CORPORATE CRIMINAL LIABILITY IN ENVIRONMENTAL OFFENSES: ASSESSING LEGAL FRAMEWORKS AND ENFORCEMENT CHALLENGES BY - RUHI AMIN SAITH

CORPORATE CRIMINAL LIABILITY IN ENVIRONMENTAL OFFENSES: ASSESSING LEGAL FRAMEWORKS AND ENFORCEMENT CHALLENGES
 
AUTHORED BY - RUHI AMIN SAITH
 
 
ABSTRACT
Recent environmental catastrophes, such as Chevron's deliberate pollution of the Amazon and the Rio Doce Dam collapse caused by Samarco, underscores the grave impact of corporate actions. Instances like the oil leakage in Nigeria attributed to Shell or the Deepwater Horizon oil spill by BP in the Gulf of Mexico act as strong indications of the enormity of environmental offenses. A common thread connects these incidents: corporations. They illuminate how corporate misdeeds wreak havoc on nature. While modern environmental laws offer the promise of holding companies accountable, enforcement is far from simple due to the intangible nature of corporations. As the spotlight intensifies, the debate rages on about whether corporations should face criminal consequences. This paper delves into the evolution of Corporate Criminal Liability, exploring the significance of "mens rea" in environmental crimes. While India boasts robust environmental laws, the pivotal question remains: Can these laws truly deter corporations from harming our planet? The answer is a subject of ongoing, impassioned discourse.
 
Keywords: Environmental Crimes, Identification Theory, Vicarious Liability, Mens Rea
 
INTRODUCTION
“The world’s leading ozone destroyer takes credit for leadership in ozone protection”
 – Kenny Bruno[1]
Globalization has linked the world and brought improvements, evident in profits and improved quality of life. However, there's a cost - we've traded clean environments for designer bags. Despite rules, implementation often falls short.
 
Throughout the history of Company Law, corporations have concealed their wrongdoings by using the shield of a "Separate Legal Entity." Therefore, to counter the illicit activities hidden under this façade of incorporation, the concept of lifting the corporate veil emerged.
 
We’ve seen multiple corporates, who under the pretext of greenwashing have caused irreparable harm. An instance is Volkswagen, which installed software in 482,000 "clean diesels"[2] US vehicles to cheat emission tests. This caused harmful pollutant emissions outside tests, violating the Clean Air Act after regulators discovered the deception.[3] 
 
This paper will aim to provide a link between corporate criminal liability through the perspective of environmental crimes. 
 
METHODOLOGY
The essay employs doctrinal research, referencing primary sources like laws and court judgments, and secondary sources like digital repositories, scholarly articles, and legal verdicts. Insights were gained from relevant scholarly papers, online databases, and blogs. Using this approach, additional information was analyzed from e-libraries and databases like Jstor, Hein Online, West Law, and Manupatra.
 
LITERATURE REVIEW
1.      Criminal Liability of Corporations – An Environmental Perspective – Vijay Kumar Singh[4]
The author supports holding corporations accountable for environmental violations and suggests increasing penalties due to previous fines being inadequate for the significant harm caused. They argue that steeper penalties are necessary to prevent corporations from prioritizing profits over environment degradation.
 
2.      Environmental Crimes: An Analysis – Dr. Virender Sindu[5]
The author brought attention to a deficiency in the enforcement of the legal system by discussing cases where courts utilized civil penalties despite the existence of provisions for criminal penalties within environmental law.
 
3.      International Environment Crime: A Growing Concern of International Environment Governance – Puneet Pathak[6]
The author highlighted the contrasting strategies employed internationally and domestically to handle environmental wrongdoing by corporations. International courts often lean towards non-criminal resolutions, while domestic courts tend to categorize such cases as administrative in nature. 
 
4.      Union Carbide Corporation v. Union of India[7]
Applying 'mens rea' to corporations is tough here. The case showcased severe corporate negligence, causing deaths and long-lasting gas leak effects. The court took 25 years for a 2-year sentence, highlighting the injustice of conventional criminal law.
 
5.      Lennard’s Carrying Co. Ltd v. Asiatic Petroleum Co. Ltd[8]
In this case, it was ruled that if an employee's behavior is closely linked to the company, the company can be deemed responsible for those actions. Nevertheless, this verdict does not address the matters of criminal accountability and the obligations of corporations with multiple directors.
 
6.      Iridium India Telecom Ltd v. Motorola Inc[9]
The court established Motorola's responsibility for the fraudulent actions carried out by its employees. Despite Motorola's argument of lacking mens rea, the court employed the doctrine of vicarious liability.
 
