A Comparative Outlook: A Normative Framework of Corporate Criminal Liability in Indonesia

The Indonesian Supreme Court (MA), in cooperation with the Corruption Eradication Commission (KPK), has recently launched the MA Regulation (PERMA) No. 13 of 2016 on the handling procedures of the crimes committed by corporations. The reason behind the formulation of this rule was the reluctance of law-enforcers in enforcing the criminal provisions against corporations.

While it was said that the enforcement has been hindered by the absence of procedural provisions (or by the political will), the theoretical discussion up to date has actually focused on the possibility to hold a corporation (not a natural person) liable. Since a corporation is a ‘fictive’ person – who will be impossible to have a (guilty) ‘mind’, it is arguable that the corporation cannot handle without connected to a certain act performed by a natural person. This theoretical debate may also be involving the current situation in Indonesia. Although PERMA No. 13/2016 is said to regulate a set of procedures, in fact it includes substantive criteria as well, which can confirm the recognition of corporate criminal liability in Indonesia. Unfortunately, the regulation seems still a bit confusing for its reader.

The definition of ‘a crime committed by a corporation’, for example, are mentioned twice in the same regulation with two different descriptions: in the general provisions (Article 1, Point 8, PERMA No. 13/2016), and in the chapter on procedures for case-handling (Article 3 PERMA No. 13/2016). The question is, if the term is mentioned in a provision in this regulation, which definition must be then used?

Article 1, Point 8, PERMA No. 13/2016

A crime committed by a corporation is a criminal act which a corporation can be held liable for, in accordance with the laws related to corporations.

Article 3 PERMA No. 13/2016

A crime committed by a corporation is a criminal act that is committed by a person based on an employment relationship, or based on any other relationships – either individually or jointly, for and on behalf of the corporation, inside and outside of the environment of corporation.

Moreover, the writer does not always use the relevant legal terms consistently. For example, the word ‘liability’ is used in Article 4, Paragraph 1, while the word ‘guilt’ is used in Article 4, paragraph 2. Technically speaking, one could have argued that the existence of a ‘guilt’ in a broad sense will form a ‘(criminal) liability’. However, the absence of ‘guilt’ of a non-natural person is exactly the objection against such a liability. Corporate liability is thus conceived from a certain link to an act of a natural person who can be guilty. For the sake of clarity, in my view, it would be wise to use the same term consistently – unless there is a clear distinction that was intended to be made by the writer.

Article 4 PERMA No. 13/2016

(1)   The corporation may be held liable in accordance with the criminal provisions in the laws related to corporations.

(2)  In deciding a penalty against a corporation, the judge can assess the guilt of the corporation referred to in paragraph (1), includes: […]

Apart from this confusing formulation, the ruling of such a criterion is certainly expected to be used as a guideline, especially for the judges nationwide. Hence, this formulation may need to be clarified, and simplified, as much as possible. In this article, I will try to clarify, based on the criteria made by the Dutch Supreme Court (HR) in the famous ‘Drijfmest-case’ which – for the careful reader – can clearly be seen as the inspiration source of the criteria outlined by  MA and KPK in Article 3 and Article 4 PERMA No. 13/2016.

I will first show the criteria used in PERMA No. 13/2016, and thereafter the criteria of ‘Drijfmest-case’, before suggesting a formulation that might be practically used in the case of Indonesia.

General Rules

Article 3 PERMA No. 13/2016

A crime committed by a corporation is a criminal act that is committed by a person based on an employment relationship, or based on any other relationships – either individually or jointly, for and on behalf of the corporation, inside and outside of the environment of corporation.

Article 4 PERMA No. 13/2016

(1)  The corporation may be held liable in accordance with the criminal provisions in the laws related to corporations.

(2)  In deciding a penalty against a corporation, the judge can assess the guilt of the corporation referred to in paragraph (1), includes:

a.     The corporation can gain profit or benefit from the related crime, or a crime was committed for the interest of the corporation;

b.    The corporation omits the crime; or,

c.     The corporation did not undertake necessary measures for the prevention, in preventing a greater impact and in ensuring the compliance with the applicable laws and regulations, in order to avoid the crime.

Based on Article 4 Paragraph 1, it can be first of all concluded that in considering this kind of case, the judge must look into the act or the crime related. If only a corporation can be held liable for it according to the existing laws – which regulates the corporate criminal liability, the judge can impose the corporate criminal liability.

