A. Legislative Technique Used for Offence Definitions The legislative techniques used in Polish criminal law can be grouped into two major categories: the so-called ‘classic’ criminal law provisions, where the legislator describes the prohibited act in a provision providing all or nearly all its elements (without any references to other statutes or regulations); and the ‘technical’ criminal law, where the criminal provision contains a rather limited description of the offence and makes reference to non-criminal (regulatory) provisions for the description of the wrongdoing or its significant aspects. Almost all the offences provided for in the Criminal Code have a complete definition, which means that all limbs of an offence are described in particular provisions of the special part, supplemented by the rules of the general part. In most cases, by analysing the text of the Criminal Code, one can sufficiently understand the scope of the prohibited and punishable behaviour. The technical criminal law is used most often in statutes regulating a particular domain of law and providing definitions of offences related to that domain, which should in principle incriminate the most serious infringements. These statutes contain several detailed administrative or civil law provisions. The subsequent criminal provisions are usually grouped into one chapter (eg, ‘Criminal provisions’ or ‘Criminal liability’). The offences consist most often of infringing one of the duties or rules described in the regulatory provisions. Hence, in order to understand the scope of the prohibited conduct, one must rely on the interpretation of these provisions rather than the content of the definition of the offence.8 The three analysed areas provide examples of both types of legislative techniques. The offences in the FITA belong to the category of technical criminal law (Articles 178–84). They usually state that only infringing the rules provided for 8 See in general on this issue Robert Zawłocki (ed), System Prawa Handlowego, Volume 10: Prawo Karne Gospodarcze (CH Beck, 2012).

88 Stanisław Tosza and Witold Zontek in enumerated articles (belonging to non-criminal parts of the statute) should incur penalties, which this provision enumerates.9 This technique has its positive and negative aspects. On the one hand, the offences precisely describe the wrongdoing as they make reference to provisions where the rules are described in a relatively detailed manner. On the other hand, a lay reader may face difficulties in assembling the elements of the offence scattered across different parts of the statute. However, it may be stated that the addressee of the offences in the FITA is a qualified person who should be able to understand the law as it is necessary for pursuing acts of misconduct relating to the financial market. In practice, among the offences provided by the FITA, the one which effectively causes difficulties in prosecution is market manipulation (Article 183). This is the case not only due to the complex evidentiary process often requiring expert witnesses (specialised in book-keeping, audit, stock trading etc), but also because of the difficulties in proving the mens rea.10 Examples of classic criminal law can be found not only among the typical criminal law provisions such as homicide or theft, but also in environmental criminal law, some of which can be found in the Criminal Code, for example, in relation to waste trafficking.11 The fact that the provisions contain all the elements does not mean that it is necessarily clear. It still requires significant interpretative effort to determine what is, for example, potentially a substantive decrease in water, air or land quality. One can also find provisions which would have the characteristics of both approaches. For example, Article 24 of the Combating of Unfair Competition Act of 1993 is provided by a technical statute, but the definition of the offence contains all the elements, bringing it more towards the classic criminal law legislative technique. Nevertheless, the interpretation of the provision must be done bearing in mind the entire act, in particular as to the understanding of the same expressions used in the definition of the offence in Article 24.12 9 For example, art 179a of the Financial Instruments Trading Act: ‘Whoever against obligations provided for in Art 28 sec 4, Art 33 sec 5, Art 83 or Art 84 of Regulation 648/2012 discloses information designated as confidential according to that regulation or makes use of such information with regards to purposes other than provided for in that regulation, is subject to a fine up to PLN 1,000,000 or to the penalty of deprivation of liberty up to 3 years or to both these penalties combined.’ 10 Article 183 of the FITA: ‘Whoever conducts the manipulation referred to in Art 39 (2) 1–3, 4 letter a) or 5–7 is subject to a fine up to PLN 5,000,000 or to the penalty of deprivation of liberty for the duration between 3 months and 5 years or to both penalties combined.’ 11 Article 183 §1 of the Criminal Code: ‘Whoever, against the provisions of the law, stocks, disposes of, processes, recycles, neutralises or transports waste or substances in such conditions or in such manner that it may threaten human life or health, or result in substantive decrease of water, air or land quality, or in substantial destruction of plant or animal life, is subject to the penalty of deprivation of liberty for between 3 months and 5 years.’ 12 Article 24: ‘Whoever by use of technical means of reproduction, copies an exterior of a product or introduces such a copied product into market, which may mislead customers as to the identity of the manufacturer or the product, thereby causes serious damage to an entrepreneur, is subject to a fine, to the penalty of limitation of liberty or to the penalty of deprivation of liberty up to 2 years.’

Poland 89 The Combating of Unfair Competition Act of 1993 is specific as regards yet another aspect related to the legislative technique linked to the relationship between civil and criminal liability. This statute defines courses of conduct which constitute acts of unfair competition and provides two types of liability for committing them. While all of them are considered torts, selected acts among them (in theory the most serious ones) are also subject to criminal liability. However, in relation to some of them, the scope of civil and criminal liability is practically the same. For instance, the offence of counterfeiting goods (Article 24) is practically equal in scope to the analogous tort. This results in the criminal enforcement of civil liability. It seems that in practice, the civil law enforcement is preferred over the criminal law enforcement, which is left as a last resort in cases where the unfair competitors do not comply with requests to cease their illegal activities. There were no convictions under Article 24 between 2011 and 2014, and in the period from 2008 to 2010, there was only one conviction per year. The number of convictions for offences provided for in the Combating of Unfair Competition Act has totalled 25 in the last 10 years.13 The most discussed issue related to the topic is the intertwining between criminal and administrative liability. As such, it is not controversial that the competent authority has powers to regulate a domain, which include powers of enforcement, which may even be highly intrusive or punitive. What is questionable is when a statute provides a parallel system of sanctioning powers – one purely criminal and the other purely administrative – for the same (or only slightly aggravated) conduct. This approach is very well exemplified by the Financial Instruments Trading Act 2005, where in parallel to the criminal offences, the statute also provides several extremely punitive (administrative and regulatory) provisions that allow the Polish Financial Supervision Authority to impose large fines (up to PLN 20,000,000 – approximately €4,500,000). This is not the only example of such an approach and various administrative authorities may impose severe penalties on the basis of provisions worded almost identically to the respective criminal provisions.

B. Criteria for Criminal Liability (Both for Individuals and Corporations) In view of the principle of unity (see above) in the case of any offences covered by the Polish legal system, the criteria for criminal liability are prescribed by the Criminal Code (with the exception of fiscal offences). Hence, all the above-mentioned 13 Final convictions of adults in 1946–2014. Statistics factfinder prepared by the Ministry of Justice, ‘Powrotność do przestępstwa w latach 2009–2015’, May 2017, https://isws.ms.gov.pl/pl/bazastatystyczna/publikacje/download,2779,6.html.

90 Stanisław Tosza and Witold Zontek offences affecting financial markets, the environment and competition will be subject to the same rules of general principles of criminal liability as the offences of theft or murder. The offences covered in the field of economic and financial law have also not developed particular criteria that would not be known in other areas. They are mostly intentional offences and the burden of proof remains on the public prosecution office. The limited applicability of corporate criminal liability results rather from deficiencies of the law stipulating this type of liability than particularities of these domains of criminal law. One can also mention in this context that some sanctions, although very severe, are provided for in the form of administrative penalties, which naturally changes the regime of its imposition and the applicable criteria (see the following section).

C. Sanctions (for Individuals and Corporations) The set of penalties for the criminal offences covered in the three areas analysed in this chapter do not differ in any way, which could suggest a specific system rather than the one provided for the classic areas of criminal law. Some of the offences are described in the Criminal Code (eg, provisions on waste trafficking) and thus directly employ the penalties stipulated by this statute. As to the offences provided for in other statutes, the differences are of minor theoretical significance, although they might be important for individual convictions. First, some statutes allow judges to impose much higher fines than the maximal thresholds allowed for the offences under the Criminal Code. For example, fines under the Financial Instruments Trading Act of 2005 may amount to PLN 5,000,000 when the traditional upper limit of a fine in the Criminal Code is (with some exceptions) 540 daily rates of fines, each amounting to PLN 2000, which in the most severe case amounts to PLN 1,080,000. Furthermore, this high limit is rarely attained, as the statistics show that the average amount of fine is less than PLN 5,000.14 The severity of sanctions stipulated by this statute is amplified by two further particularities. The Criminal Code most commonly employs three categories of punishment: deprivation of liberty, community service, which is officially named the penalty of limitation of liberty, and fines. With some minor exceptions, the court may impose only one of these penalties. The FITA combines in principle the deprivation of liberty and fines, while at the same time omitting the limitation of liberty, which is normally a milder alternative to its deprivation. However, Article 58 §1 of the Criminal Code stipulates a principle of primacy of nonconfinement penalties. The provision provides that if a statute offers a choice of

14 Explanatory notes to the draft of the criminal law reform of 2015, www.sejm.gov.pl/Sejm7.nsf/ druk.xsp?nr=2393. This indicates that only one per cent of imposed fines at that time (2013–14) exceeded PLN 5,000.

Poland 91 various types of penalties for an offence and that offence is subject to the penalty of deprivation of liberty not exceeding five years, the court imposes the penalty of deprivation of liberty only if no other penalty or penal measure can meet the aims of the punishment. The lack of a penalty of limitation of liberty in the range of sanctions available in many regulatory criminal provisions demonstrates incoherence in the system. A remedy to this problem seems to be provided by the newly introduced provision of Article 37a of the Criminal Code, which provides under certain conditions for the possibility to impose a fine or the penalty of limitation of liberty instead of the penalty of deprivation of liberty. In the field of competition law, the Competition and Consumer Protection Act of 2007 does not provide for criminal liability. However, it provides for administrative sanctions (fines) for different infringements, in particular prohibited agreements. A particularly severe fine of up to PLN 2,000,000 may be imposed on the individual head of business who (intentionally) led the company to enter into such an agreement (Article 106a). The difficulties related to the imposition of sanctions are of a systemic and practical nature. The systemic consequences can be seen in the application of the FITA. As all the offences are inchoate, there is no need to establish damage as an element of the offence. However, damage needs to be determined for the purposes of imposition of the forfeiture of illegal gains, which may cause serious practical problems in such a specialised and autonomous branch as the financial instruments trade. Another problem is linked to the above-mentioned extremely elevated administrative sanctions provided for heads of business who (intentionally) led the company into entering into a prohibited agreement. The maximum level of this fine is very high and the law does not provide for criteria according to which the level in concrete cases should be determined, except for the general proportionality requirement. Practical problems can also be found in the application of offences against the environment. These offences often contain such results as ‘loss in the natural habitat’ or refer to causing continuous damage to air, water or land quality. The practical difficulty of assessing the value (and the timeframe) of these consequences is amplified by the possibility of imposing a civil law measure to redress such damage within the criminal procedure.

III. Administration of Justice A. Public Enforcement Mechanisms i. Overview of the Different Public Enforcement Mechanisms The enforcement of policy in the area of financial markets, the environment and competition is implemented by a mix of administrative and criminal tools.

92 Stanisław Tosza and Witold Zontek The criminal tools always play a secondary and subsidiary role in relation to the administrative mechanisms and the impact differs among the three domains.15 The Financial Instruments Trading Act provides for a large body of administrative law provisions, including sanctions and a small contingent of criminal offences (including provisions on insider trading and market manipulation).16 The administrative and criminal sanctions overlap. The Banking Law is also largely enforced through administrative means, introduced in particular by the Financial Supervision Authority. The prosecution of shadow banking (pursuing banking activities without the required permissions) is enforced using civil and criminal tools. While a criminal law provision provides for a sanction (a fine or imprisonment), a civil law sanction stipulates that any banking activity undertaken under these conditions is not entitled to any remuneration and if this has been received, it must be returned.17 Criminal law plays a much more significant role in the environmental policy. A plethora of laws of a mainly administrative character are supplemented by a body of criminal offences, including a separate chapter in the Criminal Code. In particular, the Waste Act regulates various areas related to waste management and provides for administrative sanctions as well as for minor offences. Waste trafficking is a criminal offence enshrined in the Criminal Code (Article 183). The trafficking of flora and fauna is mainly the subject of administrative enforcement in the Environmental Protection Act, which also provides for criminal law sanctions (Articles 127a–29). The enforcement of competition law as regards its classic components, such as cartels or antitrust, is only of an administrative nature. Only the Unfair Competition Act 1993 provides for criminal law sanctions, which are combined with a broader scope of liability for torts.

ii. Competent Authorities The main public authority empowered by the state to investigate and combat irregularities on the financial markets is the Financial Supervision Authority (Komisja Nadzoru Finansowego). This exercises supervision over the actors active on the capital and financial markets. Besides regulatory and investigative powers, the Financial Supervision Authority may impose administrative sanctions,

15 Krzysztof Gruszecki, Prawo ochrony środowiska. Komentarz, Wyd. IV (Wolters Kluwer, 2016); Kamila Kwaśnicka, Odpowiedzialność administracyjna w prawie ochrony środowiska (Wolters Kluwer, 2011); Andrzej Michór, Odpowiedzialność administracyjna w obrocie instrumentami finansowymi (Wolters Kluwer, 2009); Bartosz Turno, Leniency. Program łagodzenia kar pieniężnych w polskim prawie ochrony konkurencji (Wolters Kluwer, 2013); Aleksandra Nadolska, Komisja Nadzoru Finansowego w nowej instytucjonalnej architekturze Europejskiego nadzoru finansowego (Wolters Kluwer, 2014); Anna Błachnio-Parzych, Zbieg odpowiedzialności karnej i administracyjno-karnej jako zbieg reżimów odpowiedzialności represyjnej (Wolters Kluwer, 2016). 16 Articles 178–84 of the FITA. 17 Article 170(2) of the Banking Law.

Poland 93 including fines (on individuals or legal entities)18 as well as decisions which have a significant impact on the actors in these markets, even leading to the cessation of activities.19 The enforcement of environmental policy is dispersed among different central and territorial agencies. The central enforcement agency at the government level is the Chief Inspector of Environmental Protection (CIEP – Główny Inspektor Ochrony Środowiska), who executes his or her functions together with the regional branches. The CIEP has the power to investigate minor offences (mostly of a regulatory nature and in principle subject to a fine of up to PLN 5,000) and issue administrative decisions, including imposing administrative sanctions in the form of fines.20 Furthermore, with respect to activities which emit dust, gases, an electromagnetic field or sewage, the CIEP may impose a decision requesting: a) suspension of any activities (including business activities) infringing environment protection rules if such an activity brings about a direct threat to life or health or direct or significant and substantive damage to the environment, b) suspension of the beginning of operations of an infrastructure if the latter does not meet the environmental requirements provided by the statute.21 The regional establishments of the CIEP are empowered to exercise the powers of the Chief Inspectorate within the territory of the relevant voivodship. However, the CIEP may take over the case if the significant character or complexity of the matter so requires.22 Certain competences regarding environmental policy are vested in the decentralised local authorities, such as the heads of territorial entities at the three levels of the administrative territorial subdivision: wójt (head of gmina, similar to the English district); starosta (head of powiat, comparable to the English county) and a voivodship marshal – marszałek województwa (head of voivodship – województwo, which can be compared to the English region).23 The policy regarding competition is enforced by the Office of Competition and Consumer Protection (Urząd Ochrony Konkurencji i Konsumenta (UOKiK)), 18 eg, for market manipulation (art 172 of the FITA). 19 Article 168 of the Financial Market Supervision Act 2006: ‘1. In case when a fiduciary bank: 1) infringes the law in significant manner, especially provisions issued pursuant to Art 94 (1) pt 1–2 and 5, 2) does not obey the principles of fair trade, 3) infringes the commission-giver’s interests – the Authority may, with the exception provided for in (2), impose on that bank a pecuniary penalty up to 500,000 PLN. 2. The Authority may withdraw the permission for operating fiduciary activity if the character of infringements done by the fiduciary bank justifies such [a] decision.’ 20 Article 195 of the Waste Statute 2012: ‘Whoever transports waste without a valid permission for such transport or without an entry to the register contrary to an obligation provided for in Art 233 is subject to administrative penalty in amount from 2,000 PLN up to 10,000 PLN’ (art 233 provides an obligation to gain the relevant permission for waste transport until the proper register is created). The penalty for a misconduct provided for in art 195 is imposed by the territorially competent Voivodship Inspectorate of Environmental Protection. 21 Articles 194–97 of the Environmental Protection Act of 2001. 22 Environmental Inspection Act of 20 July 1991. 23 Title VII, arts 376 ff of the Environmental Protection Act.

94 Stanisław Tosza and Witold Zontek which is a central authority of the state administration and has competencies in two areas: competition and consumer protection. Besides regulatory and extensive investigative powers, the Office imposes administrative sanctions in the form of fines.24 As regards the investigation and prosecution of criminal offences in these three areas, the main authority is the office of the public prosecutor.

iii. Material and Territorial Jurisdiction of the Respective Authorities The Financial Supervision Authority exercises supervision over the financial market, including banking supervision, supervision of the capital market, supervision of the insurance market, supervision of the pension market, supplementary supervision of financial conglomerates, supervision of electronic money institutions, payment institutions and payment service bureaus, as well as supervision of cooperative savings and credit unions. The Financial Supervision Authority acts at the central state level. Regardless of whether a bank has its branches throughout the entire country or only locally (eg, in Kraków), it is subject to the control of the Authority. The same principle applies to all institutions subject to its supervision (insurance companies, retirement funds, credit unions, payment services etc).25 The material and territorial competence as regards environmental policy is shared between the local administration and the CIEP at the government level. However, the latter relies to a large extent on the local branches of its office (see section III.A.ii above). The President of the Office of Competition and Consumer Protection is the sole authority in Poland empowered to take decisions regarding the following matters (provided that they do not fall within the competence of the European Commission): 1) antitrust proceedings against undertakings violating the prohibition of practices restricting competition; 2) controlling transactions between enterprises, eg, mergers, takeovers of control, acquisitions of organised parts of assets or the establishments of joint ventures; 3) granting immunity from fines or the reduction thereof to an enterprise which cooperated with the authority and provided evidence of an existence of an unlawful competition-restricting agreement (the so-called leniency programme); 4) delivering opinions and conducting proceedings with respect to state aid.26

24 Articles

106 ff of the Competition and Consumer Protection Act. 1 of the Financial Market Supervision Act of 21 July 2006. 26 Competition and Consumer Protection Act. 25 Article

Poland 95 The Office has further powers, mainly regarding consumer protection. It e xercises its functions at the national level as well as at the regional level through its local branches.27

iv. Assessment of the Enforcement Policy The Financial Supervision Authority is more lenient, especially as regards imposing penalties, towards banks in comparison to other financial market players (such as investment funds or brokerage firms). The analysis of the Authority’s register of pecuniary penalties demonstrates that almost no penalties targeted banking entities, but that most of them concerned investment funds.28 However, this tendency may be justified by the fact that the problems regarding banks are mostly dealt with by means of preventive tools and hence do not require further penalties. The environmental policy of the state is the subject of several official strategic documents.29 None of these documents attaches particular significance to combatting waste trafficking or trafficking in flora and fauna. The most important strategic document, which demonstrates the focus of environmental policy, is the so-called SPA 2020 strategy, the goal of which is to prepare and adapt relevant parts of the country for the effects of climate change.30 The policy of the Office of Competition and Consumer Protection is currently provided in the document ‘Policy of Competition and Consumers’ Protection’.31 While an important part of the document is devoted to consumer protection, it also focuses on combatting cartels, protecting competition on concentrated markets and efficient concentration control.32 It enumerates various strategies which should enable successful enforcement in these areas. In particular, as regards cartels, the Office foresees relying on reformed leniency programmes, as well as 27 ibid art 33. 28 Komisja Nadzoru Finansowego, ‘Kary nałożone przez KNF’ (penalties imposed by KNF), https:// bip.knf.gov.pl/?l=/Komisja/050_Kary/kary.html. 29 eg, Ministry of the Environment (Ministerstwo Środowiska), ‘Polityka ekologiczna państwa w latach 2009–2012 z perspektywa do roku 2016’ (‘The State’s Ecological Policy for the Years 2009–12 with a Perspective to 2016’), https://www.mos.gov.pl/g2/big/2009_11/8183a2c86f4d7e2cdf8c3572bdba0bc6. pdf; ‘Program ochrony i równoważonego użytkowania różnorodności biologicznej oraz Plan działań na lata 2014–2020’ (‘Programme of Protection and Sustainable Exploitation of Biological Diversity and Plan of Action for 2014–20’), 23 May 2014, https://www.mos.gov.pl/g2/big/2014_05/ ef8371fe47d9a9bb3be69f50e55019fd.pdf; ‘W sprawie Krajowego planu gospodarki odpadami 2022’ (‘National Waste Handling Plan 2022’), 11 August 2016, www.monitorpolski.gov.pl/mp/2016/784/ M2016000078401.pdf. 30 Ministry of the Environment (Ministerstwo Środowiska), ‘Strategiczny plan adaptacji dla sektorów i obszarów wrażliwych na zmiany klimatu do roku 2020 z perspektywą do roku 2030’ (‘A Strategic Adaption Plan for Sectors and Areas Sensitive to Climate Change by 2020 with a Vision to 2030’), https://klimada.mos.gov.pl/wp-content/uploads/2013/11/SPA-2020.pdf. 31 Office of Competition and Consumer Protection (Urząd Ochrony Konkurencji i Konsumentów), ‘Polityka ochrony konkurencji i konsumentów’, 2015, https://www.uokik.gov.pl/download. php?plik=16694. 32 ibid 30–44.

96 Stanisław Tosza and Witold Zontek on prolonging the statute of limitations to five years.33 As the document is very recent, it remains to be seen how this strategy will translate into practice.

B. Interplay between the Different Public Enforcement Mechanisms i. Description of the Interactions Regarding the financial markets and competition, the only competent administrative agencies are the Financial Supervision Authority and the Office of Competition and Consumer Protection respectively. As the competencies regarding protection of the environment are scattered across several local and central agencies and public authorities, there are several authorities which may intervene in the case of an acts of environmental misconduct depending on the circumstances of the case in question. The precise demarcation of competencies is provided for in particular statutes and is mainly based on subject matter and/ or territory. The sole authorities empowered to investigate and prosecute criminal offences are the police or similar agencies34 and prosecutors. Their exclusive competence does not exclude cooperation with the above-mentioned administrative agencies. All these law enforcement authorities are under an obligation to act within the remits of their competencies. The rule for all criminal offences prosecuted ex officio is mandatory prosecution (which is enshrined in the legality principle). It compels the authorities (eg, the police and competent prosecutors) to open an investigation if they receive information reasonably indicating that an offence might have been committed, as well as to press charges if the investigation provides enough evidence to do so.35 The administrative authorities are also under an obligation to act regardless of the decisions of the competent authorities in criminal cases. Hence, it is not uncommon that cases are dealt with in parallel and independently both by administrative authorities and a prosecutor.36 The administrative authority is legally obliged to inform the prosecutor of any criminal activity which it has discovered while performing its duties.37 33 ibid 30–32. 34 eg, the Internal Security Agency (Agencja Bezpieczeństwa Wewnętrzengo (ABW)), which is responsible for ‘investigation, prevention and detection of the crimes of a) Espionage; b) Terrorism; c) Breach of State secrets; d) Crimes which may damage State security; e) Crimes which may damage economic foundations of the State; f) Corruption of public officials … which may pose a threat to the State’s security’ (according to, www.abw.gov.pl/en/our-mission/14,dok.html). This agency was responsible for investigating the Amber Gold affair. 35 Article 10 of the Code of Criminal Procedure (CCP). See also Jan Grajewski (ed), Prawo karne procesowe – część szczególna, 3rd edn (CH Beck, 2014). 36 Błachnio-Parzych (n 15); see also the judgment of the Supreme Administrative Court of 15 April 2010, case no II OSK 538/09, published in LEX nr 597675. 37 Article 304 §2 CCP.

Poland 97 Normally these authorities provide the prosecutor with copies of all documents and decisions issued in a particular case.38 The prosecutor can demand further cooperation, such as more detailed information or access to the authority’s databases.39 Not all evidence gathered in this way may be admissible at trial due to higher standards of proof in criminal investigations. It does not seem that evidence gathered in administrative proceedings is collected with the view to a potential criminal prosecution. Furthermore, despite the fact that the prosecutor’s case is based (at least partially) on the documents and decisions of other (administrative) authorities, it occurs that his or her assessment differs from the opinion of the competent authority. Sometimes it is related to the differences of procedural standards in administrative and criminal procedure (what is sufficient for the environmental protection inspector may not be a ‘beyond reasonable doubt’ case for the prosecutor). It may also be related to the typical requirements of criminal law, such as the mens rea, the latter not constituting an important prerequisite for administrative liability.

ii. Interests of the Victim and the Choice of Public Enforcement Mechanisms The choice between criminal or administrative enforcement as regards misconduct affecting financial markets and the environment does not seem in theory to be made with a particular view to the victim’s interests. However, this does not mean that the victim cannot have a practical impact on the decisions of the law enforcement authorities. The large number of victims and the resulting public outcry prompted the competent prosecutors to open an investigation in the infamous Amber Gold affair40 after Amber Gold filed for bankruptcy and approximately 18,000 people lost their savings (totalling approximately PLN 851 million). The prosecutors had refused to do so beforehand, despite 38 ibid art 15. 39 ibid Chapter V. 40 Amber Gold was established in 2009 in Gdańsk as a company offering very high interest rates for its clients’ savings (approximately five times higher than those proposed by the commercial banks at the open market), which were possible, according to the explanation of the company, thanks to investments in gold, silver and platinum. Already in 2009, the Financial Supervision Authority informed the local prosecutor that Amber Gold might be carrying out shadow banking (which is an offence). The prosecutor refused to open an investigation, claiming that he did not see any criminal behaviour in Amber Gold’s activities. This decision was quashed in court, but again and again the prosecutor maintained his refusal to investigate. Eventually, in 2012, the Circuit Prosecutor in Gdańsk decided to investigate, but not the shadow banking – instead, a classic form of fraud. Soon afterwards, Amber Gold filed for bankruptcy. The indictment was filed at the court in Gdańsk in June 2015. This case also caused a nationwide outcry due to the lack of any coordination between the state authorities. The Supervision Authority provided the prosecutor with professional and seemingly sufficient data to investigate and the reasons for the prosecutor’s refusal remain unclear (see the current press reports: www.rp.pl/Amber-Gold/170119924-Swiadek-ws-Amber-Gold-Pismo-szefa-KNF-nie-trafilo-doSeremeta.html#ap-1).

