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DRAFT LAW ON RESPONSIBILITY OF LEGAL ENTITIES FOR CRIMINAL OFFENCES

I. CONSTITUTIONAL FOUNDATIONS FOR PASSAGE OF THIS LAW

The constitutional foundations for passage of this Law are found in the provisions of Section 2, paragraph 4, subparagraph 1 and of Section 80 of the Constitution of the Republic of Croatia.

II. ASSESSMENT OF THE SITUATION AND BASIC ISSUES TO BE GOVERNED BY THE LAW, AND THE CONSEQUENCES ARISING FROM THE PASSAGE OF THIS LAW

Today there is an obvious trend in Europe to promote corporate liability for criminal offences. The reason for that is an increasing number of criminal offences in which an individual as the perpetrator is pushed into the background, and the legal entity comes into the fore as the centre of power and the real perpetrator of a criminal activity and the beneficiary of illegally gained pecuniary or other benefit.

This happens primarily in case of economic crime, which is now rarely an act of an individual and more often the consequence of activities performed by a whole range of individuals in a legal entity, particularly in companies. Such companies often stop at nothing in order to gain some pecuniary benefit, so that there is an enormous number of frauds, tax evasions, misuses of bankruptcies, money laundering, unfair competition, criminal offences to the disadvantage of consumers and other economic crime and offences that are attributable to legal entities. Furthermore, technological development has opened up new opportunities for such forms of crime in which the individual has lost his importance and all eyes are fixed upon legal entities, e.g. in criminal offences against environment.

In some extreme cases legal entities are also formed and incorporated for the purpose of commission of criminal offences, or after their incorporation are dedicated exclusively to criminal activities, which means that enterprises are transformed into crime organisations. Under such circumstances it is considered that it is neither enough to punish responsible persons as individuals nor it is enough to confiscate the pecuniary or other benefit illegally gained by a legal entity. That is also possible in case of the conviction of individuals only, if they have gained illegal benefit for the legal entity. Such individuals are often supported by other members of the legal entity, who directly or indirectly benefit from a criminal offence. Therefore, only through punishment of the legal entity one can influence consciousness of all its members that criminal behaviour for the advantage of the legal entity is intolerable. The necessity to punish legal entities is especially emphasised in cases when the factual participation of individuals is insignificant in comparison to severity of the offence or when the individual perpetrator cannot be established.

The necessity to punish legal entities was explicitly proclaimed in the Recommendation of the Council of Europe No. R (88) of October 20, 1988 under the title Corporate Criminal Liability. That Recommendation demanded the promotion of corporate liability for the criminal offences committed in consequence of business operations even in those cases when the criminal offence does not represent the object of the enterprise. Even more explicit is the Criminal Law Convention on Corruption of the Council of Europe, ratified by the Croatian Parliament on September 27, 2000, which in its Article 18 explicitly obliges the signatories to adopt such legislative and other measures as may be necessary to ensure that legal persons can be held liable for the criminal offences of active bribery, trading in influence and money laundering. With such acts the Council of Europe aims to achieve that the member states harmonise their legislations in order to avoid the cases that some legal entities evade their liability by transferring their operations from a country that sanctions corporate criminal liability into a country that does not promote such liability and does not sanction it as such.

Accordingly, the promotion of corporate liability for criminal offences is also an international obligation of the Republic of Croatia.

It has to be emphasised that liability of legal entities for criminal offences means a number of difficulties on the doctrinal level, which is the reason why some European countries are still reluctant to introduce such liability. Therefore, the crucial stumbling-block is the principle of guilt as the starting point of such legislation, according to which the guilt is a reproof which can only be addressed to the individual and not the legal entity. However, in theory, but also in legislations, one can find the answers to such theoretical questions as well, and the number of countries promoting corporate criminal liability is gradually increasing. Corporate criminal liability has been already accepted in the Anglo-Saxon law as well, and among the countries of the European continental circle which have explicitly foreseen it one should mention the Netherlands (Criminal Code of 1976), France (Criminal Code of 1992) and Slovenia (a special law – Corporate Criminal Liability Act of 1999). Germany has governed the matter indirectly, foreseeing the punishment of legal entities for such misdemeanours that are based on the criminal offences committed by certain natural persons for the account of legal entities.

Criminal liability of legal entities had a certain tradition in Croatia, as its legal system included liability of legal entities for economic offences as a special type of punishable offences that do not represent criminal offences or misdemeanours. In 1991, the Republic of Croatia took over the Law on Economic Offences of 1977, which defined such economic offences as "violations of the laws and regulations on economic operations and financial transactions". This Law is still applied today, although in a very limited scope, so that it can be considered outdated. The new Law on Misdemeanours provides also for the complete abolishment of the category of economic offences and their transformation into misdemeanours. However, one should emphasise that neither economic offences nor misdemeanours are a satisfactory solution of the actual need to punish legal entities for criminal offences. Legal entities are not be punished only for their violation of economic and financial discipline but also for their criminal activity, which means for the criminal offences set forth in the criminal law legislation.

Considering the above mentioned, the Government of the Republic of Croatia has taken steps to prepare the Law on Criminal Liability of Legal Entities. For that purpose, on January 27, 2001 the Minister of Justice, Administration and Local Self-government made a decision on the formation of a task force for the preparation of the Draft Version of the Law on Criminal Liability of Legal Entities, which nominated the Croatian experts for criminal and commercial law. The task force has leaned on the experience of those countries that have already introduced corporate liability for criminal offences, as well as on the local experience with economic offences, and prepared the above mentioned Draft Version.

This Law consists of five Chapters. Chapter I contains the general provisions of the Law, governing its object and purpose and establishing the provisional (subsidiary) application of the Criminal Code, the Criminal Procedure Act and the Law on the Office for the Prevention of Corruption and Organised Crime. The basic principle of the Law is that it governs only the issues that are specific to corporate liability and that in all other issues the above mentioned laws apply to legal entities. Such an approach has resulted in the relatively short text of the Law. Chapter II contains the basic prerequisites for punishability, whereas the starting point was that the liability of a legal entity is to be derived from the liability of its responsible person, and the possibility that the legal entity is held liable in those cases when no responsible person can be established has been provided for only exceptionally. Chapter III governs the penalties and other punitive measures. The main penalty is a fine, which may be imposed in the amount of 5,000 to 4,000,000 Kunas. Exceptionally it has been provided for that a legal entity may be terminated. There are also four security measures, confiscation of illegally gained benefit and public pronouncement of judgement. Chapter IV provides the list of criminal offences laid down in the Criminal Code and other laws, for which legal entities may be held liable. Finally, Chapter V contains procedural norms, i.e. specific features with regard to the criminal proceedings conducted against a legal entity. The starting point was the principle of joinder, i.e. joined criminal proceedings against the legal entity and its responsible person, whereas the proceedings exclusively against the legal entity may be conducted only exceptionally. In this part special attention was paid to the issue who may represent the legal entity in the criminal proceedings, its right to a defence counsel and the precautions that may be ordered by the court against the legal entity.

One should also note that corporate liability for criminal offences is an important novelty in the Croatian legal system. Therefore it is of utmost importance to make thorough preparations for the application of this Law as of the moment of its passage. For that reason a longer period between its passage and coming into effect has been suggested.

III. ESTIMATION AND SOURCES OF FUNDS REQUIRED FOR IMPLEMENTATION OF THIS LAW

The implementation of this Law will require no provision of special funds in the national budget of the Republic of Croatia.

