Journal of Internet Banking and Commerce ISSN: 1204-5357
ISSN: 1204-5357
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The research analyses the rules applied to release from criminal liability within a context of economic activity and economic relationships. The research presents the conditions under which release from criminal liability in such cases is possible, as well as the peculiarities of its implementation. The article provides the analysis of legislations of various countries, including countries of common law (US, UK) and countries of civil law (Germany, France, Spain, Sweden, China, South Korea, etc.). Particular attention is brought to the related laws of the Commonwealth of Independent States (Russia,Belarus, Ukraine, Kazakhstan, etc.) and former CIS countries (Georgia).
Keywords |
| Criminal Law; Release from Criminal Liability; Economic Crimes; Tax Crimes |
INTRODUCTION |
| Crimes in the sphere of economic activity have a long background. At every stage such criminal activity had its own characteristics which have been associated not only with the level of socioeconomic development of a country, but also with the features of a national legal system. In this regard, various states` regulations concerning release from criminal liability in cases of crimes in the sphere of economic activity are of particular interest. |
| It should be noted that legislations of the majority states do not provide for the two independent institutions such as the institution on release from criminal liability and the institution on release from punishment, as it is customary in Russia and countries of the former socialist camp. Therefore, in this research we mainly focus on the types of release from punishment or release from prosecution. |
COUNTRIES OF COMMON LAW |
| There is no single code of criminal law in the United Kingdom. Its norms are formed by the precedents and legal acts (statutes) on the criminal law. Such statutes also regulate the institution of release from criminal liability. |
| In 1973, the Powers of Criminal Courts Act added the concept of “compensation order” to the British legislative system. The Act allows victims to claim compensation for damages caused by a defendant [1]. |
| Later, Article 67 of the Criminal Justice Act, 1982 provided for the possibility to use a compensation order as a sole sanction to an accused, replacing criminal penalties in such manner [2]. Thus, if such order is not used in a criminal case, a court should indicate the reasons why it did not happen [3]. |
| Today these Acts are replaced by the Powers of Criminal Courts (Sentencing) Act, articles 130-134 which govern compensation orders [4]. |
| According to this Act, English courts do not have any restrictions on the amount of compensation and they are guided only by the circumstances of the case and evidences submitted by the parties. However, the amount of compensation may not exceed the amount of the damage, and compensation shall not exceed 5,000 pounds in case of hearing of a case in a magistrates` court (subsection 1 of the section 131 of the Powers of Criminal Courts) [4]. |
| At the same time, the court may impose a fine to the state revenue along with the compensation. If a court has any reason to believe that the financial position of the accused does not allow him/her to pay a fine and compensation properly, preference should be given to compensation. |
| The victim is not deprived of the right to claim damages in civil litigation proceedings, but in that case is subject to compensation of only the amount in excess of the amount of compensation received in the criminal case. |
| Compensation shall be paid not directly to the victim, but through the court. Victims cannot receive compensation while any possibilities for appeal against a decision of the court exist, because a higher court may change the amount of compensation or even cancel it. |
| Talking about the experience of the United States, it should be noted that in view of the federal structure of the USA, criminal law is under the joint management of the individual states and the country as a whole. It is also noteworthy that the judicial precedent has lost its importance in the US in the criminal justice because all 50 states have their own penal codes. At the federal level Congress passes acts that later incorporate into the United States Code, Title 18 of which concerns “Crimes and Criminal Procedure”. This federal law applies to crimes occurring in several states or affecting the interests of the entire country. |
| Furthermore, there is a widespread Model Penal Code developed in 1962 by the American Law Institute and adopted as the current code in some states [5-7]. |
| The Model Penal Code contains such grounds for release from liability as mental defect or deficiency and age below the age of criminal discretion. |
| United States Code also has no special rules for release from criminal liability, but it is noteworthy that Title 26 of the Code contains legal propositions in tax law. The fact is that violation of tax legislation may be considered in the criminal, administrative or civil proceedings, and US law machinery has the power to determine in each case the way to sue the person liable for the tax offenses [8]. |
