Compliance management systems in Czech criminal law

Czech Republic

Czech criminal law enables legal entities to be exempted from criminal liability if the legal entity makes every effort reasonably required to prevent listed persons from committing crimes.

Listed persons include members of a governing body or another person in a managerial position; a person in a managerial position performing managerial or supervisory activities; a person exercising decisive influence over the legal entity’s management; an employee or a person in a similar position performing work. The compliance management system (CMS) represents an effective way to fulfil this. The CMS usually consists of complex measures, which prevent, detect, or react to criminal activity. However, defining a sufficient CMS can be complicated since each case must be assessed individually.

It is crucial that the CMS not be defined “on paper” only, but rather play an active role within the operations of the legal entity. In other words, it is important that the entity (and especially its management) regularly apply, enforce, review and update its compliance measures in order to ensure that they are perfectly suited for this particular legal entity.

Since every compliance programme should be assessed individually, the CMS must take into account factors such as company size, business activities, risk profile, market environment, etc. In addition, company culture and corporate governance play essential roles. As a result, subsidiary companies should not automatically implement the CMS of their parent company, but should instead consider their individual needs.

The most frequently adopted CMS measures include training, due diligence, internal investigations, internal regulations (e.g. code of conduct, ABC programmes), the existence of a compliance officer position and the creation of a whistleblowing hotline. All of the above measures do not necessarily need to be adopted since an effective CMS should respect the proportionality principle. Prior to the adoption of any particular measure, we recommend that a compliance risk analysis be carried out.

Importantly, the mere existence of a CMS does not automatically lead to exemption from criminal liability. Furthermore, the absence of such a system does not automatically imply that exemption is impossible. Each company should evaluate their current compliance rules and their effectiveness in order to protect the company and individuals from unnecessary risks.

For more information on corporate criminal liability and compliance in the Czech Republic, contact your CMS client partner or local CMS experts.