Joint Punishment of Juridical Persons in Connection with Their Employees' Illegal Acts Case

[21-2(A) KCCR 77, 2008Hun-Ka14, July 30, 2009]

In this case, the Constitutional Court decided that Article 31 of the Act on Special Cases Concerning Regulation and Punishment of Speculative Acts, which stipulates that a juridical person shall also be subject to fines if its employees engage in unlicensed speculative businesses in connection with the affairs of the juridical person, violates the liability rule drawn from the principles of nulla poena sine lege (no penalty without law) and the rule of law.

Background of the Case

The Act on Special Cases Concerning Regulation and Punishment of Speculative Acts (amended by Act No. 7901, March 24, 2006) provides that the term "speculative acts" refers to acts to provide the profits or losses to properties by collecting goods or benefits on properties from scores of people (hereinafter, referred to as "goods, etc.") and by deciding the benefits or losses under coincidental methods (Article 2), and that any person who wishes to operate a speculative business shall prepare the required facilities, etc. before obtaining permission from the Commissioner of the Local Police Agency (Article 4 Section 1).

However, Article 31 of the Act provides that if the representative of a juridical person, or an agent, a servant or any other employee (hereinafter, "employees, etc.") of a juridical person commits an offense as prescribed in Article 30 in connection with the affairs of the juridical person, not only shall the wrongdoer be punished but the juridical person shall be subject to a fine provided in the same Article (hereinafter, the "Provision").

The movant at the requesting court of this case is YTN Inc., a cable television broadcaster. The said movant's marketing officer Baek ○-beom, without the permission of the commissioner of the competent local police agency, had been running a quiz show on a YTN news

channel from April 2003 to March 2007, transmitting captioned advertising that said those who got answers by making charged calls would win prizes by drawing lots. On charges of running a speculative business to gain profits by inducing viewers through the stated method, movant at the requesting court YTN, along with Mr. Baek, was prosecuted and received a summary order from the Suwon District Court to pay fines. The movant at the requesting court then requested a trial on the summary order and filed a motion to request for a constitutional review of the Provision. The requesting court granted the motion and requested this constitutional review on May 19, 2008, arguing that the Provision violates the rule of liability and, therefore, the Constitution.

Provision at Issue

Act on Special Cases Concerning Regulation and Punishment of Speculative Acts, Etc. (Revised by Act No. 7901, Mar. 24, 2006)

Article 31 (Joint Penal Provisions)

If the representative ofa juridical person, oran agent, a servant or any other employee of a juridical personor an individualcommits an offense as prescribed in Article 30 in connection with the affairs of the juridical personor the individual, not only shall such offender be punished accordingly, butthe juridical personor the individualshall also be subject to a fine provided for in the relevant provisions.

Article 30 (Penal Provisions)

(2) Any person who falls under any of the following items shall be punished by imprisonment for not more than three years or by a fine not exceeding twenty million won:

1. The person who operates his business without obtaining the permission under the provisions of Article 4 (1) or 7 (2);

Summary of the Decision

In a vote of 6 (unconstitutional) to 1 (concurring) to 2 (dissenting), the Constitutional Court decided that the Provision, which

unexceptionally imposes punishment even on the juridical person that has fulfilled its duty to exercise caution in appointment and supervision and therefore has no liability for its employees' illegal acts, violates the rule of liability and is thus unconstitutional. The reasoning is as follows.

1. Court Opinion

A. Rule of Liability

The criminal punishment, as a restriction of crimes, is in essence the condemnation of negatively judged acts by law and order. Even if an outcome which is assessed negatively by the legal order takes place, the occurrence of the outcome alone cannot be the reason for imposition of criminal punishment as far as the outcome is not attributable to any specific person. This rule of liability, which imposes no criminal punishment without liability, is one of the basic principles of criminal law. It is a principle inherent in a constitutional state and drawn from Article 10 of the Constitution.

B. Necessity for Restrictions of Juridical Persons and the Rule of Liability

With the increase in social activities of juridical persons, incidents of their anti-social violation of interests are also rising. In this context, it is necessary to impose restrictions directly on the responsible juridical persons. Yet, because criminal punishment is the stiffest punishment available to the State, the liability rule derived from constitutional principles concerning criminal punishment - the rule of law and nulla poena sine lege - should be observed insofar as the legislature has opted for "criminal punishment" as the means to penalize a juridical person. According to the Provision, however, once employees, etc. of juridical persons are found guilty of violating Article 30 Section 2 Item 1 of the Act in connection with their work, juridical persons are also immediately subjected to penal provisions that levy fines before being accused of their precise liability with respect to the illegal acts of their employees, etc. This inevitably leads

to imposing criminal punishment even on the juridical persons who have fulfilled their obligation to exercise caution in appointment and supervision and thus are in no way responsible with regard to their employees' illegal acts. Therefore, the Provision contradicts the liability rule and so violates the Constitution.

2. Concurring Opinion of One Justice

When an institution or an employee that is entitled to decide on management policies and major issues of a juridical person or supervise and manage general affairs of a juridical person or an agent entrusted with the aforementioned powers acts within the given competence, the act can be regarded the same as that of the juridical person. In this case, even if the juridical person is held criminally responsible for work-related acts of violation committed by the stated institution, employee or agent, the liability rule would not be violated.

Therefore, the portion of Article 31 of the Act on Special Cases Concerning Regulation and Punishment of Speculative Acts regarding the representative of a juridical person, or an agent, a servant or any other employee of a juridical person entitled to the stated powers does not violate the Constitution. However, punishment of an agent, a servant or any other employee of a juridical person whose competence does not include the aforementioned powers violates the liability rule. Even if the Provision intends to penalize a juridical person for its negligence in the duty of appointment and supervision of its agent, servant or any other employee who are not entitled to the said powers, applying the statutory punishment equally to the principal offender and the juridical person responsible solely for the negligence is hardly considered an imposition of proportional punishment for individual liabilities. The Provision, therefore, is in violation of the Constitution.

3. Dissenting Opinion of Two Justices

In case an employee of a juridical person engages in an unlicensed speculative business, the Provision imposes fines also on the juridical person aside from the employee. This is based on the consideration

that it is difficult to clarify, considering the feature of organizations and work structures of juridical persons, who is responsible for such an act of violation although the juridical person, to which profits are imputed, is highly likely to be accused of causing or reinforcing such an act through toleration and neglect or, in broad terms, a flawed operating system incapable of supervising such an act. Therefore, the Provision is rightfully considered to have reflected the legislators' will to strictly punish the acts of juridical persons in connection with their employees' acts of violation, such as the aforementioned negligence of duty in appointment and supervision.

Meanwhile, the Supreme Court views that the joint punishment of the accountable employee and his/her employer should hold the juridical person, or the employer, responsible for reasons of negligence in appointing and supervising employees, provided that the employer is presumed to be negligent in connection with the employee's act of violation. Even in Japan, where the same joint punishment exists, the conventional wisdom and the position of the Japanese Supreme Court is that the joint punishment of employers "presumes the negligence of juridical persons in not having paid all necessary attention such as through appointment and supervision to prevent illegal acts of their agents or employees".

For this reason, even if the "juridical person's negligence of duties such as appointment and supervision of its employees" is not explicitly written into the Provision, punishment will be imposed only for such responsibilities. Also, the punishment in such cases will be applied according to constitutional interpretation of law. Based on such interpretation, the Provision does not violate the rule of liability.