Abuse of the position of the responsible person in a company (Article 234 of the Criminal Code of the Republic of Serbia)

By Jelena Bajin

Law office of Tomislav Šunjka

Abuse of the position of the responsible person in a company as a criminal act is introduced in Serbian legislature by the Amendments of the Criminal code of Serbia in 2013 ("Official Gazette of Republic of Serbia", No. 85/2005, 88/2005, 107/2005, 72/2009, 111/2009 and 121/2012). Until said changes, the Criminal code included the criminal act of Abuse of the position of an official, which referred both to abuse of the position made by the person who has public function, and abuse of the position made by the responsible person in the company.  

Abuse of the position of an official remained for public officials and elected and appointed officials and civil servants, however, after amending the Criminal Code in 2013, the criminal act was practically “split” to two acts, and now the Abuse of the position of the responsible person in a company refers only to responsible persons from industry, private enterprises and joint stock companies. After these amendments were made, number of proceedings which were led against persons for abuse of the position of an official, which weren’t officials per se, but responsible persons in a company, were transferred to proceedings for criminal act of abuse of the position of the responsible person in a company, and bearing in mind that the penalties foreseen for this act were less severe.  

The legislators’ intention in making these changes and introducing the new criminal act was to make a substantial difference between responsible and official persons, and the cases in which they individually could be regarded as responsible for the abuse of position.

Also, bearing in mind that a small number of states recognize abuse of office in their jurisdictions, many countries were unable to extradite citizens of the Republic of Serbia by the APB. The group of countries of the Council of Europe for the fight against Corruption (GRECO), the repeatedly stated to Serbian lawmakers that in terms of this criminal act there is non-compliance with European legislation. The main objection was the fact that it is too broadly defined and anachronistic. For example, in Croatia, this qualification has changed in 2007, as well as Montenegro, where it is translated into "Crime in the economy." Complete abolition, however, was not possible because it would ruin thousands of procedures that have already started.

The Article 234 of the Criminal Code which regulates the criminal act reads:

A person that obtains unlawful material benefit or causes property damage by abuse of position or authority, by overstepping its powers or failing to perform his duties for himself or another natural or legal person shall be punished with imprisonment of three months to three years. If by the commission of these acts material gain acquired is in the amount of over four hundred and fifty thousand dinars, the offender shall be punished with imprisonment from six months to five years. If the value of the acquired material gain exceeds one million five hundred thousand dinars, the offender shall be punished by imprisonment of two to ten years.

As we can see from the definition of the criminal act, the act itself can be performed by three different types of action, by abuse of position or authority, by overstepping powers or failing to perform duties. It is clear that the criminal act is performed by otherwise legal actions, however in illegal, inappropriate manner.

The problem occurs in defining what can be seen as an abuse of authority, overstepping powers or failing to perform duties and where is the boundary when these actions can be considered a criminal act, and not just bad judgment, negligence, incompetence, economic circumstances etc.

Where does the civil liability in acting as a responsible person in a company for damages to the company ends, and where does the criminal act begin?

In making this distinction, determining the intention of the offender to by acting in ways prescribed by the Criminal Code, obtains unlawful material benefit for him of other natural or legal person is crucial.

However, the legal public in Serbia has repeatedly stated, not without reason, that this incrimination is the so-called "rubber" norm, which can be very extensively interpreted and applied and that, therefore, should be used with caution.

Furthermore, when taking into consideration the Article 112 point 5 of the Criminal Code, which defines the term of “responsible person”, the said criminal act becomes even more questionable. The Article 112 point 5 reads:

A responsible person in the legal entity shall be a person that under the law, regulation or authority performs certain tasks of management, supervision or other activities from the activity of a legal person, and the person to whom it is entrusted to actually perform these tasks.

This means that, to be regarded as a responsible person by the Criminal code, a person does not have to have an official duty or position in the company (for example legal representative, director, member of the board etc.), yet has to factually be in position to perform tasks which can be regarded as commission of the criminal act. With a legal formulation like this, the number of persons who can be considered as responsible persons in a particular company expands in a manner which is highly questionable when criminal law is in question. Every person employed in a particular company has their responsibilities and duties, which are regulated by founding acts of a particular company, its bylaws, its decisions, the Labor law and the Law on business companies. The person in position to conduct an abuse of position has to be the person who is in position to make such a decision, however this decision has to be suitable to create a benefit. In other words, there has to be a clearly visible connection between acting as a responsible person with intention to abuse the position and consequence of such an action. Modern criminal law has to be unquestionably restrictive, and be used only in cases that are deemed as most offensive to a particular society.

Also, professional legal comunity in the Republic of Serbia has raised other questions, for example, is it justified to prosecute this criminal act ex officio by the state, or the prosecution of this criminal act  sholud be initiated by the legal or natural person who is damaged by the particular act, among others. This particular question is not devoid of good argumentation, since private companies are in question and private capital of these companies is damaged. Furthermore, this could lead to adversarial situations, for example that a natural person damages its own company by neglect or lack of expertise, and then finds himself prosecuted by the state.

With theese kind of problems with legal definitions of the criminal act and responsible person, which can be very extensively interpreted and applied, a doubt can be risen in acts of Public  prosecutor’s office and acting of the courts itself. Even when there is no justification for such a doubt, existence of such a doubt can harm reputation and expertise of the Public prosecutor and the acting courts. The doubt that this criminal act can be abused with political and other purposes, harms the state authorities itself, hence the state authorities can be viewed by relevant international organizations, legal experts, even the European Union as prone to influences. Bearing in mind that the Republic of Serbia has a valid and very strong intention to join the European Union, this kind of doubt in state authorities is unacceptable.

Bearing all said in mind, the Public prosecutor and especially competent courts should act in these cases with utmost diligence to avoid any kind of procedural and material mistakes. Only in this way subsequent multi-year, non-productive trials, caused by erroneous initial estimates will be avoided and the reputation and expertise of public authorities will be in this protected. More importantly, it will also protect the rights of wrongfully accused persons, since the courts have to have respect for the rights of the suspected offenders too. Also, acting with due diligence is the only way to avoid other consequences for the state budget that may occur due to unfounded prosecutions.

Criminal law protects the life of man and other basic social values, which include human rights and freedoms. However, despite such protective function of criminal law, there is a need for protection of citizens from the criminal law.

 There is no social interest which may arise as more important than respect for the principle of legality and respect of basic human rights. From the position of a country still struggling with economic crisis and transition, the state authorities must act in accordance with it, and protect the economy of the state. However, although not precise enough, the criminal act of Abuse of the position of the responsible person in a company prescribed in the Article 234 of the Criminal Code of the Republic of Serbia is not and must not become an "all inclusive" incrimination, and should be used with great caution and in a very particular and restrictive way, so that it includes only those acts whose prosecution is criminal and politically justified. Bearing in mind that this criminal act is already a part of Serbian legislature, indictment and prosecution must also be conducted with highest level of diligence and expertise of the competent courts and public prosecutors.