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Ahmad U.

Abduljalil September 21, 2016


IV Corporate Law Atty. Alizedney M. Ditucalan

Corporation: An Artificial Being, an Artificial Criminal

Criminal law is that portion of our law that punishes those who
engage in wrongdoing. Hence, the criminal sanction applies not to all legal
persons, but only to those who can be deserving of punishment. Whether
corporations have this characteristic is precisely the question we are
asking.1

Our own jurisprudence does not readily accept the idea that a
corporation is a person. Especially in relation to offences requiring mens
rea or what we referred to as the guilty mind, a companys criminal liability
is normally determined according to the identification principle. This holds
that a company can only be liable for the criminal acts or omissions of
individuals if they can be identified as the companys directing mind and
will, i.e. directors and officers who carry out management functions. This
explains why, historically, it has proved difficult to prosecute large
companies for offences requiring mens rea, particularly if the companies
operated through opaque decision-making structures.

The early case of West Coast Life Ins. Co. v Hurd,2 which raised the
issue of the power or authority of the court to proceed against a
corporation, criminally, that is to bring it into court for the purpose of making
it amenable to criminal laws. While the courts have inherent powers which
usually go with courts of general jurisdiction, it was held that under
circumstances of their creation, they have only such authority in criminal
matters as is expressly conferred upon them by statute or which is
necessary to imply from such authority in order to carry out fully and
adequately the express authority conferred. The Supreme Court did not
feel that Courts have authority to create new procedure and new processes
of criminal law. Although, there are various penal laws in the Philippines
which the corporation may violate, still the Supreme Court does not believe
that the courts are authorized to go to the extent of creating special
procedure and processes for the purpose of carrying out the penal statutes,
when the legislative itself has neglected to do so. This is true since the
courts are creatures of the statute and have only powers conferred upon
them by statute. Philippines courts have no common law jurisdiction or
powers.

In short, the primary reason today in Philippine jurisdiction why


corporation cannot be proceeded against as defendants or accused in
criminal proceedings is that there are no existing laws which to support
such a process, and the reason why no supporting legislation has been
promulgated to support the theory of a corporate criminal is the public

1 John Hasnas, Managing the Risks of Legal Compliance: Conflicting Demands of Law and Ethics
2 27 Phil. 401 (1914)
policy that ultimately a crime committed in the name of a corporation is
actually committed by the individuals who act for and behalf of such
corporation.3

The stakes in corporate crime cases are often very high, measured
both in terms of dollars and the effect that criminal or regulatory action can
have on the livelihood and lives of countless innocent persons, including
blameless employees and shareholders.4

We continuously held in our jurisdiction that a corporation does not


breathe and eat and think like a human being, but however, over the years,
it is our own Philippine courts which attributed more human rights and
qualities to corporations formerly available only to living and breathing
human beings. A corporation is an artificial being. We have accorded Due
Process, Equal Protection Clauses, and the right against Unreasonable
Searches and Seizure to corporations. But be reminded that this legal
device suits primarily the wealthy and not the oppressed.

The attributes given to corporation maybe regarded as excessive and


unnecessary. However, above all these, there is one characterization that
is deliberately unjust. In the continuously developing financial and business
world, corporations are found to be in violation of rules and regulations or
even guilty of criminal activity. This has resulted to corporations getting
away with human rights violations, environmental degradation or pollution,
food contamination, adulterated medications, and many more. But again, a
corporation is a legal fiction, incapable of intent and incapable of doing
anything.

The penalty for such offenses is usually a fine or revocation of


license. But do we really serve the ends of justice by fine or revocation of
license alone? I agree, the fines imposed are not insignificant. Yet, with
these completely irreversible violations of this extent, in many cases, not
one person has been seen in handcuffs. Not one person has been branded
as a felon. If corporations are permitted to continue with prosecutorial
immunity for their actions, then it undermines virtually the only way the
government can control and correct its abuses.

It is my honest opinion that not one theory of corporate criminal


liability possesses absolute correctness. There is no legitimate approach in
handling corporate criminal liability. However, a step to confronting this
problem is to limit the legal concept of the corporation by focusing
Philippine legislation and our structural reforms to the rights and welfare of
real human beings. Living, breathing and capable of feeling. The idea and
the definition of corporate personhood in approaching legal questions in our
jurisdiction should not be treated as unbending and inflexible. Tayag vs

3 Cesar L. Villanueva, Philippine Corporate Law (2010)


4 Julie R. OSullivan, The Last Straw: The Department of Justices Privilege Waiver Policy and the Death
of Adversarial Justice in Criminal Investigations of Corporations, 57 DePaul L. Rev. 329, 361 (2008)
Benguet Cosolidated Inc.,5 characterized a corporation as an artificial
being, created by operation of law, and that it owes its life to the state, its
birth being purely dependent on its will. To insist on that one-dimensional
approach would be treating corporate personality a master rather than a
servant. This will lead us on deciding legal questions on irrelevant
considerations without inquiry into their merits.

5
26 SCRA 242 (1968)