IV. DRAFT PROPOSAL OF THE LAW ON LIABILITY OF LEGAL ENTITIES FOR CRIMINAL OFFENCES

I. GENERAL PROVISIONS

Section 1

This Law establishes the prerequisites of punishability, punitive measures and criminal proceedings for criminal offences of legal entities.

The legal entities as referred to in this Law shall also be foreign persons considered legal entities pursuant to the Croatian law.

Application of criminal legislation

Section 2

Unless otherwise prescribed by this Law, the provisions of the Criminal Code, the Criminal Procedure Act and the Law on the Office for the Prevention of Corruption and Organised Crime shall apply to legal entities.

II. PREREQUISITES OF PUNISHABILITY

Foundation of responsibility of legal entities

Section 3

The legal entity shall be punished for a criminal offence of a responsible person if such offence violates any of the duties of the legal entity or if the legal entity has derived or should have derived illegal gain for itself or third persons.

Responsible person

Section 4

The responsible person as referred to in this Law is a natural person in charge of the operations of the legal entity or entrusted with the tasks from the scope of operations of the legal entity.

Attributing the blame of a responsible person to the legal entity

Section 5

Responsibility of the legal entity is based on the guilt of the responsible person.

The legal entity shall take over the responsibility also in cases when no criminal proceedings may be instituted or conducted against the responsible person for legal or any other reasons.

Exclusion and limitation of responsibility of certain legal entities

Section 6

(1) The Republic of Croatia as a legal entity may not be punished for a criminal offence.

(2) Units of local and regional self-government may be punished only for criminal offences that have not been committed in their execution of public authority.

Responsibility in case of change in the status of a legal entity

Section 7

If the legal entity ceases to exist before completion of criminal proceedings, a fine or a judgement of dispossession of illegal gain may be pronounced on the legal entity which is its general legal successor.

If the legal entity ceases to exist after the judgement becomes final, i.e. after completion of the criminal proceedings, a fine and a judgement of dispossession of illegal gain are executed pursuant to the provisions of paragraph (1) of this Section.

The legal entity in bankruptcy shall be punished for the criminal offences committed before filing for bankruptcy or during the bankruptcy proceedings.

III. PENALTIES AND OTHER PUNITIVE MEASURES

Types of punitive measures

Section 8

(1) For their criminal offences, legal entities may be imposed penalties and pronounced suspended sentences and security measures.

(2) For their criminal offences, legal entities may be punished with fines or termination of the legal entity.

Fines

Section 9

(1) The prescribed fine for criminal offences committed by legal entities shall not be less than 5,000.00 Croatian Kunas nor exceed 4,000,000.00 Croatian Kunas.

(2) In determination of a fine the court shall take into consideration the legal entity's income.

(3) In case of the legal entity's failure to pay the fine within the specified period of time, the same shall be collected under coercion.

Amount of a fine

Section 10

(1) If the criminal offence is punishable by imprisonment for a term of up to one year, the legal entity may be punished by a fine of 5,000.00 to 1,000,000.00 Kunas.

(2) If the criminal offence is punishable by imprisonment for a term of up to five years, the legal entity may be punished by a fine of 10,000.00 to 2,000,000.00 Kunas.

(3) If the criminal offence is punishable by imprisonment for a term of up to 10 years, the legal entity may be punished by a fine of 15,000.00 to 3,000,000.00 Kunas.

(4) If the criminal offence is punishable by imprisonment for a term of up to 15 years or by long-term imprisonment, the legal entity may be punished by a fine of 20,000.00 to 4,000,000.00 Kunas.

Imposition of a fine for the criminal offences committed in concurrence

Section 11

If the court has imposed fines on a legal entity for two or more criminal offences committed in concurrence, the single fine may not exceed the sum of individual fines or the highest fine determined by the law.

Suspended sentence

Section 12

(1) Instead of a fine the court may pronounce a suspended sentence on the legal entity and simultaneously determine that the fine shall not be collected if the legal case does not commit another criminal offence within the time specified by the court, which may not be shorter than one or longer than three years.

(2) Suspended sentence may be pronounced for criminal offences punishable by imprisonment for a term of up to five years, and the court has imposed a fine on the legal entity in the amount of up to 1,000,000.00 Kunas.

Termination of legal entity

Section 13

(1) The penalty of termination of the legal entity may be pronounced if the legal entity has been established for the purpose of committing criminal offences or if the same has used its activities primarily to commit criminal offences.

(2) The penalty of termination of the legal entity may not be pronounced on units of local and regional self-government, political parties and trade unions.

(3) Apart from the penalty of termination of the legal entity the court may also impose a fine upon the legal entity.

(4) After the judgement on termination of the legal entity becomes final, liquidation shall be carried out.

Statute of limitations

Section 14

(1) The limitation period for criminal prosecution against a legal entity is determined in accordance with the sentence prescribed for the perpetrator of the criminal offence.

(2) Fines cannot be claimed upon expiry of a period of three years after pronouncement of the judgement.

(3) There is no statute of limitations for termination of the legal entity.

Types of security measures

Section 15

Apart from other penalties the court may impose one or more of the following security measures on the legal entity: ban on performance of certain activities or transactions, ban on transactions with beneficiaries of the national or local budgets, ban on obtaining of licences, authorisations or concessions, and confiscation.

Ban on performance of certain activities or transactions

Section 16

(1) A ban on performance of certain activities or transactions may be imposed on one or more activities or transactions, the performance of which was a criminal offence.

(2) A ban on performance of certain activities or transactions may be imposed on the legal entity on the basis of court judgement for the period of one to three years as of the moment when the judgement becomes final, if further performance of certain activities or transactions would be a danger to life and limb or hazardous to property, or economy, or if the legal entity has already been punished for the same or similar criminal offence.

(3) A ban on performance of certain activities or transactions may not be imposed on units of local and regional self-government, political parties and trade unions.

Ban on transactions with beneficiaries of the national or local budgets

Section 17

(1) A ban on transactions with beneficiaries of the national or local budgets may be imposed on the legal entity in case of a threat that such operations might instigate the same to commit another criminal offence.

(2) The security measure referred to in paragraph (1) of this Section shall be imposed for a period of one to three years after the court judgement becomes final.

Ban on obtaining of licences, authorisations or concessions

Section 18

(1) A ban on obtaining of licences, authorisations or concessions as issued by government bodies or units of local and regional self-government may be imposed on the legal entity in case of a threat that such obtaining of licences, authorisations or concessions might instigate the same to commit another criminal offence.

(2) The security measure referred to in paragraph (1) of this Section shall be imposed for a period of one to three years after the court judgement becomes final.

Confiscation

Section 19

(1) The security measure of confiscation is imposed under the conditions referred to in Section 80 of the Criminal Code.

Confiscation of illegally gained benefit

Section 20

(1) The legal entity may not keep the illegally gained benefit obtained in consequence of the commission of a criminal offence.

(2) The illegally gained benefit referred to in paragraph (1) of this Section means any increase or prevention of a decrease of the legal entity's property in consequence of the commission of a criminal offence.

(3) The illegally gained benefit obtained in consequence of the commission of a criminal offence shall be confiscated on the basis of the judgement which establishes the commission of the criminal offence. The amount of the illegally gained benefit shall be determined by the court after studying the entire property of the legal entity and relation of the same to the offence committed.

(4) Should it be established that it is impossible to confiscate the illegally gained benefit consisting in money, rights or kind, the court shall oblige the legal entity to pay the full replacement value in money.

In determination of such value in money the court shall take into consideration the market value of material assets or rights at the moment of judgement.

(5) The illegally gained benefit shall be confiscated also in cases when it is kept by third persons on the basis of any right whatsoever, if under the circumstances of such gain the same knew or could know and was/were supposed to know that the value was gained in consequence of the commission of a criminal offence.

