The above depends on the ‘principal/subordinate relationship'  wherein the principal is responsible for monitoring and directing the subordinate's actions. Generally speaking, the principal has the authority to issue orders to his/her subordinate in the manner that will enable their performance of their duties, in addition to their role monitoring the subordinate's actions and holding them accountable for going against the requests of the principal. Hence, the dependency between the principal and the subordinate must show that the principal exercises administrative or organizational control over their subordinate.

Based on the above, principals shall be responsible for the harm caused by their subordinate's illegal actions, if they occur while performing the duties of their positions, or as a result of their employment. The responsibility arises upon the following conditions:

  • The principal-subordinate bond arises only if the principal has an actual authority to order, monitor and direct his/her subordinate in performing such orders;
  • The subordinate acts illegally, and the principal/subordinate relationship is already established.
  • The occurrence of an illegal act from the subordinate when performing, or as a result of his/her duties.

We refer below to one of the cases handled by our office in which the Cairo Economic Court ruled against a major national bank, forcing them to refund the amounts that were wrongly transferred from their customer's account to another account, and thus to compensate the customer for acting without their authorization, based on E-mail requests. The court further added that in such conditions, the protocol states that the bank should have dealt with their customer directly in person.

The court added that contradicting these instructions by the bank's employees led to the illegal seizure of the client's funds by online hackers.  Hence, the bank is responsible for the employees' mistaken act, as well as being obligated to refund amounts deducted from the customer's account with compensation, in addition to the revenue due by the bank from the date of transfer and until the refund date.

Link to the case

Lastly, the purpose of this article is to emphasize that principals are by in large responsible for the damage caused by their subordinates, including any illegal acts conducting by them during the performance of their duties, and that the responsibility of the principal for the illegal act of his/her subordinate is neither personal nor contractual responsibility, but rather it is the responsibility ingrained within the law, meaning that, banks are responsible for their subordinates' actions, but are not considered accomplices for said actions.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.