On January 1, 2018, Criminal Code No. 100/2015/QH13, which was amended and supplemented under Law No. 12/2017/QH14, (hereinafter “the Code 2015” or “the Code”) officially came into effect. This is the first time that the criminal liability of a commercial legal entity (“CLE”) has been regulated by Vietnamese criminal law, making it one of the most important changes and new developments in the 2015 Code. The following are notable regulations on the liability of CLEs for criminal offenses.

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  1. Definition of criminal liability of CLE

Criminal liability of CLE is the negative outcome of commissioning of a crime which a CLE must bear before the State for its criminal act (as prescribed by criminal law) and will be shown by one or more coercive measures of the State.

The criminal liability of CLE is comprised of three main elements as prescribed in Article 2.2 of the Code[1]: (1) [the accused] Being guilty (the act of causing danger to the society fully satisfies the elements constituting the crime); (2) [the act] Defined as a crime (in Art. 76 the 2015 Code), and (3) causal relationship between the two above-mentioned factors.

In its nature, the CLE’s criminal liability is similar to that of an individual: (i) it is incidence and objective persistence since the crime was committed; it is determined by special order as provided for in criminal procedure law; and (ii) it is the type of liability that has the strictest consequences for the subject (e.g. penalties, criminal justice measures, coercive measures in the criminal proceedings …).

The prosecution of the CLE’s criminal liability is not only applicable to all offenses committed within the territory of Vietnam, but also to the criminal acts of foreign entities committed outside the Vietnamese territory, as long as the offence infringes on the legitimate rights and interests of Vietnamese citizens or infringes upon the interests of Vietnam, or as defined as a crime in treaties to which Vietnam is a contracting party[2].

The concept of criminal liability of a  CLE is not unfamiliar. Previously, this concept appeared but was not officially recognized in the Penal Code 1999. The legalization of this concept into the new Criminal Code was supposed to be consistent with the theories of international law and United Nations’ recommendations, as well as Vietnamese current societal conditions.

  1. The featured articles on criminal liability of CLE in the Code 2015

a) Subjects:

According to the definition of Article 74 of the Civil Code No. 91/2015/QH13[3] (Civil code 2015) on legal persons, it can be seen that this is a very broad concept, including commercial and non-commercial legal entities. The Code 2015 is only applied to the first, so it is important to distinguish between CLE and non-commercial entities in practice.

As stipulated in Article 75 of the Civil Code 2015, an organization which is recognized as a CLE must first satisfy all the following conditions[4]:

  • Being established under the provisions of the Civil Code, Enterprise Law or other relevant laws;
  • Having an organizational structure in accordance with the provisions of the Civil Code, i.e. having executive bodies, having a clear and legal charter, and having its own seal managed and used by its representatives;
  • Having assets independent in relation to other individuals and legal entities, and taking self-responsibility with its property;
  • Independently, on behalf of itself involving in legal relationships.

So, in the essence, CLE is one whose main goal is to seek profits and to divide profits among its members. This feature is critical for distinguishing between non-commercial and non-commercial entities[5].

Businesses and economic organizations that satisfy these characteristics, who, by their independent participation in the legal relationship, will inevitably enjoy their rights and obligations and, concurrently, be responsible for their liability for their own offense. Consequently, due to CLE’s conduct, they cannot assign or transfer liability to another legal entity (including its superiors or its related entities);it is the sole responsibility of the entity to be subject to the activities of the Criminal liability (investigation, prosecution, trial, etc.), conviction, criminal prosecution (and) judicial, subject to criminal records.

b) Grounds for prosecuting criminal liability of CLE:

CLE’s criminal liability is only prosecuted when it fully satisfies the following bases:

(i) Subject: Not all legal entities bear criminal liability (as discussed above). Legal entities that conduct commercial activities (such as state agencies, political organizations, socio-political organizations…) that do not aim to seek profits, with any gained profits,  are not distributed among their members, will not be subjects under the Code 2015. If they commit illegal conduct, these organizations may be subject to the non-criminal sanctions imposed by corresponding laws (e.g. civil law, administrative law, environmental law, etc.).

(ii) Behavior performed by the CLE: causing danger to the society, causing damage or threatening to injure the social relations protected by criminal law. Such dangerous behavior must be defined as a crime, as listed in Article 76 of the Code.

(iii) The fault of the CLE in the execution of the offense: intentionally or unintentionally to commit an act contrary to criminal law, based on the subject’s perception and will while executing the offense.

(iv) A situation where CLE bears criminal liability: CLE is only liable for criminal liability if:

  • Offenses are committed in the name of CLE;
  • Offenses are committed for the benefits of CLE, i.e. the subject’s behavior targets a particular purpose of the entity, including financial, material and economic… benefits. When a crime is committed by a legal representative of CLE but that crime is not intended to bring about a legal interest, that CLE is not liable to criminal liability;
  • Offenses are committed under the direction, administration or approval of the CLE;
  • The statute of limitations for prosecution of criminal offenses is valid, as specified in Clauses 2 and 3, Article 27 of the Code.