Public pronouncement of judgement

Section 21

(1) Public pronouncement of judgement may be determined by the court in cases when it isestablished on the basis of the significance of the criminal offence that there are good reasons to inform the public of the final judgement.

(2) The court shall decide that the judgement should be publicised in its entirety or in parts, anddetermine the period of such publication. A publicised judgement may contain the injured party's name only with its consent.

(3) The court shall decide in which media the judgement referred to in paragraph (1) of this Section should be publicised. The media shall publicise the above mentioned judgement at the expense of the sentenced legal entity.

IV. CRIMINAL OFFENCES OF LEGAL ENTITIES

Criminal offences of legal entities

Section 22

Subject to the conditions determined by this Law, legal entities may be found guilty for the criminal offences laid down in the Criminal Code and other laws stipulating criminal offences.

Responsibility of legal entities for criminal offences laid down in the Criminal Code

Section 23

Legal entities may be found guilty for the following criminal offences laid down in the Criminal Code:

for the criminal offences referred to in Sections 95 and 101 of the Criminal Code,

for the criminal offences referred to in Sections 106, 107, 111, 114-116, 119-122, 124, 125 and 128-134 of the Criminal Code,

for the criminal offences referred to in Sections 141, 143 and 144-146 of the Criminal Code,

for the criminal offences referred to in Sections 169-175, 177-179 and 183-185 of the Criminal Code,

for the criminal offences referred to in Sections 195-197 of the Criminal Code,

for the criminal offences referred to in Sections 199-202 of the Criminal Code,

for the criminal offences referred to in Sections 220-236 of the Criminal Code,

for the criminal offences referred to in Sections 238, 240, 242, 243 and 245-248 of the Criminal Code,

for the criminal offences referred to in Sections 250-261 of the Criminal Code,

for the criminal offences referred to in Sections 263-267, 271 and 272 with regard to Sections 265-267 of the Criminal Code,

for the criminal offences referred to in Sections 274-290, 292, 293 and 295-298 of the Criminal Code,

for the criminal offences referred to in Sections 299-302, 304, 305 and 308-310 of the Criminal Code,

for the criminal offences referred to in Sections 311- 316 of the Criminal Code,

for the criminal offences referred to in Sections 317, 318, 322-327, 329, 330 and 332-335 of the Criminal Code,

for the criminal offences referred to in Sections 343, 347, 348 and 351 of the Criminal Code,

for the criminal offences referred to in Sections 356, 357, 366, 368-372, 374 and 385 of the Criminal Code.

(2) The criminal offences referred to in paragraph (1) of this Section comprise both serious and minor offences.

Responsibility of legal entities for criminal offences laid down in other laws

Section 24

Besides for the criminal offences referred to in Section 23 of this Law, legal entities may be found guilty for the following:

for the criminal offence referred to in Section 624, paragraph 1, items 1, 4, 5, 8-11 and paragraph 2, Section 627 and Section 628 of the Companies Act,

for the criminal offence referred to in Section 31 of the Law on National Commodity Supplies,

for the criminal offences referred to in Sections 91-93 of the Law on Foundations of the Foreign Exchange System, Foreign Exchange Transactions and Traffic in Gold,

for the criminal offence referred to in Section 32 of the Accounting Act,

for the criminal offences referred to in Sections 124a and 124b of the Copyright Act,

for the criminal offence referred to in Section 60, paragraph 1 of the Law on Poisonous and Toxic Substances.

V. CRIMINAL PROCEEDINGS

Joinder

Section 25

(1) For a criminal offence committed by the legal entity and the responsible person, joined proceedings shall be conducted and a single judgement shall be passed.

(2) If no criminal proceedings may be instituted or conducted against the responsible person for legal or any other reasons whatsoever, the proceedings shall be instituted and conducted against the legal entity only.

Decision on criminal prosecution along the line of purposefulness

Section 26

The public prosecutor may act pursuant to Section 175 of the Criminal Procedure Act in case that the legal entity possesses no property or the same is so insignificant that it would not be sufficient to cover the costs of the criminal proceedings, or if bankruptcy proceedings are conducted against the legal entity.

Territorial jurisdiction

Section 27

(1) If it is uncertain within which jurisdictional territory the criminal offence has been committed or if the offence has been committed outside the territory of the Republic of Croatia, jurisdiction shall have the court within the jurisdictional territory of which the domicile or residence of the accused is located, i.e. the accused legal entity is seated.

(2) A private charge may as well be filed with the court within the jurisdictional territory on which the accused legal entity is seated.

Institution of criminal proceedings upon motion

Section 28

If the motion for prosecution has been submitted only against the responsible person, the public prosecutor can by virtue of the office institute the criminal proceedings for the same criminal offence against the legal entity as well.

Representative of the accused legal entity

Section 29

(1) The accused legal entity in the criminal proceedings shall be represented by its representative who is authorised to undertake all actions which can be undertaken by the accused.

(2) The accused legal entity can have only one representative. The representative of the accused legal entity may be any legally competent person in his/her own right who speaks the Croatian language.

(3) The representative shall be designated by the legal entity's body or the persons representing the legal entity pursuant to the law, a decision made by the authorised governmental body, the articles of association, the memorandum of incorporation or a decision made by the legal entity's body. If the representative is not authorised to represent the legal entity by virtue of any other right, the same shall be authorised to represent the legal entity on the basis of a power of attorney in writing. Such power of attorney may also be recorded in the minutes of the court conducting the proceedings.

(4) The court is obliged to establish the identity of the legal entity's representative and to inspect his/her power of attorney to participate in the proceedings. The legal entity is obliged to serve a brief to the court, by which it has designated its representative, and the proof of his/her authority.

(5) The legal entity's representative may not be the person summoned as a witness in the same proceedings or the person against whom the criminal proceedings are conducted for the same criminal offence.

Designation of the representative

Section 30

(1) In the first summons the court shall warn the legal entity that it is obliged to designate its representative within eight days upon receipt of the summons.

(2) If the legal entity fails to designate its representative within the time referred to in paragraph (1) of this Section, the same shall be designated by the court before which the proceedings are conducted.

(3) If the legal entity ceases to exist before the judgement becomes final, i.e. before completion of the criminal proceedings, and has its general legal successor, the successor shall be obliged to designate its representative within eight days upon cessation of the legal entity. Otherwise, the representative shall be designated by the court before which the proceedings are conducted.

(4) If the legal entity designates its representative contrary to Section 29, paragraphs (2) and (5) of this Law, the court conducting the proceedings shall summon the same to designate another representative within eight days and to serve the appropriate brief to the court. If the legal entity fails to designate its representative within the above mentioned time, the same shall be designated by the court before which the proceedings are conducted.

(5) The representative of the accused legal entity shall be designated by the president of the court on the basis of a ruling served to the person designated as the representative and to the legal entity.

These persons have the right to appeal against the ruling, which does not postpone the execution of the same.

Delivery of rulings and letters to the legal entity

Section 31

The rulings and letters addressed to the legal entity are delivered to the address of its representative or to the legal entity's seat or its subsidiary.

Bringing in

Section 32

If the duly summoned representative fails to appear and to justify his/her absence, the court may issue a warrant to bring in, provided that it has been clearly indicated in the summons that in case of failure to appear the same shall be brought in.

Costs of the representative

Section 33

(1) The fee and necessary expenses of the representative shall be part of the costs of the criminal proceedings.

(2) Necessary expenses of the designated representative in the proceedings for the criminal offences for which the same is prosecuted by virtue of the office shall be advanced from the budget of the authorities conducting the criminal proceedings and are later refunded by the persons obliged to refund the same pursuant to the provisions of the Criminal Procedure Act.