RESEARCH GAPS
1)      Should corporations be subject to prosecution via civil litigation or criminal litigation?
2)      Do the penalties imposed for environmental offenses adequately address the repercussions of the transgressions?
3)      Is the inclusion of mens rea a pivotal factor in cases of corporations implicated in environmental offenses?
 
RESEARCH ANALYSIS
 
1)      Development of Corporate Criminal Liability
The Corporate Criminal liability debate focused on two aspects: absence of mens rea and inability to be imprisoned[10]. Courts leaned towards the idea that if law required both fines and imprisonment, corporations might only need to pay fines[11]. However, this raised a query: What about cases needing imprisonment? The Supreme Court[12] clarified that corporations can't evade prosecution solely due to mandatory imprisonment. Penalties are possible if part of the punishment. Currently in India[13], a stricter stance on corporate criminal liability is evident. The highest court affirmed that 'absence of mens rea' can't defend businesses. Corporations will be liable through attribution and imputation principles.
 
1.1)            Corporate Criminal Liability in Environmental Crimes
A study by Friends of Earth International[14] highlights corporations' significant environmental damage. Exxon Mobil, for instance, accumulated around 20.3 billion tons of carbon dioxide over 120 years, this means that they contributed to 4.7 to 5.3% of worldwide man-made carbon dioxide emissions since its inception.
 
The evolution towards corporate criminal liability in environmental law began with the case New York Central & Hudson River Railroad Co., v. United States,[15] which challenged the notion that corporations lack mens rea. This transformation is essential to prevent undue corporate immunity and better manage environmental abuses.
 
2)      The Problem with Sentencing Corporations
2.1)            Too many laws too little interpretation
Indian legislation reveals notable discontent. The Companies Act of 2013 assigns responsibility to individuals rather than corporations. The trend of blending administrative, environmental, and sporadic criminal laws to fulfil administrative obligations is noticeable. 
 
Penalties[16] for environmental crimes are insufficient and poorly defined, rendering these provisions symbolic rather than effective. Clarity in regulations for environmental offenses is lacking, replaced by a disjointed collection of rules. Conversely, countries like Germany feature a dedicated portion within their Criminal Code for environmental infractions, augmenting administrative sanctions.[17]
 
2.2)            Imbalance of Fines
Many environmental violations stem from ignorance, not malice. If actions aren't seen as wrong, they persist undetected. The UK's Environmental Industries Commission argues small fines can wrongly make companies view them as a cost-effective solution for environmental harm.[18] Corporations, unable to be jailed, often receive monetary penalties, but their effectiveness is uncertain. Individual fines account for paying ability, but this isn't consistent for corporations, causing imbalance. For example, the Water Act[19] imposes a 10,000 Rupees maximum fine for both, yet corporations evade imprisonment, reducing deterrence. The National Green Tribunal Act of 2010 has stricter penalties, but it's limited to complex civil cases. Research-wise, it's vital to fine corporations for environmental breaches, considering their superior financial capacity.
 
2.3)            “ex Non Cogit Ad Impossibilia”[20]
Due to the water tight statutes of criminal law, we notice an imbalance of punishment between corporations and individuals. Corporations cannot be jailed, but new provisions must be set to imprison key decision-makers for clear responsibilities in serious cases is needed. A model to strive for is exemplified by the Income Tax Act[21], which allows for the prosecution of every individual who carried the responsibility for managing the company's operations at the time of the transgression.
 
The 47th Commission Report[22] introduced a new approach: stigmatizing corporations when imprisonment isn't possible. Reversing damages, restoring the environment post-misconduct, and penalties like temporary closures for pollution failure are effective. Vigilant monitoring and media's role in stigmatization, akin to greenwashing, are vital.
 
3)      Corporate Social Responsibility
In the Companies Act of 2013, Section 135 mandates Corporate Social Responsibility (CSR)[23], requiring companies to allocate 2% of recent net profits to CSR. To genuinely integrate social and environmental factors, businesses must be sustainable and socially responsible[24], not solely profit-driven. They should strive for a triple bottom line: economic, environmental, and social performance, encapsulating people, planet, and profit[25]
 
CONCLUSION
The Brutland Report stresses aligning profits and environmental preservation, with profits promoting ecological protection. Challenges in this balance are seen in Environmental Impact Assessment.[26] Corporations escape accountability in current legal systems, diluting environmental regulations for development pretexts. Strong enforcement and upholding laws are the solution.
 