Unlike the situation in Indonesia, in the Netherlands there is a general statutory provision on the criminal liability of ‘persons’ who are not natural persons, as laid down in Article 51 Sr. (The Dutch Criminal Code). This corporate criminal liability has been confirmed by HR in a number of court cases, including the landmark case on this matter: the ‘Drijfmest-case’.

Article 51 Sr.

1.     Criminal offences can be committed by natural persons and legal persons.

2.     If a criminal offence is committed by a legal person, criminal proceedings may be instituted and such punishments and measures as prescribed by law, where applicable, may be imposed:

(1)  on the legal person; or,

(2)  on those persons who have ordered the commission of the criminal offence, and on those persons who actually directed the unlawful acts; or,

(3)  on the persons referred to in (1) and (2) jointly.

3.     In the application of the preceding subsections, the following shall be considered as equivalent to the legal person: the unincorporated company, the partnership, the shipping company and the special purpose fund.

Drijfmest-case (Par. 3.3)

Given the history of its formation, a legal person (as referred to in Article 51 Sr.) can be regarded as the perpetrator of a criminal offence, if the act can be considered a duly related responsibilities. In the court decisions, such liability is also recognized as the basis of the concept of a legal person as the perpetrator (cf., among others, HR 23 February 1993, NJ 1993, 605, and HR 13 November 2001, NJ 2002, 219).

Nonetheless, in its further development, a very careful author on this issue has recommended that in a case related to offences committed by legal entities, the character of the act should still be considered as well (Leliveld: 2015). Although this point has usually been considered by the judges in their judgments, he wrote, the judges would only mention four criteria of ‘Drijfmest-arrest’ explicitly – and not this basic criteria. Interestingly, this ‘character-of-act’ criteria has apparently been adopted in PERMA No. 13/2016, by stating in Article 4, Paragraph (1), that the corporate criminal liability must be based on a certain specific law.

Four Indications

After it has been established that the character of the act falls under the measures that are set in the legislation, the next question is whether the acts committed by the accused individual(s), given to the related facts, can intrinsically be considered as a liability of the corporation that is connected to the act of that person(s). To that end, Article 4 Paragraph (2) PERMA No. 13/2016 mentions three alternative criteria, namely corporations who (1) gain or benefit from the crime, (2) omit the crime, or (3) did not undertake necessary measures for the prevention.

As addition, there is one other criterion mentioned in Article 3 PERMA No. 13/2016 which is at first glance quite confusing. This article contains a rule with a general definition (any act for, and on behalf of, a corporation, (which is committed) inside and outside of the environment of this corporation, will make the corporation liable), but also a specific criteria which can build this general definition (the act that is committed by a person based on an employment relationship, or based on any other relationships – either individually or jointly).

Article 3 PERMA No. 13/2016

A crime committed by a corporation is a criminal act that is committed by a person based on an employment relationship, or based on any other relationships – either individually or jointly, for and on behalf of the corporation, inside and outside of the environment of corporation.

However, as described above, next to this ‘employment-or-other-relationships’ criteria in Article 3 PERMA No. 13/2016 which can perhaps show a certain form of representation, three other criteria have already been set forth in Article 4 Paragraph (2) PERMA No. 13/2016. Hence, in order to avoid any ambiguity in reading this MA regulation, the last part of Article 3 PERMA No. 13/2016 should be deemed as a general rule.

It means that the corporation can be held liable for a criminal act committed by an individual, if that individual was acting for, or on behalf of, the corporation. When will the conditions be met? There are four indications: (1) benefitting from the crime, (2) omitting the crime, (3) not taking necessary measures to prevent, or (4) having a certain relationship with the individual perpetrator(s).

Although the starting point of the MA regulation is the concept of a representation (which is commonly used in private law), the intention of the writers here is, perhaps, to include any criminal act that can be attributed to the entity (corporation) – as also stated in the ‘Drijfmest-case’. Furthermore, if we look at the third (or rather four) criteria in PERMA No. 13/2016 as an indication to show that the criminal act of an individual can be deemed as falling under the sphere or the legal person, this criteria is similar to the four criteria developed by the HR through ‘Drijfmest-arrest’.

Those four criteria are prescribed by the HR as the indications of an action that is performed ‘in the sphere of the (related) legal person’.

Drijfmest-case (Par. 3.4)

The question then arises when a (forbidden) conduct may reasonably be attributed to a legal person.