Defence counsel

Section 34

(1) The accused legal entity may have a defence counsel. The power of attorney for the defence counsel is given by the persons authorised to represent the legal entity as referred to in Section 29, paragraph (3) of this Law.

(2) The legal entity and the responsible person against whom the criminal proceedings are conducted for the same criminal offence may have one and the same defence counsel, provided that it is not contrary to the interests of their defence.

(3) The provisions of the Criminal Procedure Act regarding mandatory defence shall not apply to the accused legal entity.

Content of indictment

Section 35

Apart from the parts prescribed by the Criminal Procedure Act, the indictment against the accused legal entity shall contain also the company name of the accused legal entity, its registered seat, the company registration number, name and surname of its representative, his/her personal identification number of the citizen of the Republic of Croatia or the passport number if the representative is a foreign national.

Main trial

Section 36

(1) At the main trial, in the joined proceedings against the legal entity and the responsible person, the first person to be asked to enter his/her plea on each count of the charge shall be the responsible person and then the representative of the legal entity.

(2) The order of production of evidence at the main trial in the joined proceedings against the legal entity and the responsible person shall be determined in accordance with the responsible person's plea on the charge, regardless of the plea of the representative of the legal entity. The first person to be interrogated shall always be the responsible person and then the representative of the legal entity.

Upon the completed production of evidence and the prosecutor's and the injured party's closing arguments, the defence counsel of the legal entity presents his/her argument first, and then the representative of the legal entity, the defence counsel of the responsible person and the responsible person.

The court may decide that after the plea of guilty of the legal entity the main trial could take place in the absence of the representative of the legal entity who was duly summoned, provided that his/her presence is not much needed.

Content of judgement

Section 37

Apart from the parts prescribed by the Criminal Procedure Act, the judgement passed in the proceedings against the accused legal entity shall also contain the following:

(1) in the introductory part of the judgement, the company name of the accused legal entity, its registered seat, the company registration number, name and surname of its representative, his/her personal identification number of the citizen of the Republic of Croatia or the passport number if the representative is a foreign national,

(2) in the sentence, the company name of the accused legal entity and its registered seat.

Precautions against the legal entity

Section 38

(1) If distinctive circumstances support the concern that the accused legal entity could repeat the criminal offence or complete the attempted offence or perpetrate the offence it threatens to commit, the court shall order the following precautions:

1) ban on performance of certain activities or transactions,

2) ban on transactions with beneficiaries of the national or local budgets,

3) ban on obtaining of licences, authorisations or concessions.

The court may decide on a precaution referred to in paragraph 1, item 1) of this Section if further performance of certain activities or transactions would be a danger to life and limb or hazardous to property, or economy. This measure may not be imposed on units of local and regional self-government, political parties and trade unions.

(3) The court may upon motion of the public prosecutor or by virtue of the office issue a ruling for the purpose of banning all status changes that might lead to termination of the accused legal entity. Such ban shall be entered into the register of companies or other register.

(4) The ruling on precaution(s) shall be entered into the register of companies or other register by virtue of the office.

Section 39

This Law shall come into effect on the sixtieth day upon its publication in the "Official Gazette".

* * *

Chapter I: General provisions

Chapter I contains the general provisions of the Law itself.

On Section 1

Section 1 of this Law defines the content and scope of the Law. The Law comprises the prerequisites of punishability of legal entities for criminal offences and the penalties and punitive measures that can be imposed on legal entities for such criminal offences (substantive law provisions), as well as the provisions on proceedings for criminal offences committed by legal entities (criminal procedure provisions). As it can be seen from that provision, and from the title of the Law itself, only legal entities are accountable for criminal offences, i.e. companies, institutions, cooperatives, associations (non-governmental organisations), trade unions, political parties etc. Accordingly, the companies that do not have the status of a legal entity, and in the Croatian legal system these are silent partnership, partnership and association (NGO), cannot be accountable for criminal offences. Foreign legal entities are normally equal in their status as local legal entities. However, one should take into account that in some countries some of the companies do not have the status of a legal entity although in terms of prosecution for criminal offences they are equally treated as legal entities (e.g. these are "close companies or corporations" in the German law). Therefore Section 1, paragraph (2) stipulates that such foreign persons in Croatia shall be equally treated as legal entities, if they would be considered legal entities pursuant to the Croatian law.

On Section 2

Section 2 prescribes provisional (subsidiary) application of the provisions of the Criminal Code, the Criminal Procedure Act and the Law on the Office for the Prevention of Corruption and Organised Crime. This means that this Law should not standardise the prerequisites of punishability of legal entities, when the provisions of the existing criminal legislation (substantive law and code of procedure) can also be applied to legal entities. For example, one should not standardise emergency, attempt, coperpetration and other institutes of the general part of the criminal law, as these are prescribed in the Criminal Code and are applicable also to legal entities. For these reasons, special provisions on responsibility of foreign legal entities are also considered unnecessary, as foreign legal entities are accountable pursuant to the general provisions on application of the Croatian criminal legislation (Sections 13-16, Criminal Code), with certain modifications that will be shown in theory and practice. For instance, a legal entity shall not be punished for a criminal offence committed abroad if our law requires the identity of a norm or double punishability and the country in which the offence has been committed does not provide for the punishability of legal entities. The previous provision of Section 7 of the Law on Economic Offences, according to which the foreign legal entity is accountable for an economic offence only if it has a representation office on the territory of the Republic of Croatia or if an economic offence has been committed by its means of transport, would be too restrictive in case of criminal offences. The existence of representation offices in the Republic of Croatia may be a condition for the legitimate but not for the criminal activity of foreign legal entities.

Chapter II: Prerequisites of punishability

This Chapter comprises specific features of responsibility of legal entities in comparison to natural persons, i.e. it governs those issues that are, in terms of legal entities, not governed by the provisions of the general part of the Criminal Code. These are at the same time theoretically the most controversial issues, due to which the responsibility of legal entities for criminal offences slowly gains ground in the practice of European continental countries.

On Section 3

Section 3 stipulates that criminal responsibility of a legal entity must be based on the criminal offence committed by its responsible person. This provision is more clear than the previous provision of Section 10 of the Law on Economic Offences, according to which "the legal entity shall be responsible for an economic offence if the commission of the same has been caused by an act or failure of due supervision by a management body or a responsible person who has been authorised to act on behalf of the legal entity", which has caused a number of dilemmas. The concept of foundation of responsibility of the legal entity on the decisions of its management body has been abandoned, as responsibility must always be based on responsibility of an individual natural person (even in case of decisions made by a collective body). The legal entity, however, shall not be automatically accountable for all criminal offences of its responsible persons but only in case when a responsible person, who has committed the offence, has also violated any of the duties of the legal entity (e.g. criminal offences against environment), or if the legal entity has derived or should have derived illegal gain for itself or third persons (e.g. in case of economic offences in favour of the legal entity). Such gain may also be other than pecuniary. Unless the above described criminal offences have been committed by responsible persons, accountable shall be only the responsible person as a natural person; the most common case will be the one when the legal entity itself is a victim, i.e. when the responsible person commits the offence in his/her own favour and to the detriment of the legal entity.

