Depending on the character of the legal violation, the investigation or control proceedings may be conducted by law enforcement bodies or administrative bodies.
Criminal investigations are, as a matter of principle, carried out by a prosecutor's office, as it is the key obligation of each prosecutor's office to maintain law and order and to prosecute crimes. In particular, the purpose of the investigation is to establish whether a crime has been committed, the identity of the perpetrator, and subsequently - if the evidence collected seems to prove fault and perpetration - to file an indictment. The prosecutor's office should also make sure that no indictment is filed against an innocent person; in such an event the case should be annulled.
The prosecutor is obliged to launch an investigation at every instance in which there is a justified suspicion of a crime having been committed. An investigation may be launched ex officio or at the initiative of the aggrieved party, who must submit a formal (oral or written) notification. For the institution of proceedings with respect to certain crimes, the aggrieved party must file a motion for prosecution. After such a motion has been filed, the proceedings are conducted by enforcement bodies, but it is the aggrieved party that decides whether it wants the perpetrators of the crime to be prosecuted. A motion must be filed for the prosecution of certain business crimes, such as mismanagement (if the State Treasury is not the aggrieved party), or the use of someone else's business secrets in one's own business. If such motion is not filed then no proceedings will take place.
At the beginning of 2016 the structure of the prosecutor's office was subject to key reforms. The separation that had previously existed between the position of the Minister of Justice and the Attorney General's Office has now been removed. The tasks of the Attorney General's Office have been taken over by the National Prosecutor's Office, headed up by the Deputy of the Attorney General's Office - the National Prosecutor. The place of the appeal prosecutor's offices has been taken by the regional prosecutor's offices, which are to deal with organised business crime and tax crimes.
An exception has been introduced in the regulation that provided for the independence of the individual prosecutors, which provides that a prosecutor is obligated to comply with the directives, instructions and orders of the superior prosecutor (who could be the regional or national prosecutor). Orders may concern the content of tasks carried out in a specific case.
Crimes are also identified and prosecuted by the police, which have powers to institute preparatory proceedings for less serious crimes; the investigations carried out by the police are supervised by a prosecutor. In addition to the police, the powers to prosecute crimes are also enjoyed by the Internal Security Agency, the Central Anticorruption Bureau, the Central Investigation Bureau, the Border Guard and bodies authorised to conduct preparatory proceedings in cases for fiscal offences (within the framework of the National Tax Administration - tax offices, tax administration chambers, tax and customs offices). The other enforcement authorities, as a rule, enjoy the same rights and are bound by the same obligations as the police in criminal proceedings. Nonetheless, particularly risky operations (such as dawn raids) are usually performed either by specialised police units or one of the above agencies.
The Code of Criminal Procedure states that business entities must assist law enforcement bodies upon request. Within the course of an investigation the law enforcement bodies may request that business entities voluntarily provide documents that could represent evidence in a case. If release of the documents is denied, they are most frequently secured through a search, but the law enforcement bodies are not able, for example, to impose a financial penalty for lack of cooperation. An alternative approach may be adopted with respect to obstructing criminal proceedings by helping the perpetrator of a crime avoid criminal liability. Concealing or destroying evidence that supports suspicion of a crime constitutes a separate criminal offence and the perpetrator is subject to the penalty of imprisonment from three months to five years. The same penalty is imposed for any obstruction of criminal proceedings with an intent to assist the perpetrator and help them avoid criminal liability. Therefore, one should distinguish between the instances of limited cooperation during which account is taken of company interests (for example, by demanding that the bodies respect company secrets) and the aforementioned crime.
Whether an adversarial stance towards the enforcement authorities is a real possibility depends on the specific circumstances of each case and the kind of offence being prosecuted. It should be noted here that recent Guidelines of the Minister of Justice provide for heightened determination of all enforcement authorities in investigating tax fraud and other serious business offences.
Polish law does not provide for the obligation to self-report in relation to committing crimes. Significantly enough, the lack of the obligation to self-incriminate is one of the key principles of criminal proceedings. Given that criminal liability may only be incurred by individuals, this principle is not directly applicable to business entities.