SUGGESTIONS
1)      The issue's data mostly comes from the West; India lacks comparable statistics. Thus, legislating effective solutions without a clear understanding is tough. Research initiation is vital.
2)      Globalization spurs corporate and MNC expansion, often exploiting underdeveloped nations[27]. Thus, controlling MNC entry/exit and promoting local goods is vital.
3)      Large corporations surpass small nations' budgets[28], making fines insufficient[29]. Broader actions like stigma, dissolution, or temporary closure are necessary.[30]
4)      Merge environmental fines using the 2010 National Green Tribunal Act, Section 26(1)[31], for wider choices. Quickly institute separate corporate misconduct guidelines, distinct from individual penalties. There could also be a distinct legislation on Polluter Pays Principle.
5)      Parent firms, despite limited liabilities, own subsidiary profits and must be liable for subsidiary actions.[32]
6)      Strengthen regulators, establish an independent environmental protection entity, and incentivize eco-responsible corporate conduct through tax benefits, maintaining a balanced approach between rewards and penalties.
 
BIBLIOGRAPHY
1)      Khanna, V. S. (1996). Corporate Criminal Liability: What Purpose Does It Serve? Harvard Law Review, 109(7), 1477–1534. https://doi.org/10.2307/1342023
2)      Stessens, G. (1994). Corporate Criminal Liability: A Comparative Perspective. The International and Comparative Law Quarterly, 43(3), 493–520. http://www.jstor.org/stable/760646
3)      Diskant, G. L. (2008). Rethinking Corporate Criminal Liability. Litigation, 34(2), 5–60. http://www.jstor.org/stable/23800767
4)      Arlen, J. (1994). The Potentially Perverse Effects of Corporate Criminal Liability. The Journal of Legal Studies, 23(2), 833–867. http://www.jstor.org/stable/724468
5)      Woodka, J. L. (1992). SENTENCING THE CEO: PERSONAL LIABILITY OF CORPORATE EXECUTIVES FOR ENVIRONMENTAL CRIMES. Tulane Environmental Law Journal, 5(2), 635–662. http://www.jstor.org/stable/43291120
6)      Marty, K. F. (2009). Criminal Prosecution of Responsible Corporate Officers and Negligent Conduct under Environmental Law. Natural Resources & Environment, 23(3), 33–40. http://www.jstor.org/stable/40925020
7)      Sanskruti Harode (2021). The “Green Gap” in Prosecution of Environmental Crime, Indian Journal of Law and Legal Research , https://articles-manupatra-com.eu1.proxy.openathens.net/article-details/The-Green-Gap-in-Prosecution-of-Environmental-Crime
8)      Mr. Abhishek Anand (2004). Holding Corporations Directly Responsible For Their Criminal Acts : An Argument, Manupatra Articles, https://articles-manupatra-com.eu1.proxy.openathens.net/article-details/Holding-Corporations-Directly-Responsible-For-Their-Criminal-Acts-An-Argument
9)      D. Sliviya Dixina and S. Indrapriya. A Study on Corporate Crime in India, International Journal of Law Management and Humanities, https://articles-manupatra-com.eu1.proxy.openathens.net/article-details/A-Study-on-Corporate-Crime-in-India
10)   Ajay Bainar & Gaourav Gulati (2021) , Lifting the Corporate Veil Corporate Criminal Liability, Supremo Amicus, https://articles-manupatra-com.eu1.proxy.openathens.net/article-details/Lifting-the-Corporate-Veil-Corporate-Criminal-Liability
11)  Ananya Jian (2021) Criminal Liability of Directors: An important facet for the developing India. Supremo Amicus. https://articles-manupatra-com.eu1.proxy.openathens.net/article-details/Criminal-Liability-of-Directors-An-important-facet-for-the-developing-India
12)  Ananya Agarwal (2021). Redefining Corporate Criminal Liability with respect to Environmental Crimes. International Journal of Legal Science and Innovation. https://articles-manupatra-com.eu1.proxy.openathens.net/article-details/Redefining-Corporate-Criminal-Liability-with-respect-to-Environmental-Crimes
13)  Disha Tulsyan (2021). Corporate Criminal Liability And the Way Forward, International Journal of Law Management and Humanities, https://articles-manupatra-com.eu1.proxy.openathens.net/article-details/Corporate-Criminal-Liability-And-the-Way-Forward
 
 
 