98 Stanisław Tosza and Witold Zontek official information that the Financial Authority suspected that Amber Gold had engaged in shadow banking.41

iii. The Choice of Enforcement Mechanisms and Evidential or Other Practical Problems As mentioned above, the choice between administrative or criminal enforcement only exists in the field of financial markets and the environment as enforcement of competition law is pursued by means of administrative law only. However, it is important to stress that at the level of enforcement, the act of choosing is (at least in theory) impossible due to the obligation of the competent authorities to act. As explained above, the system of mandatory criminal prosecution does not leave the choice to the prosecutor if there are good reasons to suspect that an offence has been committed. The administrative authorities also proceed according to their criteria regardless of the decisions of the prosecutors. In this sense, the competent law enforcement authorities assess the evidence at their disposal and according to the standard of proof within the given proceedings, and then decide how to proceed independently; such evaluations do not result in cases being transferred from one authority to another. It is also rather unlikely that these criteria lead the legislator to provide criminal offences as regards protection of the environment or financial markets. However, one may suspect that practical aspects have resulted in the introduction of an administrative sanction instead of a criminal offence for individual heads of business who (intentionally) led the company to enter into prohibited agreements.42

C. The Different Public Enforcement Mechanisms in Action i. How Do the Respective Competent Authorities Typically Build up Their Cases? The respective authorities – the Financial Supervision Authority, the CIEP and the Office of Competition and Consumer Protection – may discover irregularities in the course of their own supervision activities, including through analysis of information that the entities are obliged to provide, through complaints from the victims or confessions made by the wrongdoers. The level of proactivity varies between the agencies and depending on the field of its activities. Looking from the perspective of the infringements analysed in this chapter, the Financial Supervision Authority is the most proactive authority as it conducts

41 ‘Dwa lata po upadku Amber Gold: 851 mln zł strat’ Forbes (13 August 2014), www.forbes.pl/ dwa-lata-po-amber-gold-18-tys-pokrzywdzonych-i-851-mln-zl-strat,artykuly,181401,1,1.html. 42 Article 106a of the Competition and Consumer Protection Act of 2007.

Poland 99 ongoing supervision of the banking and financial sector. Furthermore, companies active in these markets have extensive reporting duties.43 The analysis of this collected information may lead to the detection of irregularities. Following the infamous Amber Gold affair, there may be a growing tendency to report dubious activities in these markets by individuals. Reporting duties are also linked to the management of waste under the supervision of the CIEP. Irregularities linked to the trafficking of waste are likely to be discovered by the police or the customs service, as well as through individual complaints (eg, illegal dumping sites). As regards the trafficking of flora and fauna, the authorities detecting infringements are also most likely to be the police or the customs service. The disclosure duties in this regard are enshrined in EC Council Regulation 338/97 of 9 December 1996 on the protection of species of wild fauna and flora by regulating trade therein.44 The Office of Competition and Consumer Protection seems to be the least proactive in this regard. The information about the potential cartels in most cases comes from individual complaints brought by citizens or companies. The Office also undertakes its own sectoral inquiries – for example, in 2015, it analysed the market of financial auditing and consultancy.45 All the above authorities have the duty to follow up on the infringements they discover or become informed about. This means that they are obliged to undertake the respective administrative steps as well as to inform the prosecutor if the infringement might constitute an offence. In this sense, the authorities have no discretion to drop cases or to decide whether to inform the prosecutor or not.46 43 For example, the obligations of the securities issuers provided in art 56 of the Act on Public Offering, the Conditions Governing the Introduction of Financial Instruments to Organised Trading, and on Public Companies of 29 July 2015. ‘1. Subject to the provisions of paragraph 6, an issuer of securities admitted to trading on a regulated market shall disclose the following information simultaneously to the PFSA, to the company operating that regulated market, and to the public: 1) inside information, within the meaning of Article 154 of the Financial Instruments Trading Act, hereinafter referred to as “inside information”; 2) ongoing and periodic information: a) in accordance with the regulations adopted under Article 60.2 – in the case of the issuers of securities admitted to trading on the official listing market within the meaning of the Financial Instruments Trading Act or on a regulated market in a Member State other than the Republic of Poland, or b) in accordance with the rules referred to in Article 61 – in the case of issuers of securities admitted to trading only on a stock exchange market other than the official listing market, or admitted to trading on an over-the-counter (OTC) market. 1a. The PFSA shall collect the information referred to in paragraph 1 and shall ensure general and ongoing access to that information, having regard to the need to guarantee the security of information and reliability of the sources of information. 2. Subject to the provisions of Article 57.1, the issuer shall, with respect to the information referred to in paragraph 1(1): 1) disclose this information immediately after the occurrence of the events or circumstances which justify the disclosure of this information, or immediately after becoming aware of such events or circumstances, not later than within 24 hours; 2) publish this information on the Internet on its website, with the exception of the personal data of persons to whom this information relates.’ 44 Andrzej Kapel, Borys Kala, CITES w Polsce, i w Unii Europejskiej, 2nd edn (Polskie Towarzystwo Ochrony Przyrody Salamandra, 2016), www.salamandra.org.pl/citeswpolsce.html. 45 Office of Competition and Consumer Protection (Urząd Ochrony Konkurencji i Konsumentów), ‘Sprawozdanie z działalności UOKiK za 2015 r’, https://www.uokik.gov.pl/sprawozdania_z_ dzialalnosci_urzedu.php. 46 Article 304 §2 of the CCP.

100 Stanisław Tosza and Witold Zontek They are obliged to provide the prosecutor with all the evidence they have in their possession on his or her demand. Furthermore, some of the authorities may join or substitute the public prosecutor in criminal proceeding exercising its function in the prosecutor’s stead (eg, the Financial Supervision Authority).47 According to the most recent available statistics, in 2011 the Financial Supervision Authority acted in this capacity in 10–15 cases.48

ii. Reporting and Disclosure Duties for Corporations and Individuals The duty to report the commission of an offence varies depending on the type of offences in question and on the person who detected them.49 As regards a limited number of the most serious crimes (such as murder), everybody is obliged to report reasonably plausible information about its commission (or even the preparation or attempt to commit it). Failing to do so is punishable by a sentence of up to three years’ imprisonment.50 None of the enumerated offences is of an economic or financial character. In relation to any other offence, there is simply an unsanctioned civic duty to report it to the police or to the prosecutor.51 The duty is considered to be only of a civic nature, as there is no punishment for failing to report, except for civil servants who may be held criminally liable for the non-fulfilment of their duties.52 Hence, this duty obliges agents of such offices as the Financial Supervision Authority or the General Inspectorate of Environmental Protection to report to the prosecutor offences that they have detected while exercising their functions.53 Furthermore, some statutes provide for the legal (and not only civic) duty to report offences in particular domains. For instance, a bank is obliged to inform the competent authority (in particular, the police or a prosecutor) in the event of reasonable suspicion that bank services are being used for criminal activities.54

47 Article 6 §2 of the Financial Market Supervision Act. 48 Komisja Nadzoru Finansowego, ‘Rok 2011 w liczbach w Urzędzie Komisja Nadzoru Finansowego’, 29 December 2011, https://bs.net.pl/upload/File/pdf2/KNF_podsumowanie_2011_tcm75-28931.pdf. 49 These remarks do not concern competition law, as there is no offence to be reported. 50 Article 240 of the Criminal Code. 51 Article 304 §1 of the CCP. 52 ibid art 304 §2; and art 231 of the Criminal Code. 53 The general duty provided in art 304 §2 of the CCP has its more detailed counterpart in art 15 of the Environmental Inspection Act of 20 July 1991. 54 Article 106a of the Banking Law: ‘If there is a reasonable suspicion that the bank’s activities are used to conceal any criminal activity or for any purposes connected with a fiscal offence or any offence other than a criminal offence referred to in Art 165a or Art 299 of the Criminal Code, the bank will notify the public prosecutor, the Police, or any other competent authority entitled to conduct pre-trial proceedings.’ However, the statute does not provide any formalised sanction for failing to perform the above duty. It is deemed that only the supervisory sanctions of the FSA may be applied (see Arkadiusz Kawulski, Prawo bankowe. Komentarz (LexisNexis, 2013) commentary to art 106a of the Banking Law).

Poland 101

iii. Leniency and Whistleblower Programmes Among the three areas examined in this chapter, only competition law provides for a special leniency programme. However, offences regarding financial markets or environmental protection are subject to the common rules of criminal law as well as the tools of negotiated justice (see section III.C.v below). As to the former, the Criminal Code provides for rules of mitigation or the suspension of the execution of a penalty applicable on condition of cooperation with the law enforcement authorities.55 Polish law provides for the leniency programme for two categories of subjects who may be fined: commercial undertakings and individuals who are part of cartels, as well as persons managing an undertaking who allow it to infringe the cartel prohibition.56 It may allow the undertaking or the individual concerned to avoid a fine completely, on condition, inter alia, that it is the first to admit to being part of the cartel and disclosing all relevant information and evidence, immediately discontinuing its participation in the agreement.57 In the case of non-compliance with all of the statutory conditions, only a reduction is possible. In particular, the law provides the respective percentages of fine reductions depending on the order in which the particular whistleblower informed the Office.58 Furthermore, the law also provides for the so-called ‘leniency plus’ programme. This applies to those who are not able to benefit from a full fine reduction. If they provide information about another cartel of which they are part, their fine may be further reduced according to the percentages given in the statute. The application of this additional reduction can never lead to complete avoidance of the fine.59 The most recent statistical data on the leniency programme in practice dates from 2013. The number of applications filed oscillated between two and eight per year, with an exceptional peak in 2012 of 16.60 The Office of Competition and

55 Article 60 of the Criminal Code: ‘§3. The court applies extraordinary mitigation of the penalty, and may even conditionally suspend its enforcement with regard to a perpetrator who has committed a crime in complicity with other persons, if he has disclosed information concerning the individuals participating in the crime and the substantive circumstances of its commission to a law enforcement authority responsible for prosecuting crimes. §4. Upon the public prosecutor’s motion, the court may apply extraordinary mitigation of the penalty, and may even conditionally suspend its enforcement with regard to a perpetrator who has, apart from giving explanations in his own case, disclosed a crime subject to a penalty of deprivation of liberty for 5 years and presented its substantive circumstances to a law enforcement authority that had no prior knowledge of these facts.’ 56 Article 113a of the Competition and Consumer Protection Act of 16 February 2007: ‘An entrepreneur who has entered into an agreement referred to in Art 6.1 of the Act or Art 101 of the TFEU may file a request with the President of the Office for a waiver of a financial penalty or its lowering, herein after referred to as “request”.’ Article 113h: ‘The provisions of Arts 113a to 113e and Art 113g shall apply accordingly also to the managing persons referred to in Art 6a, subject to Art 113i and Art 113j.’ 57 Article 113a and 113b of the Competition and Consumer Protection Act of 16 February 2007. 58 ibid art 113c. 59 ibid art 113d. 60 Office of Competition and Consumer Protection (Urząd Ochrony Konkurencji i Konsumentów), ‘Sprawozdanie z działalności 2013’, 2014, https://uokik.gov.pl/download.php?id=1200.

102 Stanisław Tosza and Witold Zontek Consumer Protection conducted surveys as regards awareness of the programme among Polish entrepreneurs. The last one was undertaken in 2012 and showed that out of 1,200 persons who were asked, over 40 per cent knew about the programme, up from 19 per cent in 2009.61 There is no particular legal framework protecting whistleblowers in Poland, who can only benefit from protection from unlawful dismissal, which is given to all employees by labour law regardless of whether they are whistleblowers or not.62

iv. Reporting and Disclosure Duties, Whistleblower Programmes and the Privilege against Self‐Incrimination The privilege against self-incrimination is enshrined in the Code of Criminal Procedure (CCP): Article 74 §1 (no duty to prove one’s innocence) and 175 §1 (the right not to provide any explanation or not to answer any questions). Article 183 CCP extends this right to witnesses in the event that answering a question might expose them to the risk of being held criminally liable.63 The protection against incriminating oneself (in the criminal law sense) is also given to witnesses who are otherwise obliged to provide information in administrative proceedings.64 Otherwise, whistleblowers may only rely on the protection given in labour law, which, however, does not particularly target retaliation against those who blow the whistle. These persons may fall under the scope of general rules protecting employees, such as protection against unlawful dismissal, although the remedy it offers is necessarily limited.65

v. Negotiated Justice The CCP provides for two possibilities to conclude criminal proceedings with a negotiated outcome. The first may be used in the pre-trial phase if the accused admits his or her guilt and the circumstances of the offence are sufficiently clear.

61 Office of Competition and Consumer Protection (Urząd Ochrony Konkurencji i Konsumentów), ‘Znajomość programu leniency wśród polskich przedsiębiorców’, 2012, https://uokik.gov.pl/download. php?plik=11935. 62 See a detailed analysis of the legal situation of whistleblowers and the protection that may be applied to them in Anna Wojciechowska-Nowak, ‘Providing an Alternative to Silence: Towards Greater Protection and Support for Whistleblowers in the EU. Poland – Country Report’, September 2012, www.batory.org.pl/upload/files/Programy%20operacyjne/Odpowiedzialne%20Panstwo/Country%20 Report%20Poland.pdf. See also other publications (in Polish and some in English) at www.sygnalista.pl/publikacjefundacji-batorego. 63 The right to refuse to answer questions is also guaranteed to the representative of an entity in the very rarely used procedure that aims at punishing that entity for criminal acts committed by its employee (quasi-criminal liability of legal persons). 64 Article 83 §2 of the Code of Administrative Procedure. 65 For a detailed analysis of labour law protection of whistleblowers, see Wojciechowska-Nowak (n 62) 4–9.

Poland 103 The court has to approve the negotiated outcome, but without going to trial.66 The second possibility consists in the guilty plea of the accused in the first phase of the trial.67 The accused proposes a penalty, which may be approved by the court unless the prosecutor or the aggrieved party disagrees.68 The court may also make its agreement conditional upon some modifications to the proposed penalty. The application of these procedures, especially the former, relieves the prosecution or the court of the necessity to provide comprehensive evidence for the offence. Approximately 60 per cent of all criminal cases conclude with the use of one of the above procedures.69 These two procedural tools apply to offences regarding the environment and financial markets. They are not applicable in competition law, which does not provide for criminal law enforcement. However, within the administrative enforcement setting, the legislator also offered space for negotiations between the undertaking in question and the competent authority. For instance, within an antitrust procedure, an undertaking may avoid a fine by making a commitment to undertake or abstain from certain acts.70 For the sake of completeness, one should also mention mediation, which is another possible instrument of negotiated justice. However, its applicability to cases of interest in this study is limited as it focuses on reconciliation between the victim and the offender. The lack of an individualised victim in this type of case, contrary to the ‘classic’ criminality, limits the practical relevance of this method.

IV. Criminal Procedure A. Burden and Standard of Proof The burden of proof in criminal cases resulting from misconduct affecting all of the above fields is the same as in the ‘classic’ criminal law. The substance of these proceedings may be highly complex due to the nature of these cases and the profile of the suspect or accused. In practice, this may result in a much more active defence than in classical criminal law cases. It would not be surprising to see defence counsels actively providing evidence aiming at proving the innocence of their client rather than just countering the prosecution. The criminal and administrative enforcement systems are parallel and independent. In view of the legality principle, the competent authorities do not have 66 Article 335 of the CCP. 67 A newly introduced provision in art 338a of the CCP provides for a third possibility of a negotiated outcome, which takes place between the pre-trial phase and the trial, without the need for the effective trial to begin (see also art 343a). 68 ibid art 387. 69 Explanatory notes to the draft of criminal law reform from 2015, 112–14, www.sejm.gov.pl/Sejm7. nsf/druk.xsp?nr=2393Zrodlop. 70 Article 12 of the Competition and Consumer Protection Act 2007.

104 Stanisław Tosza and Witold Zontek discretion to drop a case, even if the same acts are being dealt with in another type of proceedings, provided of course that the act is considered both an offence and an administrative infringement. As was explained above (section III.B.i), the possibility that the same act is punished according to criminal and administrative law is not excluded. As a consequence, the problem of the burden of proof does not influence the decision on the chosen law enforcement method. However, it is possible in practice that the prosecutor may drop the case due to a lack of evidence as the standard of proof is generally higher than in administrative proceedings. A case that demonstrates these differences is the ruling of the Supreme Administrative Court of 2 June 2015 (case signature II OSK 2684/13) regarding prohibited substances. The court explicitly indicated that in the administrative procedure concerning an act which may also lead to criminal liability, the administrative authorities are autonomous not only in the evidentiary questions, but also as regards the interpretation of substantive law. In the case in question, the court disregarded the definitions developed in criminal cases.

B. Special Criminal Investigative Measures for the Three Areas There are no special criminal investigative measures provided in Polish criminal procedure that are applicable only for economic or financial criminal law or conceived particularly for these types of offence, nor they have emerged in practice. However, given the nature of these offences, the use of expert witnesses is more frequent. Investigative measures available to the prosecutor differ in comparison to those in use by the administrative agencies in particular in view of the different goals of the two types of law enforcement: criminal and administrative. The latter, especially as regards the supervision function, should be able to react quickly to perceived irregularities and ensure the effective protection of relevant interests. It focuses both on individuals and different types of entities. Criminal procedure aims mainly at establishing if an individual has committed an offence and potentially on preventing him or her from committing further ones. As corporate liability is very rarely used and requires a previous conviction of an individual in order to be employed, a company will never be the focus of the prosecutor. The most important preventive measures that the prosecutor may already impose in the course of an investigation are the prohibition of exercising a professional function while the investigation is ongoing or freezing assets deemed to be the benefit of a crime eligible for potential forfeiture. Freezing is possible not only in respect of the assets of the suspect or accused,71 but also of an entity which

71 Article

291 of the CCP.

Poland 105 may be subject to (quasi-)criminal liability.72 Furthermore, the new provision of Article 292a CCP provides for the possibility of introducing the so-called compulsory management of an entity, which is nominated by the prosecutor and confirmed by the court. Otherwise, if the prosecutor deems this to be insufficient, they may file a formal notion to other competent authorities to employ their specific mechanisms in order to prevent or remedy the results of the misconduct in question.

C. Rights of the Victim in Criminal Proceedings in the Three Areas In criminal proceedings in the three areas, the victim has the same rights as in any other criminal proceeding. In this regard, economic and financial criminal law does not offer more or less to the aggrieved party than in the classic areas of criminal law. The most important rights are the right to participate in the proceedings in the capacity of an aggrieved party73 and the right to have the damage redressed or the harm compensated. The latter possibility is guaranteed by the Criminal Code (Article 46) and depends only on introducing a motion either by the aggrieved party or by the prosecutor.74

D. Specialised Criminal Courts There are no specialised courts as regards misconduct affecting financial markets or the environment. These cases are dealt with by the same judges who sit on classical criminal law cases.75 As regards competition procedure (which is administrative and not criminal), a special court (which is a chamber of the Warsaw District Court) deals with all the matters reserved for the court and reviews the decisions of the President of the Office of Competition and Consumer Protection. Currently there seem to be no plans to establish any specialised courts with respect to the above areas. In our opinion, cases of misconduct affecting financial markets could particularly benefit from the establishment of such a court in view of the complex and technical substance of this domain and the required level of

72 Article 26 of the Law of 28 October 2002 providing quasi-criminal liability for entities (Ustawa o odpowiedzialności podmiotów zbiorowych za czyny zabronione pod groźbą kary). 73 Articles 49 and 5 of the CCP. 74 ibid art 49a. 75 Interestingly, for several years, the District Court of Gdańsk had a special division dedicated only to criminal cases of an economic or financial nature. The judges received special training directed at the problems relating to such cases.

106 Stanisław Tosza and Witold Zontek knowledge, which has to encompass not only the legal framework but also the rules of the financial market in general, international legal instruments, rules of corporate governance, and technical and financial aspects of trading.

V. Cooperation between Authorities and Jurisdictional Issues A. Specific Localisation Criteria In criminal proceedings, the localisation criteria are provided by the Code of Criminal Procedure and legal acts regulating the functioning of public prosecutions.76 The applicable criteria do not focus in any particular way on offences of an economic or financial character, but are relatively typical (the place of the commission of the offence as the main factor and, for example, the place where the offence was discovered or the suspect arrested as subsidiary factors).77

B. Specific Rules or Practices to Address (Positive and/or Negative) Jurisdictional Conflicts The conflict of jurisdictions between the competent authorities in criminal law is solved according to the rules mentioned in the previous section. A conflict between administrative and criminal authorities is per se impossible as these two types of proceedings run in parallel and independently of each other.

C. The Imposition of Various Sanctions of a Different Nature It is possible that one act fulfils the definition of a criminal offence and of an administrative misconduct, in which case it is possible to impose both types of 76 Section 116 of the Regulation of Ministry of Justice – rules of the internal office organisation of public prosecution, which refers to the general rules provided by the CCP in arts 31–34. See art 31 of the CCP: ‘§1. Territorial jurisdiction shall be with the court in whose region the criminal offence was committed. §2. If a criminal offence has been committed on board of a Polish vessel or aircraft, and §1 is not applicable, jurisdiction shall be within the court for the home port of the vessel or aircraft. §3. If a criminal offence has been committed in a region of more than one court, jurisdiction shall be with the court that has instituted the investigation first.’ See also art 32 of the CCP: ‘§1. If the place of committing a criminal offence cannot be established, jurisdiction shall be with the court in whose region: 1) the criminal offence has been discovered, 2) the accused has been apprehended, or 3) the accused was domiciled or temporarily resided prior to the criminal offence – whichever of these courts instituted the investigation first. §2. If the criminal offence has been committed abroad, the provision of §1 shall apply accordingly. §3. When territorial jurisdiction cannot be established pursuant to the preceding provisions, the case shall be heard by the court having jurisdiction over Śródmieście District of the Capital City of Warsaw.’ 77 See also section III.A.i above.

Poland 107 sanctions in parallel.78 As such a situation may infringe the ne bis in idem principle and the principle of proportionality, it has been analysed on several occasions by the Polish Constitutional Tribunal. The approach does not yet seem to be clear. The most recent opinion of the Constitutional Tribunal considers the parallel sanctioning not to be unconstitutional per se, but requiring the criminal court to take into account the consequences imposed in another proceeding (civil or administrative) when imposing the criminal sanction in order not to exceed the overall proportionality of the sanction.79 It cannot be excluded that in the future, the Tribunal might strike down provisions that in abstracto make it possible to impose several sanctions of a different legal nature for the same acts, if the respective provisions do not allow for the expressive adaption of sanctions because of parallel proceedings. If the criminal court adjudicated on the full compensation to the victim according to Article 46 of the Criminal Code (see section IV.C above), there is no possibility to open civil procedure for the same facts (however for any amount that is due but was not adjudicated by the criminal court it is still possible).

D. The Relevance of Sanctions Imposed in Another (EU or Non‐EU) Country Criminal sanctions imposed in another EU Member State preclude prosecution for the same facts in Poland.80 It is also considered that a decision that decisively ends criminal proceedings (not necessary a sanctioning or absolving sentence) in another EU country also has the same effect.81 The above rule also applies in the case of non-EU Member States (eg, other parties to the Schengen Agreement) with which Poland has an agreement providing the same solutions of mutual recognition. However, if this is not the case, a final decision of a foreign court does not preclude criminal proceedings for the same act in Poland, except under certain circumstances.82 When deciding on the penalty, the Polish court takes into account the time of imprisonment effectively 78 See the most comprehensive Polish monograph regarding this matter: Błachnio-Parzych (n 15). 79 Judgment of the Constitutional Tribunal of 21 October 2014 P 50/13 OTK ZU 2014 no 9A Item 103. 80 Article 114 §3, point 3 of the Criminal Code and art 50 of the Charter of Fundamental Rights of the European Union. See also Andrzej Sakowicz, Zasada ne bis in idem w prawie karnym (Temida, 2011) 128–33. 81 Sakowicz (n 80) 131. 82 Article 114 §1 of the Criminal Code. The exceptions are provided for in §3 of the same article and are as follows: ‘The provision of §1 does not apply: 1) if a sentence passed abroad has been accepted to be executed in the territory of the Republic of Poland, and likewise if a ruling passed abroad applies to a crime that has been transferred abroad for prosecution or to the perpetrator that has been extradited from the territory of the Republic of Poland, 2) to rulings of international criminal courts operating under international law that is binding for the Republic of Poland, 3) to final and valid rulings concluding criminal proceedings passed by foreign courts and other state authorities if it is provided so by an international agreement that is binding for the Republic of Poland.’

108 Stanisław Tosza and Witold Zontek served in another country and other penalties executed there, as well as considering differences between these penalties.83 Although the provision does not say it expressively, these differences should only play in favour of the offender.84 Polish prosecutors and courts are not legally obliged to take into account any regulatory penalty imposed in another country.

E. Cooperation between Administrative Authorities of a Different Kind within the Same Country The general principle of the Polish administrative procedure is cooperation between public authorities. Article 2, section 1, part 17 of the Environmental Inspection Act explicitly obliges the environmental inspection authorities to cooperate in matters related to the protection of the environment with other supervision authorities, law enforcement, administration of justice and other state or local public administration. This obligation is of a very general nature. The same Act provides more detailed provisions which make the cooperation more concrete and transparent. For instance, Article 17, section 2 of the Environmental Inspection Act obliges the inspection to provide other public administration authorities with information on results of the control it has conducted. The inspection must also exchange information with border guard and customs officials on the import of substances which pose a threat to the environment (eg, prohibited materials). In the financial markets field, under Article 17 of the Financial Market Supervision Act, the Financial Supervision Authority may transfer relevant information to the National Bank of Poland or the Bank Guarantee Fund. It may also enter into agreements with other public authorities (eg, the Energy Regulation Authority) on information sharing. The main limitation to cooperation stems from rules on secrecy which may apply in some procedures or as to some aspects of a concrete procedure. For instance, the Banking Law provides an elaborate procedures in which particular law enforcement or other authorities may be granted information that is classified as banking secrets (Articles 105–106d).

F. Cooperation between Administrative Authorities of a Different Kind Either Cross-border or at a Supranational Level There are no general rules regulating the cooperation between Polish and foreign administrative authorities. An initiative to establish such rules stemming from the 83 ibid art 114 §2. 84 Janusz Raglewski, ‘Art. 114’ in Andrzej Zoll (ed), Kodeks Karny. Część Ogólna. Komentarz, 4th edn (Wolters Kluwer, 2016).

