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Friday
Sep302016

Nicolas Tollet on the new French anti-corruption law: Shall we be scared of France now?

For more than a year, France has been working on improving its legislation to enact a new anti-corruption law in order to reach the same standards as the FCPA, the UK Bribery Act or the Brazilian Clean Company Act.

In 1993, a significant improvement had been made to France’s anticorruption battery with a law nicknamed Law Sapin; name of the minister who then supported the law. Since 2012, Michel Sapin has been back in the French government and has been working on the 2.0 version his anticorruption law.

Last week during a conference, he confirmed that considering procedural specificities under French law, the bill adopted at the Lower House in committee a few days ago, would be the final one in spite of the debates occurring through October. Therefore, it is now time to have a closer look at the bill and assess if it changes anything in reality, and if we must now be scared of France’s capacity to go after French and non-French companies suspected of transnational corruption.

Prohibitions: First, we should note that the law does not anticipate significant change in the practices prohibited. The existing legislation is already one of the most stringent in the world and covers passive and active corruption both domestic and international, as well as domestic influence peddling. Facilitation payments and private bribery are also prohibited. The new law will extend prohibition to international influence peddling. Books and records provisions are also already existing under French law.

Compliance Programs: This was expected for a long time. French law now institutionalizes compliance programs and the compliance profession preventing corruption. Such program shall include a code of conduct, trainings, due diligence, a whistleblowing line and other typical features. On the due diligence, we note that the bill requires companies to perform due diligence on its clients. Depending on who the clients are, it will be very impractical and sometimes impossible to do so. The law also requires due diligence on first line suppliers and on intermediaries.  A review of all direct suppliers will necessitate tremendous efforts from companies. Besides, the company will have to create a mapping of its corruption risk which according to the rapporteur of the law during the debates at the Lower House in June, will have to take into consideration the past. A review of past practices within the company may reveal to be necessary to meet this requirement.

According to article 8 of the bill, all companies of more than 500 employees and generating revenue of more than 100 million euros will have to set up a compliance program to prevent corruption. It applies (i) to companies meeting those criteria and (ii) to companies belonging to a group of companies, which meets those criteria. In the latter case, the parent company must be headquartered in France. The law awards a six-month period as from the publication date of the act to implement the program (i.e. approx. around May 2017).

Note that the responsibility to set up such a program lies with both the executives of the company and the company itself. Failing to set up a compliance program can lead to an administrative fine of up to 200,000 euros against the executive and 1 million euros against the company. Such sanctions would be declared by the Anticorruption Agency, which would discover the absence of proper compliance program, after the executives and the company fail to follow the recommendations of the Agency to improve the compliance program within a period that can be of up to three years.

Considering that the fine is not criminal and the time awarded to follow recommendations, there is not much incentive from French law to quickly set up a compliance program. Besides, unlike the UKBA or the Brazil Clean Company Act, it is not expressly stated that having a compliance program will be taken into consideration in the frame of a potential settlement. Therefore, smaller companies not meeting the criteria of 500 employees and 100 million euros may have no incentive from French law to set up a compliance program.

Whistleblowers: Whistleblowers are significant to unveil corruption acts and lead to investigations. The new law awards strong protection for whistleblowers and precisely defines the route to follow to benefit from such protection. Besides, anonymous whistleblowing, which was negatively viewed until now by the powerful French agency on data privacy, is now fully approved by the law. Revealing facts that can lead to discovering the identity of an anonymous whistleblower can even be sanctioned by two years imprisonment.

Leniency: French law already provides that the individual author or accomplice of bribery, corruption or influence peddling benefits from imprisonment reduced by half if he or she comes forward to the authorities and enables the authorities to stop the crime or to identify the other authors or accomplices.

Anti-corruption Agency: The French Service Central de Prevention de la Corruption set up in 1993 and which lacks of means for its missions, will be replaced by a French Anticorruption Agency anticipated to be headed by famous anticorruption judge Xaviere Simeoni. She is notably known for her work in a high-profile corruption case involving a former French President.

Such agency will be in charge of (i) assisting companies in setting up their compliance program, (ii) performing controls, (iii) sanctioning inefficient compliance programs and (iv) supervising monitorships. Guidelines are anticipated to be issued by the agency, but not necessarily as detailed as the US or UK guidance.

In terms of budget, significant means will be awarded to the agency. The current anticorruption service only has 16 employees. The new agency shall have between 60 and 70 employees and 10 to 15 million euros. It may seem low compared to similar agencies in other jurisdictions, but a comparison with the French Anticompetition Authority proves the contrary. Such authority, which does an outstanding work, is ranked 5 Stars like the U.S. FTC or the UK Competition Commission. However, it only has 185 employees and a budget of 2O million euros…

Nevertheless, we wish the agency had been set up as an independent authority centralizing all aspects of prevention, investigation and sanction, instead of the current situation where all is split among various stakeholders. It could have been similar to the French Anticompetition Authority, which is active for each of preventing, investigating and sanctioning anticompetitive practices.

Enforcement: A new office of Attorney General for financial crimes, including corruption, has been set up in 2014. Such office is actively collaborating with the various administrative services such as TRACFIN of the Ministry of Economy and Finance. The office was created with 15 judges and 10 employees and its resources were significantly improved in 2015 and 2016. The office is investigating more and more cases, including for transnational corruption; most of them are not yet public.

The main reason why French justice has not sanctioned definitively any company for transnational corruption is the length of the procedure and the difficulty to find relevant evidence. No settlement was possible; companies had to be brought to court. That issue is now resolved with the possibility for companies only to settle acts of bribery, influence peddling and money laundering without admitting guilt.

Enforcement by French authorities is now also extraterritorial and allows to reach out to crimes fully committed outside France.

Sanctions: In terms of sanctions, France already had one of the most stringent laws in the world: 10 years imprisonment and a criminal fine of 1 million euros which can be increased to twice the profits made through the crime, for individuals bribing. Such criminal fine is multiplied by five for companies bribing. Sanctions also include publication of the judgment, exclusion from public bids or even liquidation of the company.

A new sanction introduced with the law is the monitorship under the supervision of the Anticorruption Agency (which will not act as a monitor itself) for up to three years.

Also, in case of settlement, the company has to pay (i) up to 30% of its average annual revenue calculated on the three prior fiscal years, (ii) costs of the procedure and costs of legal, financial, accounting and tax experts and (iv) damages to the victim if identified. A settlement by the company does not preclude the authorities to prosecute the individuals. A press release by the Office of the Attorney General discloses the settlement.

Statute of Limitation: The statute of limitation remains of three years as from the moment when the illegal facts can be detected by the authorities if they were hidden.

Conclusion: France has enforced domestic corruption law quite seriously against individuals in many high profile domestic corruption cases prosecuted over the years. France now also has all the means to be efficient in fighting transnational bribery and to limit the US DoJ’s involvement in French companies’ practices by means of extraterritoriality. Practitioners will look closely at the activity of the French Anticorruption Agency and the Office of the Attorney General to check if times are really changing in the international arena.

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Nicolas Tollet is an Attorney at Law admitted to the Bars of Paris, New York and the United States Supreme Court, specialized in anticorruption compliance since 2008. He has been actively involved in the drafting of the law Sapin 2 with members of the French Lower House of the Parliament. He is also the founder of The European Compliance Network and a lecturer at the University of California Berkeley.