By Mattias Hedwall (Baker McKenzie Sweden)
I. Corporate liability deriving from criminal activity
1. Nature of the liability (criminal, administrative) and basis (crimes committed by directors or representatives, in the interest of or for the advantage of the company)
According to Swedish law, a corporation cannot commit a criminal act and therefore, it cannot be liable to a criminal sanction. However, if crimes are committed during the corporation’s operations, either in Sweden or abroad, criminal liability may apply to the representatives or employees of the corporation who committed the offense, and the corporation may, in conjunction, be subject to corporate fines (företagsbot). In addition, there are also administrative sanctions and the risk of damages.
With regard to criminal liability for representatives, there are no specific rules applicable to directors of the board, but the same rules apply to directors as to any other person subject to Swedish law. Examples of such criminal legislation are corruption, fraud, bookkeeping crimes and crimes against creditors. There are no explicit legal provisions allocating the liability among the representatives of a corporation. Guidance may be found in the general principles of Swedish criminal law.
The role and powers of directors in a Swedish limited liability company (aktiebolag) generally are regulated by the Swedish Companies Act (aktiebolagslagen). The provisions of the Companies Act relating to directors apply also to deputy directors, where such are appointed. As a general rule, directors are not personally liable for contracts or other commitments entered into by the limited liability company. However, directors may, under certain circumstances, incur personal liability for the company’s obligations.
Under the Companies Act, only a very limited number of rules are sanctioned by criminal penalties. One example is the prohibition on the company’s right to grant loans to, inter alia, its board members or certain group companies. The liability targets persons involved in the decision to grant the loan. The obligation for the board to maintain the company’s share ledger is further sanctioned by criminal liability. Other crimes are punishable either by the Swedish Criminal Code (brottsbalken) or by special provisions.
According to the Tort Liability Act (skadeståndslagen) Chapter 3, the liability to pay damages for crimes committed by employees or representatives, the so-called vicarious liability (principalansvar), may be triggered if certain conditions are met. A company may be liable to pay damages for both property damage, personal injury, and in some situations, pure economic loss (ren förmögenhetsskada). As a general rule, the damage must have been done during the company’s business activities and by a representative or employee of the company.
In addition to the rules of vicarious liability, a general exposure to potential damage claims exists in accordance to the Tort Liability Act. A representative or an employee of a company who intentionally or negligently causes damage may render the company liable for compensating it, as far as no relevant special exemptions exist in the Tort Liability Act.
2. Type of crimes/administrative offenses from which, according to the legislature, corporate liability may arise
Any criminal act, proscribed either by the Swedish Criminal Code or in special penal provisions, may lead to a liability to pay corporate fines. There are no exemptions to this rule; Chapter 36, Section 7 of the Swedish Criminal Code states that any crime committed during a company’s business activities may lead to the levy of corporate fines as long as the crime is punishable with a penalty greater than pecuniary fines (penningböter).
Corporate liability may also arise, as a special administrative sanction, from acts violating provisions in certain regulations. One example is violations of the Environmental Protection Act (eg, regarding the protection of species, shipment of waste, or handling of certain chemicals or substances).
3. Identification of companies and entities to which liability may apply
When it comes to corporate fines, a requisite for liability is that the offense in question has been committed in a business activity, which limits the scope of its application to companies.
Other sanctions, such as environmental sanction charges or damages are applicable to any legal entity or natural person, including companies.
4. Corporate liability for crimes committed abroad by its representatives or subsidiaries
As stated in I.1, according to Swedish law, criminal liability is not applicable to a legal entity, but it can apply to its representatives who are committing the actual crimes. The company itself may be subject to, inter alia, corporate fines, interim measures, and special administrative sanctions such as environmental sanctions and remuneration for damages. The following list is not exhaustive and other examples exist. Furthermore, the principles of international law must be respected in all cases when dealing with crimes committed abroad.
Chapter 2, Section 2 of the Swedish Criminal Code provides for the application of Swedish law to crimes committed abroad if, inter alia: i) the offender is a Swedish citizen or a resident of Sweden; ii) they are an alien who became a citizen or a resident of Sweden after committing the crime in question, or is Danish, Finnish, Icelandic or Norwegian; iii) they are an alien who is currently in Sweden and the crime committed, according to Swedish law, may lead to prison time of more than six months; or iv) the crimes are related to the operations of the Swedish Armed Forces abroad.