Poland 109 Supreme Administrative Court of Poland has so far not been adopted.85 Currently, in relation to the cooperation with EU Member States, it is necessary to rely on general principles of cooperation within the EU, such as the principle of sincere cooperation stipulated in Article 4(3) of the Treaty on European Union (TEU). Otherwise the rules are provided statute by statute. For instance, a general rule on cooperation of the Financial Supervision Authority with various national and supranational agencies is enshrined in Article 17d of the Financial Market Supervision Act.86 Furthermore, the Financial Supervision Authority has signed numerous memoranda of understanding with supervision agencies.87 Similar but more scattered rules have been provided as regards authorities that are competent for environmental protection. For example, the Polish environment protection authorities cooperate in the so-called transborder assessment of the effects of certain public and private projects affecting the environment.88

G. Cooperation between Police and/or Judicial Authorities with Administrative Authorities within the Same Country The principle of the Polish criminal procedure is the duty of public authorities to provide all necessary information as well as the files to the court and to the prosecutor’s office.89 The court and the prosecutor may request the necessary information from administrative authorities, including information that is subject to rules on secrecy.90 Furthermore, the administrative authorities are under an obligation to inform the competent authorities (ie, a prosecutor) if they suspect that a crime has been or is being committed. Statistically relevant data as to this cooperation are not available, so it is impossible to assess their functioning. At least one famous 85 For more on this proposal, see Joanna Wegner-Kowalska, ‘Współpraca administracyjna ważnym obowiązkiem państw UE’ (2016) 6 Europejski Przegląd Sądowy 4. 86 The Authority cooperates with the European Commission, the European Banking Authority, the European Insurance and Occupational Pensions Authority, the European Securities and Markets Authority, the International Organization of Securities Commissions, the International Association of Insurance Supervisors, the International Organisation of Pension Supervisors, the Basel Committee on Banking Supervision, the Organisation for Economic Co-operation and Development and the World Bank. 87 See the full list at https://www.knf.gov.pl/o_nas/wspolpraca_miedzynarodowa/porozumienia/ porozumienia.html. 88 The legal basis for cooperation in this regard is the Statute on Disclosure of Information on the Environment and its Protection, Civil Participation in Environment Protection and Assessment of Impact on Environment from 2008 implementing Directive 2011/92/EU on the assessment of the effects of certain public and private projects on the environment and Directive 2001/42/EC of 27 June 2001 on the assessment of the effects of certain plans and programmes on the environment. 89 Article 15 of the CCP: ‘All state, local government and community institutions shall, within the scope of their activities, aid and assist the bodies conducting criminal proceedings within the time limit specified by the bodies.’ The rule is specified in a variety of statutes related to the matter discussed in this chapter (see art 106b of the Banking Law and the transfer of the banking secrecy to the prosecutor described above). 90 Article 106b of the Banking Law.

110 Stanisław Tosza and Witold Zontek case (Amber Gold) demonstrated that despite these rules, the follow-up given to the information stemming from administrative authorities might not be optimal.91 On the other hand, administrative authorities may also request police assistance – for example, the President of the Office of Competition and Consumer Protection may request such assistance in order to conduct a search in a cartel investigation.92 Secrecy can also be an obstacle in cooperation between administrative and judicial authorities, and special procedures on lifting it have been provided. For example, in the field of banking law, the public prosecutor in charge of the proceedings relating to a criminal or fiscal offence may require the disclosure of information that constitutes bank secrets by a bank, its employees or any persons acting as intermediaries in banking operations, only on the basis of a decision issued at the prosecutor’s request by a regional court of an appropriate jurisdiction. The request referred should specify the circumstances justifying the need to disclose such information and its type and scope. After this request has been analysed, the court will either issue a decision to disclose such information, specifying the type and scope of the information to be disclosed, the person or organisational unit to which it applies and the entity that is obliged to disclose it, or it will refuse to approve the disclosure of such information (Article 106b of the Banking Law).

H. Cooperation between Police and/or Judicial Authorities with Administrative Authorities Either Cross-border or at a Supranational Level As a rule, the Polish prosecutor who would need to seek the help of a foreign administrative authority requests such cooperation addressing its counterpart in that country to make the necessary request to that administrative authority. The Polish prosecutors also cooperate with the European Anti-Fraud Office (OLAF) according to the applicable legal framework.

91 See

n 40. 91(1) of the Competition and Consumer Protection Act of 2007.

92 Article

2.3 Sweden VLADIMIR BASTIDAS VENEGAS AND MARIA BERGSTRÖM

I. Contemporary Challenges and Recent Reforms A. Major Recent Reforms to the Criminal Justice System Affecting the Three Areas The last ten years have seen major reforms in the financial and competition law areas, and some changes in the environmental area. These changes affect substantive criminal law (discussed in section II below), the administration of justice (section III), criminal procedure (section IV) and cooperation between authorities (section V). In the financial law field, the introduction of the recently repealed and replaced Market Abuse Penalties Act (insider trading and market manipulation) in 2005 constituted a major reform.1 The introduction of these rules also encompassed amendments to rules complementing this Act.2 First, the 2005 rules extended the scope of the offences covered by the definition of market abuse and by the criminalisation of attempts.3 Second, the rules made clearer the division of tasks between the Swedish supervising authority, the Finansinspektionen (FI), and the prosecutor, the Swedish Economic Crime Authority, the Ekobrottsmyndigheten

1 The Act on Penalties for Market Abuse When Trading in Financial Instruments (2005:377) (Market Abuse Penalties Act) (Lag (2005:377) om straff för marknadsmissbruk vid handel med finansiella instrument), repealed and replaced on 1 February 2017 by Lag (2016:1307) om straff för marknadsmissbruk på värdepappersmarknaden). 2 The Act on Reporting Duty on Possession of Certain Financial Instruments regarding the reporting of information to the supervising authority in order to facilitate supervision and the prevention of market abuse, and the Act on Trade with Financial Instruments concerning the reporting of certain transactions (Lag (2000:1087) om anmälningsskyldighet för vissa innehav av finansiella instrument; Lag (1991:980) om handel med finansiella instrument). The provisions of these laws are under constant revision. See also Lag (2016:1306) med kompletterande bestämmelser till EU:s marknadsmissbruksförordning, in force since 1 February 2017. 3 Not only was gross negligence covered by the new rules, but so too were negligent acts. On attempts, see Prop 2004/05:142, 64. On the wider definition of influencing the market, see Prop 2004/05:142, 69.

112 Vladimir Bastidas Venegas and Maria Bergström (EBM). Third, the rules revised obligations imposed on individuals regarding duties of reporting and disclosure to the authorities. Fourth, the rules also introduced enhanced cooperation between the FI and financial supervising authorities in other EU Member States. As regards cooperation between authorities, new rules were introduced in 2012 obliging the FI to refer disputes between the national competent authorities regarding the carrying out of inspections and requests for information to the European Securities and Markets Authority (ESMA).4 Since 3 July 2016, the EU Market Abuse Regulation has been in force in all EU Member States.5 By the same date, the directive on criminal sanctions for market abuse should have been transposed (the Market Abuse Directive).6 This new regulatory framework replaced the 2003 Market Abuse Directive.7 As a result, the EU Market Abuse Regulation and a new Swedish Act of Administrative Sanctions8 have been placed alongside the penalty provisions of the 2016 Market Abuse Penalties Act9 that replaced the 2005 Act. The new rules introduce parallel systems of criminal and administrative sanctions for acts that were previously crimes under the 2005 Market Abuse Penalties Act. The purpose is to increase the effectiveness of the sanctions, in particular against infringements of the reporting and disclosure duties imposed on certain market actors.10 In the Swedish context, actions where subjective intent may be proved are subject to criminal sanctions, while acts of negligence and minor offences are handled by administrative sanctions (in contrast to the previous rules, according to which both types of acts were subject to criminal sanctions).11 Moreover, a system of summary orders (föreläggande) was introduced for actions subject to administrative sanctions.12 In other cases, which were previously subject to criminal sanctions, the FI now has the power to make a claim before courts for administrative fines.13 In addition, the cooperation between the prosecutors and the FI will be intensified in order to resolve current problems. In particular, the FI will be more involved in the investigation resulting in criminal sanctions and will have a representative (biträde) working with

4 Lag (2012:194) om ändring i lagen (2005:377) om straff för marknadsmissbruk vid handel med finansiella instrument. 5 Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (Market Abuse Regulation) and repealing Directive 2003/6/EC of the European Parliament and of the Council and Commission Directives 2003/124/EC, 2003/125/EC and 2004/72/ EC [2014] OJ L173/1. 6 Directive 2014/57/EU of the European Parliament and of the Council of 16 April 2014 on Criminal Sanctions for Market Abuse (Market Abuse Directive) [2014] OJ L173, 12 June. 7 Directive 2003/6/EC of the European Parliament and of the Council of 28 January 2003 on Insider Dealing and Market Manipulation (Market Abuse) [2003] OJ L96, 12 April, 16. 8 Lag (2016:1306) med kompletterande bestämmelser till EU:s marknadsmissbruksförordning. 9 Lag (2016:1307) om straff för marknadsmissbruk på värdepappersmarknaden). 10 See Regulation 596/2014, art 30. 11 SOU 2014:46, 19. 12 Chapter 5, s 19 Lag (2016:1306) med kompletterande bestämmelser till EU:s marknadsmissbruks förordning. 13 SOU 2014:46, 350–54.

Sweden 113 the prosecutor during the criminal investigation (förundersökningen), as well as having its own more extensive investigative powers in the administrative procedure, for example, to make inspections similar to those in the competition law field. In the area of competition law, the current rules on cartels and abuse of dominant position, the Competition Act (Konkurrenslagen (KL)) encompassed some major changes.14 Although the system, which is based on administrative sanctions, in particular fines (konkurrensskadeavgift), was left intact, two changes in the form of additional administrative sanctions are relevant for the present study. First, a form of personal liability was introduced, a so-called trading prohibition (näringsförbud) for managers involved in cartel offences.15 Second, a summary fine order (avgiftsföreläggande) was introduced, providing the possibility for the Swedish Competition Authority (Konkurrensverket (KKV)) to fine without the need to litigate.16 In addition, importantly, the rules were clarified concerning the calculation of fines.17 The factors taken into account in the calculation of fines were explicitly included in the text of the law. As regards procedure, two amendments have been made. In 2005, an amendment act clarified the state of the law concerning the possibility for the KKV to carry out inspections of the private homes of individuals, as opposed to premises belonging to legal persons.18 Moreover, in 2015, additional changes were made regarding so-called mirroring (spegling).19 The KKV has regularly taken electronic copies of the computer hard drives (mirror copies) of companies subject to an inspection back to its premises for further inspection. This possibility has been widely criticised as not complying with the European Convention on Human Rights (ECHR) and as being insecure for documents including trade secrets or those covered by attorney-client privilege. The amendment act regulates mirroring for the first time. According to it, the KKV has the right to take such mirror copies with the approval of the company and the possibility for the latter to be present during any measures taken by the KKV in the handling of information. Finally, in September 2016, two new courts were assigned the handling of most competition law cases, in particular those involving the fining of companies for breach of the competition rules. From 1993 to September 2016, the Swedish Competition Authority had to sue alleged infringers of the competition rules for administrative fines at the Stockholm City Court. The judgment by the Stockholm City Court could subsequently be appealed to the Market Court. Since September 2016, the newly established Patent and Market Court (Patent- och marknadsdomstolen) has handled these cases at the first instance. Moreover, the Supreme Patent and Market Court (Patent- och Marknadsöverdomstolen) handles appeals. It should be emphasised that this 14 Konkurrenslag (2008:579). 15 KL, ch 3, s 24, cross-referring to the Trading Prohibition Act (Lagen (2014:836) om näringsförbud). 16 ibid ch 3, s 16. 17 ibid ch 3, in particular ss 8–11. 18 Lag (2005:598) om ändring i konkurrenslagen (1993:20). 19 Lag (2015:402) om ändring i konkurrenslagen (2008:579). See the proposal to the new law of April 2015 (Prop 2014/15:96).

114 Vladimir Bastidas Venegas and Maria Bergström change is expected to only have a negligible impact on competition law cases. As the reform is so recent and is not expected to have an impact on the investigation or the substance of the competition rules, this chapter will mainly focus on the state of the law before the reform of the court structure. Some important changes have also been made in the area of environmental law. In 2007, extensive changes to the Environmental Code’s general system of sanctions were made to make sanctions clearer and more effective. Changes were made in almost all the penal provisions of the Environmental Code, ie, part six of the Environmental Code on penalties, including Chapter 29 on penalty provisions and forfeiture,20 and Chapter 30 on so-called administrative environmental sanction charges.21 The rules were extended to cover legal and not only natural persons, while the applicable exemption rules were also extended. Waste transport contrary to the rules in the previous EU Regulation was criminalised through a cross-reference in the Environmental Code. Then, in 2010, the penal provision in Chapter 29, section 4a criminalising the illegal shipment of waste (otillåten avfallstransport) was introduced.22 The amendment also criminalised attempts to do so. Some minor offences were decriminalised, but were made subject to environmental sanction charges. As a result, the Chapter 29, section 4a of the Environmental Code now contains the prohibition on waste trafficking,23 while this provision is complemented by the possibility of imposing administrative sanctions in the form of so-called environmental sanction charges under Chapter 30.

B. Reasons for Introducing the Reforms and Problems Related to the Lack of Them It appears as if most of the changes were triggered by EU law. However, the more specific reasons for the changes in the three areas differed to a great extent. In the financial law field, all the changes in 2005,24 201225 and 2016 were triggered and influenced by EU law.26 The 2012 reform was additionally a response at the EU level to the perceived lack of supervision following the financial crisis. 20 SFS 2006:1014. 21 Administrative sanction charges are a mixture of administrative and criminal charges. 22 SFS 2010:210. Changed by SFS 2016:782. 23 Environmental Code (1998:808). 24 Directive 2003/6/EC of the European Parliament and of the Council of 28 January 2003 on Insider Dealing and Market Manipulation (Market Abuse) [2003] OJ L96/16 (Market Abuse Directive); Commission Regulation 2273/2003 of 22 December 2003 Implementing Directive 2003/6/EC of the European Parliament and of the Council as Regards Exemptions for Buy-Back Programmes and Stabilisation of Financial Instruments [2003] OJ L 36/33. See also Commission Directives 2003/124/ EC, 2003/125/EC and 2004/72/EC, and Commission Regulation 2273/2003. 25 The amendments made in 2012 followed the amendments at the EU level of the overall supervision of financial markets. At the EU level, these amendments were a response to the perceived lack of supervision of financial markets revealed by the financial crisis. 26 The new changes implemented in 2016 were also due to a major reform made at the EU level.

Sweden 115 As regards environmental law, the new penal provision in Chapter 29, section 4a of the Environmental Code (all of its 15 points, except point 1) was introduced following the adoption of the 2006 Regulation on Shipments of Waste (replacing the 1993 Regulation), which also implemented the Basel Convention.27 The purpose of the changes to the system of sanctions was to increase the effectiveness of the sanctions used to better delineate the penalty provisions in the Environmental Code. By removing minor offences from the criminal provisions, the aim was to reduce the number of reports of suspected crimes in order for the police and prosecutors to have more time for serious environmental offences. As regards waste trafficking, the criminalisation of the attempted illegal shipment of waste purported to achieve effective and deterrent provisions. The reasons for this were: the difficulties in intervening against completed crimes, especially if this stage occurs in another country; the deterrent effect of the penalties, which should not be seen as empty threats; similarities with other crime types, ie, the smuggling and dumping of waste; and the risk of distortion of competition.28 In competition law, the introduction of a new Competition Act in 2008 was triggered by EU law, although the redrafting of the KL in 1993 into a new act was mainly intended to simplify the legal text. In particular, adaptations to the EU rules on the calculation of fines and changes to the EU Merger Regulation triggered and influenced the Act of 2008.29 The introduced trading ban was unconnected to the financial crisis and was rather the outcome of a long discussion in Sweden regarding the criminalisation of competition law infringements.30 In the interests of protecting the leniency programmes, the criminalisation of cartel offences was not introduced in particular, as Swedish law does not permit plea bargaining.31 Instead, the legislator seems to have opted for the adoption of a personal administrative sanction directed at the management of companies involved in cartels in order to emphasise that cartel offences are perceived as serious activities in society.32 As regards the introduction of the summary fine order, it should primarily be seen as a response to a discussion in the legislative procedure on the KKV’s enforcement powers. In particular, the KKV had argued ardently that it should have the power to make its own decisions on fines, which could later be appealed to the courts.33 However, the idea was heavily criticised by the competition law community and

27 Regulation (EC) 1013/2006 on Shipments of Waste [2006] OJ L190/1; Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and their Disposal, Basel, 22 March 1989. 28 Prop 2005/06: 182. 29 Prop 2007/08:135, 118–22; Guidelines on the method of setting fines imposed pursuant to art 23(2)(a) of Regulation (EC) No 1/2003 [2006] OJ C210/2. 30 Ulf Bernitz, Svensk och europeisk marknadsrätt 1, 3rd edn (Norstedts Juridik, 2011) 212; Leif Gustafsson and Jacob Westin, Svensk konkurrensrätt, 3rd edn (Norstedts Juridik, 2010) 286. See also the SOU 2004:131 report, which gives a deeper analysis of the effects of criminalising cartel offences and presents a purely ‘technical’ model of what such rules could look like. 31 This follows from the general rule that prosecutors have an obligation to prosecute: Swedish Code of Judicial Procedure (Rättegångsbalken (1942:740)) ch 20, s 6; SOU 2004:131, 126. 32 Proposal to the Act of 2008 (Prop 2007/08:135, 159). 33 See discussion in Prop 2007/08:135, 81–85.

116 Vladimir Bastidas Venegas and Maria Bergström the legislator opted to only provide the possibility for the KKV to make such a summary fine order subject to the approval of the alleged infringer. The summary fine order system also purported to decrease litigation costs for the authority, thus opening up the possibility to deal with more cases. The changes to the calculations of fines were introduced for two reasons. First, considering the punitive character of the fines in competition law, it was intended to increase legal certainty for companies as regards the sanctions for competition law infringements. Second, by clarifying the rules on the setting and the calculation of fines, the amendments had the purpose of facilitating for courts to set higher fines in competition law cases.34 The changes made to the procedure in 2005 and 2015 had the aim of expressly stating in the law already-existing practices as well as tightening up the protection for undertakings. Finally, the introduction of new courts in September 2016 was wholly unrelated to competition law issues; rather, the reform aimed at gathering cases on intellectual property rights and marketing law in the same courts.

C. Reforms Planned in the Near Future In the environmental field, illegal shipments of waste remain a significant problem.35 In this sense, amendments to the Regulation on Shipments of Waste, which are meant to strengthen Member States’ inspection systems, are of crucial importance.36 Amendments include provisions relating to enforcement and inspections laid down in Article 50 of the Regulation. Inspection plans shall be based on a risk assessment covering specific waste streams and sources of illegal shipments. The Member States need to apply the changes as from 12 July 2017. Since mid-2016, a new tool called waste codes has allowed customs officials to more easily identify waste that crosses EU borders illegally and more easily identify potential waste streams.37 In the Swedish context, a proposed change to widen the applicable field for Chapter 29, section 4a of the Environmental Code is currently being considered by the government. According to the proposal, the requirement that the waste must have been exported in order for the crime to be

34 Prop 2007/08:135, 120. 35 Some estimates suggest that the overall non-compliance rate with the Regulation could be around 25 per cent; European Commission, ‘Waste Shipments’, http://ec.europa.eu/environment/waste/ shipments/index.htm. 36 Regulation (EU) 660/2014 Amending Regulation (EC) 1013/2006 on Shipments of Waste [2014] OJ L189/135. 37 On 28 July 2016, the Commission adopted an implementing act setting out a preliminary correlation table between customs and waste codes: Commission Implementing Regulation (EU) 2016/1245 Setting out a Preliminary Correlation Table between Codes of the Combined Nomenclature Provided for in Council Regulation (EEC) No 2658/87 and Entries of Waste listed in Annexes III, IV and V to Regulation (EC) No 1013/2006 of the European Parliament and of the Council on Shipments of Waste [2016] OJ L204/11.

Sweden 117 completed should be a bandoned, so that the crime of illegal shipment of waste is completed earlier.38 It is also suggested that the crime of gross illegal shipment of waste should be introduced. At the same time, it is suggested that exceptions from criminal liability should be possible for minor cases and that the attempted illegal transport of waste should no longer be criminalised. A possibility to use the provision on forfeiture of property should be introduced. In the competition field, a current governmental investigation is exploring the possibilities for the KKV to take its own decisions regarding the setting of administrative fines.39 Under the current system, the KKV can only take a decision that imposes a cease and desist order on its own and has to litigate before the courts for the imposition of fines. It has been claimed that the right for the KKV to take a decision on fines could result in more effective competition law enforcement and more fining decisions, as well as facilitating cooperation with other competition agencies in the EU. However, this claim has met with strong objections from the competition legal community.

II. Substantive Criminal Law A. Legislative Technique Used for Offence Definitions In contrast to more traditional areas of criminal law, the legislative technique used for offence definitions in the analysed areas is characterised by vague provisions and cross-references. Examples can be found in all three areas. In the financial field, the definition of the offence of insider trading was formulated in broad, vague, open and general terms with negative effects on enforcement.40 As regards waste trafficking, prosecutors claim that the underlying EU Regulation on Shipments of Waste contains numerous ambiguities and is difficult to apply in practice.41 The definition of the offence of illegal shipments of waste in the Environmental Code refers to 15 different points, each of which includes detailed cross-references to other legal provisions.42 In the area of competition law (both EU and Swedish), there is a general ‘problem’ of vague concepts used in the provisions stipulating the prohibitions.43 Concepts such as restriction of competition and relevant market

38 Otillåten avfallstransport, Miljö- och energidepartmentet, Promemoria 2016-10-03, 11, www. regeringen.se/48ecc4/contentassets/f50ba1a95fd34a41af20a69cc0e3613a/promemoria---otillatenavfallstransport.pdf; and Promemoria – otillåten avfallstransport, Miljö -och energidepartementet, www.regeringen.se/contentassets/f50ba1a95fd34a41af20a69cc0e3613a/remissmissiv---promemoriaom-otillaten-avfallstransport.pdf. 39 Directives for new governmental report (Kommittédirektiv 2015:48). 40 SOU 2014:46, 199. 41 Riksrevisionen, ‘Transporter av farligt avfall – fungerar tillsynen?’ RiR 2015:10 (April 2015) 90. 42 Environmental Code, Ch 29, s 4 a. 43 See, eg, Bo Vesterdorf, ‘Article 102 TFEU and Sanctions: Appropriate When?’ (2011) 32 European Competition Law Review 573.

118 Vladimir Bastidas Venegas and Maria Bergström may be problematic, in particular regarding the foreseeability of the prohibition. Moreover, the cartel offence prohibition is also indirectly specified by so-called block exemption regulations. All Swedish laws on block exemptions make a crossreference to European block exemption regulations.44 Over time, the special features mentioned above have been expanded or generalised to other areas of criminal law. Cross-referencing to other provisions is also used for a number of different areas, including other areas where administrative fines may be used. Sanctions with similar legislative techniques can be found in a number of different fields.45 It is also obvious that the use of vague provisions and cross-references in offence definitions is problematic. For instance, the use of cross-references to norms of lower constitutional standing than is required for penal provisions that also include imprisonment as a penalty has been stated illegal by the Swedish Supreme Court.46 Likewise, cross-referencing to EU regulations needs to specify which articles of the EU regulations require criminal sanctions. As a result, most penal provisions in the Environmental Code have been redrafted to clarify and better define penal provisions to ensure that they comply with the legality principle.47 Moreover, a particular problem with the vague provisions in the competition law area is that they are consequentialist. While ‘traditional’ criminal law focuses on the establishing of a particular act that results in a particular harm, the particular actions of undertakings in the competition law context may have either positive or negative economic effects in the market depending on the legal and economic context in the particular situation. For instance, an agreement and its content may restrict competition if the parties to the agreement have large market shares, if competitors are weak and if there are impediments for potential competitors to enter the market. The same agreement may be deemed as beneficial for competition if the parties are small and if competitors are strong. Even though most competition lawyers would hardly object to such outcomes, it hardly promotes legal certainty for potential offenders. However, it should be underlined that competition rules as regards ‘hardcore’ cartels strictu senso has almost developed to the point that

44 See, for instance, the law providing a block exemption for certain agreements on technology transfer. Lag (2008:586), s 3, making a cross-reference to Regulation 316/2014. 45 eg, concerning tax surcharges (the first sanction charge was introduced in 1971), customs surcharges, market disruption fee charges, concerning charges relating to traffic overload, unauthorised building, overtime, unlawful employment of aliens, water pollution, competition compensation, the Work Environment Act, the Animal Welfare Act, the Radio and Television Act, notification of financial holdings, electricity certificates, financial and banking operations, insurance operations, conveyors, product safety, emissions trading, overtime in road transport, insurance brokerage, trading with financial instruments, the stock market, the securities market, commercial fishing, investment funds, cash registers etc. See Wiweka Warnling-Nerep, Sanktionsavgifter – Särskilt i näringsverksamhet (Norstedts Juridik, 2010) with further references. 46 See Supreme Court Judgment NJA 2005, s 33. 47 Prop 2005/06:182, s 41f.

Sweden 119 merely the act of coordinating prices or production between parties has been made illegal, irrespective of the actual or potential effects on the market.48

B. Criteria for Criminal Liability (Both for Individuals and Corporations) According to Swedish law, criminal law should be reserved for those offences where the person to be punished has shown a more marked degree of intent or negligence, ie, that he or she appears to be blameworthy. In other words, there is a basic rule requiring that these offences must have been committed intentionally or at least be acts of a more palpable negligence. The requirement of intent is also directly stated in the Penal Code (Chapter 1, section 2). According to the criminal liability principle, it is inconceivable to criminalise acts that do not involve any intellectual element (strict liability), so there is a restrictive policy to penalise negligent acts. In some cases, however, it may be appropriate to extend criminal liability to include acts of negligence. It seems that all three areas under discussion are characterised by a lower requirement regarding the culpability of the offender than traditional areas of criminal law. As regards waste trafficking and cartel prohibition, negligence is sufficient for criminal liability. This could be compared to the prohibition of swindling in the financial field and the smuggling of waste, the latter requiring intent, as well as the illegal import or unlawful export of waste, which requires gross negligence. In addition, in all three areas, administrative sanctions are used where requirements of culpability may be even lower. Moreover, all areas seem to set a higher duty of care in relation to the offender when determining what is defined as negligence. The Environmental Code stipulates that persons who pursue an activity or take a measure, or intend to do so, must possess the knowledge that is necessary in view of the nature and scope of the activity or measure to protect human health and the environment against damage or detriment.49 Higher demands are put on traders than individuals regarding what knowledge they need to acquire in order to comply with the rules. The threshold of finding intent as regards cartel prohibition in the competition law field is determined by reference to the fact that the undertaking should, at a minimum, have been aware that the action taken would result in harmful effects

48 (Hardcore) cartel offences are so-called restrictions by object under art 101 of the Treaty on the Functioning of the European Union (TFEU) and KL, ch 2, s 1. In the event that an agreement is found to contain a restriction by object, it is no longer necessary to consider (and thus investigate) the concrete effects on the market. 49 Environmental Code, ch 2, s 2.

120 Vladimir Bastidas Venegas and Maria Bergström on the market. This is not difficult to establish for the coordination of prices between competitors.50 Similar requirements are made in the rules relating to insider trading and the revealing of insider information. In addition, there is also the use of presumptions in the area of competition law, in particular as regards the liability for parent companies for actions carried out by subsidiaries.51 For instance, according to EU competition law, if the parent company owns 100 per cent of the subsidiary, this creates a presumption that it exercises control over the subsidiary in a specific situation, such as entering into a cartel agreement.52 This rule supposedly also applies in Swedish competition law.53 Furthermore, there are a number of problems related to the definition of culpability of offenders as well as to the use of vague concepts in all three areas. First, as regards the financial field, there was a problem with the interpretation of the offence of insider trading. The Swedish provision had limited the offence to those individuals who receive insider information, making the establishment of the offence more difficult. In addition, it did not follow from the text that there was an additional requirement of using insider information when manipulating markets. Both these problems were addressed by the recent changes to the rules on market abuse.54 Second, in the environmental field, the definitions of negligence and intent are still unclear. Moreover, as regards the offence of an attempt to traffic waste, most major ports no longer allow goods to enter the ports before the cargo is cleared (the export declaration is approved and completed by the Customs Administration). This means that Swedish customs now largely carry out checks before the goods start to be transported to the border, thus precluding the possibility of an attempt being committed.55 Third, in the competition law field, there is great uncertainty about the criteria for the trading prohibition sanction concerning managers. The individual in question must have seriously set aside his or her obligations. The question is less problematic where managers were personally involved in cartel meetings or instructed persons at a lower level to participate in such meetings.56 However, whether individuals in management are liable for the actions taken by a person at a lower level in the company when there are no direct instructions (which is quite common in cartel cases) is a more intricate question.