On Section 4

The definition of the responsible person referred to in Section 4 is slightly different from the definitions in Section 9 of the Law on Economic Offences and Section 89, paragraph 7 of the Criminal Code, which include all persons entrusted with a certain scope of tasks within the legal entity. The proposed definition brings the persons managing the legal entity's operations to the foreground, i.e. the persons who are authorised to enter into contracts on behalf of the legal entity and those who are also able to commit criminal offences for its account. However, as natural persons may commit criminal offences, for which the legal entity is also accountable, not only in entering into contracts but also within the scope other activities and operations of the legal entity, the previous wording has been retained, according to which the responsible person is a natural person in charge of the operations of the legal entity or entrusted with the tasks from the scope of operations of the legal entity. This opens up a wide space of accountability of legal entities.

On Section 5

The issue how to harmonise responsibility of legal entities for their criminal offences with the principle of guilt is probably the most difficult theoretical question in the overall complex of responsibility of legal entities for criminal offences. As well as in most of European continental countries, criminal law in the Republic of Croatia is also based on the principle of guilt; moreover, this principle has been now explicitly proclaimed in Section 4 of the Criminal Code. As such guilt consists in reproof addressed at the perpetrator as a free and responsible being, it is difficult to justify such reproof with regard to legal entities. Therefore, some systems rely on objective responsibility of the legal entity. Such a solution would be unacceptable here, as all criminal offences for which legal entities are accountable are either intentional of negligent, so that these forms of guilt must also be established in case of a legal entity. Therefore, the only solution is to derive the legal entity's guilt from the guilt of its responsible person, as stipulated in Section 5, paragraph 1 of this Law. This in turn means that the responsible person must be characterised not only by intention and negligence but also other elements of guilt as foreseen in Section 39 of the Criminal Code (accountability and awareness of unlawfulness). However, such a solution means additional difficulties in cases when no responsible person can be identified, as it cannot be claimed with certainty that the responsible person is guilty if the same is unknown to the court. However, even in those cases it is necessary to punish the legal entity, as it was explicitly stated under items 1 and 2 of the Recommendation of the Council of Europe No. R (88) 18 of October 20, 1998. If one should insist on the strictly established principle of guilt and exclude punishment of the legal entity in all cases when the natural person as the perpetrator is unknown, or no proceedings can be instituted and conducted against the natural person, it would be unacceptable from the viewpoint of crime policy. For the same reasons, Section 5, paragraph (2) of this Law provides for a possibility that the legal entity is found guilty even in cases when it is impossible to institute or conduct criminal proceedings against the responsible person for legal or other impediments. In such a case the guilt of the responsible person would actually be presumed, which means that in such cases it would be allowed to prove that the responsible person has not been guilty (e.g. that the responsible person who died in the meantime had been under a misapprehension which excluded her/his guilt).

On Section 6

Section 6 provides for exclusion or limitation of responsibility of certain legal entities. All legislations that provide for criminal responsibility of legal entities agree that the government should be excluded from such responsibility as the government can punish itself. It is disputable whether this should apply to territorial communities. The law has opted for responsibility of the units of local and regional self-government in cases when criminal offences have not been committed in their execution of public authority. In other words, these units may not be accountable for criminal offences when they act iure imperii but are accountable when acting iure gestionis, i.e. when they act as equal partners in trading and other business activities.

On Section 7

This Section stipulates responsibility in cases of changes in the status of a legal entity before completion of criminal proceedings, after the judgement becomes final, i.e. after completion of criminal proceedings, and in particular for legal entities in bankruptcy. As the legal entities in bankruptcy proceedings or liquidation continue their operations that also in that stage can be criminal, Section 7, paragraph (3) of this Law provides for a possibility of punishing the legal entity for criminal offences committed before or during the bankruptcy proceedings or during liquidation. The specific feature of this stage is limitation of the circle of responsible persons, primarily to receivers and liquidators as the persons who are in that stage authorised to represent the legal entity. However, difficulties may arise if the legal entity ceases to exist before completion of the criminal proceedings. In such a case Section 7, paragraph (1) of this Law provides for a possibility of punishing the legal entity that is the general legal successor, however only by a fine and a judgement of dispossession of illegal gain. This provision is aimed at making it impossible for the legal entity to cease fictitiously only for the purpose of avoiding punishment and retaining its illegal gain. Similar is the situation when the legal entity ceases to exist before the judgement becomes final, which means that in such a case the fine may be imposed on and the illegal gain may be confiscated only from the legal entity that is the general legal successor of the legal entity found guilty and sentenced (Section 7, paragraph (2) of this Law).

Chapter III. Penalties and other punitive measures

On Section 8

Considering the types and purposes of penalties as foreseen in the Criminal Code, Section 8 of this Law stipulates three types of penalties for legal entities. These are fines, suspended sentence and security measures.

With regard to fines, imprisonment is obviously not applicable to legal entities but is applicable to their responsible persons, as they are punished pursuant to the Criminal Code. The main penalty for legal entities is a fine, as well as termination of the legal entity, which is applied only as an exceptional penalty. The fine imposed on legal entities must be different from the fine imposed on natural persons. The fine for legal entities must be higher than the one for natural persons; moreover, the system of daily incomes, as set forth in the Criminal Code, is not applicable to legal entities.

On Section 9

Section 9 of this Law stipulates that the fine imposed on legal entities may range from 5,000.00 to 4,000,000.00 Kunas. Since the system of daily incomes, which is used for precise maintenance of the account regarding the perpetrator's financial situation, has not proved possible, it would be needed to emphasize that in determination of a fine the court shall take into account all the incomes earned by the legal entity as decisive for its financial situation. It is a matter of course that in case of any failure of payment of the fine the legal entity shall be subject to compulsory execution (distraint).

The principle of legality requires that the law sets forth not only the criminal offence (nullum crimen sine lege) but also the penalty (nulla poena sine lege). With regard to descriptions of the criminal offences for which the legal entities shall be accountable, there are no specific features. However, the penalties prescribed for natural persons obviously may not be applied to legal entities.

This applies not only to imprisonment, which is impossible in case of legal entities, but also to fines. In determination of fines for certain criminal offences one should also take into account that the fines must be fixed (nulla poena sine lege certa). The best solution would be to determine a special fine to be imposed on legal entities for each criminal offence that may be committed by the same. However, such a technique would impose additional burden on the wording of the Criminal Code and of other acts and laws including the criminal offences the legal entities can be accountable for, and would not be needed after all.

On Section 10

Determining the ranges of penalties for natural persons, the Criminal Code has adopted several frameworks adapted to severity of criminal offences. Therefore, Section 10 of this Law has taken four of these basic frameworks (imprisonment for a term of up to 1, 5, 10 or 15 years or long-term imprisonment) and stipulated special frameworks of the fines to be imposed on legal entities (up to 1, 2, 3 and 4 million Kunas). This means the realisation of the principle that the penalty prescribed for the legal entity corresponds to severity of the criminal offence committed.

On Section 11

In Section 11 one should state more precisely the method of determination of fines for the criminal offences committed in concurrence. Therefore this Section sets forth that in such a case the single fine for the offences in concurrence may not exceed the sum of individual fines or the highest fine determined by the law (which amounts to 4 million Kunas).

On Section 12

In preparation of the draft version of this Law, a sanction set forth in the French Criminal Code has also been considered, i.e. court supervision, which comes quite close to the Anglo-Saxon probation, according to which the convicted legal entity is subject to certain conditions, such as interim reporting on its financial situation or the introduction of a court supervisor authorised to performed inspection of the legal entity's operations without previous notice. This concept has been abandoned on the grounds that for the time being in Croatia there are no adequate personnel, competent and qualified for such supervision. Therefore the provision of Section 12 has retained the institute of suspended sentence in its European-continental version. Basically, the adopted concept of suspended sentence has been taken over from Section 67 of the Criminal Code, whereas the period of being subject to probation has been limited to one to three years. The possibility of giving a suspended sentence has been confined to the criminal offences that are punishable by imprisonment for a term of up to five years and a fine of up to 1 million Kunas.