| Nevertheless, in the case of the initiation of criminal proceedings, the offender shall bear criminal responsibility in the form of fine or imprisonment. His/her positive conduct after the completed offence may only be considered for the purpose of mitigation of the sentence [9]. |
COUNTRIES OF CIVIL LAW |
| German Penal Code, adopted in 1871 and which is in effect to the present day, contains the general rule where under a court may mitigate the sentence or abstain from its imposition if the accused “in an effort to achieve reconciliation with the victim (offender-victim mediation), has made full restitution or the major part thereof for his offence, or has earnestly tried to make restitution” or “in a case in which making restitution for the harm caused required substantial personal services or personal sacrifice on his part, has made full compensation or the major part thereof to the victim” [10]. |
| At the same time there are a number of conditions: the sentence for the alleged crime should be the “imprisonment not exceeding one year or a fine not exceeding three hundred and sixty daily units” [10], and the costs of the proceedings shall be on the account of the accused. |
| Some sections of the Code governing individual offences contain special rules with the conditions of the release from punishment (Section 149 “Preparatory acts” (to counterfeit money or stamps); Section 261 “Money laundering; hiding unlawfully obtained financial benefits”). |
| According to Section 153a of the German Criminal Procedure Code, in a case of a misdemeanor (an offence punishable by imprisonment of up to one year or by a milder penalty), the public prosecution office may, with the consent of the accused and of the court competent to order the opening of the main proceedings, discharge the accused at the same time imposing upon the accused any obligations such as reparation of harm caused, payment of compensation to the victims, payment to a non-profit institution or to the Treasury etc. [1,11]. |
| The criminal codes of France and Austria provide for the rules on release from punishment which have an effect in case of complete and voluntary abandonment of the criminal purpose. French Criminal Code contains such rule in the general part of the Code (Article 132-59), the Criminal Code of Austria contains it directly in the section on offences in the sphere of property (Section 6, Paragraph 167). However, release from punishment in France can be made even after the beginning of the criminal proceedings, ”where it appears that the reintegration of the guilty party has been achieved, that the damage caused has been made good and that the public disturbance generated by the offence has ceased” [12]. But as for Austria, release from punishment takes place only if the accused has compensated the damage to the victim at the time of surrender or before the law machinery learns about the crime [13]. |
| In some cases the Criminal Code of Sweden provides an opportunity to avoid punishment. Chapter 14 of the Criminal Code of Sweden governing crimes on falsification, destruction or illegal disposal of money, documents and securities, contains Section 11 which states that “a person, who has incurred criminal responsibility under the above provisions of this Chapter, but voluntarily and before any considerable inconvenience has arisen has averted in the matter of proof the jeopardy presented by the act, may be sentenced to a lesser punishment than that provided for the crime. No punishment shall be imposed if the danger occasioned by the act was slight and the punishment provided for the act does not exceed imprisonment for one year” [14]. |
| The limit of one year in prison, as a condition for release from punishment, is not so strict taking into account the fact that the maximum sentence according to the Criminal Code of Sweden is 10 years (except for life imprisonment). |
| In Spain, there is a criminal responsibility for non-payment of taxes and various fees and charges, as well as for falsification of tax information in order to reduce the tax or to obtain subsidies (Articles 305, 307, 308 of the Spain Criminal Code). It is also possible to release the accused from liability in case of the commission of these crimes if the accused reimbursed all illegal sums before he is notified of commencement of the inspection or control operations of the relevant tax authority or, “in the event of those actions not having taken place, before the Public Prosecutor, the State Attorney or a representative of the Administration of the Autonomous Community or of the City Council concerned having filed a suit or arraignment against him” [15]. |
| According to the Criminal Code of Switzerland the accused may be released from criminal liability in cases concerning a number of economic crimes (Article 163 “Bankruptcy and debt collection felonies or misdemeanours. Fraudulent bankruptcy and fraud against seizure”, Article 164 “Reduction of assets to the prejudice of creditors”, Article 165 “Mismanagement”, Article 166 “Failure to keep proper accounts”, Article 167 “Undue preference to creditors”). |
| Thus, according to Article 171 of the Criminal Code of Switzerland, “if the debtor or a third party in terms of Articles 163 paragraph 2 and 164 paragraph 2 has made special efforts in economic terms and as a result facilitated the adoption of a judicial composition agreement, the competent authority may waive any prosecution, referral to court or the imposition of a penalty” [16]. |