50 Prop 2007/08:135, 112; see also the proposal to the Competition Act of 1993, Prop 1992/93:56, 92. See also cases from the Market Court: MD 1999:22 and MD 2000:2. 51 For Swedish competition law, see judgment by Market Court, MD 2001:31 Telia. 52 Case C-97/08 P Akzo Nobel v Commission ECLI:EU:C:2009:536. 53 Johan Karlsson and Marie Östman, Konkurrensrätt – en handbok, 5th edn (Karnov Group, 2014); see the discussion at 1014–19. 54 Prop 2016/17:22, 269–274; SOU 2014:46, 378–85. 55 Naturvårdsverket, ‘Roller och ansvar mellan myndigheter vid gränsöverskridande avfalls-transport – Export från EU’ Bilaga 1 (1 October 2012), https://www.naturvardsverket.se/upload/stod-i-miljoarbetet/ vagledning/avfall/grot/handlingsplan/handlingsplan-roller-avfallstransporter.pdf. 56 Prop 2007/08:135, 163.

Sweden 121 The exact degree of supervision that must be exercised by the person in management seems to be uncertain. According to the preparatory works, there is guidance in the principles applicable as regards criminal liability for companies. In line with these principles, depending on the individual circumstances in specific cases, where an inappropriate delegation to individuals at a lower level in the company has occurred, or where the delegation is correct but the management has failed in their supervision, individuals may meet the requirements for liability.57 At the same time, it is also stated in the preparatory works that managers are only personally liable when flagrant faults have occurred in the supervision of the individuals at the lower level that have entered into the cartel arrangement.58 As there is still no court practice on the trading prohibition, the current state of the law is uncertain.

C. Sanctions (for Individuals and Corporations) In the financial and environmental law fields, formal criminal sanctions (such as imprisonment and criminal fines) and administrative sanctions (such as fines) are applied. In the competition law area, only administrative sanctions are applied. The formal criminal sanctions applied in the financial and environmental area do not differ from other areas of economic criminal law and they will therefore not be discussed further below. As regards formal administrative fines, the most common feature that distinguishes them from formal criminal sanctions is that they are normally subject to a strict liability standard,59 as illustrated by the fines applied in the fields of financial and environmental law. In competition law, while formally negligence is required, in practice, the higher duty of care on the part of the offender has driven the degree of culpability closer towards a strict liability standard. Moreover, it should be noted that administrative fines vary to a great extent between areas in relation to the levels and design. They may nonetheless broadly be classified into two different categories. First, administrative fines are used to punish less serious infringements by natural persons (repressive), but which occur extensively (massförseelser). Second, some administrative fines are imposed for regulatory offences committed by legal persons (economic operators) with a deterrent purpose. The deterrent character is particularly illustrated by the level and the method of calculating the fines.60 Such administrative fines may, for example, eliminate illegal proceeds similar to specific criminal sanctions, such as forfeiture of property.61 Additionally, the method of fining may incorporate the

57 ibid

163. 164. 59 Governmental report on what to criminalise (‘Vad bör straffas?’), SOU 2013:38, 544. 60 ibid. 61 Translation of förverkande in Ds 1999:36. 58 ibid

122 Vladimir Bastidas Venegas and Maria Bergström probability of detection in the calculation of the fines to adequately deter potential infringers. It follows that there is a clear distinction between those administrative fines of a deterrent character and penal fines and repressive fines, which are normally pre-determined in detail. Moreover, it is obvious that the deterrent character of the fines makes charges under such sanctions to be classified as criminal charges under the ECHR. These deterrent administrative fines are also similar to corporate fines (företagsbot), although these are characterised as penal fines. The use of deterrent administrative fines is illustrated by sanctions in the financial and competition law fields. In the financial sector, for example, the breach of the notification requirement of certain transactions by certain market actors may result in the imposition of fines of specific pre-determined sums or based on the value of the transaction.62 Administrative fines in the competition law field amount to a maximum of 10 per cent of the turnover of the company in the preceding year. Moreover, the level of the fines is calculated on the basis of the time period in which the cartel was active, the share of the market covered and the estimated profits made by the cartel members.63 In the competition law field, the specific aim was to increase the deterrent effect when the fines were introduced in 1993. While the possible high levels of fines in the competition law area stand out compared to the use of administrative sanctions in other areas of law, it should also be noted that Swedish courts in practice have been quite restrictive in accepting the level of fines claimed by the KKV. There are examples of how the regime of administrative sanctions that are of a deterrent nature has affected the criminal law regime. In 2006, the rules on (penal) corporate fines in Chapter 36 of the Penal Code were adapted in line, inter alia, with the competition rules. In accordance with Chapter 36, section 7 of the Penal Code, an entrepreneur shall be ordered to pay a corporate fine for more severe crimes committed in the exercise of his or her business activities. Aiming at making corporate fines more effective, the reform in 2006 adapted, in particular, the level of the fines in light of the level of administrative fines in competition law as well as other EU rules.64 However, it should be noted that corporate fines have been little used so far. While the description of the regime of sanctions above suggests a development towards a stricter regime with higher amounts of fines and perhaps more lenient requirements for liability, it must be emphasised that there are serious problems encountered in the execution of sanctions. These problems appear in both the environmental and competition law fields. There are also problems in the financial law field, but these seem to be the low number of prosecutions and convictions,65 and the need for more effective enforcement measures.66

62 Lag (2016:1306) med kompletterande bestämmelser till EU:s marknadsmissbruksförordning, ch 5. 63 KL,

ch 3, s 8. 2005/06, 32–33. 65 SOU 2014:46, 174–77. 66 SOU 2014:46. 64 Prop

Sweden 123 In relation to the environmental law field, the most common measure for illegal cross-border waste shipments is that the County Administrative Board (CAB) issues an (administrative) injunction prohibiting export. However, it can be the case that the CAB’s subpoenas are returned, for example, because the recipient could not be found. Injunctions then become ineffective in practice. According to the report by the Swedish National Audit Office, sanctions lack a deterrent effect. This is probably due to the low risk of detection and low penalties for the illegal transboundary shipment of waste. Furthermore, 44 per cent of the cases in which illegal shipments were suspected did not lead to any further measures by the Prosecution Authority.67 Also, environmental sanction charges for infringements of the rules on the cross-border shipment of waste have been applied in only two per cent of the cases involving the illegal transboundary shipments of waste between 2010 and 2013.68 In the competition law field, the most serious issue has been the tendency of the courts to lower the level of fines requested by the KKV. In a report of 2005, it was argued that the KKV’s interventions were inadequate in terms of fact- finding and evidence, included misjudgements of the law and were deficient in terms of the litigation.69 It could be questioned whether the KKV has remedied these issues. Moreover, it is important to underline that in theory, the level of administrative fines in the competition law field should also take the probability of detection into account. Clearly, this would require fines to be set to a much higher level than the current practice and that the current practice of Swedish courts to decrease the amount of fines is problematic if the sanctions are intended to act as a deterrent.

III. Administration of Justice A. Public Enforcement Mechanisms i. Overview of the Different Public Enforcement Mechanisms In the area of competition law, only administrative sanctions are available. Breaches of the cartel prohibition are primarily sanctioned through administrative fines and trading prohibitions, but injunctions and penalty payments (vite) are also available and are used in cases of abuse of a dominant position. In the financial market and environmental law fields, the Swedish system provides for both criminal sanctions stricto sensu and administrative sanctions.

67 For

the period from 2010 to 2013. Riksrevisionen (n 41) 95. 107. 69 Governmental report on a new competition act (‘En ny konkurrenslag’), SOU 2006:99, 180–82. 68 ibid

124 Vladimir Bastidas Venegas and Maria Bergström In the financial field, intentional acts that constitute ordinary offences or gross offences, as well as the instigation of and complicity in such offences, remain punishable. The same applies to attempted insider offences and attempts and preparation to commit gross insider offences. A new provision that criminalises attempted market manipulation has been introduced into the Market Abuse Penalties Act, whereas criminal liability for careless and minor offences under the Market Abuse Penalties Act has been abolished.70 Such acts can instead be subject to examination and sanctions under the administrative procedure.71 In the environmental field, illegal shipment and smuggling of waste is sanctioned by imprisonment and fines, and may be seized due to its presumed importance in a criminal investigation.72 For legal persons, corporate confiscation (forfeiture) may apply, which under Swedish law is a special legal effect of crime, and for more severe crimes committed in the exercise of business activities,73 an entrepreneur may be ordered to pay a corporate fine. In addition, an environmental sanction charge, which is applicable both to natural and legal persons, can be decided if economic operators neglect to comply with reporting duties or lack relevant transport documentation in breach of the Waste Shipment Regulation.74 Moreover, an administrative order, such as imposing waste disposal, together with an export ban, can be issued.

ii. Competent Authorities As regards market abuse, market manipulation and related reporting, disclosure and registry duties, the FI is the appointed supervisory authority, while the EBM handles prosecutions.75 The EBM is a prosecutor authority specialising in economic crimes, while the FI is a specialised authority supervising financial markets (insurance, trade with financial instruments and companies listed on the stock exchange). The FI take decisions on administrative measures and sanctions in the event of a disregard of the Market Abuse Regulation’s prescribed obligations.76 It can issue a sanctions order, which – if it is approved – is to be equated with a final and non-appealable judgment.77 In this way, a court examination is only necessary in cases where an order of this kind is not approved. 70 Market Abuse Penalties Act (2016:1307), ch 2, s 7; Prop 2016/17:22, 291. 71 SOU 2014:46, 33; Market Abuse Penalties Act (2016:1307). 72 Objects reasonably presumed to be important to a criminal investigation or taken from a person through a criminal act or subject to criminal forfeiture may be seized according to ch 27:1 of the Swedish Code of Judicial Procedure. 73 Crimes with more severe penalties imposed than summary fines. 74 Förordning (2012:259) om miljösanktionsavgifter, ch 11. The government decides for which infringements an environmental sanction charge should apply. 75 SOU 2014:46. 76 ibid 38; Lag (2016:1306) med kompletterande bestämmelser till EU:s m arknadsmissbruksförordning, ch 3. 77 Lag (2016:1306) med kompletterande bestämmelser till EU:s marknadsmissbruksförordning, ch 5, s 19.

Sweden 125 Besides sanction orders, a court examination is necessary for approval of on-site investigations by the FI.78 The prosecutors, the Swedish Prosecutor Agency or the EBM, do not have the powers to take decisions on criminal sanctions, but need to issue charges at the courts. In the environmental field, the Swedish Environmental Protection Agency (EPA) is the central environmental authority, which acts as a driving force and coordinator in environmental policy and protection. Regulatory authorities intervene in the event of non-compliance with the provisions of the Environmental Code. In most cases, the 290 municipalities exercise regulatory control, except for certain large-scale facilities, which are regulated by the 21 regional County Administrative Boards (CABs). The CABs are responsible for the supervision of waste transport subject to the Regulation on Shipments of Waste. They are also the permit-issuing authorities for the majority of operations, where a limited number of major facilities are granted permits by the environmental courts. The Customs Administration investigates the case of waste shipments offences under the Environmental Code and the Act on Penalties for Smuggling.79 The coast guard performs various controls in ports and in connection with this activity comes into contact with the illegal transport of waste. The police conduct other controlling operations without a direct connection to waste transport. Concerning waste trafficking, the municipalities and the CABs can issue fines, injunctions/orders and prohibitions/bans,80 whereas the Swedish Prosecutor Agency investigates and prosecutes. In the competition law field, the supervisory authority is the KKV, which is specialised in competition law, but which also supervises public bodies regarding the rules on public procurement. A few other authorities supervise specific sectors and may intervene in relation to acts that may overlap with the competition rules (the Swedish Post and Telecom Authority (PTS) and Swedish Transport Agency (TS)). The KKV and the sectoral authorities only have the power to issue prohibition injunctions and penalty payments.81 The imposition of fines or a trading prohibition requires the KKV to bring an action to the court.82

iii. Material and Territorial Jurisdiction of the Respective Authorities The general rule is that the criminal act must have either been committed or completed (ie, finalised) in Sweden.83 It is sufficient if part of an act or an effect

78 Lag (2016:1306) med kompletterande bestämmelser till EU:s marknadsmissbruksförordning, ch 4. 79 Act (2000:1225) on penalties for smuggling. 80 According to ch 2, s 28a of the Miljötillsynsförordning (2011:13), the CAB is the responsible authority for the transport of waste that falls under Regulation 1013/2006, and should collaborate with other CABs and the coast guard, the police and the customs authorities (Förordning 2015:657). 81 KL, ch 3, s 1. 82 ibid ch 3, ss 5 and 24. 83 Swedish Penal Code, ch 2, ss 1 and 4.

126 Vladimir Bastidas Venegas and Maria Bergström has taken place in Sweden. The operative prosecution activities are conducted in seven Public Prosecution Areas and the National Public Prosecution Department. The prosecution areas consist of the country’s 32 public prosecution offices, with a geographical sphere of operation that is approximately equivalent to a county. The National Public Prosecution Department consists of the prosecution offices with national responsibility – one for combating corruption, one for dealing with environment and working environment cases and one for security-related cases. Furthermore, the Stockholm International Public Prosecution Office is also a part of the department. Likewise, the territorial jurisdiction of administrative authorities is national, regional or local. Specific laws normally do not address the issue of jurisdiction in relation to other states, which is instead governed by the general principles of public international law. The effects principle is thus applied to determine the jurisdiction for actions that have taken place outside of Swedish territory.84 In relation to more specific issues, it is pertinent to mention that in the environmental field, according to Article 30 of the Regulation on Shipments of Waste, Member States may conclude bilateral agreements making the notification procedure for shipments of specific flows of waste less stringent in respect of cross-border shipments to the nearest suitable facility located in the border area between the two Member States concerned. Turning to rules on material jurisdiction, this is normally decided in environmental and financial law by the nature of the offence (criminal or regulatory breach) which will determine whether the investigation of an individual case is handled by the prosecutors (including the EBM) and the Swedish customs or other authorities. For instance, market abuse and market manipulation are supervised by the FI, which also handles the investigation of individual cases on the breach of duties to disclose, notify and set registries on persons with ‘inside information’ who are subject to administrative sanctions. While supervision is the responsibility of the FI, it is for the special prosecutor authority, the EBM, to handle criminal investigations of individual cases on market abuse and manipulation. By contrast, either the person committing the misconduct or the description of the offence will determine the supervising authority with regard to issues related to competition law. The KKV deals with competition law breaches strictu senso as restrictive agreements, including cartel offences, abuse of a dominant position and merger control under the KL. No other national authority deals with these particular types of misconduct under the KL. However, the PTS supervises companies

84 The KKV has jurisdiction to investigate the matter under EU law within the limits set by EU competition law: Council Regulation (EC) No 1/2003 of 16 December 2002 on the Implementation of the Rules on Competition Laid down in Articles 81 and 82 of the Treaty [2003] OJ L1/1, arts 11 and 13.

Sweden 127 in the telecom sector under the Act on Electronic Communications (LEK), the broadcasting sector under the Act on Standards on Radio and TV Broadcasts (LSSRT), and as the postal market under the Postal Act (PL).85 The Transport Agency (Transportstyrelsen) supervises train transport markets under the Railway Act (JL).86 The powers of the sectoral authorities are to take particular measures when undertakings are in a ‘dominant position’ or the undertakings in question are the holders of infrastructure or inputs that are necessary to access in order to compete in the market.87

iv. Assessment of the Enforcement Policy Recent reforms have tried to ensure a more comprehensive and coherent enforcement policy. On a general level, the choice between criminal sanctions and administrative sanctions or civil liability relies on a number of factors. Criminal sanctions are applied when they are appropriate and effective. Appropriateness includes an assessment of the protected interest, that the act in question causes harm to the protected interest, the lack of a more important conflicting interest and the existence of culpability by the offender (intent or a certain degree of negligence). Effectiveness includes factors such as the availability of other enforcement mechanisms (administrative or civil).88 In the financial field, criminal sanctions target the most serious infringements and acts when there is some form of culpability. The administrative fines target acts that are less serious and do not require the proof of subjective criteria (intent or negligence). In the environmental field, the administrative sanctions are complemented by criminal sanctions where breaches against administrative injunctions/orders and prohibitions/bans and other unwanted behaviour are criminalised. In general, the EU law requirements of effective, proportionate and dissuasive sanctions have sometimes led to the introduction of new sanction charges that are often regarded as more effective than criminal sanctions strictu sensu. Recently, changes have been made where some minor offences no longer give rise to criminal liability, but to sanction charges. In the competition field, even though the imposition of administrative fines requires the proof of culpability, the choice of administrative fines is justified by the effectiveness of the rules. In 1993, when the choice was made, heavily influenced by EU law, administrative fines were perceived as resulting in a higher deterrent effect than criminal sanctions (which existed in the previous law) considering the level of the amount that could be imposed through penal fines.

85 Lagen (2003:389) om elektronisk kommunikation (LEK); lagen (1998:31) om standarder för sändning av Radio och TV-signaler (LSSRT); Postlagen (2010:1045) (PL). 86 Järnvägslagen (2004:519) (JL). 87 LEK, ch 4, s 4: see, eg, PL, ch 4, s 5; LSSRT, ss 7–8. 88 SOU 2013:38, s 498.

128 Vladimir Bastidas Venegas and Maria Bergström

B. Interplay between the Different Public Enforcement Mechanisms i. Description of the Interactions On a general level, cooperation between different authorities seems established and workable in the areas of financial and competition law, while cooperation between authorities in the area of environmental law is under development, with a special focus on clarifying their roles and responsibilities, increasing knowledge through information and strengthening regional cooperation.89 This section describes the most interesting elements of the cooperation that occur within the three different areas and subsequently addresses the two issues that are of most relevance in the Swedish system. In the financial law field, the most important question is when the FI should transfer the case to the EBM. The starting point is the initiation of an investigation by the FI when there is suspicion of a regulatory breach, while the EBM acts when there is suspicion of a crime. The FI has the obligation to pass on the case immediately to the EBM as soon as there is a suspicion that a criminal offence under the Market Abuse Penalties Act has been committed.90 As regards the cooperation between the FI and the EBM, the two authorities have regular meetings regarding ongoing cases on market abuse as well as when a prosecutor at the EBM decides whether a formal criminal investigation (förundersökning) is to be initiated.91 On the one hand, the cooperation between the FI and the EBM is well established and it has been considered that the cooperation has resulted in a decreased length of the procedure as well as an increased quality of enforcement.92 On the other hand, it is also argued that there are still difficult issues in terms of the cooperation between the two authorities. In particular, too few cases on insider trading are prosecuted. Two reasons of this problem are the failure by certain market actors to report suspicious transactions and the fact that the EBM has a tendency not to prioritise these cases.93 It has been stated that the FI also has problems in dealing with this issue because of the unclear boundary between the supervision of financial markets and specific criminal investigations handled by the EBM.94 Moreover, it seems clear that the system of the FI automatically handing over ‘suspicious’ transactions reported by financial institutions does not work properly.

89 Naturvårdsverket, ‘Handlingsplan för tillsyn över gränsöverskridande avfallstransporter 2014–2016’ (3 February 2015), https://www.naturvardsverket.se/upload/stod-i-miljoarbetet/vagledning/avfall/grot/ handlingsplan/Handlingsplan-tillsyn-avfallstransporter.pdf. 90 Market Abuse Penalties Act, ch 3, s 1. See also Act (2016:1306). 91 SOU 2014:46, 252–53. 92 ibid 196. 93 ibid 179. 94 ibid.

Sweden 129 The EBM gets too many cases where the available data are scarce and are unlikely to result in prosecution. It has therefore been requested that the FI should make some form of preliminary investigation using its own powers to collect more data before the case is handed over to the EBM.95 These problems have been addressed by the recent amendments.96 In environmental law, the Environmental Code specifically states that an environmental sanction charge shall not be payable if it would be unreasonable in view of the fact that the infringement has already led to a penalty under the provisions of Chapter 29 of the Environmental Code. In other words, this provision is meant to prevent dual sanctions. As regards the interaction between different kinds of public enforcement, before the attempt point has been reached, eg, before the transport started there is no crime against an export ban, and criminal sanctions are not applicable (cf the crime of gross smuggling, which in contrast already is criminalised at the stage of preparation, in the Law on Penalties for Smuggling). Still, the CAB has the opportunity, as part of its supervisory role, to issue an injunction or prohibition if the conditions are satisfied. Likewise, if a preliminary investigation for various reasons is not initiated, the CAB can still ban exports and submit to the exporter that the waste must be disposed of by an approved waste disposal plan. In the event that a preliminary investigation is closed down at a later stage and the seizure is lifted, or if the seizure is lifted for other reasons, the CAB may also decide on an export ban. If an order with an export ban has been issued by the CAB, it is still possible to make a crime report and bring charges in the same case, provided that the CAB order is not combined with a fine. In the competition law field, the KKV acts when there is suspicion of a breach of the KL and if the case is prioritised. The sectoral authorities (the PTS and the TS) act in cases where their competence is triggered. The KKV and PTS mainly cooperate with each other. While there are no formal obligations to hand over a case to the other authority, the PTS needs to consult the KKV in individual cases concerning obligations imposed on undertakings with market power.97 A draft decision on measures to be imposed on the individual company is sent to the KKV. Moreover, the authorities are obliged to share (requested) information to the extent that it is required for their respective tasks regarding the LEK.98 The first important issue in the Swedish system concerns compliance with the ECHR and the EU Charter of Fundamental Rights. The Swedish Supreme Court has stated that according to the lis pendens principle, and in particular Article 4, Protocol No 7 to the ECHR, parallel and separate investigations cannot be carried out by different authorities that have the power to intervene against the same act 95 ibid 255–56. 96 Prop 2016/17:22, 128. 97 Regulation on Electronic Communication (förordning (2003:396) om elektronisk kommunikation), s 23. 98 ibid s 24.

130 Vladimir Bastidas Venegas and Maria Bergström with the use of different sanctions.99 In the area of financial law, the solution to this problem is a choice system. For reasons pertaining to legal certainty, and in particular so as not to violate the ne bis in idem principle, the new regulatory framework of administrative sanctions under the Market Abuse Regulation that has been placed alongside the penalty provisions of the Market Abuse Penalties Act has been based on a model in which public bodies choose whether to deal with prohibited acts in either the administrative or the criminal sanctions system.100 The decision by the authorities to choose between systems should be made prior to a decision on initiating prosecution or a decision on imposing administrative sanctions. Such a choice system presupposes more developed cooperation between the authorities, partly to ensure that an individual is not subjected to a duplication of legal procedures regarding one and the same act, and partly in order to create opportunities for the authorities to choose between the administrative and the criminal sanctions systems.101 Regulations on the obligation to provide information and the obligation to cooperate have been introduced in both the Act of Administrative Sanctions and the Market Abuse Penalties Act.102 In the competition law field, problems are avoided by rules stating that sectoral authorities cannot impose penalty payments if administrative fines under the KL have been ordered for the same acts.103 It should also be noted that the sanctions of fines and the trading prohibition that may be imposed for cartel offences target different persons, even if they concern the same act.104 In a similar fashion to the situation in competition law, the environmental law rules avoid parallel sanctions by preventing the launching of a criminal investigation when administrative fines have been imposed or the imposition of an administrative charge when penalties have been imposed for the same act. However, the avoidance of parallel investigations does not eliminate all potential conflicts with the ECHR. Another issue that may arise in the cooperation between authorities in charge of different kinds of procedures (criminal or administrative) is that administrative authorities use injunctions in conjunction with penalty payments (vite) to put pressure on either legal or natural persons to forward information that may incriminate them and result in criminal sanctions. This has been perceived in Swedish law as being contrary to the right for individuals not to self-incriminate (or presumption of innocence) that follows from Article 6 ECHR.105 Potential problems in the financial field are currently resolved by the fact that the FI, the administrative authority, needs to close its investigation

99 Supreme Court Judgment NJA 2013, s 502; see also Supreme Court Judgment NJA 2005, s 33. 100 SOU 2014:46, 34. 101 ibid. 102 Lag (2016:1306) med kompletterande bestämmelser till EU:s marknadsmissbruksförordning; and Lag (2016:1307) om straff för marknadsmissbruk på värdepappersmarknaden). 103 LEK, ch 7, s 17; PL, ch 4, s 19. 104 Trading Prohibition Act, s 17. 105 SOU 2014:46, 146–47.

Sweden 131 as soon as there is a suspicion of a crime and the case is passed on to the EBM. As explained above, for suspicious transactions reported by financial institutions, this occurs immediately. However, following the recent amendments to the rules on market abuse, the FI is now granted powers to impose penalty payments as well as to contribute to the criminal investigation carried by the EBM. It is anticipated that a decision needs to be made as to which sanctions are to be applied in order to enforce the investigative measures that can be applied by the FI. In a situation where measures are taken with a view to imposing criminal sanctions, the FI will not use penalty payments.106 The second important issue in the Swedish system concerns the exchange of information between the authorities. It follows from the rules on transparency that the authorities may also access public documents held by other authorities. This general rule is limited by the rules on confidentiality.107 Confidentiality (sekretess) means that information, inter alia, may not be made available to other Swedish authorities (and also foreign authorities or international organisations) in cases other than those stated in the Public Access to Information and Secrecy Act (OSL)108 or in an enactment or an ordinance to which the OSL refers. Confidentiality does not prevent information from being provided to another authority if it is obvious that the interest of information being disclosed has priority over the interests the secrecy is aiming to protect. However, there are exemptions to this provision. Provisions in other statutes and ordinances may state the case in which information of a particular kind may be provided to other authorities. This is relevant in the environmental field, where the declarations by the customs authority are essential in deciding which forms of transport can be of interest to stop and control in order to prevent illegal waste trafficking. Under the OSL, customs can share information with municipalities and CABs, but a proportionality test needs to be applied according to the above-mentioned criterion. In the Environmental Protection Agency’s action plan on cross-border waste, transport routines are described for the CAB’s supervision and collaboration with other agencies. These include crucial exchange of information, both orally and by email, before and during criminal investigations relating to the illegal transport of waste.109

106 ibid 265. 107 Public Access to Information and Secrecy Act (2009:400), Information concerning public access to information and secrecy legislation, etc, revised edn 2009, Ministry of Justice. According to a provision contained in the Public Access to Information and Secrecy Act, secrecy does not prevent information from being provided to another authority, as long as there is a provision in a statute or ordinance that the information should be provided to the authority. One example of such an obligation to provide information is the obligation to testify according to the Code of Judicial Procedure. Nor does secrecy prevent information being provided to another authority in a number of situations directly stated in the Public Access to Information and Secrecy Act. Examples of such situations are that information is needed for a trial of an official for an offence in office, for reconsideration of a decision or a measure by the authority that has the information or for supervision of the authority that has the information or for auditing the authority. 108 Public Access to Information and Secrecy Act (2009:400). 109 Naturvårdsverket (n 55) 11–12.