On Section 13

A special penalty stipulated in Section 13 of this Law is termination of the legal entity. As it has already been emphasised, this penalty is considered exceptional and its exceptional character is guaranteed in the way that it may be pronounced only if the legal entity has been established for the purpose of committing criminal offences or if the same has used its activities primarily to commit criminal offences. If this condition has been fulfilled, undecided is the type and severity of criminal offences. Further limitation of this penalty consists in the fact that it may not be pronounced on units of local and regional self-government, political parties and trade unions. Apart from the penalty of termination of the legal entity, the court may also impose a fine upon the legal entity.

On Section 14

With regard to the statute of limitations for criminal prosecution against a legal entity, applicable are the provisions of the Criminal Code. However, as the periods of limitation are related to the amounts of fines imposed on natural persons, one should also specifically emphasise that the limitation for criminal prosecution against the legal entity is determined in accordance with the penalty prescribed for the perpetrator of a criminal offence (Section 13, paragraph (1) of this Law). Thus it is guaranteed that the limitation for criminal prosecution shall be the same for the natural person as the perpetrator and the legal entity. As for the limitation of execution, it has been foreseen that the execution of a fine imposed on the legal entity comes under the statute of limitations in three years upon pronouncement, i.e. the limitation period has been extended in comparison to the statute of limitations for the fine imposed on natural persons, which is two years, for the reason that the fine imposed on a legal entity is always considered the main penalty and is higher than that imposed on a natural person. It has also been foreseen that there is no statute of limitations for termination of the legal entity, as such limitations would be in contravention of the very nature of that penalty.

On Section 15

This Law also stipulates four security measures as additional sanctions. These are: 1. ban on performance of certain activities or transactions, 2. ban on transactions with beneficiaries of the national or local budgets, 3. ban on obtaining of licences, authorisations or concessions, and 4. confiscation. It could be argued whether these sanctions represent subsidiary penalties, as they are pronounced along with a fine or the penalty of termination of the legal entity as the main penalty. Although they do include some punitive elements, predominant are preventive elements; therefore they are considered security measures. This also means the realisation of parallelism with the system of sanctions foreseen for natural persons, which is based on differentiation of penalties and security measures.

On Section 16

The Law stipulates the prerequisites for the application of security measures. Section 16, paragraph (1) stipulates that a ban on performance of certain activities or transactions may be imposed on one or more activities or transactions, the performance of which was a criminal offence.

Paragraph (2) stipulates the prerequisite for this measure: if further performance of certain activities or transactions would be a danger to life and limb or hazardous to property, or economy, or if the legal entity has already been punished for the same or similar criminal offence. Furthermore, the period of such a ban has been limited to one to three years. Paragraph (3) stipulates that a ban on performance of certain activities and transactions may not be imposed on units of local and regional self-government, political parties and trade unions.

On Section 17

A ban on transactions with beneficiaries of the national or local budgets as a security measure may be imposed on the legal entity for a period of one to three years provided that there is a threat that such operations might instigate the commission of another criminal offence. This means that the court shall establish the existence of such threat by means of relating the same to the criminal offence already committed by the legal entity.

On Section 18

As well as in the previous security measure, this Section also foresees the same condition that is to be fulfilled in order to be able to pronounce the penalty in form of a ban on obtaining of licences, authorisations or concessions, which are issued by government bodies or units of local and regional self-government. The existence of a threat that obtaining of licences, authorisations or concessions might instigate the commission of another criminal offence is established by means of relating the same to the criminal offence already committed. This ban may be pronounced for a period of one to three years after the judgement becomes final.

On Section 19

The security measure of confiscation in this Law has been stipulated in accordance with the provisions of the Criminal Code regarding confiscation of the objects used for the commission or preparation of a criminal offence, manufactured or intended for the commission of a criminal offence or created by the commission of a criminal offence. Paragraph (2) stipulates the cases in which the court shall impose this measure by referring to the conditions set forth in Section 80 of the Criminal Code.

On Section 20

The reason for most of the criminal offences committed by legal entities is illegally gained benefit. Section 20 of this Law specifies the prerequisites for pronouncement of this measure, which is, as well as in the Criminal Code, a sui generis measure. Paragraph (2) defines the illegally gained benefit as any increase or prevention of a decrease of the legal entity's property in consequence of the commission of a criminal offence. Paragraph (3) stipulates the instructions for the court how to determine the illegally gained benefit, whereas such determination may be based on the court assessment along with the inspection of the entire property of the legal entity and the relation of the same to the offence committed. Paragraph (4) stipulates, in accordance with the relevant provision of the Criminal Code, that in case of impossibility to confiscate the illegally gained benefit consisting in money, rights or kind the court shall oblige the legal entity to pay the full replacement value in money. However, a new provision has been added, according to which in determination of the replacement value in money the court shall take into consideration the market value of material assets or rights at the moment of judgement. Finally, pursuant to the amended provision of Section 82, paragraph (3) of the Criminal Code, it has been stipulated that the illegally gained benefit shall be confiscated also in cases when it is kept by third persons on the basis of any right whatsoever, if under the circumstances of such gain the same knew or could or was/were supposed to know that the value was gained in consequence of the commission of a criminal offence, which sets forth the protection of a conscientious gainer.

The injured party's right to be compensated from the confiscated property has not been specifically mentioned. However, on the basis of the general provision of Section 2 of this Law on provisional (subsidiary) application of the Criminal Code it can be concluded that such compensation is possible under to conditions referred to in Section 82, paragraph (4) of the Criminal Code.

On Section 21

Section 21 of this Law stipulates public pronouncement of a judgement as a sui generis measure. However, whereas this measure in Section 83 of the Criminal Code is confined to the criminal offences committed in mass media, in case of legal entities there is no such limitation. The court may decide on public pronouncement of a judgement at any time when due to the significance of the criminal offence the court establishes that there are good reasons to inform the public of the final judgement. Section 21, paragraph (2) and (3) of this Law stipulates some additional details with regard to public pronouncement of a judgement.

Chapter IV. Criminal offences of legal entities

In determination of the criminal offences for which legal entities shall be accountable there is a principle dilemma whether one should define the catalogue of such criminal offences at all or whether it would be simpler to set forth that legal entities may be accountable principally for all criminal offences provided for in legislation. It is regarded as a matter of course that a legal entity may not commit all criminal offences that can be committed by a natural person (e.g. a murder or a rape).

However, exclusion of responsibility of a legal entity for such criminal offences would anyhow arise from the provision of Section 3 of this Law, i.e. in such a case no duty of the legal entity would be violated and the legal entity would not derive or should not have derived illegal gain for itself or third persons. However, in order to exercise the legal security in terms of informing legal entities for which criminal offences they could be accountable, a catalogue of such criminal offences (i.e. those for which legal entities could be accountable) has been compiled. The Law has also stipulated and mentioned not only those criminal offences set forth in the Criminal Code (Section 23 of this Law) but also those from special legislation (Section 24 of this Law).

On Section 22

The basic question is the determination of a catalogue of incrimination i.e. of criminal offences for which legal entities can be accountable and found guilty. Criminal responsibility of legal entities can thus be prescribed only for the criminal offences laid down in the Criminal Code, which reduces the scope of their responsibility. Or, it is possible to set forth that legal entities are accountable for the criminal offences laid down in other laws. Should the other option be accepted, then it would be possible (as it is in Section 24 of the Slovenian Law on Responsibility of Legal Entities) to set forth that "Legal entities are accountable for the criminal offences laid down in the special part of the criminal code and for – other criminal offences set forth by the law". This means that special (additional) legislation should define the criminal offences for which legal entities are accountable. However, it seems more appropriate to define the catalogue of such incriminations in this law and thus eliminate possible unclear points regarding the criminal offences outside the scope of the Criminal Code for which legal entities may be found guilty. Such an approach implies two separate sections; first, in which a catalogue of incriminations from the special part of the Criminal Code has been determined, and second, in which a catalogue of incriminations from additional legislation has been determined.