The answer to that question depends on the specific circumstances of the case, which also belongs to the nature of the (forbidden) conduct. Therefore, a general rule is hard to formulate. An important landmark in the liability is, however, whether the conduct has occurred or is carried out in the sphere of the legal person. Such a conduct can be attributed, in principle, to the legal person.

A conduct in the sphere of the legal person will be able to exist if one or more of the following circumstances occur(s):

– It is an act or omission of a person who, either by virtue of an employment or any other reasons, has been working on behalf of the legal person,

– The conduct fits into the normal business operations of the legal person,

– The conduct was useful to the legal person in supporting the business carried out by him,

– The legal person was capable to determine whether the conduct was likely to occur, or not, and such a conduct, or a similar conduct, was accepted, or let to be accepted by the legal person in accordance with the factual course of events. It will also fall under ‘accepting’, if (the legal person) did not exercise the due care that could reasonably be required from the legal person to prevent the conduct. In addition, it’s worth noting that the last criteria – as developed in HR 23 February 1954, NJ 1954, 378, and in the event that was an issue in that case, tends to be referred to as “ijzerdraad-criteria” – it might be developed with the intention to cover the functional-perpetration of a natural person (i.e. the criminal liability of a natural person for an act conducted by another natural person), but in some cases it can also be used as criteria for the attribution of a conduct of a natural person to a legal person (cf. HR 14 January 1992, NJ 1992, 413).

In brief, those fourth criteria are (1) the criminal act or omission conducted by an individual, is committed for the interest of the legal person (cf. Article 3 PERMA No. 13/2016), (2) it fits into business activities of the legal person (no comparison in PERMA No. 13/2016), (3) it benefits the legal person in its business (cf. Article 4, Paragraph 2, Sub a, PERMA No. 13/2016), and (4) the legal person is capable to determine whether the act would have been conducted, or not, and such an act, based on the given facts in the related case, has been accepted by the legal person, or at least it can be considered as to be accepted (cf. Article 4, Paragraph 2, Sub b and Sub c, PERMA No. 13/2016).

Comparative Analysis

As we can see, there is a close similarity in the normative framework of both countries. Writer of the MA Regulation has clearly been inspired by the Dutch legal norms. However, as the implementation will be a matter of facts, it is important to consider how the judges in daily practice apply this rule.

As mentioned earlier, there is also an interesting note to the application of this rule in the Netherlands. It has found that while the first criterion (working for, or in behalf, of the corporation) and the third (getting benefits) can theoretically be considered as the weakest, these two criteria are the most applied criteria in the legal practice (Leliveld: 2015). To that end, he suggested, this concept of corporate criminal liability would be more convincing, if the legal considerations based on the second criterion (in compliance with the business activity) and the fourth (the acceptance-criteria) could be more used and clarified. In my view, it will consequently improve legal certainty, as it will also give an opportunity to the related corporation to take preventive measures beforehand.

For the situation in Indonesia, a further research would be needed to study the application of the four criteria as stated in PERMA No. 13/2016. To date, MA has enacted that regulation as a guideline in practice which has been discussed in this article. First, it should be determined whether the act, by its nature, has been set in the legislation as a (criminal) act which the corporation can be held liable for. Secondly, the case shall be tested to the four alternative criteria laid down in PERMA No. 13/2016, i.e. whether the corporation was (1) being represented in the undertaken act, (2) getting benefit from the crime, (3) omitting, or (4) not taking necessary measures for the prevention.

Article 3 PERMA No. 13/2016

A crime committed by a corporation is a criminal act that is committed by a person based on an employment relationship, or based on any other relationships – either individually or jointly, for and on behalf of the corporation, inside and outside of the environment of corporation.

Last but not least, I have noticed a little accident in the translation of the English word ‘environment’, which might originally come from the Dutch word ‘sfeer’. The term itself has already been used in Law No. 31/1999 on Corruption Eradication (see Article 20 Paragraph 2). If one translates it into the Indonesian word ‘lingkungan’, however, it can also be understood as the environment in its physical sense. Therefore, the term could be (wrongly) interpreted to only cover acts that are conducted in the territory of the corporation, while a criminal act which a corporation can be held liable for, can also be committed outside its territory. From this perspective, I can understand why the writer of the MA Regulation also mentioned it that way, but people can argue to object the inclusion of a criminal act that is committed not in the (working) sphere of the corporation.

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