Corporate Criminal Liability under the New Criminal Code (Law No. 1 of 2023)

Corporate crime is a criminal offense committed by a corporation as a result of the actions of its directors or employees, for which the corporation is held liable. These actions are classified as criminal offenses because the behavior of the corporation or employees acting on behalf of the corporation is prohibited by law and punishable by law. [2]

Alongside the origins of the concept of white-collar crime, corporate crime was also classified by American criminologist Edwin Sutherland (1993) as “crimes committed by respectable people of high social status in the course of their work.” The ‘white-collar’ class, or those in positions of respect, have a greater opportunity to concentrate exclusively on corporate crime.[3] Unfortunately, however, most cases that arise are not covered by criminal law, but are treated as civil or administrative offenses.

Since the beginning, there has been debate about who should be held responsible for corporate crime. There is a doctrine of sociates delinguere non potest inherited from the French Revolution and adopted by the old Criminal Code, which considers that corporations or legal entities cannot commit criminal acts, or in other words, that corporations do not have the capacity to be blamed and held accountable. The old Criminal Code also stipulated that the subject of criminal law was only a person in the biological sense (natural person). The “artificial person” nature of corporations meant that they did not have the mens rea to commit a crime.

However, Prof. Muladi said that this outdated doctrine could no longer be upheld because of the wide variety of crimes and their far-reaching impact. The consequences affect not only individuals, but also corporate entities and even countries. [4] Until now, crimes with economic elements have been dealt with under Emergency Law No. 7 of 1955 on Economic Crimes. Therefore, there has long been a desire to, among other things, specifically regulate corporate crimes in the new Criminal Code.

Indonesian law recognizes that progress in the era of globalization has led to the development of organized crime, which also includes corporate actions (organized groups of people and/or wealth), both legal entities and non-legal entities. Legal entities can take the form of limited liability companies, foundations, associations, cooperatives, state-owned enterprises, regionally-owned enterprises, village-owned enterprises, or similar entities. There are also unincorporated associations, or business entities in the form of firms, limited partnerships, or similar entities.

Criminal acts and corporate liability are theoretically divided into two categories, namely:


1. Derivative Liability, where the corporation is liable for the actions of an individual, so that corporate liability is derived from personal liability.

2. Corporate's Fault Liability, where the corporation is liable for its own mistakes or actions.

The Supreme Court has sharply addressed the subject of who can be held liable in corporate crimes (Supreme Court Regulation No. 13 of 2016), namely: (i) the corporation or its board of directors; (ii) the corporation together with its directors; (iii) other parties proven to be involved in the corporate crime. In line with this, the Limited Liability Company Law (Law No. 40 of 2007) stipulates that the Board of Directors and Board of Commissioners are corporate organs that can act on behalf of the company (corporation). The Board of Directors and Board of Commissioners are referred to in Article 1 point 10 of Perma No. 13/2016 as “management” or corporate organs, as stated in the articles of association of a company.

Criminal Liability of Corporations under the Criminal Code (Law No. 1 of 2023)

While the old Indonesian Criminal Code did not recognize corporations as subjects of criminal acts, the new Indonesian Criminal Code or Law No. 1 of 2023 (hereinafter referred to as the “Criminal Code”) does. Criminal law subjects can no longer be limited to natural persons. Article 45 paragraph (1) states that “Corporations are subjects of Criminal Acts.” Therefore, both legal entities and non-legal entities are considered capable of committing criminal acts and can be held accountable under criminal law. After corporate criminal liability was regulated in Book I of the Criminal Code, corporate criminal liability, which previously only applied to certain criminal acts, now applies generally to other criminal acts, both within and outside the Criminal Code.

 

Criminal liability may be borne jointly by the corporation and its officers who hold functional positions, or only its officers may be held criminally liable. Officers who hold functional positions are those who: (i) have the authority to represent the corporation; (ii) make decisions on behalf of the corporation; and (iii) have the authority to supervise the corporation. Officers who may be subject to criminal liability are those who commit criminal acts that benefit the corporation, either as perpetrators or as accomplices within the scope of the corporation's business or work. [5] In this case, this includes corporate controllers, those who give orders, and beneficiaries.

the punishment of corporations must take into account the following (Article 56 of the Criminal Code):

• the level of loss or impact caused;

• the level of involvement of persons who hold functional positions in the corporation and/or have a role as commanders, controllers, and/or beneficial owners of the corporation;

• the duration of the criminal act committed;

• the frequency of criminal acts by the corporation;

• the nature of the criminal offense;

• the involvement of officials;

• the values of law and justice that exist in society;

• the corporation's track record in conducting business or activities;

• the impact of punishment on the corporation; and/or

• the corporation's cooperation in handling criminal acts.

Criminal penalties for corporations consist of principal penalties and additional penalties (Article 118 of the Criminal Code). Principal penalties take the form of fines that must be paid within a certain period of time and may be paid in installments, in accordance with the court's decision (Article 122 of the Criminal Code). If the fine is not paid, the corporation's assets or income may be seized and auctioned by the prosecutor to pay off the debt. If the proceeds from the seizure/auction are insufficient to settle the debt, the corporation will be subject to a substitute penalty in the form of the suspension of some or all of its business activities.

Meanwhile, additional penalties for corporations include: (a) payment of compensation; (b) remediation of the consequences of the criminal act; (c) fulfillment of neglected obligations; (d) fulfillment of customary obligations; (e) financing of job training; (f) confiscation of goods or profits obtained from the criminal act; (g) announcement of the court decision; (h) revocation of certain licenses; (i) permanent prohibition from performing certain acts; (j) closure of all or part of the corporation's business premises and/or activities; (k) suspension of all or part of the corporation's business activities; and (l) dissolution of the corporation.

Additional penalties for revocation of licenses, closure and freezing of business premises shall be imposed for a maximum period of 2 years. Meanwhile, if the corporation fails to carry out the additional penalties referred to in points (a) to (e) above, the corporation's assets may be seized and auctioned by the prosecutor.

In addition to criminal penalties, administrative sanctions may also be imposed on the corporation, based on the corporation's misconduct identified from the misconduct of its functionally responsible officers. The measures that may be imposed on corporations are regulated in Article 123 of the Criminal Code, namely: (a) takeover of the corporation; (b) placement under supervision; and/or (c) placement of the corporation under guardianship.

Thus, Indonesian law now regulates corporate criminal liability. The clauses in the 2023 Criminal Code have reinforced Perma No. 13/2016. Corporate criminals can no longer evade punishment through the old view that considers their violations as a “part of the work environment” that is appropriate and legal.

However, the principles of punishment for corporate crimes that have just emerged in the Criminal Code do not immediately solve the problem. The challenges remain almost the same, both in Indonesia and around the world, namely:

 

• new and organized crimes (including corporate crimes) will continue to evolve, outpacing the speed at which regulations are developed.

• law enforcement agencies and state apparatus have limited resources, compared to the potentially unlimited resources of corporations.

• there is still no widespread awareness of the impact of corporate crime, which can be more destructive and widespread than traditional crime;

• crimes that are treated as mere civil or administrative violations mean that perpetrators who are punished are not ashamed or deterred, and even continue to classify themselves as 'respectable people.'

 

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Law Number 1 of 2023 concerning the Criminal Code; LN RI Year 2023, Number 1, January 2, 2023.

Supreme Court Regulation No. 13 of 2016.

Law No. 40 of 2007 concerning Limited Liability Companies in conjunction with Government Regulation in Lieu of Law (Perpu) No. 2 of 2022 concerning the Job Creation Perpu.