| Chinese Criminal Code contains a legal provision on release from punishment for “minor crimes”. According to the Article 37 of the Chinese Criminal Code a person committed a crime which circumstances are minor and do not require criminal punishment “may, depending on the different circumstances of the case, be reprimanded or ordered to make a statement of repentance, offer an apology or pay compensation for the losses, or be subjected to administrative penalty or administrative sanctions by the competent department” [17]. |
| The prosecutor's office can make a decision to withdraw charges under the conditions prescribed by law [18]. However, the Code does not specify the criteria to determine the category of minor crimes and that makes the situation more complicated taking into account the number of crimes (including the crimes in the economic sphere) which are punishable by death penalty and which, thus, cannot be related to the minor crimes. |
| In accordance with Article 213 of the Korean Criminal Code the punishment for counterfeiting (Article 207) “shall be mitigated or remitted if self-denunciation is made before the commission of the intended crime” [19]. Similar stipulations exist for some other crimes, but it is noteworthy that such stipulations are actually a duplication of the general rule of voluntary renunciation which is contained in the Article 26: “when a person voluntarily ceases his criminal act which he began or prevents the result of the culmination thereof, the punishments shall be mitigated or remitted” [19]. |
COMMONWEALTH OF INDEPENDENT STATES |
| There is a particular interest in the criminal legislation of member states of the Commonwealth of Independent States (CIS). The criminal laws of each state are based upon common principles yet each member state has taken its own vector of development. |
| The Criminal Code of the Russian Federation contains Article 76.1 “Release from criminal liability in cases of crimes in the sphere of economic activity”. |
| Part 1 of Article 76.1 of the Russian Criminal Code establishes the grounds for release from criminal liability in cases of crimes in the sphere of taxation. Such crimes are provided by the Articles 198-199.1 of the Criminal Code. First of all, it is worth noting that Articles 198 and 199 of the Criminal Code contain special rules concerning the grounds for release from criminal liability in cases of mentioned crimes. In other words, these special provisions were virtually copied to the general part of the Code. |
| According to the content of the Part 1 of Article 76.1 of the Criminal Code, there are two following conditions for release from criminal liability: |
| • The crime is committed for the first time; |
| • The damage inflicted upon the budget system of the Russian Federation as a result of the offence is fully repaired. |
| The damage inflicted upon the budget system of the Russian Federation means payment in full of arrears in the amount fixed by tax authorities in the effective decision on calling to account; of appropriate penalties; of fines in the amount fixed in compliance with the Tax Code of the Russian Federation [20]. |
| It is also noteworthy that release from liability by the Part 1 of Article 76.1 of the Criminal Code is only possible before setting the date of the trial and it significantly narrows the possibility of using this rule. |
| Part 2 of Article 76.1 of the Criminal Code applies to 21 crimes of Chapter 22 of the Criminal Code which governs the crimes in the sphere of economic activity. |
| This rule establishes three imperative conditions for release from liability: |
| • the crime is committed for the first time; |
| • the accused has repaired the damage caused to a citizen, organization or the State as a result of making the offence and has remitted to the federal budget the pecuniary compensation, which is five times as much as the amount of the caused damage, or has remitted to the federal budget the income derived as a result of making the crime and the pecuniary compensation which is five times as much the amount of the income derived as a result of making the crime. |
| In the summer of 2015, Article 76.1 of the Criminal Code was supplemented by Part 3 which added new grounds for release from criminal liability. |
| This provision was adopted as a part of the campaign of combating offshore companies which cause damage to the Russian economy. Part 3 of Article 76.1 of the Code provides for the release from criminal liability in cases of crimes in connection with tax or customs duties evasion (Articles 194, 198-199.2) and non-return of funds in foreign currency from abroad (Article 193). |
| The main conditions for release from liability are: |
| • The crime is committed before January 1, 2015; |
| • The offender is a declarant or a person, the information on whom is contained in a special declaration filed within the period from July 1, 2015 to June 30, 2016 in accordance with the Federal Law “On voluntary declaration of assets and bank accounts/deposits by individuals and on introducing amendments to certain legislative acts of the Russian Federation”. |