On Section 23

The proposed catalogue of criminal offences for which legal entities would be accountable makes approximately one half of the catalogue of incriminations of the special part of the Criminal Code. As certain criminal offences in the catalogue have been mentioned in terms of sections without any mention of relevant paragraphs, paragraph (2) of this Section stipulates that all the above mentioned criminal offences, apart from their basic forms, comprise both serious (qualified) and minor (privileged) offences.

On Section 24

Some of the criminal offences laid down in additional legislation should by no means be neglected in this Law, as for most of these offences the responsible persons in legal entities are accountable, and these are mostly acts and failures within the scope of activity of legal entities. The catalogue of the so-called additional criminal offences has omitted the criminal offences laid down by the Law on Issue of and Trade in Securities, as the passage of the new law is currently under way and the existing provisions of that law are not in harmony with the general provisions of the Criminal Code (structure of the statutory description of a criminal offence, frameworks and method of determination and imposition of fines etc.). Such lack of harmony is also noticed with regard to the criminal offences from additional legislation – there are many so-called double incriminations (completely or almost identical statutory descriptions in the Criminal Code and in additional legislation). Furthermore, additional legislation has not respected the general provisions of the Criminal Code on imposition of fines (e.g. special laws impose fines in absolute amounts, which is contrary to the provision of Section 51 of the Criminal Code /system of daily incomes/ etc.). As one should, after this Law comes into force, amend also the laws stipulating criminal offences (by stipulation of legal frameworks of sanctions imposed on legal entities), this would be an opportunity to amend such laws also in other segments and to harmonise the same with the Criminal Code.

Chapter V. Criminal proceedings

The Law on Responsibility of Legal Entities for Criminal Offences must also comprise the provisions regarding criminal proceedings, as the appearance of a legal entity as the accused before the court represents a special situation that requires certain solutions. This Law has foreseen a restrictive arrangement of the part regarding the proceedings in accordance with the provision of Section 2 of this Law, which has foreseen provisional (subsidiary) application of the Criminal Code, the Criminal Procedure Act and the Law on the Office for the Prevention of Corruption and Organised Crime. Accordingly, this Law governs only those issues that should be formulated in a different way due to the specific feature of the proceedings, whereas all other issues are governed pursuant to the Criminal Procedure Act and the Law on the Office for the Prevention of Corruption and Organised Crime.

Along with the Criminal Procedure Act, it was also necessary to stipulate provisional (subsidiary) application of the recently passed Law on the Office for the Prevention of Corruption and Organised Crime, as that Law stipulates special authority and action of the authorities in case of criminal offences in the field of corruption and organised crime, which, pursuant to this draft, may be also committed by legal entities. This gives explicit statutory authority to the authorities to apply the provisions of the Law on the Office for the Prevention of Corruption and Organised Crime also to legal entities.

One should certainly emphasize that with regard to subject-matter jurisdiction of courts there is no departure from the Criminal Procedure Act, due to which this Law contains no provisions regarding subject-matter jurisdiction of courts. The courts of jurisdiction for criminal proceedings against legal entities should be the courts of subject-matter jurisdiction and not commercial courts. Regardless of the fact that commercial courts have certain experience with the responsibility of legal entities for economic offences, one should take into account that these are criminal offences committed not only by legal entities but also by natural persons. Therefore it would be unjustified to transfer the proceedings against natural persons from the jurisdiction of regular courts to commercial courts. Regular courts have enormous experience in application of criminal law, whereas the experience of commercial courts is much more modest in that respect. Finally, although it would be the legal entities that would most often be accountable for economic offences, it will not always be the case, as it can be seen from the catalogue of criminal offences referred to in Section 23 and 24 of this Law. Therefore there are no serious grounds to transfer such cases to the jurisdiction of commercial courts when the cases in question are not related to business operations and commercial law.

On Section 25

Section 25 of this Law proclaims joining of proceedings against the natural person and the legal entity (joinder). This principle is a procedural and legal aspect of the concept accepted in Chapter II of this Law, according to which criminal responsibility of the legal entity is based on the blame of a natural person as the responsible person. Furthermore, the provision of Section 25, paragraph (2) of this Law, according to which the proceedings may exceptionally be conducted against the legal entity only, provided that no criminal proceedings may be instituted or conducted against the responsible person for legal or any other reasons whatsoever, is a consequence of the provision of Section 5, paragraph (2) of this Law.

On Section 26

Although criminal prosecution of legal entities is based on the principle of legality, applicable are also the exceptions set forth in Section 175 of the Criminal Procedure Act, which have introduced the principle of purposefulness. If the public prosecutor decides on postponement of the criminal proceedings against the accused responsible person, such decision may be extended also to the accused legal entity, provided that the same consents to that and is willing to fulfil some obligations that can refer also to the legal entity (e.g. performance of some action for the purpose of improvement or compensation of a damage in consequence of the commission of a criminal offence, or payment of a certain amount of money in favour of some public institution, for humanitarian or charity purposes, i.e. into the foundation for compensation of victims of criminal offences). Furthermore, Section 26 of this Law stipulates another three cases in which the public prosecutor may decide not to institute criminal proceedings against a legal entity: if the legal entity possesses no property or the same is so insignificant that it would not be sufficient to cover the costs of the criminal proceedings or if bankruptcy proceedings are conducted against the legal entity.

On Section 27

Section 27, paragraph (1) of this Law governs the issue of territorial jurisdiction in cases when the primary territorial jurisdiction according to the place of the commission of a criminal offence cannot be determined, as such place is either unknown or outside the territory of the Republic of Croatia. If the joined criminal proceedings against the responsible person and the legal entity are conducted in such cases, the public prosecutor will be able to choose whether to institute the proceedings at the court within the jurisdictional territory of which the domicile or residence of the accused is located (Section 26, paragraph (1) of the Criminal Procedure Act) or at the court within the jurisdictional territory of which the legal entity is seated (elective territorial jurisdiction). From this provision it also arises that in case of the criminal proceedings conducted against the legal entity only, jurisdiction shall have the court of territorial jurisdiction in the legal entity's seat. Accordingly, in case of criminal offences prosecuted on the basis of a private charge, and accountable is also the legal entity, Section 27, paragraph (2) of this Law stipulates that a private charge may be filed with the court within the jurisdictional territory of which the accused has domicile or residence (Section 23, paragraph (2) of the Criminal Procedure Act) but also with the court within the jurisdictional territory of which the legal entity is seated.

On Section 28

Section 28 stipulates the authority of the public prosecutor to institute the proceedings against the legal entity by virtue of the office for a criminal offence which is prosecuted upon motion, provided that the injured party has submitted such motion for prosecution only against the responsible person and not against the legal entity. In this case it has been taken into account that injured parties would not know that they may submit a motion for prosecution also against the legal entity, which means that in such cases it should be made possible or them to institute the criminal proceedings against the legal entity as well.

On Section 29

As the legal entity is the accused, it is necessary to designate a person to represent the same. Such person is called the representative. The representative is entitled to perform all actions that can be performed by the accused as a natural person, such as plea of (not) guilty, production of evidence, inspection of files, examination of witnesses and expert witnesses, production of judicial remedies etc.

