New rules for liability for environmental crimes necessitate a review of compliance policies in companies
In a few days, the Act of 22 July 2022 Amending Certain Acts to Combat Environmental Offences will enter into force. It changes the rules of liability for commission of offences by corporate entities. Prosecutors in Poland will no longer have to obtain a conviction of a natural person affiliated with a corporate entity before pursuing criminal charges against the corporate entity. This removes the main practical obstacle which has made it extremely rate for law enforcement to seek to hold companies criminally liable. As a result of the changes, we expect a larger number of criminal proceedings against companies. Environmental compliance is a solution for reducing this risk.
Violation of environmental protection regulations creates a risk of administrative and criminal liability for businesses. However, the risk of criminal liability has not been very realistic, as it has not been enforced in practice (each year, there have been only a handful of such proceedings, primarily involving tax offences, and the penalties imposed have not exceeded a few thousand zlotys). The new law, as well as the increasing public interest in environmental issues, in particular in connection with the environmental disaster on the Oder River in the summer of 2022, will probably change this state of affairs.
Under what rules can collective entities be liable for environmental crimes?
Environmental crimes are defined in the Criminal Code and a number of other industry regulations. Criminal liability is primarily borne by the immediate perpetrators: natural persons. Additionally, collective entities (partnerships, companies, associations, etc) may also be liable for criminal offences. Such liability is dependent on fulfilment of several prerequisites, as we discussed in more detail in our brochure last year. The Act on Liability of Collective Entities for Punishable Offences specifies the types of offences for which collective entities can be liable. This means they can be liable only for certain offences committed by a natural person affiliated with the collective entity, and the entity must have actually or potentially benefited from the offence. Liability of the collective entity also depends on demonstrating that the crime occurred as a result of a lack of diligence in selection, supervision or organisation within the collective entity. Finally, holding a corporate entity criminally liable requires a prior conviction of a natural person or one of several comparable rulings (conditional discontinuance of proceedings, permission to voluntarily submit to liability, or discontinuance of the proceedings due to circumstances excluding punishment of the perpetrator). The new act repeals the prerequisite of prior conviction of an individual in the case of environmental crimes.
Environmental compliance—a tool for managing the risk of legal liability and reputational damage
As prosecution of a collective entity for environmental offences will no longer be dependent on a prior ruling against a natural person affiliated with the entity, it will become much easier to prosecute companies. It is expected that the amendment will reverse the current trend, so in the face of harsher penalties, companies should prepare accordingly and minimise the risk of misconduct that could result in being held criminally liable.
The first recommended step is to conduct a meticulous risk analysis and verify whether the company is properly implementing its obligations under environmental laws. Depending on the nature of the business, the audit should specifically cover waste, water and sewage management, as well as the handling of hazardous substances. Taking such measures is essential to identify critical areas of the company’s activity for liability risks (such as risk of environmental damage, or international waste shipments). If violations are identified that could result in corporate liability, they can then be eliminated efficiently and thoughtfully, thus mitigating the risk of severe liability for the company.
This is particularly relevant in the case of businesses involved in collection or processing of waste or operation of installations requiring a permit, as imposition of a fine for commission of environmental offences under the Act on Liability of Collective Entities for Punishable Offences is grounds for mandatory refusal to issue such a permit.
Furthermore, the company should have a compliance system in place to ensure that its operations comply with environmental laws and prevent the occurrence of irregularities. The system should be designed so that the entity can identify possible risks on an ongoing basis and respond to them accordingly. In this respect, it is vital to verify whether the measures are effective at preventing commission of environmental offences.
In each organisation, for the compliance policy to be implemented correctly and to remain valid at all times, the company should establish a compliance function, i.e. appoint people responsible for this area, tasked with implementing and updating procedures. It is not enough that solutions exist formally, if they do not translate into the company’s practice. If criminal proceedings are brought against a collective entity, more and more often law enforcement authorities will verify whether the established rules were actually applied. Therefore, it is essential to develop an organisational culture focused on compliance with the rules. Training is important, as well as an emphasis by managers on the importance of the compliance system—setting the tone from the top. Especially for larger organisations, the operation of internal control mechanisms in the environmental area will be crucial. Independent audits can also be useful, taking a fresh look at the procedures in place at the organisation.
It is no less important for the organisation to have procedures in place to ensure that positions are filled by persons competent to perform specific tasks and there is adequate internal supervision over their performance.
It cannot be ruled out that the internal organisation of the entity may even unintentionally foster the commission of environmental offences and benefitting from them. Meanwhile, law enforcement agencies are increasingly analysing mechanisms for operation of organisations, with a particular emphasis on rules for promotions and incentives. For this reason, corporate entities must ensure that they do not create an atmosphere facilitating the perpetration of various violations.
Internal documents should also precisely define individuals’ duties and responsibility for occurrence of certain violations. The set of natural persons who can be held liable within a collective entity is broad, so it is important to precisely define the care that must be demonstrated by selected employees.
Companies should also consider introducing whistleblowing systems. While establishing a formal whistleblowing practice is not yet required in Poland, as work is still underway on the Whistleblower Protection Act, undoubtedly such a system can already help effectively identify irregularities that may constitute a criminal offence. Finally, companies should be prepared to respond if action is taken by law enforcement authorities, such as an unannounced search (dawn raid), or the need to mount an immediate defence against interim measures (e.g. securing property). One of the steps that can be taken for this purpose is to introduce a dawn raid policy.
A fine is not everything
Fines are not the only sanctions that can be imposed if a collective entity is held criminally liable. The act provides for a broad catalogue of such measures: a ban on promotion and advertising, a ban on manufacturing or selling specific products or providing specific services, ineligibility for grants, subsidies and other support from public funds, a ban on bidding for public contracts, or publication of the judgment. Special laws also provide for further sanctions. Holding both the company and persons affiliated with it liable will preclude the possibility of obtaining:
- An integrated permit
- A permit for introduction of gases and dust into the air
- A waste generation permit
- A waste collection permit
- A waste processing permit.
An application for such permits must be accompanied by criminal record certificates confirming that the operator of the installation, the collective entity or persons affiliated with it have not previously been held criminally liable for environmental offences. As long as such entities are listed in the National Criminal Register as being punished, the competent authority will refuse to issue a permit. In this context, it should also be noted that, for example, in the case of a conditional discontinuance of proceedings against an entity, it can still obtain a clean criminal record certificate, as a sanction has not been imposed. Finally, punishment of a collective entity may also be a reason for the Chief Inspector of Environmental Protection to object to a planned international shipment of waste, if the given company carries out such activities.
Summary
The upcoming expansion of liability and harsher penalties for environmental crimes need not mean a worse situation for collective entities. It is important to exercise extreme caution and effectively identify areas of operation with a higher risk of occurrence of environmental violations. After all, the purpose of the changes is first and foremost to prevent environmentally harmful activities, and only secondarily to effectively prosecute the perpetrator. Ongoing, skilful monitoring of sensitive areas of the company’s operations, using well-thought-out procedures, should ensure that the company pursues its business in compliance with applicable laws.
Paulina Wojtkowska, Environment practice, Wardyński & Partners