132 Vladimir Bastidas Venegas and Maria Bergström

ii. Interests of the Victim and the Choice of Public Enforcement Mechanisms In the environmental and financial law fields, it is either impossible or very difficult to identify specific victims. In the competition law field, where this is possible to a certain extent, the interests of the victims are not taken into account in the choice between the different public enforcement mechanisms. However, as is further elaborated in section IV.C below, there is a subsidiary right for certain parties to enforce the competition rules when a complaint has been rejected by the KKV. This may be used, in particular, by certain victims of competition law infringements to put an end to such infringements.

iii. The Choice of Enforcement Mechanisms and Evidential or Other Practical Problems The supervising authorities do not have a real choice between different enforcement mechanisms. In general, the law prescribes in detail when cases move, for example, from an administrative authority to the prosecutor. It also seems clear that the choice made in the legislation between formal administrative or criminal enforcement is connected to issues relating to the burden of proof and procedure. Additionally, there are problems related to the burden of proof and evidential nature, which are clearly illustrated by those cases closed shortly after being passed on to the prosecutor (see section III.B.i above). In the financial law field, the division between criminal and regulatory offences has been made on the basis of the gravity of the offence as well as the legal criteria for establishing an offence (the requirement of subjective intent or negligence). As regards the environmental law field, accomplished or attempted waste trafficking in breach of (1) notification and authorisation requirements or (2) conditions under an authorisation is criminalised, while the transport of waste within Sweden before reaching such an ‘attempt-point’ for waste trafficking may be subject to administrative sanctions.110 The application of (only) administrative sanctions to the breach of authorisation or disclosure duties was seen as more appropriate than criminal sanctions. Importantly, there is no need to show intent or negligence in some of the offences subject to administrative sanctions. According to the preparatory works, one of the considerations when designing the administrative fines was to avoid complications that would have been caused by a requirement to demonstrate intent or negligence.111 In the competition law field, only administrative sanctions apply. The reason why criminal sanctions have not been introduced is that it would decrease

110 Environmental 111 Proposal

Code, ch 29, s 4a and ch 30, ss 1–2. to the Environmental Code, Prop 1997/98:48, 535–38.

Sweden 133 the incentives for undertakings to report infringements under the leniency programme. In addition, the safeguards under criminal law could complicate the investigations of competition law infringements that would need to be handled by the prosecutor. It was anticipated that the prosecutor might either lack the expertise to handle such investigations or simply would not prioritise competition cases.

C. The Different Public Enforcement Mechanisms in Action i. How Do the Respective Competent Authorities Typically Build up Their Cases? The three areas differ to a large extent as regards the way in which the competent authorities build up their cases. Moreover, the investigative and prosecutorial discretion in an individual case will mainly depend on whether the investigation is classified as either criminal or administrative according to Swedish law. The first major difference concerns the detection of cases. In the competition law field, the KKV is made aware of most cases by third parties (competitors, suppliers and customers).112 As the KKV is also in charge of the supervision of public procurement, cases under the cartel prohibition on bid-rigging may be discovered by the authority on its own. By contrast, in the financial law field, the FI relies to a great extent on the formal obligations of companies to report suspicious transactions. Otherwise, the FI carries its own supervision and may, for example, spot questionable movements in the stock value of companies that result in an investigation being launched. In the environmental law field, the detection of cases seems to a large extent to occur as a result of the checks carried out by customs and the CABs.113 In addition, in the investigation of cases, there are important differences between the three areas of law. In the competition law area, the KKV usually builds up its cases by using the full battery of administrative measures, such as requesting information from the alleged offenders and competitors, carrying out inspections and collecting data through the inspections or interviews.114 While in theory the leniency programme should give incentives for infringers to give information to the authority on their own initiative, this has not happened in practice. By contrast, in the financial law area, the essential factor in investigations seems to have been the information notified by market actors to the FI, even though the latter has investigative powers similar to the KKV. It is also important that so far

112 Karlsson and Östman (n 53) 1085; Gustafsson and Westin (n 30) 312. 113 Of the total number of inspections carried out from 2009 to 2013, 347 (approximately 45 per cent) were carried out by the CAB together with the customs authorities, of which 137 shipments were found to be illegal. 114 KL, ch 5.

134 Vladimir Bastidas Venegas and Maria Bergström the investigative measures available to the FI have not been as far-reaching as those available in the competition law field.115 In fact, the recent amendments in the financial law field aim to give the FI the same powers as the KKV. In the environmental law field, the investigation focuses on the documents and physical goods that are subject to inspection by customs and the CABs. Accordingly, the main tool is the inspection as such. It is also important to address the possibility of launching a formal criminal investigation in both the financial law and environmental law fields. When a case is handed over to the prosecutor, including the EBM in the financial law field, all the investigative measures under criminal law will be available, such as searches at undertakings, premises, interviews and production orders. Importantly, in environmental law, a criminal investigation gives the customs authorities the possibility to also seize the transported goods. Finally, whether the investigation is formally criminal or administrative in nature under Swedish law impacts the discretion of the authority as regards both the investigation as well as the stopping of the infringement through sanctions. Generally, in formal criminal investigations, such as those carried out in both the financial and environmental law fields, prosecutors do not have discretion as to whether to prosecute. If the evidence may substantiate the committing of a crime, they have an obligation to prosecute (åtalsplikt). If it becomes apparent during the course of the preliminary investigation that it is not possible to prove that a crime has been committed, the prosecutor will discontinue the preliminary criminal investigation. Some offence definitions also require a public interest to be shown in the individual case, which may vary depending on the provision in question. The scope of the ‘public interest’ is normally specified in the preparatory works and does not necessarily indicate discretion. In addition, there are exceptions to the obligations to prosecute, but they require specific criteria to be met. While it would go too far to claim that a prosecutor has discretion in the assessment of whether a case is strong enough to proceed to prosecution and the determination of whether it is in the public interest to do so, it seems as if there is some form of limited margin of assessment for prosecutors when taking the decision to prosecute. By contrast, in the competition law field, where the investigation is formally administrative in nature, the KKV has discretion as to which cases to investigate.116 This permits the authority to prioritise certain cases and, importantly, to reject complaints made by third parties without a more thorough investigation.

ii. Reporting and Disclosure Duties for Corporations and Individuals As presented below, the reporting and disclosure duties are important for detecting offences in financial and environmental law. By contrast, the enforcement of competition law does not rely on general reporting and disclosure duties.

115 Act

on Trade with Financial Instruments, ch 6, ss 1–2. and Östman (n 53) 1104–05.

116 Karlsson

Sweden 135 In financial law, the importance of reporting and disclosure duties is notable. The Market Abuse Regulation and the complementary Act of Administrative Sanctions requires that certain market actors report transactions to the FI that could be presumed to be related to insider trading or market manipulation.117 It is also important to note that the reporting of cases which do not lead to prosecution may induce the FI to carry out its own investigations (eg, about the routines for reporting the relevant transactions by a certain market actor), which may later result in an individual case that is handed over to the EBM.118 It follows that the information supplied by market actors seems crucial for the enforcement of the rules on market abuse. In the environmental law field, traders who export waste need to know if it is necessary to notify the Environmental Protection Agency of the transport of waste. Waste shipped without the necessary approval counts as an illegal shipment of waste and there are reporting and disclosure duties for the relevant authorities. The same liability rules apply to the import of waste to Sweden, but the company in the country of origin should turn to the authority of its country.119 The penalty for non-compliance is a fine or imprisonment. The same applies to waste that is prohibited from export or import. While reporting and disclosure duties appear to be essential for the detection of offences in financial and environmental law, there are no such general obligations imposed on market actors according to competition law. However, the KKV has a right to ask for information in its general supervision of particular sectors (a so-called sector inquiry) and may impose injunctions to provide such information in conjunction with penalty payments (vite).120 Such sector inquiries constitute more targeted measures than a general duty to report and disclose that may be launched as a response to complaints made by individuals.

iii. Leniency and Whistleblower Programmes In environmental law, enforcement does not currently rely on leniency or whistleblower programmes. Nonetheless, in this area, a corporate fine can be adjusted if the trader has been helpful and has tried to prevent, remedy or limit damage or has admitted to the offence. Similarly, an environmental sanction charge does not need to be issued if it would be unreasonable in view of what the person who is liable to pay the sanction charge has done to prevent a breach from occurring.121 117 There are no recent numbers as to the amount of cases that are reported by the FI on its own initiative to the EBM regarding insider trading and market manipulation. However, before the Market Abuse Penalties Act (of 2005), this figure seems to have been approximately 50 per cent. Prop 2004/05:142, 99–100. 118 ibid 109. 119 Riksrevisionen (n 41) 71. 120 Lag (2010:1350) om uppgiftsskyldighet i fråga om marknads- och konkurrensförhållanden, ss 1 and 4. 121 Environmental Code, ch 30, s 2, para 3.

136 Vladimir Bastidas Venegas and Maria Bergström In financial law, the recent reforms in 2016 introduced a ‘whistleblower’ programme (following demands from EU law) permitting individuals in companies to turn to the FI as well as strengthening the rules protecting individuals (under labour law) that report problems internally to their employer.122 However, it is too early to assess the success of this particular measure. In competition law, leniency is generally perceived as being an essential tool for discovering cartels. In the light of the positive experiences in EU law regarding the leniency programme, the legislator in Sweden has also promoted and safeguarded leniency in Swedish competition law. However, in practice, there are few cases where the Swedish leniency programme has been applied.123 To begin with, since 1993, in only 20 cases so far has the KKV claimed fines before the Stockholm City Court. Of these, not all concerned cartel offences, where the leniency rules could potentially apply. Although the number of cases is too small to make any general conclusions about the Swedish system, the introduction of the leniency programme does not seem to have had the effect of increasing the discovery of ‘new’ cartels in Sweden to a great extent.

iv. Reporting and Disclosure Duties, Whistleblower Programmes and the Privilege against Self‐Incrimination Importantly, the use of whistleblower programmes and disclosure duties may raise conflicts with either the privilege against self-incrimination or between individuals and undertakings. In competition law, a possible conflict of interest may occur between undertakings participating in the leniency programme and individuals who are potential targets of a trading prohibition. However, this conflict is avoided by rules stating that the trading prohibition cannot be imposed in those cases.124 A similar conflict between employees and employers may arise as a result of the ‘whistleblower’ programme that has recently been introduced through the reform of the rules on market abuse. Accordingly, mechanisms are in place to protect the anonymity of the ‘whistleblower’ both at the FI and also at the company in question (for internal disclosure of information) in order to secure the possibility for individuals to report misconduct to the enforcement authorities.125

v. Negotiated Justice To begin with, plea bargaining is not permitted under Swedish criminal law. Moreover, summary orders are used regarding both criminal and administrative 122 Act 2016:1306, ch 2, s 11. Prop 2016/17:22, 307–11; SOU 2014:46, 415–18. 123 Noted already in the governmental report (on criminalisation) of 2004. However, the rules on leniency had only been applied for a short time when the report was written. As such, the report did not elaborate on the reasons for the low level of success of the Swedish leniency programme when compared to similar programmes in the EU and the US: SOU 2004:131, 44. 124 Trading Prohibition Act, s 9. 125 Act 2016:1306, ch 2, s 11; SOU 2014:46.

Sweden 137 sanctions (strafföreläggande and avgiftsföreläggande). Under criminal law, summary penal orders are generally available in cases where the sanction is limited to a fine or conditional sentences according to Chapter 48 of the Procedural Code. As regards regulatory offences, there is no such general availability of administrative summary orders. The availability is determined by the applicable act in the case. Normally, the summary order is used when the factual circumstances are clear and a person has admitted having committed the offence. The prosecutor or the administrative authority will determine the sanction subject to approval by the offender. As regards both types of summary orders, the sanction will normally be a fine, but summary penal orders may also encompass a conditional sentence. Summary orders are in practice not subject to negotiations, but rather constitute a ‘take it or leave it’ offer to the offender. If the offender accepts the summary order, there is no litigation and only extraordinary remedies are available to challenge the summary order afterwards. For environmental law, the summary penal orders are provided for in the Procedural Code. In competition law, summary orders are available (since 2008) under Chapter 3, section 16 of the KL. In financial law, recent reforms include the possibility for the FI to issue summary orders for regulatory offences related to market abuse and market manipulation.126 So far, summary orders have mostly been used in the environmental field, but still not in large quantities. There were three cases of summary penal orders out of 44 decisions by the Prosecution Authority in 2012 and 22 out of 73 in 2013 for the offence of illegal shipment of waste.127 A large number of environmental crimes result in a summary penal order. A high number of unsuccessful cases make many prosecutors choose summary penal order rather than bringing the case to court. By contrast, only three cases have been resolved through the summary order in the competition law field. It is too early to determine the importance of summary orders in this domain, especially as the KKV dealt with few cartel cases in the course of the last few years. In general, the greatest benefit of summary orders is the avoidance of litigation. Both in the environmental and competition law fields, cases are burdensome both in terms of the evidence required and the technical complexity. To use time at court to present such evidence is ineffective when the offence has been admitted. Environmental crime is also often difficult to investigate and prove, which is demonstrated in the low number of convictions following prosecution. In the competition law field, the vast amount of evidence may require longer oral hearings than in other cases.128 Importantly, the KKV is not supposed to use summary orders as a way of alleviating the burden of collecting the necessary evidence or avoid difficulties with proving the offence in court.

126 Act

2016:1306, ch 5; SOU 2014:46, 194–204. (n 41) 95. 128 Prop 2007/08:135, 81–90. 127 Riksrevisionen

138 Vladimir Bastidas Venegas and Maria Bergström

IV. Criminal Procedure A. Burden and Standard of Proof In environmental law, the prosecutor, unlike the supervisory authorities, has the full burden of proof and presumptions are not sufficient.129 Supervising and prosecuting authorities have no free choice as to the applicable public enforcement mechanisms requiring a lower or higher standard of proof or lower or higher procedural safeguards. As regards the financial and environmental areas, prosecutors simply assess whether the conditions for continuing a criminal investigation or prosecuting are met and, if so, then have a duty to proceed. Supervising authorities may then act if the prosecutor closes the criminal investigation or in relation to acts that are not criminalised.

B. Special Criminal Investigative Measures for the Three Areas The use of special expertise and particular investigative tools is important in all the three areas of law examined in this chapter. Moreover, special pre-conviction and remedial measures are in particular used in the area of competition law. First, the requirement of special environmental expertise besides legal expertise is central in many areas of environmental law. In waste trafficking, legal expertise is often not enough, even though special experience builds up and the Prosecution Authority has produced a guide to categorise the most common types of waste. In other words, special expertise is often crucial. Hence, in the environmental law field, the special expertise on the part of the supervisory authority (the CAB) is also key to the criminal investigation. Within this field, customs or the police together with the CAB carry out checks for export declarations and make inspections.130 In many cases, the other law enforcement authorities are dependent on the CAB’s special knowledge when it comes to waste assessment, and the CAB’s assessment is a precondition for whether an investigation should be initiated or not. Even though an environmental prosecutor is available around the clock,131 if expert assessment of the waste is lacking, this makes it difficult 129 As regards the problems with factual presumptions and the high ‘duty of care’ applied for negligent acts or the requirement of intent in the financial and competition law fields, see above. 130 Naturvårdsverket, ‘Gränsöverskridande transporter av avfall, roller och ansvar’ (1 July 2015), www. naturvardsverket.se/upload/stod-i-miljoarbetet/vagledning/avfall/grot/handlingsplan/roller-ansvargrot-150701.pdf. 131 Since 2009, there has been a national operating unit within the Prosecution Authority; the National Unit for Environment and Working Environment Cases. The unit handles matters concerning violations of the Environmental Code and related regulations and orders. The National Unit operates in five locations across the country: Malmö, Gothenburg, Jönköping, Stockholm and Östersund. Each workplace has a geographical area of responsibility.

Sweden 139 for the prosecution office to handle these cases. The police officers who contact prosecutors often lack in-depth knowledge of the area and therefore have difficulties in providing sufficient information to the prosecutor. As such, the supervisory authority’s assessment is key to the criminal investigation. Similarly, in the competition law field, the expertise of economists is crucial for the assessment of competition law infringements. Case handlers include not only lawyers but also economists and normally there is a chief economist with a supervisory and coordinating function regarding the economic analysis and methods applied in different cases. Additionally, in competition law, the main and most important measure used in investigations is the use of inspections of company premises.132 The KKV has also developed the use of the mirroring of hard drives to collect and copy electronic data at the undertaking’s premises. The use of extensive inspections may be perceived as equivalent to home searches made by p rosecutors. However, perhaps the particularity of these inspections is related to the fact that it is not prosecutors that have the power to carry such inspections, but an administrative authority. Although a court order is required, the courts only make a superficial assessment of the KKV’s request. The practice of mirroring has led to the explicit rules of 2015 determining the specific rights of undertakings. These rules are also a novelty from a criminal law perspective. First, in the financial field, the use of analysis tools with the transaction reporting system (TRS) seems quite particular in comparison to the investigative tools used in other areas of law. The analysis tools are used on the information reported by certain market actors and give warning when certain criteria are met that indicate a potential market abuse.133 Second, in competition law there is a special pre-conviction preventive or remedial measure available by giving undertakings the possibility to make so-called commitments. Following the rules in EU competition law, the KKV has the right under the KL to accept commitments to remedy situations which may be breaches of competition law.134 A breach of these commitments may later result in a fine being issued. A commitment decision is not an admission of an offence against the competition rules. Importantly, commitments concern specific measures to remedy the perceived competition problem and not general measures, such as a compliance programme.135 Importantly, in practice, the use of commitments is not particularly relevant in cases involving cartels, but is used more in cases of abuse of a dominant position. Commitments in the competition law field may seem to be similar to the injunctions used by the sectoral authorities

132 KL, ch 5, s 3. 133 Prop 2016/17:22, 58; SOU 2014:46, 172. 134 KL, ch 3, s 4. 135 It could be added that the introduction of a compliance programme after an infringement has been made was not found to be a mitigating circumstance in the setting of fines, due to the difficulties in assessing its actual effectiveness. See the case from the Market Court, MD 2009:11.

140 Vladimir Bastidas Venegas and Maria Bergström (eg, the PTS in the telecom sector). However, injunctions (with or without penalty payments) are formal administrative sanctions. Commitments made by undertakings under the KL are voluntary.136

C. Rights of the Victim in Criminal Proceedings in the Three Areas The rights of victims are only relevant in the area of competition law, as it is either impossible or very difficult to identify specific victims in the environmental and financial fields (see section III.B.ii above). In competition law, this is possible as particular victims may have a special status within the procedure. It must be emphasised that such status will never apply to end-users (which competition law is supposed to ultimately protect), but only to competing undertakings or undertakings targeted by the measure restricting competition. End-users only have the possibility to initiate civil actions.137 In order to benefit from the respective rights, a victim of a competition law offence needs to be classified as a party in the administrative procedure. In order to acquire this status, an undertaking must have a legitimate interest in the KKV’s final decision. This means that the KKV must make an assessment in each individual case as regards the effects of the breach of competition on that party. Among the rights from which the party benefits are the right to receive information about the case and the right to make its view known before decisions are taken. It should be noted that a problem encountered in this field is that the classification as a party for persons who are victims (and not offenders) is somewhat unclear in Swedish law. For instance, a mere claim that a person has been subject to an abuse of a dominant position does not grant that person the status of a party in the administrative procedure of the KKV.138 Moreover, there is a subsidiary right for certain parties to make a claim to stop ongoing infringements. This is normally used by victims of abuse of a dominant position (competitors or customers). In comparison to other fields of criminal and administrative law, this subsidiary right in the competition law field is quite unusual. However, in the market law field, which includes competition law, this is also used in relation to the prohibition of aggressive and misleading advertising.

136 In the areas of financial and environmental law, this is not relevant. 137 Victims like end-users (or customers) do have a right to make damage claims through private actions (standalone or follow-on cases). End-users also have the possibility (in theory) to make a collective action for damages. See KL, ch 3, s 25; and the Act on Collective Actions (Lag (2002:599) om grupprättegång). 138 Karlsson and Östman (n 53) 1086–90.

Sweden 141

D. Specialised Criminal Courts The approach to specialised courts in Sweden is that as a principle, they should be avoided, unless there is a very significant policy reason for doing so. Hence, their use is limited and the build-up of the necessary competence and experience has often been achieved by focusing on certain types of cases in a particular forum. This is illustrated by the court structure in the competition law field. Under the previous court structure that applied until September 2016, the Stockholm City Court (Stockholms Tingsrätt, hereinafter Sthlm TR) handled claims for fines or trading prohibition made by the KKV.139 The Sthlm TR is primarily a district court (first instance), but also serves as a special forum in some cases. The Market Court (Marknadsdomstolen (MD)), which under the previous court structure served as the only court or the court of last instance in a large number of competition cases, specialised in particular in market law, including unfair advertising law and competition law.140 The reform of the court structure in competition law cases in September 2016 reinforced the degree of specialisation by formally introducing two courts that are fully specialised in intellectual property law, marketing law and competition law (see section I.A above). Additionally, it is acknowledged that the handling of cases regarding market abuse and market manipulation may require special competence. Accordingly, the Stockholm City Court is assigned as a special forum for all cases of prosecution made by the EBM as well as future cases of claims for administrative fines by the FI.141 Nevertheless, so far there are no specialised financial courts and the environmental courts do not deal with criminal sanctions. The general courts that handle criminal cases and civil claims, which comprise district courts, courts of appeal and the Supreme Court, also hear cases concerning penalties or forfeiture referred to in Chapter 29 of the Environmental Code. Moreover, appeals against administrative sanctions taken by the CABs are handled by the general administrative court system.

V. Cooperation between Authorities and Jurisdictional Issues A. Specific Localisation Criteria The localisation criteria follow from the Penal Code and apply to all crimes.142 The criminal act must have either been committed or ‘completed’ in Sweden.

139 KL,

ch 3, s 5. ch 7, s 1. 141 Act 2016:1307, ch 3, s 7; SOU 2014:46, 240–45. See also Act 2016:1306. 142 Swedish Penal Code (1962:700), ch 2, ss 1 and 4. 140 KL,

142 Vladimir Bastidas Venegas and Maria Bergström It is sufficient that the act was committed only partially in Sweden or that only its effect took place there. This rule may be illustrated by offences in the financial law field. The sale of a specific financial instrument abroad will meet these criteria if the instrument is admitted to trade on a regulated market in Sweden.143 More specifically, the penal provision for the completed crime of illegal shipment of waste may require that Sweden’s territorial borders have been passed.144 In such cases, this means that the crime is completed only when the goods have crossed the EU borders, making it difficult to prove for the national authorities.145 It seems as if so far, issues connected to the use of social media or the use of the internet have not affected the interpretation or application of the principles for determining jurisdiction.

B. Specific Rules or Practices to Address (Positive and/or Negative) Jurisdictional conflicts As stated above, jurisdiction in criminal cases follows from the general rule in Chapter 2, sections 1 and 4 of the Penal Code. When a conflict of jurisdiction occurs, it is for the competent Member State authorities to resolve the conflict through consultations. An effective solution could be a concentration of criminal proceedings in one Member State. This can be done directly between the authorities, but there is also an opportunity to accept the help of Eurojust as a mediator.146 For the Swedish authorities, there is no general rule, and thus the jurisdiction for the FI and the KKV follow from the general principles of public international law. As regards jurisdictional issues between different supervising authorities in the financial law field, there are no specific rules at either the national or the EU level determining jurisdiction within the EU. Rules on cooperation between competent authorities and with ESMA under the Market Abuse Regulation include the exchange of information and cooperation in investigation, supervision and enforcement activities. Problems of jurisdiction in competition law arise in relation to investigations of breaches of EU competition law carried out by the European Commission and by the competition authorities of Member States. In the application of EU law, the Commission may take over cases which are being investigated by the national competition authorities.147 As regards parallel investigations in 143 This was found in two cases from the Svea Court of Appeal (Svea hovrätt, Cases B 1317-11 and B 919-12). See also SOU 2014:46, 419. 144 In addition, in order to violate art 34 or 36 of Regulation (EC) No 1013/2006 on Shipments of Waste, goods have to be exported from the Union. 145 As regards competition law, see above. 146 In Sweden, Council Framework Decision 2009/948/JHA (of 30 November 2009 on Prevention and Settlement of Conflicts of Exercise of Jurisdiction in Criminal Proceedings [2009] OJ L328/42) has been transposed by Regulation (2014:1553) (Förordning (2014:1553) om förebyggande och lösning av tvister om utövande av jurisdiktion i straffrättsliga förfaranden inom Europeiska unionen). 147 Regulation (EC) No 1/2003, art 11.

Sweden 143 different Member States, nothing hinders several national competition authorities from investigating cartel offences that have cross-border effects. However, national competition authorities have the right to suspend or reject a complaint (based on EU law) which is being investigated by another competition authority or where a decision regarding such a complaint has been adopted by another competition authority. Also, the Commission has the right to reject a complaint on the same grounds.148 The allocation of cases between national authorities is also dealt with in a Commission Notice.149 It should be noted that this does not hinder the KKV from persisting with an investigation of breaches of Swedish competition law. However, as EU law hinders decisions based on national competition law contrary to EU law (regarding the cartel offence), in practice it may be problematic for the KKV to reach a decision before the Commission has taken a final decision.150

C. The Imposition of Various Sanctions of a Different Nature Breaches of the rules on and related to market abuse may be subject to either criminal or administrative sanctions. The recent division between penalty provisions of the Market Abuse Penalties Act and the regulatory framework of administrative sanctions under the Market Abuse Regulation and the Act of Administrative Sanctions is based on a choice model and presupposes cooperation between authorities in order to avoid parallel proceedings. In general, a requirement concerning intent constitutes the criterion for determining the criminalised area. As regards environmental law, the situation is slightly different. If an order with an export ban has been issued by the CAB, this does not preclude a crime report and criminal charges from being brought in the same case, provided that the CAB order is not combined with a fine. For minor offences, the CAB can also issue environmental sanction charges. However, there are offences under the Environmental Code and the Regulation on Environmental Fines that can result in both criminal and environmental sanctions. The Environmental Code contains a rule that when an environmental sanction charge may be imposed for an infringement and it can be assumed that the penalty will be limited to a fine, prosecution will be brought only if it is in the public interest to do so. The rule aims to reduce the scope for double penalties for less serious offences. In addition, the Law on Penalties for Smuggling may be applicable in the individual case, which may limit the impact of the current provision on illegal shipments of waste.151 Where the

148 ibid art 13. 149 Joint Statement of the Council and the Commission on the Functioning of the Network of Competition authorities, 15435/02 ADD 1; Commission Notice on Cooperation within the Network of Competition Authorities [2004] OJ C101/43. 150 Regulation (EC) No 1/2003, art 3(2). 151 Act (2000:1225).

