Applying the principle of corporate criminal liability
National laws generally avoid the question of how to deal with offences committed by a corporation which is part of a group of companies. 1 Although subsidiary companies own themselves, exercise operational autonomy and are able to finance themselves, they are by definition financially dominated by the parent company which owns most or nearly all of their capital. 2 As a result, they are often de facto deprived of all decision-making power. The parent company, however, can deny responsibility for crimes committed by its subsidiary under the pretext that it cannot be held “vicariously criminally liable”. 3
Faced with the frequent disconnect between law (the development of independent legal entities) and reality (the lack of independence- i.e. autonomous management power- among legal persons created by a parent company) it is important to pierce the corporate veil surrounding a subsidiary’s legal personhood and hold the parent company (ies) liable for the actions of its/their subsidiaries, to the extent that the subordination of the latter to the former is significant. 4
In situations where several legal entities, for example a parent company, its subsidiaries and their subcontractors, acted together, each making a gain from the offence, one should consider the overlapping criminal liability of the several legal persons under the concept of complicity. 5 A parent company can be charged with complicity for acts committed abroad by a subsidiary in situations where “the parent company provides indispensable or accessory assistance to commit the offence and the assistance is provided to accomplish its goals or defend its interests or if the acts are carried out on the parent company’s behalf […].” 6 In this case, the subsidiary is not necessarily relieved of all liability because, “as a rule, an illegal order from a superior is not a justification or excuse, unless the subsidiary can establish its non-liability by proving that it was under moral constraint.” 7 If on the other hand the interference of the multinational’s parent company in the management of its subsidiaries is minimal, the distinction between the various legal persons will limit the charges of co-liability against the parent company. In each case, the facts must be evaluated.
To establish a parent company’s criminal liability for crimes committed by its subsidiaries and subcontractors abroad, an adequate causal link must be established between the mode of participation and the Commission of the predicate offence.
Complaints filed in France against Lafarge
In October 2016, following media reporting about French multinational cement company Lafarge’s continuous presence in terrorist-controlled areas of Syria, the French Ministry for the Economy and Finance made a referral of the case to the prosecutor. The facts indicated that the company Lafarge had maintained its operations in Syria, in an area controlled by the Islamic State. Whereas the European Union had banned the purchase of oil in the country and for Lafarge, Lafarge was suspected of having conducted business with the Islamic State and paid intermediaries to receive commodities to sustain the operation of its facilities.
One month later, in November 2016, 11 former Syrian employees and two NGOs, Sherpa and ECCHR, filed a criminal complaint against the cement company for alleged violations committed in Syria by its subsidiary, Lafarge Cement Syria (LCS), and against three of its executives. In 2012, when the civil war was raging in the country, especially in the areas of Raqqa and Aleppo, Lafarge decided to repatriate its expatriate employees but the Syrian employees had to stay to continue running the plant. By doing so, the company refused to suspend its activities and allegedly paid compensation to jihadist groups.
After the opening of judicial investigations, some executives were indicted for “financing of terrorism” and “reckless endangerment”, in Decemer 2017. In June 2018, the company Lafarge SA, as a legal person, was indicted for the same offences and for complicity of crimes against humanity.
In November 2019, the Examining Chamber of the Paris Court of Appeal rejected the charges of complicity of crimes against humanity, but upheld the indictment for financing of terrorism.
In a distinct decision issued in October 2019, the Examining Chamber denied the NGOs of their legal interest in the legal proceedings. The two NGOs (Sherpa and the ECCHR) filed an appeal to the Supreme Court (Cour de Cassation) against this decision.
Prosecuting multinational corporations for serious crimes that affect humanity as a whole would help, on the one hand, to put an end to their impunity, but also, on the other hand, to balance the relationship between resource-rich countries and those that exploit them and, in so doing, to restore confidence in international justice. The Lafarge case could create an important precedent for multinationals that continue to participate in economic activities around armed conflicts and help establish a criminal aspect to the duty of care doctrine (see link to part on civil). This case also demonstrates the current movement towards prosecution and conviction of the parent company for acts committed by one of its subsidiaries.
The parent company, however, can attempt to deny responsibility for crimes committed by its subsidiary under the pretext that it cannot be held “vicariously criminally liable”.