Under the statute of limitations for prosecution of criminal liability, there are some points to note as follows[6]:

The time limit for searching for a different type of crime[7] is different:

a) 05 years for less serious offenses;

b) 10 years for serious offenses;

c) 15 years for very serious crimes;

d) 20 years for particularly serious offenses.

The duration of the criminal liability inquiry is calculated from the date the crime was committed, but the timing can be changed in some cases[8].

c) Crimes that CLE bears criminal liability.

The Code 2015 lists 33 offenses of which CLE only bears criminal liability. They are 22 crimes in Chapter XVIII. Crimes that infringe upon the economic management order; 09 crimes in Chapter XIX. Environmental crimes; 02 offenses under the Chapter. XXI Crimes that violate public safety, public order.

These crimes are determined on the basis of assessing their nature, severity and prevalence of crimes, as well as experience from the practice of combatting crimes in the past and concurrently with International treaties to which Vietnam is a member, such as the Anti-Corruption Convention (UNCAC Convention), the United Nations Convention on Narcotic Drugs of 1961; Convention on Psychotropic Substances 1971.

d) Penalties and judicial measures applicable to convicted CLE:

Penalties include:

* 03 major penalties:

(i) Fines (minimum: 50 million VND, maximum: 20 billion VND);

(ii) Suspension of operation for a definite period of time (up to 03 years): means the suspension of operation of CLE in one or more sectors in which the CLE committed a crime, causing damage  with consequences which is able to be actually recovered. The term of suspension is 6 months – 3 years.

(iii) Permanent suspension of operation: means the termination of operation of CLE in one or more sectors in which CLE commits a crime, causing damage or likely to cause actual damage, and the consequences are unable to be recovered. Any CLE that is established solely for the commission of a crime shall be permanently suspended from its operation.

* 03 additional penalties:

(i) Prohibition of trading, operating in certain fields: The duration of prohibition is from 01 to 03 years from the effective date of the verdict.

(ii) Prohibition of capital mobilization: The time limit is from 01 to 03 years, counting from the date the verdict comes into force.

(iii) Fine, when not applied as a principal penalty.

For each crime, the offender shall be subjected only to one principal penalty and may be subjected to one or more additional penalties. Penalties generally affect the economic and financial interests of CLE.

In addition to penalties, CLE may also be subjected to judicial remedies:

(i) Confiscation of objects, money directly related to crime, such as:

– Tools and means used for committing crimes;

– Objects or money obtained from the offense, or the sale, or exchange of such things; illicit profits or benefits gained from crime;

– Objects that are prohibited from being stockpiled or banned from circulation by the State.

(ii) Return property, repair or compensation; forced to publicly apologize;

(iii) Compulsory restoration;

(iv) Forced to implement some measures to remedy, to prevent further consequences, such as:

  • Forced to dismantle work, construction work without permit or construction not in accordance with the permit;
  • Forced to remedy environmental pollution, the spread of diseases;
  • Forced to take out of the Socialist Republic of Vietnam’s territory or re-export of goods, articles, and means if committed offenses in importing, exporting and infringing intellectual property rights;
  • Forced to destroy goods and articles which are harmful to human health, domestic animals, plants and the environment, cultural products with harmful contents or other material evidence that are subjected to destruction according to the provisions of law;
  • Forced to remove infringing elements on goods, goods packages, business facilities and articles;
  • Forced to recall infringing products and goods that are circulating in the market.

The penalties for criminal offenders are determined by the Court based on the provisions of the Code 2015, consideration of the nature and extent of danger to the society of criminal offenses, the observance of the law by CLE, and the extenuating and aggravating criminal liability that are applicable to CLE. For penalties; the court shall base its decision on the situation of the property and the ability to enforce the judgment on the offender.

e) Extracting and extenuating circumstances[9]

* 05 extenuating circumstances applied for CLE, including:

(i) Already prevented or alleviated the harmful effects of the offence;

(ii) Voluntarily repair, compensate for damage or remedy the consequences;

(iii) Committed an offense but causing no damage or causing minor damage;

(iv) Actively cooperate with responsible agencies in detecting crimes or in the course of resolving cases;

(v) Contribute to the implementation of social policy;

* 06 extenuating circumstances apply to legal entities, including:

(i) Contract with another CLE to commit a crime;

(ii) Intentionally commit the crime to the end;

(iii) Committing the crime twice or more;

(iv) Recidivism or dangerous recidivism;

(v) Taking advantage of war conditions, emergency situations, natural calamities, epidemics or other special difficulties of society to commit crimes;

(vi) Use sophisticated tricks to commit crimes or to hide or hide crimes.