144 Vladimir Bastidas Venegas and Maria Bergström offence is punishable pursuant to the Law on Penalties for Smuggling, no penalty shall be imposed pursuant to the provisions of the Environmental Code.152 Regarding corporate fines and prison sentences in general, in 2012 the Supreme Court concluded that in cases where the offence that can be the basis for a decision on a corporate fine was committed by a sole trader and is punishable by a prison sentence, the criminal sanction should be given preference. In this case, the crime should lead to a long prison term. It was therefore clear that any corporate fine should not be imposed on the sole trader.

D. Relevance of Sanctions Imposed in Another (EU or Non‐EU) Country At a general level, the ne bis in idem principle prevents the sanctioning of acts that have already been subject to sanctions for acts committed abroad.153 In addition, the Swedish criminal courts must consider sanctions imposed in other states when determining the sanction in an individual case.154 As regards the application of the general approach to the specific areas of law in this study, there is very little information. In financial law, this problem is not discussed in preparatory works or doctrine. In competition law, there are no cases where sanctions imposed abroad regarding the same case have been taken into account in order to mitigate fines. The issue is not addressed by the KL and is not discussed in the preparatory works. The only issue that is addressed is that a previous infringement of the KL or EU competition law is an aggravating factor when determining the fine.155

E. Cooperation between Administrative Authorities of a Different Kind within the Same Country In general, authorities have a duty to assist other authorities.156 While national multi-agency cooperation is standing practice in all three fields of law, thus far it is most important within environmental law. As regards financial law, as described above, there is cooperation between the FI and the EBM. Officials from the FI may assist the EBM in its investigations and this cooperation will be further developed under the new rules. As explained

152 Environmental Code, ch 29, s 11, para 2. 153 Swedish Code of Judicial Procedure, ch 17, s 1,3; EU Charter of Fundamental Rights, art 50; Convention on the Implementation of the Schengen Agreement (CISA), art 54; and art 4 of the Protocol No 7 of the European Convention on Human Rights. 154 Penal Code, ch 2, ss 5a and 6. 155 KL, ch 3, s 11. See case C-537/16, and Joined Cases C-596/16 and C-597/16 on market manipulation and insider dealing. 156 Administrative Act (förvaltningslagen (1986:223)), s 6.

Sweden 145 above, due to the protection of human rights, the FI cannot carry out a parallel investigation when the case has been passed on to the EBM. In competition law, cooperation between KKV and the Swedish Enforcement Agency (Kronofogden) is extremely limited. The Swedish Enforcement Agency assists the KKV when it carries out inspections of the company or individual’s premises.157 However, such assistance is limited to the use of force, such as the opening of locks and the sealing of premises.158 Thus, the Swedish Enforcement Agency is not involved in the investigation or the assessment of whether the criteria for cartel offences are met. In environmental law, the CABs, in their supervision function, cooperate with the police, customs and the coast guard (see also section V.G below).159 The CABs are responsible for supervision in respect of shipments governed by the Regulation on Shipments of Waste. Illegal cross-border waste transfer is most commonly detected when the customs authorities, together with the CAB, carry out a check for an export declaration without any suspicion of a crime. Depending on the assessment of the CAB in its supervisory role, it will inform the customs authorities or, where applicable, the police (initially orally) if there is suspicion of criminal activity.

F. Cooperation between Administrative Authorities of a Different Kind Either Cross-border or at a Supranational Level Cross-border cooperation between administrative authorities of a different kind mainly occurs in the areas of financial and environmental law. As the European Competition Network organises the cooperation between the different national agencies, it will not be discussed further below.160 Transnational cooperation between different national competent authorities in EU Member States (within the same sector) in the financial law field occurs in particular following the rules in the Market Abuse Regulation.161 The competent national authorities may ask each other for information as well as to carry out inspections on their behalf.162

157 KL, ch 3, s 10. 158 Karlsson and Östman (n 53) 1126–27. 159 Environmental Inspection Regulation (2011:13), ch 2, s 28. 160 This cooperation is regulated by Regulation (EC) No 1/2003 and the Commission Notice on Cooperation within the Network of Competition Authorities [2004] OJ C101/43. 161 Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014 on Market Abuse (Market Abuse Regulation) and repealing Directive 2003/6/EC of the European Parliament and of the Council and Commission Directives 2003/124/EC, 2003/125/EC and 2004/72/ EC [2014] OJ L173/1. 162 Regulation (EU) No 596/201, art 25.

146 Vladimir Bastidas Venegas and Maria Bergström As regards the possibility of the EBM to require assistance from prosecutors (and the police) in other countries, the Act on Request for International Legal Assistance applies and assistance through Eurojust may come into play.163 However, this is only relevant in cases where there is a need for more far-reaching measures, such as the making of interviews or searches of premises in another Member State. Otherwise, if there is only a need for a request for information, the EBM is likely to turn to the FI, which will make such a request to another national supervisory authority. In the environmental law field, Article 52 of the Regulation on Shipments of Waste stipulates that Member States, where appropriate and necessary in liaison with the Commission, shall cooperate with other parties to the Basel Convention and inter-state organisations via, inter alia, the exchange and/or sharing of information, the promotion of environmentally sound technologies and the development of appropriate codes of good practice. The Swedish authorities are involved in several international projects dealing with the transboundary shipment of waste. The Swedish Environmental Protection Agency takes part in the European IMPEL (European Union Network for the Implementation and Enforcement of Environmental Law) network and its cluster on transborder shipments of waste (IMPEL‐TFS). IMPEL is an international non-profit association of the environmental authorities of the EU Member States, acceding and candidate countries of the EU, the European Economic Area (EEA) and the European Free Trade Association (EFTA).164 Joint inspections of transborder shipments of waste are organised within this forum, principally in ports but also on the road. The Enforcement Actions III project has allowed participants to gain valuable experience of inspection methods, enforcement structures, planning inspections and the exchange of staff and information. The Enforcement Actions projects have formed the bedrock of practical activity of the IMPEL-TFS cluster.165

G. Cooperation between Police and/or Judicial Authorities with Administrative Authorities within the Same Country Cooperation between the judicial authorities and the police with administrative authorities mainly occurs within the field of environmental law. The CABs are responsible for supervision in respect of shipments governed by the Regulation on Shipments of Waste. In this role, they cooperate with the police, the customs authorities and the coast guard,166 as well as the Prosecution Authority.

163 Lag (2000:562) om internationell rättslig hjälp i brottmål, ch 3. 164 See http://impel.eu/about. 165 See IMPEL, ‘Enforcement Actions’, https://www.impel.eu/projects/enforcement-actions. See also IMPEL, ‘TFS Prosecutors Project’, https://www.impel.eu/projects/tfs-prosecutors-project. 166 Environmental Inspection Regulation (Miljötillsynsförordning) (2011: 13), ch 2, s 28.

Sweden 147 However, the police cannot take part in the Environmental Protection Agency’s decision to authorise shipments of waste.167 If the customs authorities or the police have reason to believe that a crime has been committed, they may initiate an investigation for attempted smuggling/ illegal waste shipment and seize the goods. After compiling the materials from the CAB, they promptly leave a preliminary investigation to the environmental prosecutor. Where necessary, the environmental prosecutor is contacted prior to or during an inspection. Suspicion of crime may also arise during normal police work, or the coast guard may encounter illegal waste transports, and if so will report these to the CAB, which is dependent on the cooperating authorities in order to stop transport for control and for access to vehicles and containers. In other words, collaboration takes place both at a national level and at a regional level between the Prosecution Authority, the Customs Administration, the CABs, the municipalities and the police in order to achieve effective law enforcement regarding the illegal transboundary movements of waste. It seems that the availability of the CAB is quite important during the investigation of cases carried out by other authorities.168 Representatives of the prosecutor’s office have mentioned that the availability of the CABs often affects the criminal management of controls, since the CABs have expert knowledge of the classification of waste, which in turn determines whether a crime has been committed or not. When the CAB staff are off duty, the prosecutors are without guidance. The same applies for the police and the customs authorities, and it has been the case that suspected illegal shipments of waste have been released without being checked due to the CAB’s personnel being unavailable.169 Accessibility is also problematic for the other authorities.170 This has been pointed out by the recent report by the Swedish National Audit Office as one of the shortcomings in the system that remains unresolved thus far.171

H. Cooperation between Police and/or Judicial Authorities with Administrative Authorities Cross-border or at Supranational Level Generally, according to the Council Framework Decision on the prevention and settlement of conflicts of exercise of jurisdiction in criminal proceedings, there 167 For the situation in financial law, see above. For the competition law field, the question is not relevant. 168 Naturvårdverket. 169 According to ch 2, s 28a of the Environmental Inspection Regulation (Miljötillsynsförordning) (2011:13), the CAB is the responsible authority for transports of waste that fall under Regulation (EC) No 1013/2006 and should collaborate with other CABs and the coast guard, the police and the customs authorities (Förordning 2015:657). 170 Naturvårdsverket (n 55). 171 Riksrevisionen (n 41).

148 Vladimir Bastidas Venegas and Maria Bergström should be direct consultations between competent authorities of the Member States with the purpose of achieving a consensus on any effective solution aimed at avoiding the adverse consequences arising from parallel proceedings and avoiding the wasting of time and resources of the competent authorities concerned.172 According to the Swedish Regulation, the competent Swedish authority is the Prosecutor Agency, which has to cooperate with the competent authorities of the other Member States. In the financial law field, there are no Swedish rules that govern the possibility for the prosecutor to engage in cooperation with administrative authorities in other countries. However, in simple cases of, for example, a request for information, the EBM has the possibility to turn to the FI, which can make a request to the supervisory authorities in other EU Member States, since the FI has the right to request information from other supervisory authorities under the Market Abuse Regulation.173 Likewise, the Regulation on Shipments of Waste includes provisions on collaboration between competent authorities concerning the transmission of notification and requests for information and documentation.174

172 Council Framework Decision 2009/948/JHA of 30 November 2009 on Prevention and Settlement of Conflicts of Exercise of Jurisdiction in Criminal Proceedings [2009] OJ L328/42. 173 Regulation (EU) No 596/2014, art 25; and Lag (2016:1306) med kompletterande bestämmelser till EU:s marknadsmissbruksförordning. 174 Regulation (EC) No 1013/2006 on Shipments of Waste [2006] OJ L190/1.

2.4 The US SARA SUN BEALE

I. Introduction1 The federal government plays the dominant – but not exclusive – role in the regulation of securities, environmental and antitrust law, and this chapter focuses principally on federal law. Where possible, reference is made to the role of state law, though the variations are too great for a detailed analysis. Federal antitrust, environmental and securities law offences are similar in many respects. Important common features include: • specialised federal agencies that play an important role in enforcement; • policies and procedures that are designed to encourage self-reporting and cooperation with government investigations; and • heavy reliance on negotiated settlements and guilty pleas. These characteristics are neither distinctive to the offences in question, nor can they be considered responses to the recent challenges in the field of economic and financial crimes. On the contrary, these characteristics are well-established general features of the federal criminal justice system. Guilty pleas have long been a mainstay of the US system. For example, by 1970, roughly three-quarters of all US convictions were the result of plea bargains.2 Similarly, the US has a long history of programmes that encourage self-reporting and cooperation. For example, a Department of Justice programme to encourage self-reporting by giving amnesty in antitrust cases began in 1978,3 and beginning in 1999 the Sentencing Commission’s Organizational Guidelines provided incentives for corporations to deter and

1 Katherine Boyles, Eleanor Geise, Andrew Husak, Logan Mohs, Logan Page and Rachel Smith provided outstanding research assistance in the preparation of this chapter. 2 Brady v US 397 US 742, 752 (1970). Since 1970, the reliance on guilty pleas – most resulting from plea agreements – has increased in criminal cases of all kinds. By 2012, 97 per cent of federal convictions and 94 per cent of state convictions resulted from guilty pleas. Missouri v Frye 132 S Ct 1399, 1407 (2012) (citing US Department of Justice, Bureau of Justice Statistics). 3 For a discussion of this program, see the text accompanying nn 471–73.

150 Sara Sun Beale prevent crime.4 However, as noted below, federal officials continue to develop and adapt procedures designed to encourage such cooperation.

A. Changes Affecting Enforcement Tools There have been significant changes in the use of the enforcement tools employed for the offences surveyed here. However, in many cases, these initiatives expanded on procedures already in place.

i. DPAs, NPAs and Structural Reform Prosecutions Approximately 15 years ago, federal prosecutors began entering into Deferred Prosecution Agreements (DPAs) and Non-Prosecution Agreements (NPAs) designed to allow corporations to avoid conviction by agreeing to accept sanctions and undertake corrective actions.5 In the case of DPAs, criminal charges are filed, but action is deferred and the charges are dismissed if the conditions of the agreement were fulfilled. In the case of NPAs, there is a formal agreement not to prosecute. These procedures, which have become more common over the last 10 years, build on the general practice of negotiated settlements and guilty pleas, giving prosecutors an alternative to filing criminal charges or proceeding on civil charges alone in cases involving corporate defendants. Between 2001 and 2014, the Department of Justice entered into 306 DPAs and NPAs.6 These agreements frequently included provisions that the court cannot require as part of the authorised sentence, but may be included if the defendant accepts them. Employing DPAs and NPAs, the Department of Justice brought ‘structural reform prosecutions’ aimed at the adoption of sweeping internal corporate reforms.7 Using these techniques, it obtained ‘demanding settlements’ from corporations including AIG, America Online, Boeing, Bristol-Myers Squibb Co, Computer Associates, HealthSouth, KPMG, MCI, Merrill Lynch & Co, and Monsanto, as well as several public entities.8

4 Paula Desio, ‘An Overview of the Organizational Guidelines’, www.ussc.gov/sites/default/files/pdf/ training/organizational-guidelines/ORGOVERVIEW.pdf. 5 A deferred prosecution agreement requires judicial approval. An information charging the offence and the DPA are filed with and must be approved by a federal district court. In contrast, non-prosecution agreements do not require court approval and typically nothing is filed. 6 Brandon L Garrett, ‘The Corporate Criminal as Scapegoat’ (2015) 101 Virginia Law Review 1789, 1802 (citing Brandon L Garrett and Jon Ashley, ‘Federal Organizational Prosecution Agreements’, University of Virginia School of Law, http://lib.law.virginia.edu/Garrett/prosecution_agreements/ home.suphp, archived at http://perma.cc/SNK7-MZHT). 7 See generally Brandon L Garrett, ‘Structural Reform Prosecution’ (2007) 93 Virginia Law Review 853 (empirically analysing the use of structural reform prosecutions). 8 ibid 855.

The US 151 Most recently, the Enforcement Division of the Securities and Exchange Commission (SEC) adopted DPA and NPA procedures for its administrative cases.9 This issue is closely related to the question of entity liability versus individual liability, which is discussed below.

ii. Incentives for Whistleblowers Congress substantially increased the incentives for whistleblowers, creating programmes affecting securities violations as well as other offences such as tax violations.10 But another powerful form of whistleblower compensation has been available in the US for more than 100 years. Under the False Claims Act,11 private parties are permitted to bring fraud suits against government contractors on behalf of the US (essentially as ‘private attorneys general’) and are entitled to receive a share of the recovery.12 In 2014, the US recovered approximately $5.7 billion in False Claims Act and qui tam litigation.13

iii. Big Data and Electronic Discovery Electronically stored information has already spurred some changes and will become even more significant in the future. The SEC’s Enforcement Division has significantly expanded its data analytics,14 and big data are likely to have increased importance across fields. The electronic discovery of large quantities of information has become a major topic of concern in civil proceedings15 and is expected to become more significant in criminal proceedings, especially white-collar prosecutions. 9 See the text accompanying nn 83–85. 10 For a discussion of the SEC whistleblower programme, see the text accompanying nn 175–78. The US rewards tax-fraud whistleblowers who provide information leading to very large recoveries of unpaid taxes, giving them between 15 per cent and 30 per cent of the monies collected as a result of their information, 26 USC § 7623(b)(1); see generally Internal Revenue Service, ‘Whistleblower – Informant Award’, www.irs.gov/uac/Whistleblower-Informant-Award. This programme has been quite successful; between 2009 and 2013, information from whistleblowers led to the collection of nearly $1.7 billion of lost tax revenue. See IRS, ‘Fiscal Year 2013 Report to the Congress on the Use of Section 7623’ (2014) Table 6, www.irs.gov/pub/whistleblower/Whistleblower_Annual_report_FY_13_3_7_14_52549.pdf. 11 31 USC §§ 3729–33 (2012). 12 The private party, called a relator, must notify the government, which has the option of joining and taking over the lawsuit: 31 USC § 3730(b)(2) (2012). If the government takes over the lawsuit, the relator remains entitled to the same share of the recovery as if it were obtained through the relator’s own suit. See 31 USC § 3730(c)(5) (2012). 13 See Civil Division, US Department of Justice ‘Fraud Statistics – Overview’ (20 November 2014) 2, www.justice.gov/civil/pages/attachments/2014/11/21/fcastats.pdf. 14 See the text accompanying n 82. 15 In 2015, the Federal Rules of Civil Procedure were amended to deal comprehensively with electronic discovery. See H Christopher Boehning and Daniel J Toal, ‘FRCP Amendments Take Effect, Impacting E-Discovery Practice’, New York Law Journal, 1 December 2015, https://www.law.com/ newyorklawjournal/almID/1202743563205/FRCP-Amendments-Take-Effect-Impacting-EDiscoveryPractice (describing amendments).

152 Sara Sun Beale

iv. Parallel Proceedings Parallel civil and criminal investigations have been and remain common in securities cases, and the leadership of the Department of Justice has emphasised the need for its prosecutors to work closely with their civil and administrative counterparts.16 Parallel proceedings are, however, less common in environmental cases.17

v. Relabelling Proceedings There is no observed new tendency to label coercive enforcement as ‘administrative’ rather than criminal.

B. Entity Liability versus Individual Liability Entities as well as individuals can be liable for all of these offences. In general, the government must prove the same elements to convict an entity as an individual. There is no difference in the standard of proof and no presumption or shifting of the burden. However, as a practical matter, the federal standard for corporate criminal liability – respondeat superior – is very favourable to the prosecution. A corporation may be convicted on the showing that the offence was committed by any employee or agent acting within the scope of his or her authority and at least in part for the benefit of the corporation.18 If no single employee or agent had all the essential knowledge, the courts may allow the government to establish mens rea based on the collective knowledge of all the corporation’s employees.19 Further, many publicly traded corporations fear that the consequences of a criminal conviction would be extraordinarily damaging, or even fatal.20 Accordingly, they are under great practical pressure to cooperate with the government to avoid a prosecution entirely or at least to secure an agreement that charges will be held in abeyance and dismissed if the corporation fulfils conditions including corrective actions. As noted above, the government and the corporation may enter into a DPA or NPA.21

16 See the text accompanying nn 235–48. 17 See the text accompanying nn 359–60. 18 For a general discussion of the scope of corporate criminal liability, see Charles Doyle, ‘Corporate Criminal Liability: An Overview of Federal Law’ (Congressional Research Service R43293, 2013); and Kathleen F Brickey, Corporate Criminal Liability, 2nd edn (Clark Boardman Callaghan, 1992) § 1:04. For a decision applying this standard, see US v Ionia Management SA 555 F3d 303 (2d Cir 2009). 19 See, eg, US v Bank of New England, NA 821 F 2d 844, 856 (1st Cir 1987). The collective knowledge standard is controversial and is not accepted by all courts. See Doyle (n 18) 4 fn 21. 20 For a discussion of the pressures facing corporations, see Sara Sun Beale, ‘Is Corporate Criminal Liability Unique’ (2007) 44 American Criminal Law Review 1503, 1524–25; and Assaf Hamdani and Alon Klement, ‘Corporate Crime and Deterrence’ (2008) 61 Stanford Law Review 271, 277–81. 21 See the text accompanying nn 5–8.

The US 153 Over the past few decades, there have been significant shifts in the Department of Justice’s approach to corporate crimes that have ‘reshaped the implementation of corporate criminal liability in the federal system’.22 Standards guiding the decision whether to prosecute (and guidelines for sentencing corporations that are charged and convicted) now focus on corporate culpability and also seek to minimise undesirable social costs.23 Beginning in 1999,24 the Department began issuing guidance on the exercise of prosecutorial discretion in cases involving corporations in its Principles of Federal Prosecution of Business Organizations, which are now included in the US Attorneys’ Manual.25 The Principles recognise that there are valid reasons not to pursue criminal charges against a corporation, even when the evidence would be sufficient to support a conviction. The Principles instruct federal prosecutors to consider a variety of factors relevant to corporate culpability, as well as the corporation’s ‘timely and voluntary disclosure of wrongdoing and its willingness to cooperate in the investigation of its agents’.26 One of the most controversial aspects of the Department’s early guidance was an emphasis on the need for corporations seeking the benefits of cooperation to waive various procedural rights, including their attorney–client and work product protections. Subsequent revisions of the Department’s policies deleted the requirement that these privileges be waived.27 The Principles were amended to recognise that DPAs and NPAs could provide a beneficial middle-ground option, and the number of DPAs and NPAs increased. These policies and practices – which restrict the effective scope of corporate criminal liability to focus on corporate culpability and minimise negative collateral consequences to innocent third parties – have been effective responses to many of the criticisms of corporate criminal liability. The government often seeks to obtain global criminal and civil settlements, which may include multiple states. These agreements may include provisions that the court could not require without the defendant’s agreement. For example, BP’s guilty plea agreement28 arising from the Deepwater Horizon oil spill in the Gulf of Mexico included a fine of $4 billion, including $2.4 billion dedicated to acquiring, restoring, preserving and conserving the marine and coastal environments, ecosystems and bird and wildlife habitat, and $350 million to fund research,

22 See Sara Sun Beale, ‘The Development and Evolution of the US Law of Corporate Criminal Liability and the Yates Memo’ (2016) 46 Stetson Law Review 41, 50. 23 ibid 50–61. 24 Deputy Attorney General Eric Holder, ‘Memorandum to All Component Heads and United States Attorneys, Bringing Criminal Charges against Corporations’ (Washington DC, 16 June 1999). 25 The Department’s evolving guidance is stated in the Principles of Federal Prosecution of Business Organizations in the US Attorneys’ Manual § 9-28.000 (amended November 2017). 26 ibid. 27 For a general description of the evolution of the guidelines, see Brandon L Garrett, ‘The Metamorphosis of Corporate Criminal Prosecutions’ (2016) 101 Virginia Law Review Online 60. 28 Guilty Plea Agreement, US v BP Exploration & Production, Inc, No 2:12-cr-00292-SSV-DEK (ED La 29 January 2013), www.justice.gov/iso/opa/resources/43320121115143613990027.pdf.

154 Sara Sun Beale development, education and training to be conducted by the National Academy of Sciences.29 The agreement also included the appointment of process safety and ethics monitors. Under Attorney General Eric Holder, the Department sought comprehensive settlements for conduct during the financial crisis in 2008, and it achieved record recoveries.30 This emphasis on negotiated settlements with corporations has been the subject of widespread criticism,31 and in 2015 the Department announced a renewed emphasis on the prosecution of individuals as well as corporations.32 Critics charged that the Department was generally failing to prosecute individual defendants in cases in which corporations were convicted or negotiated settlements involving DPAs, NPAs or global settlements avoiding criminal liability.33 Further, middle managers were often charged more frequently than high-level officers.34 As revised, the Principles emphasise the need for corporations to make full disclosure of the misconduct by individuals in order to achieve favourable treatment for their cooperation.35 However, the revised Principles have themselves drawn criticism.36

C. Criminal Procedure: Burden of Proof In contrast to the burden of proof in civil cases, which is a preponderance of the evidence, in criminal cases guilt must be established by proof beyond a reasonable doubt.37 The SEC has explicitly acknowledged that the higher burden of proof is a significant factor in determining whether criminal securities charges will be undertaken,38 and this is also likely to be one of the factors considered in determining whether to bring criminal charges for antitrust or e nvironmental crimes. However, other factors often play an even more significant role. For example, 29 ibid Exhibit B, Exhibit B-1. 30 See the text accompanying nn 77–78. 31 See generally Garrett (n 6). 32 Beale (n 22) 42, 62–68 (citing the Yates Memo). The Yates Memo is discussed in the text accompanying nn 89–90. 33 Garrett (n 6) 1792–94. 34 ibid 1802–05. 35 See the text accompanying nn 89–90. 36 See, eg, Elizabeth E Joh and Thomas W Joo, ‘The Corporation as Snitch: The New DOJ Guidelines on Prosecuting White Collar Crime’ (2015) 101 Virginia Law Review Online 51 (expressing doubt that policy will be effective); and Katelyn Polantz, ‘DOJ’s “Yates Memo” Goes Too Far’, National Law Journal, 20 November 2015, www.nationallawjournal.com/legaltimes/regulation/id=1202743031700/ DOJs-Yates-Memo-Goes-Too-Far-Former-Deputy-AG-Says?mcode=1202615784448&curindex=2 32&slreturn=20170617103957 (quoting the former Deputy Attorney General as saying ‘all-or-nothing approach [on corporations earning credit for cooperating with the government] will prove to be impractical’) (brackets in original). 37 In re Winship 397 US 358, 364 (1970) (holding that due process requires proof beyond reasonable doubt of every element of the crime). 38 See the text accompanying nn 247–48 (noting difference in evidence considered sufficient for civil and criminal securities cases).

The US 155 criminal charges for antitrust violations are normally reserved for the most extreme cases of per se unlawful agreements.39

D. Specialised Courts The US has no specialised judicial system for federal antitrust, environmental or securities crimes: all violations (civil and criminal alike) are heard by courts of general jurisdiction (either federal or state depending on which actor is enforcing the particular laws). This is not viewed as a weakness of the system; a unified court system with generalist judges hearing a wide variety of cases is instead a hallmark of the federal court system.

E. Cooperation between Authorities: Jurisdictional Issues National investigations frequently include not only the Department of Justice but also one or more federal agencies, and states may also participate in the federal investigation or pursue their own related investigations.40

F. Double Jeopardy Because of overlapping federal and state jurisdiction, individuals and entities may be subject to both federal and state prosecution for the same conduct. The double jeopardy clause of the Fifth Amendment is more limited than the European interpretation of the ne bis in idem principle, so conflicts between sanctions rarely arise. The Supreme Court has held that the legislature may impose both civil and criminal sanctions for the same act or omission.41 The Court has also adopted the dual sovereignty doctrine, which provides that an act that violates both federal law and the law of one or more states may be punished by each.42 Under this doctrine, double jeopardy does not preclude successive prosecutions and punishment by separate sovereigns, and each US state is considered a separate sovereign.43 39 See the text accompanying n 420. 40 For a discussion of the multiple layers of overlapping jurisdiction involving prosecutors at the federal, state and local levels, see Sara Sun Beale, ‘What are the Rules if Everybody Wants to Play? Multiple Federal and State Prosecutors (Acting) as Regulators’ in Anthony S Barkow and Rachel E Barkow (eds), Prosecutors in the Boardroom: Use Criminal Law to Regulate Corporate Conduct (NYU Press, 2011) 202. 41 Helvering v Mitchell 303 US 391, 399 (1938). See generally Joshua Dressler and Alan C Michaels, Understanding Criminal Procedure, 4th edn (LexisNexis, 2006) 14.01[A][3][b]. 42 ibid 14.01[B]. 43 See Bartkus v Illinois 359 US 121, 138–39 (1959) (articulating dual sovereignty doctrine and holding acquittal in federal prosecution did not bar state prosecution); Abbate v US 359 US 187, 195–96 (1959) (applying dual sovereignty doctrine to uphold federal conviction after state acquittal).