The obligation to report that an offence has been committed only applies to situations in which crimes have been committed by other parties, and these are serious crimes prosecuted under the Criminal Code or those that will harm national security. As regards any remaining crimes, the criminal procedure provisions do not provide for a sanction for failure to report them; in particular, Polish law does not provide for a general obligation to report internal irregularities in business entities.
With respect to fiscal crimes, it is only possible for the person responsible for committing the act to avoid criminal fiscal liability by making an ‘unprompted voluntary disclosure' or adjustment to a tax return. The Penal Fiscal Code provides for a number of specific requirements for acts of ‘repentance' that need to be met for any actions commenced to avoid responsibility to be effective.
Although not exactly a self-reporting obligation, it is worth mentioning the obligation to report transactions that may represent acts of money laundering. The types of institution set out in the Act are obliged to immediately report such transactions to the General Inspector of Financial Information.
As regards various leniency measures in competition law, the Polish competition authority might reduce the amount of administrative penalty or even abstain from imposing such a penalty on an entity that entered into a competition-limiting agreement, if that entity submitted an appropriate petition and fully disclosed all important facts regarding said agreement. Full and immediate disclosure and full compliance are required. The disclosing entity is also obliged not to disclose the fact that the petition has been submitted, in particular to the other parties in the agreement in question.
ii Internal investigations
Polish law does not directly provide for the obligation to carry out internal investigations once managers receive information on irregularities within an enterprise, nor is there any obligation to report any such results thereto. It is assumed, however, that the conduct of internal investigations represents fulfilment of the obligation to take care of the interests of the enterprise under management. Failure to verify signs of irregularity may represent grounds for liability for damages and, in extreme cases, for criminal liability for mismanagement. Internal investigations are not only conducted when the provisions of law have been violated to obtain benefits for the enterprise but also when, as a result of the law being violated, the enterprise has been harmed.
Notwithstanding the above, specific entities (such as banks or investment firms) are obligated to maintain tight compliance control or internal audit systems. Such systems serve a similar function to internal investigations and are - at times - subject to compulsory reporting. Failure to properly maintain the above systems may result in a vast array of administrative sanctions being imposed on the relevant entity.
As internal investigations are not regulated, the course of investigation in these two situations will not differ considerably; however, substantial differences appear when law enforcement bodies institute official investigations or the company decides to report existing irregularities. The enterprise may obtain the status of aggrieved party and enjoy the attributable rights within preparatory proceedings and, at a later stage, court proceedings, if the indictment is filed. These rights include the right to inspect the files of the case, participation in the investigation or the right to appeal disadvantageous decisions taken during the proceedings (such as a decision on discontinuation of proceedings). At a court stage an aggrieved party may act as auxiliary prosecutor.
In recent years, the number of internal investigations regarding irregularities in the private sector has noticeably increased. In many instances, this is due to the operation in Poland of companies regulated by the strict rules of the US Foreign Corrupt Practices Act (FCPA) or the UK Bribery Act.
Commonly, internal investigation measures encompass the review of business e-mail correspondence and electronic files, conversations with employers, and the review of company documents. As regards confidentiality and secrecy, no specific regulations exist and therefore, the use of any information within an internal investigation must comply with the generally applicable provisions. Processing of personal data (except sensitive data) is generally permitted within the course of internal investigation without the need to obtain specific consent from the person to whom the data relates.
As a rule, whistle-blowing as such is not sufficiently regulated by the Polish law. Whistle-blowing employees enjoy protection from discriminatory treatment by employers and management due to their disclosure of irregularities and other undesirable circumstances within the organisation. This does not entail that a whistle-blower may not suffer negative consequences. The provisions of the Labour Code do not provide any special protection for the people who were - in their capacity as employees - involved in illegal activities. An employment contract with a whistle-blower who was involved in criminal activities may be terminated under ordinary procedures or even under dismissal procedures depending on the circumstances of an individual case, even though that person reported the irregularities, as long as the treatment of such employee is not discriminatory. Therefore, it should be considered that regulations protecting whistle-blowers are missing from the Labour Code, thus, in many situations, potential whistle-blowers will not have any incentive to disclose irregularities.