The extenuating or aggravating circumstances which are already prescribed by the Code as signs of defamation or framing, shall not be regarded as extenuating or aggravating factors when deciding penalties.

f) To remove previous criminal convictions[10]

A CLE convicted of a criminal offense shall be automatically acquitted if, within 02 years from the date of completion of the principal penalty, the additional penalty, other decisions of the judgment (e.g. court fees), or when the statute of limitations for enforcement of judgments expires, and the CLE has not committed new offenses.

Apart from these highlighted contents, the Code 2015 also contains a number of new regulations applicable to criminal offenses such as penalties in the case of multiple crimes (Article 86); Compensation of multiple judgments against CLE (Article 87); Exemption of penalty (Article 88).

[1] Article 2. Basis of criminal liability

“…2. No corporate legal entity that commits a criminal offence that is not regulated in Article 76 hereof has to incur criminal liability

[2] See Articles 5.1 and 6 of the Code 2015:

Article 5. Effect of the Criminal Code on criminal offences committed within the territory of the Socialist Republic of Vietnam

“1. The Criminal Code applies to every criminal offence committed within the territory of the Socialist Republic of Vietnam.

It also applies to criminal offences committed on sea-going vessels and airplanes having Vietnamese nationality or operating in Vietnam’s exclusive economic zones or continental shelves or consequences thereof.”

Article 6. Effect of the Criminal Code on criminal offences committed outside the territory of the Socialist Republic of Vietnam

  1. Any Vietnamese citizen or Vietnamese corporate legal entity that commits an act outside the territory of Socialist Republic of Vietnam which is defined as a criminal offence by this document shall face criminal prosecution in Vietnam as prescribed by this document.

This clause also applies to stateless residents of Vietnam.

  1. Any foreigner or foreign corporate legal entity that commit a criminal offence outside the territory of Socialist Republic of Vietnam shall face criminal prosecution as prescribed by this document if such offence infringes the lawful rights and interests of Vietnamese citizens or interest of Socialist Republic of Vietnam or under a international agreement to which Vietnam is a signatory.
  2. Where a criminal offence or its consequence occurs on an airplane or sea-going vessel that does not have Vietnamese nationality at sea or outside Vietnam’s airspace, the offender shall face criminal prosecution under an international agreement to which Vietnam is a signatory, if any.

[3] Article 74. Juridical persons

  1. An organization shall be recognized as a juridical person if it meets all of the following conditions:
  2. a) It is legally established as prescribed in this Code and relevant laws;
  3. b) It has an organizational structure prescribed in Article 83 of this Code;
  4. c) It has property independent from other natural and juridical persons and bears liability by recourse to its property;
  5. d) It participates independently in legal relations in its own name.
  6. Every natural or juridical person has the right to establish a juridical person, otherwise provided for by law.

[4] Article 75. Commercial juridical persons

  1. Commercial juridical person means a juridical person whose primary purpose is seeking profits and its profits shall be distributed to its members.
  2. Commercial juridical persons include enterprises and other business entities.
  3. The establishment, operation and termination of commercial juridical person shall comply with regulations of this Code, Law on enterprises and other relevant laws.

[5] Article 76. Non-commercial juridical persons

  1. Non-commercial juridical person means a juridical person whose primary purpose is not seeking profits and its possible profits may not distributed to its members.
  2. Commercial juridical persons include regulatory agencies, people’s armed units, political organizations, socio-political organizations, political-socio-professional organizations, social organizations, socio-professional organizations, social funds, charitable funds, social enterprises and other non-commercial organizations.
  3. The establishment, operation and termination of non-commercial juridical persons shall comply with regulations of this Code, laws on organizational structure of the state and other relevant laws.

[6] Article 27. Time limit for criminal prosecution

 

[7] Article 9. Classification of crimes (amended by Law on amendments to the Criminal Code, No. 12/2017/QH14, Clause 2 Article 1)

  1. Crimes defined in this Code are classified into 04 categories according to their nature and danger to society:
  2. a) Less serious crime means a crime whose danger to society is not significant and for which the maximum sentence defined by this Code is a fine, community sentence (non-custodial), or 03 years’ imprisonment;
  3. b) Serious crime means a crime whose danger to society is significant and for which the maximum sentence of the bracket defined by this Code is from over 03 years’ to 07 years’ imprisonment;
  4. c) Very serious crime means a crime whose danger to society is great and for which the maximum sentence of the bracket defined by this Code is from over 07 years’ to 15 years’ imprisonment;
  5. d) Extremely serious crime means a crime whose danger to society is enormous and for which the maximum sentence of the bracket defined by this Code is from over 15 years’ to 20 years’ imprisonment, life imprisonment, or death.
  6. Crimes committed by corporate legal entities are classified by their nature and danger to society as prescribed in Clause 1 of this Article. The same are applied to the crimes specified in Article 76 hereof.”.

[8] Clause 3 Article 27, the Code No. 100/2015/QH13

[9] See more: Articles 51, 52 of the Penal Code 2015

[10] See more: Chapter X, Penal code 2015


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