Loss cannot be ignored even in illegal business - Supreme Court on calculation of benefit in illegal business

In legal practice, it is not uncommon to encounter crimes that require a detailed analysis of the facts not only in terms of the course of their commission, but also in terms of the economic consequences of these acts. One of such offences is unauthorised entrepreneurship, where a substantial benefit may be a circumstance which conditions the application of a higher penalty rate. The Supreme Court, in a recent resolution, Case No. 5 Tdo 720/2023 of 30 August 2023, dealt with the interpretation of the term "substantial benefit" in the context of the offence of unauthorised business under Section 251(2)(b) of the Criminal Code.

The concept of net benefit in case-law

A fundamental guideline for the interpretation of the notion of substantial benefit is the opinion of the Supreme Court's historic, but still relevant, collected opinion of 1990, according to which the notion is to be interpreted as net benefit, i.e. the proceeds of criminal activity after deducting the costs incurred to achieve it. This interpretation is consistent with the need to assess fairly the degree of social harmfulness of the conduct and the related need to determine an adequate penalty. The starting point for determining whether the benefit derived from the unauthorised business constitutes a substantial benefit is a sum of at least CZK 1 000 000.

Relevant case-law

In a case recently dealt with by the Supreme Court, the accused was found guilty of unauthorised business by granting loans without the necessary authorisation. The offence was classified as unauthorised business with reference to the substantial benefit the accused derived from the activity. The lower courts were faced with the challenge of correctly determining the amount of that benefit, which was crucial in determining the correct legal qualification and thus the range of criminal penalties to be considered.

In its order, the Supreme Court emphasized that the total net benefit of the crime must be calculated as the sum of the gains from successful transactions less the losses from unsuccessful actions. In this way, it has established a clear framework for calculating the benefit that reflects the real economic results of the illegal business, since the illegality aspect of the business is not determinative in this respect. In other words, even in the case of an illegal business, the loss is taken "fully" as a fact that has impaired the economic benefit of the "illegal businessman" and to that extent he has enriched himself less by the illegal business even in the eyes of the criminal law.

Implications for practice

This Supreme Court ruling provides important guidance for the assessment of the offence of unauthorised entrepreneurship, especially in cases where the calculation of benefit (enrichment) is crucial for determining the level of punishment. This provides legal practice with clearer criteria for assessing the economic aspects of these offences, which contributes to greater predictability of court decisions and to enhancing legal certainty.

More broadly, the decision also demonstrates the constant evolution of case law in response to changing conditions in social and economic life. A detailed and careful assessment of all the circumstances of the case, including economic factors, is essential for fair and adequate criminal sanctions that reflect the real social harm of the conduct.

Lucie kaufmanová collaborated on the article.