156 Sara Sun Beale Since each sovereign is entitled to enforce its own laws and impose its own penalties, the double jeopardy clause does not bar successive prosecutions or multiple punishments. Although the Supreme Court has never addressed this issue, courts of appeal have found that the dual sovereignty doctrine ‘applies with equal vigor in the international context’.44 Thus, with the exception of cases subject to universal jurisdiction in which US law incorporates an offence defined by international law, the US Constitution does not bar successive prosecution by separate sovereigns, whether domestic or international.45 However, there are non-constitutional limits on successive prosecutions for the same offence. The Department of Justice has adopted administrative procedures generally barring federal prosecutions based on substantially the same acts or transactions involved in a prior state proceeding.46 In 2018, Deputy Attorney General Rod Rosenstein announced a new policy encouraging coordination with authorities in other countries to avoid multiple penalties for the same conduct.47 Moreover, as an informal matter, in some cases federal prosecutors have taken account of sanctions imposed by other countries. In a few instances Department of Justice lawyers have stated they reduce US financial penalties when other countries have imposed sanctions for the same conduct.48 For instance, one Department of Justice official stated that the Department of Justice will ‘give credit’ to avoid subjecting a company to double penalties and give ‘“dollar for dollar” credit for payments made to other jurisdictions’ in Foreign Corrupt Practice Act cases, over which the SEC and the Department of Justice have jurisdiction.49 In addition, the Sentencing Guidelines permit consideration of fines previously imposed for ‘a similar offense’.50 One scholar noted that there are few instances where the Department of Justice investigated illegal activity and chose not to prosecute because of a prosecution in another jurisdiction.51 The US Sentencing Guidelines provide additional guidance to courts at the sentencing phase of a criminal trial. The US Sentencing Commission establishes guidelines for a wide range of criminal offences; however, the Commission’s guidelines are advisory only, and the sentencing judge has discretion to impose a sentence outside the guidelines range52 so long as the sentence is still within 44 Michael P van Alstine, ‘Treaty Double Jeopardy: The OECD Anti-Bribery Convention and the FCPA’ (2012) 73 Ohio State Law Journal 1321, 1334. See also Frederick T Davis, ‘International Double Jeopardy: US Prosecutions and the Developing Law in Europe’ (2016) 31 American University International Law Review 57, 63–64 (stating that the Double Jeopardy clause does not prevent a prosecution in the US even if there has been a prosecution in another country). 45 Van Alstine (n 44) 1335–36. 46 US Attorneys’ Manual, § 9-2031 (Dual and Successive Prosecution Policy (‘Petite Policy’)). 47 US Department of Justice, Deputy Attorney General Rod Rosenstein Remarks (9 May 2018) . 48 Davis (n 44) 66–67. 49 ibid. 50 US Sentencing Guidelines § 5E1.2(d)(6). 51 Davis (n 44) 67. 52 US v Booker 543 US 220, 246 (2005) (holding that the Sentencing Guidelines were unconstitutional as mandatory dictates, but could be constitutionally retained as advisory guidelines).

The US 157 the statutory maximums. But the guidelines still serve an important function in encouraging consistency across trial courts, and the sentencing judge remains obligated to calculate the appropriate guidelines range and consider it when sentencing.53 The ranges of the guidelines are determined based on the conduct of the substantive offence, the applicable aggravating factors for offences of that type and the defendant’s criminal history.54

G. Extraterritorial Jurisdiction The US Constitution does not prohibit the exercise of extraterritorial jurisdiction,55 but a statutory grant of authority is a prerequisite to the exercise of jurisdiction over both federal prosecutions and civil cases. Thus, the effective scope of jurisdiction over transnational crime depends upon: (1) congressional enactments; and (2) the federal courts’ interpretation of statutes that may confer extraterritorial jurisdiction. Since the turn of the century, the Supreme Court has tightened the rules of interpretation, significantly restricting access to the federal courts in cases involving extraterritorial conduct. In cases involving a key statute frequently relied upon to bring civil cases based on extraterritorial conduct, the Court applied a strong presumption against extraterritoriality: absent a clearly expressed Congressional intent to the contrary, federal laws will be construed to have only domestic application.56 In justifying this presumption, the Court emphasised the need to avoid international discord or friction, as well as the ‘common sense’ view that Congress ordinarily focuses on domestic matters.57 In criminal cases, the federal courts had applied a somewhat more liberal rule of construction to the question of extraterritorial jurisdiction,58 but in 2016 the Supreme

53 See ibid (‘The district courts, while not bound to apply the Guidelines, must consult those Guidelines and take them into account when sentencing’). 54 See, eg, US Sentencing Guidelines Manual § 2R1.1; US Sentencing Commission, Sentencing Table, 1 November 2012, www.ussc.gov/sites/default/files/pdf/guidelines-manual/2012/manual-pdf/ Sentencing_Table.pdf; US Sentencing Commission Fine Table, 1 November 2012, www.ussc.gov/ Guidelines/2012_Guidelines/Manual_PDF/Fine_Table.pdf. 55 US v Neil 312 F3d 419, 421 (9th Cir 2002). 56 Kiobel v Royal Dutch Petroleum 133 S Ct 1659, 1669 (2013); Morrison v National Australia Bank Ltd 561 US 247, 255 (2010). 57 ibid 1669 (citing EEOC v Arabian American Oil Co 499 US 244, 248 (1991)). 58 See S Nathan Williams, ‘The Sometimes “Craven Watchdog”: The Disparate Criminal-Civil Application of the Presumption against Extraterritoriality’ (2014) 63 Duke Law Journal 1381, 1383–84 (describing the civil and criminal lines of cases and arguing that they should be reconciled); Charles Doyle, ‘Extraterritorial Application of American Criminal Law’ (Congressional Research Service, 31 October 2016) 9–10 (describing ‘second rule of construction’ originating in the Supreme Court’s decision in US v Bowman 260 US 94 (1922)), and 19–20 (noting that lower courts understood Bowman to mean ‘a substantial number of other federal crimes operate overseas by virtue of the implicit intent of Congress’). But see Restatement (Fourth) of the Law of Foreign Relations, Tent Draft No 2, § 201, Reporters’ Note 4 (22 March 2016) (‘US practice with respect to jurisdiction to prescribe generally does not distinguish between public and private law or between civil and criminal enforcement’).

158 Sara Sun Beale Court applied the same presumption against extraterritoriality employed in recent civil cases to the question whether a federal criminal statute has extraterritorial jurisdiction.59 It is too soon to say whether the lower courts will rely on these recent decisions to restrict the application of statutes that had previously been read to provide for extraterritorial criminal jurisdiction. In construing statutes, US courts also apply a second presumption: as a matter of ‘prescriptive comity’, courts may interpret statutes to include other limitations.60 Courts employ this presumption to ‘seek to avoid unreasonable interference with the sovereign authority of other states’.61 This principle is applied only as a matter of statutory construction; the courts have no discretion to decline to apply federal law if Congress has provided for extraterritorial application.62

II. Misconduct Affecting Financial Markets: Federal Securities Fraud A. Contemporary Challenges and Recent Reforms i. Major Recent Reforms to the Criminal Justice System In the US, both initial offerings in securities and trading in secondary markets are regulated by federal statutes supplemented by administrative regulations. The two foundational federal statutes are the Securities Act of 193363 and the Securities and Exchange Act of 1934,64 both of which include prohibitions on manipulative and deceptive practices.65 The federal government is the dominant player in securities enforcement. The laws of the 50 states are too varied to catalogue all of the differences. Unless stated explicitly, this discussion focuses on federal law and its enforcement. However, some sections address the interaction between state and federal authorities. There are two recent and significant statutory changes that affect the criminal enforcement of the federal securities laws:66 the Dodd-Frank whistleblower provision,67 and the enactment of the Sarbanes-Oxley Act (SOX), which contains

59 RJR Nabisco, Inc v European Community 136 US 2090 (2016). 60 See Restatement (Fourth) of the Law of Foreign Relations, Council Draft No 3 § 204 (December 2016). 61 ibid comment a. 62 ibid. 63 15 USC §§ 77a et seq (2012). 64 15 USC §§ 78a et seq (2012). 65 The 1933 and 1934 Acts also create other regulatory offenses, which will not be analysed in detail here. There are also many other later enacted securities laws that are beyond the scope of this paper. 66 See the text accompanying nn 63–65, 102–12 for discussions of the basic statutory framework. 67 See nn 175–77 and the accompanying text.

The US 159 an additional statutory form of criminal securities fraud.68 Some critics have also highlighted a third statutory change made by the Dodd-Frank Act:69 an expansion of the SEC’s authority to bring actions in its administrative tribunals rather than in the courts.70 In response to criticism of the procedures in its administrative tribunals, the SEC adopted a variety of reforms.71 Defendants in administrative proceedings also objected on constitutional grounds to the process by which SEC administrative law judges (ALJs) have been appointed. The Supreme Court agreed, ruling that the SEC’s appointment process violated the constitution.72 The most important development in the courts was the Supreme Court’s rejection of a ruling by the influential Second Circuit Court of Appeals that would have narrowed the reach of insider trading.73 At the executive level of government, the Obama administration introduced key changes, including the creation of the Financial Fraud Enforcement Task Force, a Department of Justice emphasis on NPAs or DPAs74 in cases involving institutional defendants and a recent re-emphasis on individual liability. The Financial Fraud Enforcement Task Force, described as ‘the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud’, included more than 20 federal agencies, all 93 US Attorneys’ Offices, as well as state and local partners.75 The broad mandate of this task force included but did not focus on securities fraud.76 Under Attorney General Eric Holder, the Department of Justice negotiated for comprehensive civil and criminal settlements, some of which included DPAs and NPAs allowing corporations to avoid debarment and other penalties. The Department of Justice concluded some very large and complex cases in

68 See nn 124–25 and the accompanying text. 69 See, eg, Jed S Rakoff, District Judge, SDNY, ‘Is the S.E.C. Becoming a Law unto Itself?’ (Keynote Address, PLI Securities Regulation Institute, 5 November 2014), 6–7, http://assets.law360news. com/0593000/593644/Sec.Reg.Inst.final.pdf. 70 15 USC § 77h–1(g) (2012). 71 See US SEC, ‘SEC Adopts Amendments to Rules of Practice for Administrative Proceedings’, Press Release 2016-142, 13 July 2016, https://www.sec.gov/news/pressrelease/2016-142.html. 72 Lucia v SEC, 138 SCt 2044 (2018) (holding SEC administrative law judges are ‘inferior officers’ subject to the Constitution’s appointments clause). This decision will require the Commission itself to appoint the ALJs (as it has done since November 2017), rather than delegate this selection to its staff. 73 In Salman v US 137 S Ct 420 (2016), the Supreme Court rejected the Second Circuit’s holding in US v Newman 773 F3d 438 (2d Cir 2014) that the personal benefit to the insider that is necessary to establish insider trading under Dirks v SEC 463 US 646 (1983) requires proof of ‘an exchange that is objective, consequential and represents at least a potential gain of a pecuniary or similarly valuable nature’. 74 See the text accompanying nn 5–9 for a broad discussion of these tools. 75 Fin Fraud Enforcement Task Force, ‘The Task Force’, www.stopfraud.gov/about.html. 76 In 2014, a DOJ press release stated that: ‘Over the past three fiscal years, the Justice Department has filed more than 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,900 mortgage fraud defendants.’ See, eg, US Department of Justice, ‘Former Alabama Real Estate Investor Indicted for Conspiracy to Commit Mail Fraud’, 31 March 2014, www.stopfraud.gov/iso/opa/ stopfraud/ALS-140331.html.

160 Sara Sun Beale which institutional defendants agreed to pay very large penalties. For example, a case against the Bank of America produced the largest civil settlement with a single entity in history, including $1.6 billion in penalties and consumer relief.77 The strategy of using DPAs and NPAs to achieve such settlements reflected the Attorney General’s publicly expressed concern that some of the institutions were so large that criminal charges would have a negative impact on the national economy and perhaps even the global economy.78 However, the Department of Justice was criticised for not being tough enough on the financial institutions that caused the financial crisis and for failing to bring criminal charges against the top officials of any of the banks.

ii. Reasons for Introducing the Reforms and Problems Related to the Lack of Them The SEC’s recent actions were shaped by its response to the 2008 financial collapse of the markets and to the revelation of Bernard Madoff ’s long-running Ponzi scheme, which was the largest financial fraud in US history. These led to significant changes in the personnel, priorities and procedures of the SEC. Under the Obama administration, key leadership posts in the SEC were filled by individuals who had held senior prosecutorial positions in the US Attorney’s Office for the Southern District of New York, which is widely recognised as the preeminent office for securities law enforcement. In 2013, President Barack Obama appointed Mary Jo White to serve as chair of the Securities and Exchange Commission. White, who served for more than a decade as the US Attorney in the Southern District, was the first ex-prosecutor to serve as chair.79 Prior chairs had been bankers, corporate lawyers and career SEC officials. White then broke with tradition and appointed former prosecutors from the Southern District to head the SEC Enforcement Division.80 77 The Bank of America (BOA) acknowledged that, along with Merrill Lynch and Countrywide, it sold billions of dollars of structured financial products known as residential mortgage-backed securities (RMBS) backed by toxic loans whose quality, and level of risk, they knowingly misrepresented to investors and the US government. US Department of Justice, ‘Bank of America to Pay $16.65 Billion in Historic Justice Department Settlement for Financial Fraud Leading up to and during the Financial Crisis’, 21 August 2014, www.justice.gov/opa/pr/bank-america-pay-1665-billionhistoric-justice-department-settlement-financial-fraud-leading. 78 Peter J Henning, ‘Attorney General Eric Holder’s Mixed Scorecard’ New York Times (28 April 2015), http://nyti.ms/1HUBUhP. 79 For the background on White’s prior career and her appointment, see Ben Protess and Benjamin Weiser, ‘A Signal to Wall Street in Obama’s Pick for Regulators’ New York Times (24 January 2013), http://dealbook.nytimes.com/2013/01/24/mary-jo-white-to-be-named-new-s-e-c-boss. 80 Robert Khuzami was appointed as Director of the Enforcement Division in 2009. A former federal prosecutor, Khuzami’s cases included what was the largest terrorism trial in US history (10 defendants accused of the 1993 bombing of the World Trade Center). He is the first former prosecutor to hold this position. See US SEC, ‘Robert Khuzami Named SEC Director of Enforcement’, 19 February 2009, www. sec.gov/news/press/2009/2009-31.htm. His appointment was seen as a response to the SEC’s failure to discover Madoff ’s fraud and the financial crisis.

The US 161 Some of the changes made by the new leadership were uncontroversial. The new director reorganised the Enforcement Division, created specialty units focused on high-priority misconduct, and hired industry experts.81 The Division targeted misconduct involving highly complex markets, products, transactions and practices, and it improved the use of information technology and the collection and analysis of complaints and tips.82 The SEC also adopted a system of DPAs and NPAs like those employed by the Department of Justice in criminal cases.83 This formalised a prior policy and extended it to individuals as well as corporations.84 The Director of the Division of Enforcement characterised the new policy as ‘a potential game-changer’.85 President Donald Trump nominated a more conventional SEC chair: Jay Clayton, a partner in Sullivan Cromwell, a prestigious US law firm.86 Clayton was confirmed by the Senate on 2 May 2017.87 Industry observers expect Clayton’s tenure to emphasise deregulation rather than aggressive enforcement.88

iii. Reforms Planned in the Near Future In September 2015, under recently appointed Attorney General Loretta Lynch, Deputy Attorney General Sally Yates issued a policy directive that was understood to be a response to criticism that the Department had failed to bring criminal charges against any of the individuals involved in the 2008 financial crisis.89 The Yates Memorandum directs all Department of Justice civil and criminal attorneys to focus on individual accountability for corporate wrongdoing.90 It is too early 81 US SEC, ‘SEC Names New Specialized Unit Chiefs and Head of New Office of Market Intelligence’, 13 January 2010, www.sec.gov/news/press/2010/2010-5.htm. 82 ibid. 83 17 CFR § 202.12 (2016). See US SEC, ‘Enforcement Cooperation Program’, www.sec.gov/spotlight/enfcoopinitiative.shtml (describing the new incentives to individuals and companies who come forward and provide valuable information to SEC investigators and the analytical framework used to evaluate whether, how much and in what manner to credit the cooperation). 84 The policy formalised and extended the Commission’s Seaboard Release: ibid. 85 US SEC, ‘SEC Announces Initiative to Encourage Individuals and Companies to Cooperate and Assist in Investigations’, 13 January 2010, www.sec.gov/news/press/2010/2010-6.htm. Director Robert Khuzami, a former prosecutor, explained: ‘There is no substitute for the insiders’ view into fraud and misconduct that only cooperating witnesses can provide. That type of evidence can expand our ability to conduct our investigations more swiftly, and to act quickly to file charges, freeze assets, and protect investors’ (ibid). 86 Donna Borak, ‘Senate OK’s Jay Clayton, Trump’s Pick for SEC Chair’ CNN Money (2 May 2017), http://money.cnn.com/2017/05/02/news/economy/senate-clayton-sec-confirmation/index.html. 87 ibid. 88 See Matt Egan, ‘Trump’s Wall Street Cop Promises “No Favoritism” Despite Ties to Banks’ CNN Money (23 March 2017), http://money.cnn.com/2017/03/23/investing/jay-clayton-sec-confirmationhearing. 89 Memorandum from Sally Quillian Yates, Deputy Attorney General, for all US Attorneys, 9 September 2015, www.justice.gov/enrd/file/800431/download. 90 Under the new policy, corporations must provide the Department of Justice with all the relevant facts regarding individuals in order to qualify for any benefits for their cooperation. And when settling corporate liability, in the absence of extraordinary circumstances, the Department of Justice will not

162 Sara Sun Beale to say what effect the new policy will have and to what extent it will be continued under the Trump administration. Preet Bharara, the US Attorney for the Southern District of New York – the pre-eminent district for securities law cases – aggressively prosecuted and won a large number of high-profile insider trading cases with innovative theories of insider trading law and investigative techniques not ordinarily employed in whitecollar cases.91 Although Bharara was celebrated as the ‘enforcer of Wall Street’, a 2014 decision by the Court of Appeals gave insider trading a narrower interpretation, reversing one of Bharara’s high-profile convictions and raising questions about others. The Supreme Court rejected the appellate court’s decision, reinstating the conviction and rejecting the narrow interpretation of insider trading.92 There is no agreement on the question whether the securities laws are over or underenforced. As noted, the SEC has faced criticism that it is too aggressive, but it has also been criticised for becoming too close to major institutional players. For example, the reform of institutional conflict of interests involving research analysts at investment banks was spearheaded by the New York Attorney General rather than the SEC.93 The Department of Justice was successful in obtaining monetary relief in the wake of the 2008 financial crisis, but it was subject to harsh criticism for letting institutions off too easily and failing to prosecute individuals. The Yates Memo was an effort to rebalance individual and institutional enforcement. Critics charged that the SEC was moving cases to administrative tribunals in an effort to gain an unfair advantage.94 The SEC had a high success rate in the administrative tribunals,95 where procedural rules were unfavourable to the defence and appeals are to the SEC itself.96 In response to these criticisms, in 2016 the SEC adopted amendments to its procedural rules governing a dministrative proceedings.97 These amendments lengthened the pre-hearing period in some cases, allowed parties in some cases to conduct depositions and clarified other release culpable individuals from liability. Finally, corporate charges are not to be resolved without a clear plan to resolve related individual cases (ibid). 91 See William D Cohan, ‘Preet Bharara: The Enforcer of Wall Street’ Fortune (2 August 2011), http:// fortune.com/2011/08/02/preet-bharara-the-enforcer-of-wall-street. Bharara, who had prosecuted cases involving organised crime, narcotics and money laundering as a young lawyer, employed wiretaps – a technique not ordinarily used in white-collar cases – to obtain evidence. 92 See n 73 and the accompanying text. 93 Aaron M Tidman, ‘Note: Securities Law Enforcement in the Twenty-First Century: Why States are Better Equipped Than the Securities and Exchange Commission to Enforce Securities Laws’ (2007) 57 Syracuse Law Review 379, 400–02. 94 Orrick Editorial Board, ‘SEC Gives itself the Home Court Advantage in an Accounting Fraud Internal Controls Action against a Corporate CEO’, ORRICK Blog, 31 July 2014, http://blogs.orrick. com/securitieslitigation/2014/07/31/sec-gives-itself-the-home-court-advantage-in-an-accountingfraud-internalcontrols-action-against-a-corporate-ceo. 95 Gretchen Morgenson, ‘Crying Foul on Plans to Expand the S.E.C.’s In-House Court System’ New York Times (26 June 2015), https://www.nytimes.com/2015/06/28/business/secs-in-house-justiceraises-questions.html. 96 17 CFR § 201.410 (2016). 97 See US SEC (n 71).

The US 163 procedural rules, such as the rules for dispositive motions, evidence, expert reports and appeals.98 The SEC also issued public guidance on how it determines whether to bring a proceeding in court or in an administrative forum.99 Although there is no formula for how the SEC makes this decision,100 the criteria sought to explain the SEC’s choice of forum. Some observers believe that both the Department of Justice and the SEC have seen some incremental expansion of their institutional roles, with the SEC becoming more hard line and prosecutorial, and the Department of Justice showing interest in matters ordinarily left to regulators, such as the appointment of a full-time compliance expert. Most fundamentally, securities fraud has been criticised as vague and undefined, leaving the line between criminal and civil liability unacceptably blurred.101

B. Substantive Criminal Law i. Legislative Technique Used for Offence Definitions The relevant statutory provisions and implementing regulations are written in broad terms that have been fleshed out by the courts. This chapter first provides a brief description of the US approach to securities law and then focuses on securities fraud and the crime of insider trading. The Securities Act of 1933 and the Securities and Exchange Act of 1934 were enacted in response to the stock market collapse of 1929.102 This legislation, which also created the SEC, was designed to restore confidence in the capital markets by implementing disclosure requirements that would provide investors with reliable information. Congress chose not to grant the SEC authority to approve or disapprove of securities or to pass on their merits.103 The Commission’s only function is to ensure full disclosure of all material facts. Wilful violations of the 1933 and 1934 Acts are felonies punishable by up to 20 years in prison.104 The 1933 Act provides that no securities may be offered or sold to the public unless they are registered with the SEC and specified information is disclosed,105

98 ibid. 99 Andrew Ceresney, Director of the Division of Enforcement, ‘Keynote Speech at New York City Bar 4th Annual White Collar Institute’, US SEC, 12 May 2015, www.sec.gov/news/speech/ceresney-nycbar-4th-white-collar-key-note.html. 100 ibid. 101 Samuel W Buell, ‘What is Securities Fraud?’ (2011) 61 Duke Law Journal 511 passim. 102 For a general overview of the 1933 and 1934 statutes, see Louis Loss and Joel Seligman, Fundamentals of Securities Regulation, 5th edn (Aspen, 2004). 103 ibid 35–38. 104 15 USC §§ 78ff(a) (2012) (making it a criminal offence to: (a) wilfully violate any provision of the securities laws or related rules; or (b) wilfully and knowingly make false and misleading statements of material fact in applications, reports or documents required to be filed under the securities laws). 105 For a general discussion of the registration requirements, see Loss and Seligman (n 102) 471–727.

164 Sara Sun Beale and it provides civil liability for certain misstatements or omissions.106 Section 17 of the Act makes it unlawful to engage in fraudulent or deceitful practices in connection with any offer or sale of securities, whether registered under the Act or not.107 The 1934 Act significantly expanded the regulatory framework, created the SEC and added critical anti-fraud provisions.108 The Act regulates securities trading in secondary markets and seeks to eliminate abuses in trading after the initial distribution of securities.109 In addition to prohibitions of certain manipulative activities with respect to exchange-listed securities,110 section 10(b) of the 1934 Act contains a catch-all provision that makes it unlawful to ‘use or employ, in connection with the purchase or sale of any security … any manipulative or deceptive device or contrivance in contravention of such rules and regulations as the Commission may prescribe as necessary or appropriate in the public interest or for the protection of the public’.111 This provision is broadly worded, but it is triggered only when a regulation promulgated by the SEC has been violated.112 The government also has the option of charging securities fraud cases under other federal statutes – especially the mail and wire fraud statutes.113 The mail and wire fraud statutes have been broadly construed and they can reach conduct that does not fall within the more specific securities law provisions. For example, the Supreme Court unanimously affirmed a conviction for mail and wire fraud, although it was equally divided on the question whether the same conduct constituted securities fraud.114 In prosecutions involving fraud related to securities, the breadth of the mail and wire fraud statutes provides the government with options: it can charge fraudulent conduct related to securities exclusively under the mail

106 Section 11 of the Act provides civil liability for misstatements or omissions in a registration statement and for misstatements or omissions in any offer or sale of securities (whether or not registered under the Act). 15 USC § 77k (2012). Section 12 provides for liability for the sale of a security by means of a prospectus or oral communication that contains a material misstatement or omission. 15 USC § 77l (2012). In Gustafson v Alloyd Co 513 US 561 (1995), the Supreme Court held this provision does not reach secondary trading or initial offerings unless they are made publicly by means of a statutory prospectus. 107 15 USC § 77q(a) (2012). 108 The 1934 Act contained many other important provisions, including the registration and regulation of broker-dealers, self-regulation by national securities exchanges, and the regulation of publicly held companies. For a general description of these provisions, see Louis Loss et al, Securities Regulation, 5th edn (Wolters Kluwer Law & Business, 2014) 344–46. 109 Loss and Seligman (n 102) 45–46. 110 15 USC §§ 77(i) and 77j(b) (2012). 111 15 USC § 77j(b). 112 Steven S Thel, ‘Taking Section 10(b) Seriously: Criminal Enforcement of SEC Rules’ (2014) Columbia Business Law Review 12–13. 113 18 USC §§1341, 1343 (2012). 114 Carpenter v US 484 US 19 (1997) (holding that a reporter who provided brokers with prepublication notice of the content and timing of columns that would affect the stock price of companies had defrauded his employer of its property rights in its confidential information, and affirming the securities fraud conviction by a divided vote without an opinion on the question whether the securities laws reached conduct where the victim newspaper had no interest in the securities traded).

The US 165 or wire fraud statutes, or add mail and wire fraud charges in addition to securities law charges.

ii. Criteria for Criminal Liability (Both for Individuals and Corporations) In order to implement section 10 of the 1934 Securities Exchange Act, the Commission promulgated rule 10b-5, which makes it unlawful to use any means of interstate commerce, the mails or the facilities of a national securities exchange to engage in any of the following practices ‘in connection with the purchase or sale of any security’: (a) To employ any device, scheme, or artifice to defraud, (b) To make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or (c) To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person.