| Besides, in the Criminal Code of the Russian Federation there are special rules for release from criminal liability in cases of crimes concerning crime cartels (Article 178), bribery in the sphere of professional sports and commercial competitions (Article 184), smuggling of cash or monetary instruments (Article 200.1). These rules provide much more lenient conditions for release from liability (for example, the condition of extortion in respect of the accused or the condition of voluntary reporting of a crime earlier than other joint offenders). |
| Along with the general grounds for release from criminal liability such as “complete and voluntary abandonment of the criminal purpose” and “settlement of a case with the injured party” which are contained in the criminal codes of most countries of the former USSR, the Belarus Criminal Code contains Article 88.1 which provides for “release from criminal liability in connection with the voluntary compensation of damages (harm), the payment of income received by criminal way” [21]. |
| According to this Article, passed in 2005, “a person who commits a crime which caused damage to the public property or property of a legal entity with state owned stake in its authorized capital, or a crime which caused substantial damage to the state or public interests without infringement on life or health of people, can be released from criminal liability in the order established by the legislative act, if such person voluntarily has compensated damages (harm), paid the income received by criminal way, as well as fulfilled other conditions for release from criminal liability provided for in the legislative act”. |
| It is noteworthy that the application of this provision does not depend on the will of the investigating authorities or the court, and it is possible only in the case of appeal of the accused to the President of the Republic of Belarus with the request for release from liability [22]. |
| According to Note to Article 235 (Money laundering), “a person involved in money laundering shall be released from criminal liability if such person voluntarily reported of his actions and facilitated the identification of the crime [21]. |
| A similar rule is contained in the previous Criminal Code of the Republic of Kazakhstan of 1997 and passed unchanged into the new Criminal Code adopted in 2014 (Note to Article 218) [23]. |
| Besides, Chapter 8 of the Criminal Code of Kazakhstan governing crimes in the sphere of economic activity includes such an offense as “the creation and management of financial (investment) pyramid” (Article 217). Note to this article also provides for the release from liability for the accused who voluntarily reported about aiding in creation of financial pyramids or about managing a pyramid or its structural subdivisions, and actively facilitated the uncovering and suppression of its activity. |
| According to Article 236 of the Criminal Code of the Republic of Kazakhstan (Customs duties and tax evasion) which is most similar in its content to the Russian legislation, “a person who voluntarily paid the amount of arrears, accrued interest, and penalties established by the legislation of the Republic of Kazakhstan, shall be released from criminal liability according to the first part of this article, if his actions do not contain elements of another crime” [23]. |
| The Criminal Code of Ukraine also contains provisions largely similar to Articles 198 and 199 of the Russian Criminal Code. According to paragraph 4 of Article 212 (Evasion of taxes, duties or other compulsory payments) of the Ukraine Criminal Code “a person who committed a crime provided for by paragraph 1, 2 or 3 of this Article shall be discharged from criminal liability if he/she paid taxes, duties (compulsory payments) and indemnified the State for the damage caused by late payment (fiscal penalties, fines) prior to the institution of a criminal case against him/her” [24]. |
| According to paragraph 4 of Article 212.1 of the Criminal Code of Ukraine (Evasion of payment of premiums on obligatory state pension insurance), “a person who committed a crime provided for by paragraph 1 or 2 of this Article for the first time shall be discharged from criminal liability if he/she paid insurance payments on obligatory state pension insurance and indemnified the State for the damage caused by late payment (fiscal penalties, fines) prior to the institution of a criminal case against him/her)” [24]. |
| Release from criminal liability for tax and duties evasion is provided for by Note to Article 292 of the Tajikistan Criminal Code, which establishes a specific time period within which the accused shall pay the full amount of taxes and duties, interest and penalties: 30 days since the date of the respective decision of the tax authority if the crime is committed for the first time; and 20 days since the same date in the case of the second commission of this crime [25]. |
| According to Note to Article 262 of the Criminal Code of Tajikistan, “a person who took part in legalization of illegal incomes shall be released from criminal liability if he/she assisted in exposing the crime and voluntarily handed over illegally obtained incomes” [25]. It is noteworthy that, in contrast to the similar rules of the Criminal Codes of Kazakhstan and Belarus, there is a necessary condition for release from liability in Tajikistan such as the payment of the income illegally received. |
| According to the notes to the relevant articles of the Azerbaijan Criminal Code, the full compensation of damages is the sole condition for release from criminal liability for customs duties evasion (Article 209) and tax evasion (Article 213) [26]. |