Section 29 of this Law stipulates the conditions that are to be fulfilled by the representative and the procedure of his/her designation in the legal entity. Section 29, paragraph (2) stipulates that the legal entity may have only one representative, who may be any legally competent person in his/her own right and who speaks the Croatian language. Pursuant to paragraph (3) the representative shall be designated by the legal entity's body or the persons representing the legal entity, and the decision on such designation shall be based on the law, a decision made by the authorised government body, the articles of association, the memorandum of incorporation or a decision made by the legal entity's body. The legal entity may designate its representative also on the basis of a power of attorney. The provisions of paragraph (4) oblige the legal entity to serve a brief to the court, by which it has designated its representative, together with the proof of his/her authority. Paragraph (5) stipulates which persons may not be representatives of the accused. These are the witness and the responsible person against whom the criminal proceedings are conducted for the same criminal offence.

On Section 30

As no criminal proceedings may be conducted without a representative, it was necessary to give the court the right to appoint such representative in certain cases. The court shall designate the representative of the legal entity by virtue of the office unless the legal entity designates its representative within the specified time (paragraph (1)), unless the general legal successor of the legal entity that has ceased to exist before completion of the criminal proceedings designates its representative (paragraph (2)), and if the designated representative does not fulfil the statutory conditions (paragraph (3)). Paragraph (4) of this Section stipulates the procedure of designation of the legal entity's representative by the court.

On Section 31

Section 31 stipulates the method of delivery of rulings and letters to the legal entity. In order to prevent avoidance of receipt of such rulings and letters, and thus also obstruction of the criminal proceedings, this provision stipulates that all rulings and letters addressed to the legal entity shall be delivered to the address of its representative or to the legal entity's seat or its subsidiary.

On Section 32

This Section authorises the court to bring the representative in, provided that he/she fails to appear before the court and to justify his/her absence. However, such measure, i.e. the warrant to bring in, may be confined to those cases only when his/her presence in the investigation or at the trial is indispensable. During the trial it is the moment when the representative gives his/her testimony on the grounds of the indictment with regard to the legal entity, or when he/she gives his/her testimony as the accused. In other cases the main trial may take place in the absence of the accused (Section 36, paragraph (4)).

On Section 33

Pursuant to Section 33, paragraph (1) of this Law, the fee and necessary expenses of the representative shall be added to the costs of the criminal proceedings as referred to in the provisions of Section 119, paragraph (2) of the Criminal Procedure Act. In accordance with Section 119, paragraph (4) of the Criminal Procedure Act, the necessary expenses of the designated representative are arranged as the necessary expenses of the appointed legal counsel and the legal representative.

On Section 34

The representative shall be differentiated from the legal counsel. The accused legal entity is entitled to have both its representative and its legal counsel. However, the legal counsel is not mandatory. Section 34 of this Law stipulates who issues the power of attorney for the legal counsel, as well as the conditions under which the legal entity and the responsible person may have one and the same defence counsel.

On Section 35

The content of indictment is stipulated in Section 34 of the Criminal Procedure Act. As that provision does not provide for an accused legal entity, Section 35 of this Law stipulates the content of an indictment against a legal entity. The same applies to the content of judgement (Section 38 of this Law).

On Section 36

It was also necessary to modify the provisions regarding the main trial, which has been done in Section 36 of this Law. As the responsibility of the legal entity is based on the guilt of its responsible person, it seems logical that the responsible person should be the first one to enter his/her plea on the counts of the charge and then the representative of the legal entity (paragraph (1)). Pursuant to Section 320, paragraphs (4) and (7) of the Criminal Procedure Act, the order of production of evidence depends on the attitude of the accused towards each count of the charge. If the accused pleads guilty, the accused shall be examined, and then the production of evidence shall be carried out. If the accused pleads not guilty, the proceedings shall continue with the production of evidence, and the accused shall be examined after the production of evidence (Section 334, paragraph (2) of the Criminal Procedure Act). The above structure of the main trial has also required that this Law solves the issue of the order of production of evidence in the joined proceedings against the responsible person and the legal entity in case when one of them pleads guilty and the other one pleads not guilty. Paragraph (2) of this Section stipulates that in such a case the order of production of evidence shall depend on the responsible person's plea, regardless of the attitude of the legal entity's representative towards the charge. This means that in case that the responsible person pleads guilty, he/she shall be examined first and then the legal entity's representative. The production of evidence shall be carried out afterwards. If the responsible person pleads non guilty, the production of evidence shall follow, then the responsible person shall be examined and the legal entity's representative shall be examined last. Such a solution is also the consequence of the principle that criminal responsibility of the legal entity is based on the guilt of the natural person.

The order of closing arguments upon the completed production of evidence has also been established. Contrary to the order of examination and in accordance with the rule that the accused shall always have the last word (Section 343 of the Criminal Procedure Act), the closing argument shall first be presented by the legal entity's representative and then by the responsible person. The provision in paragraph (4) of this Section considerably extends the authority of the court to hold the main trial in the absence of the accused. As a rule, the main trial may not take place in the absence of the accused, except for exceptional cases as referred to in Section 305, paragraphs (2) and (4) of the Criminal Procedure Act. This Law stipulates another exception in criminal proceedings against the legal entity, according to which the court may hold the main trial in the absence of the duly summoned legal entity's representative provided that the same has pleaded (not) guilty and if his/her presence is not indispensable.

On Section 37

Explanation as in On Section 35

On Section 38

Section 38 of this Law stipulates precautions against the legal entity. The precautions are the measures that can be ordered in case of circumstances that might require pre-trial detention, although the same purpose may be fulfilled with these measures. The cases foreseen in Section 38, paragraph (1) of this Law are the grounds for pre-trial detention referred to in Section 102, paragraph (1), item 3 of the Criminal Procedure Act, which become the reasons for precautions against the legal entity. These measures are actually the security measures referred to in Sections 16-18 of this Law. If there is a threat that the legal entity, by performing certain activities or transactions, performing transactions with beneficiaries of the national or local budgets or by obtaining licences, authorisations or concessions, could repeat the criminal offence or complete the attempted criminal offence or perpetrate the offence it threatens to commit during the proceedings, the court shall order one or more precautions. Such precautions are ordered and supervised by the same procedure as other precautionary measures, which means that they could be ordered during the entire criminal proceedings, that they are ordered by the investigating judge, the single judge or the president of the panel. Precautions may last until it is necessary and at the longest until the judgement becomes final. Every two months, by virtue of the office, the court shall examine whether the need for the precautions still exists and vacate them if they are not need any more (Section 90 of the Criminal Procedure Act).

Section 38 of this Law also stipulates special conditions when the precautions are ordered in form of a ban on certain activities and transactions, the prerequisites for a ban on certain status changes and the mandatory entry of precautions into the register of companies. The Criminal Procedure Act stipulates some other measures that can be ordered against the accused, such as provisional seizure of objects (Sections 218 and 463), provisional measures securing the claim for indemnification (Sections 136 and 467), refusal to present or surrender the files or to disclose the same (Section 219, paragraphs 1-2), temporary suspension of suspicious financial transactions and sequestration of funds (Section 219, paragraphs 5-7) etc. All these measures as foreseen for natural persons may also be applied against a legal entity, and as such should not be specifically governed by the Law on Responsibility of Legal Entities for Criminal Offences.

On Section 39

Section 39 determines the date when this Law shall come into effect, however with a longer acatio legis as it is reasonable to expect that the courts and prosecution authorities would need a longer period of time to become familiar with the content of this Law, which represents an important novelty in the Croatian legal system, and thus to ensure its efficient application in practice.