The public sector foundations in connection with the criminal liability of legal persons

Written on 29 Sep 2016

The Circular 1/2016 of the Attorney General´s Office has interpreted article 31bis of the Spanish Criminal Code excluding the criminal liability of public sector foundations; however there are doctrinal positions that defend the criminal liability of the public sector foundations.

Article 31bis of the Spanish Criminal Code (“Criminal Code“) introduced the criminal liability of legal persons for certain crimes into our criminal justice system. This article does not provide a definition for criminal purposes of the term “legal person”. In this sense, some authors believe that this broad concept of the legal person also includes the public sector foundations as entities liable for criminal charges.

On the other hand, the Spanish legislator has not expressly included the public sector foundations in the list of legal persons exempted from criminal liability found in Article 31bis of the Criminal Code, which was amended last year through the Act 1/2015 of 30 March, (“Act 1/2015“), to include the following:

“1. The provisions on the criminal liability of legal persons shall not apply to state, territorial and institutional public administrations, regulatory bodies, agencies and public companies, international public law organisations, or those which exercise public powers of sovereign or administrative nature.

2. In the case of public commercial companies running public policies or providing services of general economic interest, only the penalties laid out in points a) and g) of paragraph 7 of Article 33 may be imposed upon them.

Given this new drafting, in its interpretative Circular 1/2016 regarding the criminal liability of legal persons under the reform of the Criminal Code made by Act 1/2015 (“Circular 1/2016“), the Attorney General´s Office has concluded that the public sector foundations are excluded from criminal liability for being subject to public law. The Attorney General´s Office states that public sector foundations carry out activities in the general interest of the Spanish Nation and does not carry out activities that are private or of a commercial character, so they should be considered to be subject to public law. It also seems plausible to conclude that if the Spanish legislator had wanted to determine that the public sector foundations should be subject to criminal liability, they would have been included in section 2 of article 31bis, which refers to public corporations subject to a special regime whereby they can only be charged with a reduced number of penalties.

The previous argument, together with the defining feature of the foundations as non-profit associations and the assignment of their assets for the general
interest, are arguments to conclude that, according to the Attorney General´s Office, indeed the public sector foundations should be excluded from the provision that regulates the criminal liability of legal persons (article 31bis).

By contrast, according to some authors including Daniel Benitez Rodriguez and Alfonso Arroyo Díez (Revista Aranzadi Doctrinal No.6 / 2016), it cannot be asserted that the conclusion of the Attorney General´s Office is clear. According to them, public sector foundations are not public bodies, but rather entities of a private legal nature subject to civil law and only subject to public law for certain issues, amongst others, the award of contracts or the finance of their
activities. The fact that the public sector foundations are financed with public funds, cannot convert them to public sector bodies “per se” as they do not
exercise public powers. The exception is those who assume public powers of administrative nature such as public foundations in the hospital sector, which are assumed by express legal provision (“Report 7/2013 of June 6 of the Generalitat de Cataluña Advisory Board on Administrative Procurement “). Thus, it is stated in the executive report by the Commission for the reform of the public sector submitted to the Council of Ministers on 21 June 2013 (“CORA Report”) that “In regard to their nature, public sector foundations are private legal persons despite the majority stake of Public sector in their constitution or assets, and even though there is also an element of public control over the activity of these entities”.

Moreover, we should not forget the purpose of the implementation of compliance programmes. As the Spanish Supreme Court stated in its recent Judgment 154/2016 of 29 February (RJ 600), the basis for criminal liability of legal persons is that entities should install effective measures of crime prevention in such a way that the crimes that could be committed by legal persons are prevented. Thus, stating in its Circular 1/2016, the Attorney General´s Office considers that “strictly speaking, models of organisation and management or corporate compliance programmes are not intended to prevent criminal sanction of the company but promote a genuine ethical business culture”. Therefore, following the reforms that had being implemented in the public sector towards transparency and good governance, it could be understood that the implementation of compliance programmes in those legal entities theoretically private but financed with public funds is an additional and effective measure to fight against corruption and fraud.

Furthermore, considering that in its Circular 1/2016 the Attorney General´s Office has set an interpretive criterion, the fact that public sector foundations are not expressly included in article 31bis may result in the Courts considering that public foundations could be charged under equal conditions to the legal person not excluded from responsibility. This is why this interpretative gap must ultimately be resolved and interpreted judicially, or modified by the legislature in the future so that legal certainty regarding possible criminal charges relating to public sector foundations is ensured.