[1] The World of Greenwash, CorpWatch, January 1, 1997, (August 16th, 10:30 PM) www.corpwatch.org/campaigns/PCD.jsp?articleid=244
[2] Joby Warrick, EPA : Volkswagen used ‘defeat device’ to illegally skirt air pollution controls, The Washington Post EPA: Volkswagen used ‘defeat device’ to illegally skirt air-pollution controls - The Washington Post
[3] EPA: Transportation, Air Pollution, and Climate Change, United States Environment Protection Agency,  (August 16th, 10:30 PM)  Transportation, Air Pollution, and Climate Change | US EPA
[4] Vijay Kumar Singh, Criminal Liability of Corporations – An Environmental Perspective, Chapter 3 in: Environmental Crimes: Corporate Liability, ISBN 978-81-314-2521-3, (August 16th, 11:00 PM) https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2972053
[5] Dr. Virender Sindhu, Environmental crimes: An analysis in the International Journal of Advanced Educational Research, Volume 3; Issue 1; January 2018, (August 16th, 11:00 PM)  https://www.scribd.com/document/453498297/environmental-crime-pdf
[6] Puneet Pathak - International Environment Crime : A Growing Concern of International Environment Governance, 13 US-CHINA L. REV. 382 (2016) (August 16th, 11:00 PM) International Environment Crime : A Growing Concern of International Environment Governance  
[7] Union Carbide Corporation v. Union of India, 1989 SCC (2) 540
[8] Lennard’s Carrying Co. Ltd v. Asiatic Petroleum Co. Ltd, AC 705
[9] Iridium India Telecom Ltd v. Motorola Inc, (2010) 14 ADDL SCR
[10] A.K. Khosla v. S. Venkantesan, (1992) Cr.L.J. 1448.
[11] MS Javali v. Mahajan Borwell & Co and Ors
[12] Standard Chartered Bank v. Directorate Enforcement, AIR 2005 SC 2622 
[13] Iridium India Telecom Ltd v. Motorola Incorporated and Ors, (2010) 14 (ADDL) SCR 591.
[14] Dorsey, Michael K., “A Plan for Democratic Control of Corporate Crime.”, September 2004, (August 16th, 11:00 PM) https://papers.ssrn.com/sol3/papers.cfm?abstract_id=597722
[15] New York Central & Hudson River Railroad Co., v. United States, 212 US 481 (1909)
[16] Indian Penal Code, 1860, Chapter IV
[17] German Criminal Code (Strafgesetzbuch – StGB), Chapter 29, offences against the environment.
[18] Grabosky, Peter and Frances Gant, “Improving Environmental Performance, Preventing Environmental Crime”, 2000, (August 16th, 11:00 PM) https://www.ojp.gov/ncjrs/virtual-library/abstracts/improving-environmental-performance-preventing-environmental-crime
[19] The Water (Prevention and Control) Act, 1974. § 38
[20] I.A. Khan, Environmental Law, Allahabad: Central Law Agency, 2002, p.59.
[21] Income Tax Act, 1961 § 78(b),
[22] Report, Committee on Reforms of Criminal Justice System Government of India, Ministry of Home Affair, Volume 1, March 2003, (August 16th, 11:00 PM)  https://www.mha.gov.in/sites/default/files/criminal_justice_system_2.pdf.
[23]European Commission (2009) Corporate social responsibility. (16th August, 11:30 PM), https://single-market-economy.ec.europa.eu/policies/sustainable-business/corporate-social-responsibility_en
[24] Antunes D, Santos A, Hurtado A (2015) The communication of the LCA: the need for guidelines to avoid greenwashing. Espacios 36(5), (16th August, 11:30 PM) https://www.researchgate.net/publication/283019567_The_communication_of_the_LCA_The_need_for_guidelines_to_avoid_Greenwashing
[25] Elkington J (1994) Towards the sustainable corporation: win-win-win business strategies for sustainable development. Calif Manag Rev 36(2):90–100.  (16th August, 11:30 PM), https://doi.org/10.2307/41165746,
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[27] Samir Kumar Singh. (2005). An Analysis of Anti-Dumping Cases in India. Economic and Political Weekly, 40(11),
1069–1074. (16th August 2023, 10:40 PM), http://www.jstor.org/stable/4416337
[28] UNRISD (2002) (16th August 2023, 10:40 PM) http://www.globalpolicy.org/reform/2002/modelun.pdf
[29] Sterlite Industries(I) Ltd v. Union of India & Ors. (2013) 6 S.C.R 573
[30] Law Commission of India : The Trial and Punishment of Social and Economic Offences, Report No. 47 (1972) (16th August 2023, 10:40 PM) https://cdnbbsr.s3waas.gov.in/s3ca0daec69b5adc880fb464895726dbdf/uploads/2022/08/2022080816-1.pdf
[31] Paryavaran Suraksha Samiti & Anr. v. Union of India & Ors., WRIT PETITION(C) NO. 375 OF 2012
[32] Iridium India Telecom Ltd. v. Motorola Inc, CRIMINAL APPEAL NO.688 OF 2005