1 Introduction to the legal framework and relief channels regarding the prohibition of commercial bribery in Italy Presentation by Raffaele Caldarone NCTM - Studio Legale Associato Italy

2 Commercial bribery in general Commercial bribery, specifically the bribery of government officials by commercial entities, results in considerable economic harm for developing and developed nations alike Bribery distorts market competition, instills inefficiency into economic transactions, impedes the development of international commercial relationships, and undermines public confidence in democratic governance

3 Commercial bribery in Italy - Overview of the law In Italy prosecution of commercial bribery refers mainly to cases of corruption vis-à-vis a public administration official or a person entrusted of a public service (here both defined as “public agent”) Corruption is punished by law both with criminal sanctions to individuals (physical persons) and so called “administrative” (but actually criminal) sanctions to legal persons One single case of corporate crime concerns commercial bribery of certain specific company (non-public agent) officers (see below)

4 Commercial bribery in Italy - Overview of the law Identification of “public administration” (and consequently of “public agent”) is particularly difficult since the notion qualifies on a “functional” basis (i.e. on the basis of the functions exercised by the individual concerned) As a consequence a public agent may often exist within a corporation which may apparently have nothing to do with the public administration It is for instance the case of companies rendering public services or engaged in business having relevance to the public or owned/controlled by the government

5 Commercial bribery in Italy - Overview of the law In corruption of a public agent or a company officer sanctions are provided both for the corruptor (private person) and the corrupted (public agent or company officer) Corruption is further differently treated whether bound to the commission of an act of the office or contrary to the duties of the office: in the first case basis sanctions for individuals are imprisonment from 6 months to 3 years, in the second case from 2 to 5 years Sanctions include confiscation of the crime proceeds

6 Commercial bribery in Italy - Overview of the law Several aggravating circumstances are provided: one regards the case where the stipulation of a contract with the public administration is involved A special type of corruption is provided when judicial activities are involved Inducement to or inchoate corruption are either prohibited and punished

7 Commercial bribery in Italy - Overview of the law Other behaviors such as concussion (i.e. the extortion of the public administrator who, abusing of his capacity or powers, forces or induces someone to grant him money or other benefits) or aggravated fraud against the State or embezzlement against the State or undue obtainment of grants in prejudice of the State are either prosecuted as crimes Corruption, concussion and inducement to corruption are either prohibited vis-à-vis members of the European Community and functionaries of of the EC and of foreign States The above extension derives from the Italian compliance to the OECD Convention signed in Paris in 1997 to prevent international corruption

8 Commercial bribery in Italy - Overview of the law One specific corporate crime concerns private bribery (i.e. bribery committed by company officers not belonging to the public administration) The crime may be committed by a limited number of company officers: directors, general managers (CEO), managers responsible for preparation of accounting and corporate documents (CFO of listed companies), statutory auditors, liquidators, external auditors The above mentioned officers must commit or omit acts in violation of the duties inherent to their office procuring prejudice to their company versus the grant or promise of any benefit from third parties Sanctions provided are the imprisonment up to three years The same sanctions apply both to the corruptor and the corrupted person The crime is so far provided with respect to individuals only. Hence legal persons who may be acting as corruptors of company officers are not yet punished due to this crime

9 Commercial bribery in Italy - Overview of the law Another case of commercial bribery treated as a crime in Italy is the behavior of those who interfere with and alter the course of a public tender Any understanding between participants in a public tender or other behavior of any of those participants designed to determine an alteration of the outcome of the tender is punished by criminal law An important implication of commercial bribery is money laundering which is often connected with the availability or transfer of funds required to bribe Anti-money laundering provisions in Italy are currently present in the criminal code and a large number of specific prescriptions are ruled by special acts that classes of financial and commercial traders are required to apply

10 Commercial bribery in Italy - Overview of the law From a civil law perspective, a sentence for crime - i.e. for an illicit - always entitles in Italy the victim(s) of the crime to damages Damage and the entity thereof have to be proved by the claimant Commercial bribery is not considered relevant for strict antitrust purposes both from the perspective of the abuse of dominant position or the proscribed understandings Courts have in some (but not all) cases sentenced violations of public law rules - including commercial bribery - as unfair competition due to the alteration of equal market conditions and the infringement of professional fairness

11 Introduction to legal person liability act Legislative Decree no. 231 of 8th June, 2001 (hereafter: “Act no. 231/2001”) introduces into the Italian legal system a liability of companies deriving from crimes committed by individuals Also this legislation derives from the compliance of Italy to the OECD 1997 Paris Convention to prevent international corruption The liability, defined as a “administrative”, is similar to a criminal liability because it:  derives from an offence  is verified by means of criminal proceedings  implies the application of particularly severe sanctions

12 Italian corporate “administrative” liability Pursuant to the provisions of Sect. 5 of the Act no. 231/2001: a company is liable for offences committed in its own interest or advantage by an individual: who holds a representative, administrative, managerial (or similar) position in the company (“apical” officers) subordinate to the management or supervision of one of the apical subjects (“officers subject to supervision”) a company cannot be held liable if the aforementioned individuals acted on their own behalf or in the interest of a third party

13 Offences A company may be held liable only for offences, committed in its own interest or advantage, listed in the Act no. 231/2001, belonging to the following general categories: 1.Offences against the public administration 2.Offences against the public relief 3.Corporate crimes 4.Offences concerned with terrorism or the subversion of democracy 5.Offences against individuals 6.Market abuse crimes and other offences 7.Offences against life and individual personality 8.Transnational organized crimes 9.Manslaughter and non-intentional serious and very serious injuries arising from the breach of laws against injuries at work 10.Information technology and data protection crimes 11.Offences committed by organized criminality 12.Offences against manufacturing and trading activities 13.Intellectual property crimes 14.Inducement to render false or not to render declarations to judicial authorities

14 Offences committed abroad A company based in Italy may be deemed liable in Italy and sanctioned by Italian Courts pursuant to Sect. 4 of Act no. 231/2001 even due to criminal offences committed abroad The above is subject to the occurrence of the general conditions required by the same Act for offences committed in Italy and provided that the State were the offences were committed does not prosecute the company

15 Sanctions The sanctions, tuned on the basis of the type of offence and the relevance of the criminal behavior, are: 1)Financial sanctions 2)Disqualification (temporary or definitive prevention to carry-on business activities affected by the violation) 3)Confiscation 4)Publication of the judgement

16 Organizational, Management and Control Model Liability Exemption (Sect. 6 Act no. 231/2001) Pursuant to Sect. 6 of Act no. 231/01, the company is not liable if it proves that: a)It has adopted and effectively implemented, before the commission of the offence, a specific compliance program (Organizational, Management and Control Model) suitable to the prevention of offences of the same kind of those occurred b)It has appointed a specific internal body/committee with autonomous powers of action and control to supervise the operation and observance and cure the updating of the above mentioned program c)In case of violation committed by “apical” officers, they have fraudulently avoided to comply with the Organizational, Management and Control Model d)The internal body/committee has not failed in supervising the operation, observance of the program