Nonetheless, numerous firms have adopted measures to allow the anonymous reporting of irregularities noticed within firms. Sometimes, anonymous hot lines or e-mail boxes are made available through which to point out violations of law and standards. Despite these efforts, the number of confirmed whistle-blowers has never been significant in Poland.
When it comes to criminal liability, a person disclosing information to law enforcement bodies regarding crimes and the circumstances of the perpetration thereof may expect extraordinary mitigation of punishment. If a perpetrator discloses to law enforcement bodies new, previously unknown, circumstances relating to a crime that carries a penalty of more than five years' imprisonment, he or she may submit a motion for extraordinary mitigation of punishment or even a conditional suspension thereof. Furthermore, in the event of corruption in business and in the public sector, a perpetrator of ‘active' corruption is not subject to penalty if, after the fact of the corruption, such person notifies law enforcement bodies and discloses all significant circumstances of the deed, and all this takes place before law enforcement bodies have become aware of the facts.
From 1 May 2017 onwards, banks in Poland will be obligated to adopt formal whistle-blowing procedures, including an indication of the management board member responsible for handling matters related to whistle-blowing. A bank's whistle-blowing policy would be subject to periodic internal assessment.
i Corporate liability
Since 28 November 2003 the Act on Liability of Collective Entities for Acts Prohibited under Penalty has been in force, which regulates issues of quasi-criminal liability of commercial companies. This Act is applicable if a person acting in the name of a company committed one of the crimes specified in the Act, and the company gained or could have gained any benefit from this act, whether financial or not.
The catalogue of crimes, the commission of which may cause the commencement of criminal proceedings, include:
b corruption in business;
c credit and subsidy fraud;
d money laundering;
e crimes linked to making repayment of creditors impossible and reducing their satisfaction;
f failure to file a bankruptcy petition on time;
g insider trading; and
h administrative corruption.
There are also numerous other crimes specified in acts regulating specific areas of economic activity.
A condition for commencing proceedings against a company is that it has been established by a legally final guilty verdict that a crime has been committed by a person acting in the name of a company. There are two other instances when proceedings against a company may be commenced: a verdict conditionally discontinuing criminal proceedings against such an individual, or a verdict that discontinues criminal proceedings by stating that despite the crime having been committed, the perpetrator cannot be punished.
Liability on the basis of this Act may be imposed in the event that one of the following is proven: at least a lack of due diligence in the choice of the person representing the entity, who is at the same time the perpetrator of a crime, or the defective organisation of the company, which did not ensure the avoidance or the commission of the crime, and this would not have occurred had due diligence been observed in its organisation. Note that the liability arising under this Act is non-transferable, that is, in case of a merger, division or restructuring of the relevant company, the liability expires. However, the court might impose an interim prohibition of such transformations on such a company in order to prevent it from avoiding said liability.
It should be emphasised that it follows from practice to date that the law enforcement bodies do not commence proceedings in every case in which such a possibility arises. The statistics of the Ministry of Justice show that each year only a couple of dozen proceedings of this type are commenced. This figure is very low, especially taking into account the fact that each year over 10,000 people are sentenced for committing business crimes.
As regards criminal proceedings, although in the strict sense a company cannot be the accused, during the course of such proceedings it is nonetheless possible to hand down a judgment ordering a company to reinstate any benefits gained thanks to a crime committed by an individual. In this case, the company becomes a quasi-party and may defend itself against liability by availing itself of certain rights to which the accused is usually entitled. An entity obligated to return benefits has the right to study the case files of the proceedings, may take part in the hearing before the court, file motions to admit evidence, put questions to the witnesses, as well as appealing unfavourable decisions and verdicts.
In turn, in such proceedings the company may face auxiliary liability. An entity that is liable on an auxiliary basis is liable for a fine imposed on the perpetrator of a fiscal crime if, when committing the crime, the perpetrator acted in the name of the company, and the company gained or could have gained financial benefit.