Prosecutions for securities fraud are generally brought under section 10(b) and rule 10b-5 under the 1934 Act and section 17 of the 1933 Act. These broadly drawn statutes provide only general guidance and the courts have been active in developing the law. Indeed, ‘[t]he law of securities fraud is one of the most heavily judicially created bodies of federal law’.115 The federal courts have also recognised that purchasers and sellers of securities have an implied cause of action for damages arising from violations of section 10(b) and rule 10b-5.116 Insider trading refers to the purchase, sale or transfer of securities using material non-public information in breach of a fiduciary duty or a similar duty of trust and confidence.117 Although insider trading is considered to be one of the most important forms of securities fraud, neither the statutes nor rule 10b-5 define or mention it. The courts, rather than Congress, have developed the law of insider trading, drawing upon the common law of fraud as well as the applicable statutes and regulations.118 The courts now recognise two distinct forms of insider trading. Under the traditional or classical theory, section 10(b) and rule 10b-5 are violated when a corporate insider trades in the securities of his corporation on the basis of

115 Buell (n 101) 545. 116 Herman and MacLean v Huddleston 459 US 375, 380 (1983) (stating that the existence of the implied remedy ‘is simply beyond peradventure’). 117 Miriam F Weisman, Corporate Crime & Financial Fraud: Legal Implications of Corporate Misconduct (American Bar Association, 2012) 38. 118 Stephen J Choi and AC Pritchard, Securities Regulation: Cases and Analysis, 2nd edn (Foundation Press, 2008) 354–66.

166 Sara Sun Beale material non-public information.119 This trading, the Supreme Court has ruled, constitutes a ‘deceptive device’ under rule 10b-5 because ‘a relationship of trust and confidence [exists] between the shareholders of a corporation and those insiders who have obtained confidential information by reason of their position with that corporation’.120 The relationship of trust and confidence imposes a duty on the insider to disclose or abstain from trading.121 The classical theory requires corporate insiders – officers, directors, employees, attorneys, accountants, consultants and other fiduciaries – to disclose or abstain from trading in the corporation’s securities based on this duty to their shareholders. The misappropriation theory extends the reach of the securities laws to outsiders who become privy to confidential information, but who themselves owe no duty to the corporation’s shareholders. This theory applies only when there is a fiduciary-like duty between the misappropriator of information and the source of that information. When such a fiduciary-like duty exists, the Supreme Court reasoned, a misappropriator who trades or tips on the basis of confidential information deceives and defrauds those who entrusted him with that information.122 This deception constitutes a violation of section 10 and rule 10b-5. The SOX, passed in 2002, provided the government with an additional option: a new statute, modelled on the mail and wire fraud laws, making it a crime to knowingly execute or attempt to execute ‘a scheme or artifice … to defraud in connection with’ certain securities governed by provisions of the 1934 Act or to obtain money or property ‘by false or fraudulent pretences, representations, or promises … in connection with’ those securities.123 The SOX also added a related attempt and conspiracy provision.124 There have been only a handful of reported cases under these new provisions and commentators are divided on their significance. Although some commentators concluded that the new provisions are not of significance, others have identified differences that could be beneficial to the government, such as the ‘knowing’ mens rea requirement.125 119 Chiarella v US 445 US 222, 228 (1980). 120 ibid. 121 ibid 222–29. 122 US v O’Hagan 521 US 642, 652 (1997). 123 18 USC § 1348 (2012). 124 18 USC § 1349 (2012) (making it a crime to conspire or attempt to commit ‘any offense under this chapter’; the chapter includes mail fraud, wire fraud, bank fraud, health care fraud and the new securities law offence). 125 Compare Geraldine Szott Moohr, ‘An Enron Lesson: The Modest Role of Criminal Law in Preventing Corporate Crime’ (2003) 55 Florida Law Review 937, 948 (noting that § 1348 is more broadly applicable to fraud ‘in connection with any security’, not merely those involving sales or purchases, and the law requires a mens rea of knowledge rather than wilfulness) and Luke AE Pazicky, ‘A New Arrow in the Quiver of Federal Securities Fraud Prosecutors: Section 807 of the Sarbanes Oxley Act of 2002 (18 USC § 1348)’ (2003) 81 Washington University Law Quarterly 801 (noting that § 1348 does not require proof of the same jurisdictional elements as mail and wire fraud statutes, and eliminates technical elements of securities fraud, such as reliance), with Phillip Wesley Lambert, ‘Worlds are Colliding: A Critique of the Need for the Additional Criminal Securities Fraud Section in Sarbanes-Oxley’ (2003) 53 Case Western Reserve Law Review 839 (arguing that there is little or no difference between § 1348 and the existing laws).

The US 167

iii. Sanctions (for Individuals and Corporations) Individual sentences are determined under the US Sentencing Guidelines.126 Wilful violations of the 1933 and 1934 Acts are felonies punishable by a maximum of 20 years in prison and a fine of $5 million for an individual or $25 million for a corporation or other legal entity.127 The new offences (under the SOX) are punishable by a fine and a maximum of 25 years’ imprisonment and fines set by more general provisions.128 Judges determine the sentence in individual cases after calculating the advisory guideline sentence.129

C. Administration of Justice i. Public Enforcement Mechanisms a. Overview of the Different Public Enforcement Mechanisms Two federal agencies administer the securities laws: the SEC and the Department of Justice. The SEC wields extensive regulatory authority and it is authorised to bring administrative actions as well as civil lawsuits for securities violations.130 The Department of Justice has the sole authority to bring criminal charges for securities violations.131 The SEC is an independent federal agency with broad responsibility for regulating the securities markets and enforcing the securities laws and regulations. It is headed by a five-member commission, composed of the chair and four members, who are appointed by the President and confirmed by the Senate for a term of five years. No more than three members may be from the same political party.132 The SEC’s functional responsibilities are organised into five divisions and 23 offices, each headquartered in Washington DC and 11 regional offices composed principally of staff from the national enforcement and examination programmes.133 In the fiscal year 2015, the SEC had the equivalent of 4,031 employees.134

126 The US Sentencing Guidelines are discussed in the Introduction. 127 15 USC § 78ff(a) (2012) (making it a criminal offence to: (a) wilfully violate any provision of the securities laws or related rules; or (b) wilfully and knowingly make false and misleading statements of material fact in applications, reports or documents required to be filed under the securities laws). 128 18 USC § 1348 (2012). 129 See the text accompanying nn 52–54; see generally US Sentencing Guidelines § 2B1.1 (providing that the base level for both offences is 7, with upward adjustments for specific offense characteristics, including amount of loss, number of victims and the defendant’s role in connection with a publicly traded company). 130 Howard M Friedman, Securities and Commodities Enforcement (Lexington, 1981) 6. 131 ibid. 132 US SEC, ‘Current SEC Commissioners’, www.sec.gov/about/commissioner.shtml. 133 US SEC, ‘FY 2017 Cong. Budget Justification, FY 2017 Annual Performance Plan, FY 2015 Annual Performance Report ’10–11’, www.sec.gov/about/secreports.shtml. 134 ibid.

168 Sara Sun Beale b. Competent Authorities The Role of the SEC: Civil Suits, Administrative Proceedings and Referrals for Prosecution The SEC Division of Enforcement conducts investigations into possible violations of the federal securities laws and it prosecutes the SEC’s civil suits in the federal courts as well as its administrative proceedings.135 In civil suits, the SEC seeks injunctions to prohibit future violations; a person who violates an injunction is subject to fines or imprisonment for contempt. In addition, the SEC often seeks civil money penalties and the disgorgement of illegal profits. The courts may also bar or suspend individuals from acting as corporate officers or directors. The SEC can also bring a variety of administrative proceedings, which are heard by administrative law judges and may be appealed to the SEC itself. One type of proceeding, for a cease-and-desist order, may be instituted against any person who violates the federal securities laws. The SEC may order the respondent to disgorge ill-gotten funds in these proceedings. With respect to regulated entities (eg, brokers, dealers and investment advisers) and their employees, the SEC may institute administrative proceedings to revoke or suspend registration, or to impose bars or suspensions from employment. In proceedings against regulated persons, the SEC is authorised to order the payment of civil penalties as well as disgorgement. Attorneys in the SEC’s Enforcement Division and its regional offices must obtain the approval of the Commission before bringing a civil case or an administrative action.136 The SEC may refer information revealing possible criminal conduct to the Department of Justice, and there may also be parallel civil and criminal investigations. The Role of the Department of Justice: The Criminal Division Fraud Section and US Attorneys Responsibility for criminal prosecution for federal securities violations is shared by the US Attorneys in each of the 94 US judicial districts and the Fraud Section of the Criminal Division in Washington DC. With the exception of prosecutions under the Foreign Corrupt Practices Act, US Attorneys may prosecute all types of securities violations without prior approval from the Fraud Section.137 135 The following description of the Division’s enforcement authority is drawn from US SEC, ‘About the Division of Enforcement’, www.sec.gov/divisions/enforce/about.htm. 136 US SEC, Division of Enforcement, Enforcement Manual §§ 2.5–2.5.3 (15 June 2015). 137 The one exception is charges arising under the Foreign Corrupt Practices Act (FCPA). The US Attorneys’ Manual gives the Fraud Section virtually complete control over FCPA investigations and prosecutions. No investigation or prosecution involving the FCPA’s anti-bribery or record-keeping provisions may be instituted without the express authorisation of the Fraud Section, and any information relating to a possible violation must be brought to the Section’s attention immediately. US Department of Justice, US Attorneys’ Manual § 9-47.110 (updated October 2016). This coordination by the Fraud Section is necessary given the potential extraterritorial effects of FCPA prosecutions.

The US 169 The Fraud Section investigates and prosecutes securities fraud and other complex white-collar cases throughout the US. It also plays a role in developing Department of Justice policy, advising departmental leadership on legislation, and coordinating inter-agency and multi-district investigations and international enforcement efforts.138 The Fraud Section includes the Securities and Financial Fraud Unit, which works closely with the SEC and other partner agencies.139 It chairs the Securities and Commodities Fraud Working Group, which includes representatives from US and foreign law enforcement agencies, the SEC, the Commodities Futures Trading Commission, securities and exchange selfregulatory authorities.140 Although each US Attorney has the authority to bring criminal cases under the securities laws, the US Attorney’s Office for the Southern District of New York (SDNY) plays an especially influential and high-profile role because that district includes Wall Street. The US Attorney’s Office for the SDNY includes a Securities and Commodities Fraud Task Force, which investigates and prosecutes crimes of all varieties of securities fraud, insider trading, market manipulation schemes, accounting and regulatory reporting frauds.141 The Task Force works in close coordination with the SEC, the Commodity Futures Trading Commission (CFTC) and the Federal Bureau of Investigation (FBI) to uncover these cases of financial fraud.142 State Securities Laws State securities laws (‘blue sky laws’) pre-dated the federal legislation enacted in 1933 and 1934,143 and every state continues to regulate securities. State laws generally include: (a) requirements for registration of securities to be sold in the state; (b) requirements for registration of brokers and dealers; and (c) anti-fraud provisions.144 The laws and the role of various agencies in regulating securities vary significantly from state to state. In some states, the Attorney General administers the securities law, while in other states the Attorney General’s role is much more limited as securities commissions administer the securities law.145

138 US Department of Justice, ‘Fraud Section’, www.justice.gov/criminal-fraud. 139 US Department of Justice, ‘Securities and Financial Fraud Unit’, www.justice.gov/criminal-fraud/ securities-and-financial-fraud-unit. 140 US Department of Justice, ‘Interagency Working Groups’, www.justice.gov/criminal-fraud/ interagency-working-groups. 141 US Attorney’s Office, Southern District of New York, ‘Divisions’, www.justice.gov/usao-sdny/ criminal-division. 142 ibid. 143 State regulation can be traced back to 1852, and the first general state securities laws were passed just after the turn of the century. For a general description of the development of the early state laws, see Loss et al (n 108) 55–66. 144 Loss and Seligman (n 102) 9–32. 145 Abbe Tiger and Joe Opron, ‘Securities Regulation’ in Emily Myers (ed), State Attorneys General Powers and Responsibilities (National Association of Attorneys General, 2013) 246.

170 Sara Sun Beale In response to significant variations from state to state, the National Conference of Commissioners on Uniform State Laws and other groups developed a series of model state laws.146 These model laws have been only partially successful in promoting uniformity: states are divided on which model law to adopt147 and some of the largest and most significant states – including New York – have not adopted any of the model laws. c. Material and Territorial Jurisdiction of the Respective Authorities The Department of Justice and the SEC have concurrent jurisdiction over the same securities matters and can bring parallel actions.148 The states have their own securities laws, which are not pre-empted by the federal securities laws and are administered and enforced by state authorities. The specific state authority that administers the state securities law varies from state to state.149 d. Assessment of the Enforcement Policy The SEC claims that it has significantly increased its total enforcement activity, including both the number of enforcement actions and the penalties imposed. For example, the Director of the Enforcement Division testified that in the fiscal year 2014, the Commission brought the highest number of enforcement actions to date (755) and obtained a record level of monetary remedies (more than $4.16 billion).150 However, critics have argued that these figures are misleading. One line of criticism highlights the difference between organisational and individual defendants. An independent analysis by the Wall Street Journal concluded that the SEC had toughened penalties against individuals, but had a more mixed record against firms, levying a larger number of fines but smaller penalties per firm. 151 146 ibid. 147 Loss et al (n 108) 69–79 (noting that by 2013, 17 states had adopted the 2002 Uniform Securities Act, and almost 30 jurisdictions had in force all or part of the 1956 Uniform Securities Act). These model laws provide for administrative, civil and criminal enforcement. See, eg, Uniform Securities Act of 2002, § 501 (providing general fraud provision modelled generally on rule 10b-5, section 17(a) of the 1934 Act, and section 101 of the 1956 Uniform Act), § 508 (providing criminal penalties for wilful violations), § 509 (providing civil liability for false material statements or omissions) and § 604 (providing for administrative enforcement). 148 Memorandum from the Attorney General to All US Attorneys et al, ‘27. Coordination of Parallel Criminal, Civil, Regulatory, and Administrative Proceedings’, 30 January 2012, www.justice.gov/usam/ organization-and-functions-manual-27-parallel-proceedings. 149 Tiger and Opron (n 145) 246. 150 ‘Oversight of the SEC’s Division of Enforcement: Hearing before the Subcommittee on Capital Markets and Government Sponsored Enterprises of the Committee on Financial Services’, 114th Cong 6 (2015) (statement of Andrew Ceresney, Director of the Division of Enforcement, US SEC). 151 Jean Eaglesham and Andrea Fuller, ‘Wall Street’s Top Cop Takes Harder Line’ Wall St Journal (13 July 2015), www.wsj.com/articles/sec-escalates-financial-penalties-1436804327 (analysing 4,443 penalties imposed between October 2004 and 2015, based on information provided by the SEC in response to public record requests). Eaglesham and Fuller considered firm size, focused on the mean fine rather than the average (which can be skewed by a few large cases) and distinguished between fines imposed on individuals and those imposed on firms.

The US 171 The Journal’s conclusions were challenged by other observers, who concluded that the data show a long-term trend towards significantly increased fines against companies.152 A law review article presents a more fundamental challenge to the SEC’s narrative, concluding that, by the best measure, the SEC’s enforcement has grown slowly or even remained constant since 2002.153 This article demonstrates that the number of primary enforcement actions has increased, but that it peaked in 2009, rather than 2014 as shown by the agency’s statistics.154 SEC primary enforcement remained more or less flat between 2002 and 2014, once contempt cases and delinquent filings cases are excluded.155 In an apparent effort to respond to this critique, in October 2015 the SEC announced disaggregated enforcement statistics, reporting 807 new enforcement actions including a record 507 primary enforcement actions.156 Some observers think that the SEC under Chairman Mary Jo White went too far in seeking to show how tough it was. Defence lawyers criticised the agency’s ‘increasingly hard line approach’ and they charged that the SEC was especially severe with individuals, demanding both large fines and industry bars.157 After largely completing the major cases that developed out of the financial collapse of 2008, Chairman White announced a ‘broken windows’ strategy of pursuing even small violations, based on the theory that police pursuit of low-level street offences helps reduce the overall crime rate.158 On the other hand, a leading liberal senator and former law professor charged that the SEC has not gone far enough to achieve a bold enforcement strategy.159 There also seems to have been an unusual degree of internal conflict within the SEC. White’s broken windows strategy was criticised by other Commissioners appointed by both parties,160 and under White the Commission appears to have been unusually divided along roughly partisan lines. Some of the conflicts were public. Although historically most Commission votes have been unanimous, under White there were a number of three-to-two votes.161 To some degree, these 152 ibid. 153 Urska Velikonja, ‘Reporting Agency Performance: Behind the SEC’s Enforcement Statistics’ (2016) 101 Cornell Law Review 901, 903–05. Velikonja argues that the SEC’s data is flawed, inter alia, because it does not distinguish between independent primary enforcement actions and other actions based on the same facts: (1) actions that seek to bar the defendant from appearing before the Commission; and (2) secondary enforcement actions seeking a different remedy. 154 ibid 938. 155 Contempt proceedings ensure compliance with the judgments issued in primary enforcement proceedings. ibid 931–32, 939, fig 2. 156 US SEC, ‘SEC Announces Enforcement Results for FY 2015: Results Include Significant Number of High-Impact and First-of-Their-Kind Actions’, 22 October 2015, www.sec.gov/news/pressrelease/2015-245.html. 157 Eaglesham and Fuller (n 151). 158 ibid. 159 ibid (quoting Senator Elizabeth Warren). 160 ibid. 161 Mark Schoeff, Jr, ‘How Partisan Politics Have Poisoned the SEC’ Investment News (10 May 2015), www.investmentnews.com/article/20150510/REG/150509926/how-partisan-politics-have-poisonedthe-sec.

172 Sara Sun Beale disagreements reflect the decision of Congress to delegate some difficult issues to the SEC rather than resolving them legislatively. Other disagreements may be less visible. Some staff members privately remarked that minority members tried to block investigations they did not support by raising technical objections.

ii. Interplay between the Different Public Enforcement Mechanisms a. Interaction between the Different Public Enforcement Mechanisms The SEC and Department of Justice have complementary roles. The SEC may refer information revealing possible criminal conduct to the Department of Justice, and parallel civil and criminal investigations may also proceed. Additionally, the Securities and Commodities Fraud Task Force at the Southern District of New York works closely with the SEC, the Commodities Futures Trading Commission and the FBI in investigating and prosecuting these financial crimes. This interaction is discussed further in section IV.C.III.a below. b. Interests of the Victim and the Choice of Public Enforcement Mechanisms There are multiple mechanisms to compensate victims of securities fraud. The SOX created the Federal Account for Investor Restitution (FAIR) Fund, which allows penalty money to be directed, at the SEC’s discretion, to injured investors instead of to the US Treasury.162 The courts have implied a private right of action for damages as a result of securities fraud.163 However, Congress has restricted this implied authority and the courts have limited the scope of the cause of action.164 A large and complex body of law now governs private securities law actions.165 c. The Choice of Enforcement Mechanisms and Evidential or Other Practical Problems Parallel SEC and Department of Justice actions often occur.166 States can also bring securities prosecutions based on state law. As discussed in section IV.E.v below, enforcement of the securities laws has been hampered by inadequate funding in many states. 162 For a general discussion of the Fund, see Verity Winship, ‘Fair Funds and the SEC’s Compensation of Injured Investors’ (2008) 60 Florida Law Review 1103. 163 See Stoneridge Investment Partners, LLC v Sci-Atlanta, Inc 552 US 148, 157 (2008) (noting that the courts have previously found an implied private right of action). 164 See Greg Gaught, Note, ‘Rethinking Janus: Preserving Primary-Participant Liability in SEC Antifraud Actions’ (2015) 65 Duke Law Journal 527, 553–56 (describing the effect of various judicial decisions and the Private Securities Litigation Reform Act of 1995, which sought to deter frivolous class action suits by heightening private plaintiffs’ pleading requirements and permitting the imposition of sanctions on attorneys who file class action lawsuits determined to be frivolous following mandatory judicial review). 165 ibid 532–36. 166 US SEC, Division of Enforcement, Enforcement Manual § 5.6.

The US 173

iii. The Different Public Enforcement Mechanisms in Action a. How Do the Respective Competent Authorities Typically Build up Their Cases? The SEC has many sources of information including whistleblower tips, referrals from self-regulatory organisations and its examination and enforcement processes. Many insider trading cases are triggered by the Commission’s data analytics, which identify possible patterns of insider trading, or by a referral to the SEC from the industry-funded regulator of broker–dealer relationships.167 The criminal authorities have investigative tools that are unavailable to the SEC, including search warrants, wiretaps and undercover investigations, which may prove critical to an investigation.168 On the other hand, the SEC may take the lead in document review and the analysis of records, and witness interviews may be jointly conducted.169 The SEC also has the ability to freeze assets and obtain temporary injunctions based on suspicious trading so that illegal profits are not dissipated during an investigation.170 Cooperation between the SEC and Department of Justice is further discussed in section IV.E.vii below. b. Reporting and Disclosure Duties for Corporations and Individuals Pursuant to federal law, public companies are required to file periodic reports with the SEC. These reports include annual earnings. Companies are also required to disclose information to their shareholders prior to their shareholder meetings.171 c. Leniency and Whistleblower Programmes There is no general statutory leniency programme for securities law violators. However, in 2016, the Department of Justice’s Fraud Section adopted a pilot programme associated with its enforcement of the Foreign Corrupt Practices Act, which is administered by the SEC and Department of Justice. The new programme was designed to incentivise voluntary self-disclosure, cooperation with the government and stronger internal compliance protocols.172 In the first year after the adoption of the pilot programme, the Fraud Section nearly tripled the average

167 ibid (citing referrals from the Financial Industry Regulatory Authority, Inc (FINRA) and the Options Regulatory Surveillance Authority). 168 Mary Jo White, Chairwoman, US SEC, ‘All-Encompassing Enforcement: The Robust Use of Civil and Criminal Actions to Police the Markets’, speech, 31 March 2014, www.sec.gov/News/Speech/ Detail/Speech/1370541342996. 169 ibid. 170 ibid. 171 US SEC, ‘The Laws that Govern the Securities Industry’, www.sec.gov/about/laws.shtml. 172 US Department of Justice, ‘Criminal Division Launches New Pilot Program’, 5 April 2016, https:// www.justice.gov/archives/opa/blog/criminal-division-launches-new-fcpa-pilot-program.

174 Sara Sun Beale number of corporate resolutions and corporate penalties,173 and the Department of Justice has renewed the programme.174 The Dodd-Frank Act, enacted in 2010, directed the SEC to make monetary awards to eligible individuals who voluntarily provide original information that leads to successful SEC enforcement actions resulting in monetary sanctions over $1 million and successful related actions.175 Rewards are 10 to 30 per cent of the monetary sanctions collected by the SEC.176 This new programme provides a significant incentive for individuals and entities to provide the government with information that may lead to successful securities investigations yielding significant financial penalties. These incentives have been effective in generating an increasing number of useful whistleblower tips. In the fiscal year 2015, the SEC received nearly 4,000 whistleblower tips and it paid more than $37 million to eight whistleblowers.177 Each had provided information of which the SEC was not aware that led to the opening of a new investigation or contributed to the success of an enforcement action. The CFTC is working to modify its whistleblower programme to align it with the strong SEC programme to protect whistleblowers. This may lead to more whistleblowers seeking out the CFTC to provide information about illegal conduct.178 d. Reporting and Disclosure Duties, Whistleblower Programmes and the Privilege against Self‐Incrimination Conflicts of interests may arise when a lawyer represents an entity or corporation and the interests of the officers, employees and other agents of the corporation differ from those of the corporation. A lawyer for the corporation is required to separate the interests of the corporation and its agents and to act in the best interests of the corporation.179 Individual officers, employees and agents may require separate representation. 173 Elkan Abramowitz and Jonathan Sack, ‘FCPA Enforcement Trends: Will They Continue?’ New York Law Journal (7 March 2017), https://www.maglaw.com/publications/articles/2017-03-07fcpa-enforcement-trends-will-they-continue/_res/id=Attachments/index=/Abramowitz%20Sack%20 3.7.17.pdf. 174 Jonathan Sack, ‘DOJ Announces it Will Extend FCPA “Pilot Program”’ Forbes (13 March 2017), https://www.forbes.com/sites/insider/2017/03/13/doj-announces-it-will-extend-fcpa-pilot-program. 175 15 USC § 78u-6 (2012). The phrase ‘related actions’ is defined in 17 CFR § 240.21F-3. 176 15 USC § 78u-6(b)(1). 177 US SEC, ‘2013 Annual Report to Congress on the Dodd-Frank Whistleblower Program’ 1, 10, www.sec.gov/about/offices/owb/annual-report-2013.pdf. 178 C Ryan Barber, ‘Commodities Agency Wants Greater Power to Protect Whistleblowers’ National Law Journal (30 August 2016), www.nationallawjournal.com/id=1202766309140/ Commodities-Agency-Wants-Greater-Power-to-Protect-Whistleblowers?slreturn=20160803103113. 179 Andrew B Serwin and Jessica N Pandika, ‘Who is the Client: Confidentiality When Representing Organizations’ GPSOLO (July/August 2007), www.americanbar.org/content/newsletter/publications/ gp_solo_magazine_home/gp_solo_magazine_index/who_is_client.html.

The US 175 e. Negotiated Justice The Department of Justice increasingly uses NPAs and DPAs to resolve crimes committed by corporations. These agreements allow companies to avoid stiff penalties in exchange for the corporation’s cooperation and increased monitoring to prevent future misconduct.180

D. Criminal Procedure i. Burden and Standard of Proof In a criminal securities prosecution, the government has the burden of proving the defendant’s guilt beyond reasonable doubt.181

ii. Special Criminal Investigative Measures for the Three Areas Whistleblowers are increasingly important to the prosecution of securities crimes.182 The government also uses NPAs and DPAs as tools to encourage cooperation and self-monitoring of entities.183

iii. Rights of the Victim in Criminal Proceedings in the Three Areas Victims of crimes have the right to have notice and to attend proceedings; they also have limited rights to participate and to be heard on questions of release, pleas and sentencing, and to confer with the attorney for the government.184 If the defendant is convicted, victims have a right to restitution.185

iv. Specialised Criminal Courts Although the SEC has administrative tribunals in which some federal securities charges can be litigated, the US has no specialised judicial system for securitiesrelated crimes. Civil and criminal securities law cases are heard by the courts of general jurisdiction (either federal or state depending on which actor is carrying out the enforcement). The lack of specialised securities courts is not viewed as a weakness; a unified court system with generalist judges hearing a wide variety of cases is instead a hallmark of the US federal court system. 180 See the text accompanying nn 5–9. 181 In re Winship (n 37). 182 US SEC, ‘2013 Annual Report to Congress on the Dodd-Frank Whistleblower Program’ 1, 10