If the crime is not punishable in the country where it was committed, it cannot be tried under Swedish law. If the crime is punishable in the country where it was committed, it cannot be punished more strictly in Sweden than allowed by the applicable law in the country where the crime was committed.
There are exceptions to the rules above, where Swedish courts have jurisdiction. Among others, this is the case if the lowest possible punishment by Swedish law is four years of imprisonment or if the crime has been committed against the state of Sweden.
5. Corporate liability in the case of transactions taking place after the commission of a crime (acquisitions, mergers, demergers, etc.)
Corporate liability is connected to the legal entity itself and not to the owners of the company. Therefore, liability may be imposed even after if there is a change of ownership for the commission of a crime before the change in the ownership structure. This could also apply to a situation where the entity has changed its form, for instance from a partnership (handelsbolag) to a limited liability company. If a transfer of assets has been made in order to avoid liability for crimes committed within the legal entity, there is a risk that the liability could be transferred to the acquiring company. The company resulting from a merger will be liable for any crimes committed by the merged companies.
II. Applicable sanctions
1. Type of sanctions applicable to the company
Corporate fines (företagsbot), regulated in Section 7 of Chapter 36 of the Swedish Criminal Code is not a criminal sanction, but a special legal effect with the character of a criminal sanction that targets corporations for not following the law. Even negligence in stopping or preventing a crime from occurring during the company’s business activities may lead to sanctions for the company. The corporate fines range from a minimum of SEK 5,000 to a maximum of SEK 10 million. The size of the fine is decided on the basis of the severity of the crime committed and the connection to the company’s business. In order for a corporate fine to be issued, the crime in question must be punishable by more than pecuniary fines, which prevents its application to minor offenses.
Confiscation (förverkande) may, for instance, be used in a situation where a company has generated financial benefits from illegal activities. According to Chapter 36, Section 4 of the Swedish Criminal Code, confiscation may be used to forfeit a company’s gains if the source is unlawful. The crimes may have been committed by representatives or employees of the company, but they have to have been committed as a part of the company’s business activities. The amount confiscated does not have to be equal to profits resulting from the crimes, but amounts corresponding to savings or increased profitability may also be targeted for confiscation if they are a result of illegal activities.
Examples of special sanctions targeting corporations are the provisions in the Environmental Code (miljöbalken) regarding environmental sanctions (miljösanktionsavgifter). The government, through regulations, decides to what infringements environmental sanctions can be applied. Such regulations have been issued regarding the protection of species, environmentally hazardous activities and chemical products, among other things. The pecuniary charge for infringing on a regulation regarding environmental sanction charges will be at least SEK 1,000, but must not exceed SEK 1 million. Regulation (2012:259) on Environmental Sanction Charges (förordning (2012:259) om miljösanktionsavgifter) provides for rules that may result in environmental sanctions. A company does not need to have benefited economically from the infringement for the sanctions to apply; through repression or threats of repression, the legislator seeks to improve the general conscientiousness of the corporations.
2. Interim measures, cease and desist orders, bans and confiscatory measures
If the company is expected to pay corporate fines, the Court may order sequestration (kvarstad) of as much of the company’s property as will be sufficient to cover the corporate fines. The measure of sequestration may also be adopted as regards tortious claims.
3. Liability of directors or managers for not having adopted (intentionally or negligently) measures for the prevention of the crime
Under Swedish law, there are no specific provisions addressing the liability of directors and managers for not having adopted measures to prevent crimes. The same principles of criminal law apply to directors or managers, as it does to any person under Swedish jurisdiction.
However, persons in leading positions of a company, such as managers and directors, may sometimes be liable for crimes committed by other representatives of the company. As an example, a provision in the Swedish Criminal Code regarding negligent financing of bribery may be illustrated by a case where a company provides money or other assets to a middleman, who acts on behalf of the company, and thus, by gross negligence, furthers a bribe, gross bribery or trading in influence. Since according to established legal principles of Swedish law, only natural persons can be held liable for a crime, the persons who can be held liable for the negligent financing of bribery are the persons in leading positions in the company who, through gross negligence, furthered the crime.
III. Measures and “models” of prevention and effects of the same on corporate liability and applicable sanctions
Generally, if adequate measures have been taken in order to prevent a crime, corporate fines should not be issued against the company. Nonetheless, there are certain requirements with regard to these measures. For instance, they may not be too general. As an example, general rules about following the law are not sufficient to prevent liability in the event of a crime. The rules must be specific and concrete in order to be perceived as serious, as well as developed specifically to prevent certain crimes. Compliance material and policy documents must therefore target certain crimes that could be committed within the company in order to prevent them from occurring. Sufficient resources must also be allocated so that the responsible persons may provide training and other compliance measures, such as screenings and audits. When the company is not held liable, there may still be a responsible party, such as corporate representatives or employees.