As regards representation, the ‘original' perpetrator and the corporate entity may be represented by the same attorney or counsel, even though its role would be slightly different in each of these proceedings.
The Act on Liability of Collective Entities for Acts Prohibited under Penalty provides for the possibility of a judgment with regard to a company imposing a fine of between 1,000 and 5 million zlotys (which cannot exceed 3 per cent of the revenue gained in the year in which the crime that forms the basis for liability was committed). The court will mandatorily order the forfeit of any financial benefits gained from the crime, even indirectly.
In addition, the following punishments are possible with regard to collective entities:
a a ban on promotion and advertising;
b a ban on availing of public aid;
c a ban on availing of aid of international organisations;
d a ban on applying for public tenders; and
e making public information about the judgment handed down.
In the event of auxiliary liability for a tax crime, the scope of liability is determined by the amount of the fine ordered with regard to the accused. Essentially, fines for a fiscal crime range from 560 to 16.1 million zlotys for crimes committed in 2014 and these change each year in line with the increase in the minimum wage. In ruling practice, however, it is very unusual for fines to exceed 100,000 zlotys.
As regards administrative liability, the amount of fines and spectrum of other sanctions (revocation of licences or concessions) significantly varies depending on the relevant duties and legal bases for their imposition. Administrative fines might be very severe, capped at more than 10 million zlotys (much more than the maximum possible criminal fine) or up to 10 per cent of yearly revenue in the most extreme cases. There is no uniform regulation of administrative sanctions in the Polish legal system.
iii Compliance programmes
Legal provisions do not impose the obligation on business entities to implement compliance programmes, although such programmes operate in many firms. They are particularly common in firms with foreign capital and in the financial sector.
In reality, the existence of a compliance programme and ensuring its existence may significantly limit the risk of liability under the Act on Liability of Collective Entities for Acts Prohibited under Penalty, even if the commission of a crime resulted from inappropriate organisation.
A functioning compliance programme is helpful in cases of actions contrary to the law that harm the interests of enterprises. A frequent problem that appears in criminal proceedings involving crimes harming enterprises is the lack of internal regulations clearly laying down the procedures and scope of duties, as a result of which it is difficult to show the actions or omissions of the guilty party.
In the absence of a general regulation of compliance, it would be difficult to establish any specific recommended elements of compliance programmes. As a rule, it would be advisable for the scope of such programmes to cover all branches and subsidiaries of a given entity and ensure regular review of their activity. Shortcomings to that extent usually have a very strong negative impact on the efficiency of such programmes. Involvement of expert auditors and accounting experts also seems to be the preferred course of action.
iv Prosecution of individuals
As has already been mentioned, the position of a company in proceedings conducted by law enforcement bodies against an individual depends to a large extent on whether the company gained any benefit from the crime or whether it was harmed by the crime.
At present, the Code of Criminal Procedure provides that an aggrieved party is an entity whose interests have been directly harmed or threatened by a crime. Not every crime as a result of which an enterprise suffers damage will allow it to exercise its rights as an aggrieved party in criminal proceedings.
On the other hand, newly amended provisions of the Code of Criminal Procedure grant a firm the right to appeal decisions of the prosecutor on discontinuing an investigation if the firm notified the prosecutor about a crime that harmed its interests, even if only indirectly. To date, only a directly aggrieved party has had the right to file a complaint against decisions on discontinuing an investigation, while a person indirectly aggrieved has not had the right to any control over the court. The new regulation should be viewed positively as it grants greater litigation guarantees and may lead to more effective crime prevention.
If proceedings against an individual involve a breach of law that may lead to a company being held liable, a question arises as to the legitimacy of cooperation between the accused and the firm. In the vast majority of cases a judgment favourable to the accused rules out the risk of sanctions for the firm. There are no prohibitions whatsoever on joint defences, so cooperation within the proceedings is admissible. It should be noted, however, that situations may occur when the accused's line of defence will not be consistent with the interests of the firm. This may be the case, for example, when the accused bases his or her defence on implicating another company employee or manager who is indeed guilty of committing a crime.