| The Criminal Code of the Kyrgyz Republic provides for the special rules on release from liability for the crimes in the sphere of economic activity such as smuggling (Article 204) and evasion of customs duties, taxes and mandatory insurance contributions (Articles 210-213) [8]. In case of voluntary payment of a tax debt (or due customs payments), including interest and penalties, the accused may be released from criminal liability at any stage of the criminal proceedings. With respect to smuggling, it also needs to have been committed for the first time and there shall have been the customs declaring procedure of the contraband [27]. |
| The Criminal Code of Georgia which quit the CIS in 2009 provides for release from liability for the persons who voluntarily reported to the authorities that he or she has bribed the participants or organizers of professional sports events or commercial entertainment competitions (Article 203) [28]. |
| The Criminal Code of Georgia also provides for the “classic” rule on the release from criminal liability in cases of crimes of tax evasion (Article 218) which states that “a person shall not incur criminal liability under this article if the imposed principal payable amount has been paid, deferred or adjusted within 45 working days after receipt of a tax notice in response to a tax audit findings, or if the obligation of its payment has been suspended based on the law” [28]. |
| The Criminal Codes of Armenia, Uzbekistan, and Moldova do not contain any general or special rules on release from criminal liability in cases of crimes in the sphere of economic activity. |
CONCLUSION |
| The comparative analysis of legislations of various countries that govern release from criminal liability for economic crimes allowed to draw the following conclusions. |
| Firstly, legislations of the developed countries provide for the institution of release from criminal liability (punishment) in the rules of criminal law and criminal procedural law. |
| Special rules that apply to release from liability are also widespread in developed countries. These rules are described in separate chapters, sections, and articles governing specific crimes or groups of crimes. |
| The institution of release from liability in cases of crimes in the sphere of economic activity covers quite a large quantity of crimes. These crimes, however, must have signs of a “minor crime", that is, the sentence for crimes should contain the mildest punishment. |
| However, the law enforcers have an opportunity to apply these rules in specific cases at their own discretion. That can be done both at an investigation stage, as well as during the court criminal proceedings. In addition, the legislations of developed countries have no restrictions concerning re-application of the rules on release from liability. |
| Finally, the main objective of the rules on release from criminal liability is to restore violated rights of a victim. This objective exposes the need for compensation of damages as the main condition for release from liability. Other conditions may include payment of a fine or an offender`s repentance. |
| The criminal legislations of the states-members of the Commonwealth of Independent States are generally similar to the legislation of developed countries due to application of the general rules inherited from the USSR. |
| In our opinion, the legislations of the states-members of the CIS do not contain any general rule concerning release from criminal liability in cases of crimes in economic activity, such as Article 76.1 of the Russian Criminal Code. Only Article 88.1 of the Criminal Code of Belarus looks similar to Article 76.1 of the Russian Criminal Code. |
| Almost all the criminal codes of the CIS countries contain special rules on release from criminal liability for tax or other economic evasions (customs duties, insurance contributions, etc.). The conditions for application of the release rules are full payment of the debt, as well as fines and penalties. The condition for release that requires the crime to have been committed for the first time is not common. |
| An accused may be released from criminal liability if payment of calculated dues is made within certain time limits or before the initiation of criminal proceedings. Only the Criminal Code of Kyrgyzstan provides that the release rules can be applied at any stage of the criminal proceedings. |
| There are some other special rules for release from criminal liability in cases of crimes in the sphere of economic activity in the criminal codes of the CIS countries. For example, there is a widespread rule on release from liability in cases of money laundering. |
| In our perspective, almost all of the researched countries address the promotion of rules dealing with the release from criminal liability in cases of crimes in the sphere of economic activity. This demonstrates the special attention of governments toward business problems, and their understanding of the key role of companies and industries within the economy. There is also significant interest in the developing countries of Asia and South America, the legislation of which shall be analyzed in the future. |
References |
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