On the subject of environmental sanctions, it is possible to adopt measures that can prevent the application of the sanctions. If it would be unreasonable to apply the sanctions, considering what the company has done to prevent the violation/damage, the measure may be deemed sufficient and the sanctions prevented. However, whether the measures taken are sufficient has to be assessed in each particular case.
1. Consequences of the adoption of a compliance “model” and effects on corporate liability for crimes committed by the company’s managers, directors or representatives (cases in which it is possible to obtain an exemption from liability or a mitigation of the sanction)
Please see Section III.
2. Modality according to which a compliance “model” must be adopted in order to benefit from exemption from responsibility or mitigated punishment (codes of ethics, procedures, etc.)
There is no official best practice that explicitly sets out the requirements of different compliance documents. Please see Section III.
3. Monitoring: independent person or body to control/supervise, with the purpose of verifying the correct application of the “model”; mode of operation of such person or body
There is no official best practice that explicitly sets out the requirements of an independent person or body to control/supervise the correct application of the “model,” as this model does not exist. Please see Section III.
IV. Judicial proceedings to determine corporate liability
1. Court competent to decide the liability of and penalties applicable to the company
Which court is competent to decide the liability of and penalties applicable to the company is dependent on the nature of the liability. Since corporate fines are special legal effects of crimes committed by representatives of the company, the general court competent to decide on the crimes is also competent to decide on the related corporate fines.
Environmental sanctions are administrative sanctions and according to the Environmental Code Chapter 30 Section 3, the regulatory authority (tillsynsmyndighet) is authorized to decide whether these charges may be applied. There are several regulatory authorities, each of which is certified to decide on charges that may be applied for infringement of laws or regulations, according to which they are responsible for the inspection.
2. Possibility of the application of interim measures
Interim measures regarding seizures may be applied during the preliminary investigation or trial if the provision on sequestration is applicable. The Court is authorized to decide on sequestration. However, the prosecutor may, if necessary, decide on temporary seizure of property until the Court has passed its judgment.
3. Plea bargains and related effects on the corporate liability
Corporate actions to reduce liability should, in general, be adopted prior to the commission of the crime or infringement. Plea bargains are alien to Swedish criminal law and voluntary disclosures do not affect liability. However, a company that has been charged a corporate fine may, under certain circumstances (eg, if the company takes mitigating actions and cooperates with the authorities) receive a smaller fine than what would normally be imposed with regard to the crime. However, the prosecutor and the court are not obliged in any way to consider any actions taken by the company, and any information that the company provides to a prosecutor, or the authorities, could be used against the company.
4. Imposition of sanctions against the company
Sanctions are imposed on the company by the competent court. Further information on the competent court can be found in Section IV.1, and for sanctions, see Section II.
5. Permanence of corporate liability if the crime is extinguished
Since corporate fines are special legal effects of crimes committed by representatives of the company, it cannot be held liable and subject to corporate fines if the crime that would be the basis for it has been extinguished. In general, since corporate liability in Swedish law is a consequence of the acts of natural persons representing the company, the company cannot be held liable if the act is extinguished.
V. Corporate liability in multinational groups
In Swedish law, every legal entity or person is judged individually. To the best of our knowledge, there is no legal basis for applying liability to a group. Still, a parent company may theoretically become liable for its subsidiary’s activities if it is proven that the parent company conducted the activities through the subsidiary, or has constructed a corporation scheme in order to avoid liability.
1. Liability of parent companies located abroad in the case of offenses committed by directors, managers or representatives of the local company
As stated in I.4, criminal liability may occur if certain conditions are met. If the crime is prosecutable under Swedish law for a representative, in theory, corporate fines could also apply. The crucial question is if the crime committed by a representative abroad is to be perceived as committed within the business activity of the parent company.
2. Basis of liability and applicable sanctions
Please see Sections I.4 and II.1 for further information.
VI. Significant case law concerning corporate liability arising from crimes and draft laws under discussion
1. Significant case law, if any
There is no significant case law, to our knowledge.
2. Proposed or contemplated new legislation
To the best of our knowledge, there is currently no new legislation proposed or contemplated regarding corporate liability in Sweden.