The basic duty of the lawyer towards a client in criminal proceedings is to act exclusively for his or her benefit. Pursuant to the position of the judiciary and doctrine that has dominated for years, a defence lawyer must disclose all circumstances that are favourable to the client, even if the client does not consent to this himself or herself.
As regards employee issues, commission of a crime undoubtedly entitles an employer to terminate the employment contract under a disciplinary procedure. What is important is that the reasons for termination of the contract should be precisely indicated in a written termination of the employment contract, which reasons can be verified by the court if the employee appeals to the Labour Court. In the event that the reasons given in the termination of the contract prove groundless, the employee may be reinstated to work by the court or may be entitled to a compensation claim, or both.
As regards payment of the legal fees, there are no specific regulations that would prohibit any company from covering the costs of legal services rendered to its employee or a member of its body.
i Extraterritorial jurisdiction
Polish criminal-law provisions essentially provide for the liability for crimes committed in Poland. Pursuant to the provisions of the Criminal Code, a crime is deemed to have been committed at the place the perpetrator acted or omitted to perform an act he or she was obligated to perform, or where the effects of the crime were felt or were intended to occur.
With regard to crimes committed abroad, the rule of the ‘double criminality' of an act applies. This means that law enforcement bodies may conduct criminal proceedings only with respect to acts that constitute a crime both in Poland and in the country in which they were committed. Polish citizens are liable for crimes committed abroad in all instances where an act constitutes an offence under Polish law and at the place it was committed. As regards foreigners' liability for acts committed abroad, Polish criminal law may be applied if a crime harms the interests of Poland, a Polish citizen or a Polish company, and at the same time the requirement of double criminality is satisfied.
The requirement of the double criminality of an act does not apply, inter alia, to a situation where a crime harms the national security of Poland or its material economic interests, or is aimed against Polish offices or officials, nor does it apply to a situation where financial gain (even an indirect one) was derived in Poland.
ii International cooperation
Polish law enforcement bodies cooperate with the authorities of other countries. The rules and scope of cooperation vary due to the fact that in some cases of cooperation, bilateral international agreements, multilateral conventions or international organisation regulations (including primarily European Union law) will apply with some countries, whereas in the absence of an international agreement the provisions of the Code of Criminal Procedure apply.
The possibility of handing over a Polish citizen as part of an extradition procedure is excluded in principle. By way of exception, the court may decide to extradite a Polish citizen if such possibility follows from an international agreement ratified by Poland. An additional condition is that the crime that the subject of the extradition procedure is charged with must have been committed outside Poland, and that the act such person is charged with must constitute a crime under Polish law, both at the time the court decision is taken and at the time it was committed.
Polish enforcement authorities routinely cooperate with authorities of a significant number of countries, including Germany and the UK, mainly thanks to the large Polish population in those countries.
iii Local law considerations
Enforcement authorities apply the relevant Polish standards in all kinds of proceedings conducted in Poland. The personal data protection regime and the bank secrecy regime are relatively strict and involvement of a foreign element in a given case does not lead to the relevant requirements being loosened in any manner.
V YEAR IN REVIEW
Unlike in previous years, regulation of criminal procedure seems to have stabilised. No major amendments are either planned or pending - the only existing draft bill refers to further harmonisation of access to an attorney in accordance with applicable EU regulations. Additionally, the Supreme Court issued a resolution clarifying the application of past procedural regimes to cases that are still being considered.
The current government continues its relatively radical efforts to eradicate widespread VAT fraud and other kinds of business crime. One of the most recent amendments to the Criminal Code introduced more severe treatment for producing or handling fake or otherwise unsound invoices, which usually constitute one element of a wider VAT fraud. The harsh stance on these acts has not subsided and the government is preparing to introduce a so-called ‘split payment' system to separate net payments from VAT payments in B2B transactions. Due to technical requirements arising under the EU law, the exact timeline of this introduction has been difficult to determine to date. The government is also planning to introduce an automated system of data-collection scanning and aggregating information about bank accounts. This system will also automatically assess the risk of a given undertaking being involved in tax fraud, money laundering and other business crime.
