Introduction
On 19 August 2024, the Federal Criminal Appellate Court ("FCAC") of Switzerland rendered a landmark decision in a matter of criminal responsibility of legal persons and transfer of such responsibility after a merger. It is the first time, in our knowledge, that a Swiss upper court had to decide on such a question. The decision may be appealed to the Swiss Federal Tribunal.
Facts
In a nutshell, a company active in the provision of banking services (lets' call it Company A) was convicted in first instance of money laundering and condemned to pay a substantial fine.
Company A appealed against this judgment. During the appellate proceedings, Company A merged with a company providing the very same kind of services (we will call it Company B). Company A was struck off from the Commercial Register on the day of the merger.
Company B then requested that the remaining criminal proceedings against the now non-existing Company A be discontinued. Company B explained that, although the merger had resulted in the transfer of all of Company A's liabilities and assets to Company B, criminal liability, which is eminently personal, could not be transferred from Company A to Company B. A continuation of the proceedings against Company B, even, at the state of appeal, would breach the principle of personal criminal liability and the principle of presumption of innocence, both protected by the Swiss Constitution and the Human Rights European Convention.
Discussion on the merits
In a convincing judgment, the FCAC explained firstly that the Swiss Code of Criminal Procedure or other provisions do not regulate the consequences of a defendant company being deregistered from the Commercial Registry as a result of a merger.
After analyzing the reasons for this gap, the FCAC decided that it could itself decide on the matter.
At the outset, the FCAC underlined that criminal liability was personal, and that this principle precluded the continuation of public proceedings in the event of the disappearance of the defendant.
However, and without calling this principle into question, the FCAC pointed out that the issue at hand should be solved by taking into account the principle of the continuation of the economic situation of the two considered companies. The FCAC outlined that the European Court of Human Rights adopted the same approach in a similar situation and so did France, Germany and other European countries. The FCAC then referred to the Swiss doctrine, much of which also advocates an approach based on the economic sense of a merger. Then, by analyzing the facts in concrete terms, it concluded that the two companies were pursuing similar goals, and that the situation was that of a universal succession. According to the FCAC, in terms of the criterion of economic and functional continuity, the defendant company had not ceased to exist on the day it was dissolved. On the contrary, its economic activity had dissolved into that of Company B and continued in this new form.
The FCAC thus concluded that Company B succeeded Company A as a party to the criminal proceedings.
Conclusion
While this approach using the criteria of economic continuation and rational of a merger may seem very strict for Company B, it must be commended. As of to date, an appeal to the Swiss Federal Tribunal is possible and very likely. However, the soundness of the reasoning of the FCAC might make it difficult to overturn it.
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