According to VAT fraud, under the newly introduced articles 270a and 277a of the Criminal Code, forgery of or tampering with an invoice in relation to circumstances influencing the amount of a tax (or other public obligation) or its refund, in order to use such invoice as an authentic one, or using such a fake invoice constitutes a separate offence. The perpetrator is liable to imprisonment for a period of six months to eight years. If the perpetrator forged or used invoices documenting transactions whose value exceeded 10 million zlotys or made forging or using fake invoices a source of their permanent income, the offence is considered to be a felony. Such perpetrator is liable to imprisonment for a period of five to 25 years.
Under the Act of 23 March 2017 on the amendment of the Criminal Code and certain other acts, there is a new institution in Polish criminal law called ‘extended confiscation'. According to this new regulation, all the assets acquired by the perpetrator within five years prior to commission of an offence would be considered a benefit thereof, unless the perpetrator or the other interested party could submit evidence in rebuttal. This applies in the case of sentencing for:
a an offence resulting in direct or indirect benefit of a substantial value;
b an offence subject to a penalty of five or more than five years of imprisonment resulting in - even potential - direct or indirect benefit; or
c an offence committed in an organised-crime group.
The Act on Trading in Financial Instruments and certain other acts are about to be amended to bring the Polish legal system in line with the EU market abuse regulations, which will significantly alter the national regulation of securities frauds, insider trading and other offences related to financial instruments and public companies.
An entire new institutional framework was implemented effective from 1 January 2017 in order to detect tax frauds and process internal revenue matters - i.e., the National Tax Administration. The new framework roughly resembles the old one but is much more integrated and centralised, which is supposed to increase its efficiency. Additionally, the simultaneously amended regulatory framework of tax proceedings was designed to hamper tax optimisation and refuse more requests for individual interpretation of tax law, which - in practice - reduced the clarity and integrity of the tax law.
The catalogue of offences subject to corporate liability under the previously mentioned Act on Liability of Collective Entities for Acts Prohibited under Penalty is constantly expanding and recently covered certain offences related to energy law. This trend is expected to continue.
As regards legislative activity, one of the recent draft bills targets abusive loan sharks and exploitative payday loan schemes and would criminalise the very act of demanding the payment of interest (and other related payments) exceeding duly calculated maximum interest or realising a collateral in a similar manner.
VI CONCLUSIONS AND OUTLOOK
Polish law does not regulate in detail the matter of internal investigations, whistle-blowing and related issues. There are close to no obligations (or privileges) connected with the above. Leniency programmes are relatively scant and based on the relevant authority's discretionary assessment.
The existing government is still carrying out extensive work concerning criminal law. As part of its legislative work, the government plans to introduce changes including more severe sanctions for serious crimes against life and health, but also in business cases. The Minister of Justice seems to have temporarily stalled work on a new Criminal Code, and focused on more immediate legislative efforts.
The general outlook is that the government is ready to sacrifice some civil liberties in order to ensure better crime detection as well as the sure and harsh punishment of criminals. Currently, the government does not attach much importance to internal investigations and does not seem too keen on allowing more kinds of leniency procedures or measures. Additionally, numerous companies report difficulties as to compliance with tax regulations, especially in light of the current harsh treatment of related offences.
After the re-imposition of the ‘inquisitive' model of proceedings, the prosecution offices are working more effectively due to reduced scope of assigned tasks. However, the recent ‘restructuring' of the entire prosecution service still causes certain issues, which will hopefully be mitigated in the future.
1 Tomasz Konopka is a partner at Sołtysiński Kawecki & Szlęzak.
2 Article 23, Section 1, item 5 of the Act of 29 August 1997 on Personal Data Protection (consolidated text: Journal of Laws 2016, item 922 as amended).
3 Resolution of the Supreme Court of 29 November 2016, Case No. I KZP 10/16, www.sn.pl.