After considerable debate, France adopted its new Law on Transparency, the Fight against Corruption and Modernization of Economic Life, on November 8, 2016 (the “Law”). This Law represents a reaction to international pressure brought to bear against the French government for its perceived laissez-faireenforcement towards corruption, and a response to severe sanctions imposed by the U.S. Department of Justice (“DOJ”) on French companies in recent years. The French Minister of Finance, Michel Sapin (after whom the Law has been nicknamed the “Sapin II” Law), has indicated that the adoption of the Law will bring France’s anti-corruption regime up to the highest European and international standards in its fight against corruption.

Analysis

The principal measures of the Law include the creation of an anti-corruption agency, the protection of whistleblowers, the introduction of an obligation for companies to prevent corruption, the possibility for companies to negotiate financial settlements with judges (akin to Deferred Prosecution Agreements in the U.S.), and the creation of the French legal equivalent of U.S. monitorships. Notably, the Law also creates extra-territorial jurisdiction for offences committed outside of France.

Creation of an Anti-Corruption Agency

The Law creates a French Anti-Corruption Agency (“Agence française anticorruption“, the “Agency”) under the authority of the French Minister of Justice and Minister of Budget, tasked with the mission of aiding the competent authorities to prevent and detect acts of corruption, influence peddling, extortion, misappropriation of public funds, and other related misconduct.

Similar to the DOJ in the United States, France’s new Agency will review the quality and effectiveness of companies’ anti-corruption programs and will exercise investigative powers to request documentation as part of its review.

The Agency will also publish information relating to the prevention and detection of corruption, and issue an annual report describing its activities.

Protection of Whistleblowers

The Law creates protections for whistleblowers by imposing financial penalties on those who retaliate against whistleblowers and providing for the possibility of indemnities and financial assistance for whistleblowers who submit good faith reports of misconduct and are prejudiced as a result.

The Law also expands the previous definition of a whistleblower to cover “any individual who reveals or reports, disinterestedly and in good faith, a crime or misdemeanor; a serious and manifest breach of an international commitment duly ratified or approved by France, of an unilateral act of an international organization adopted on the basis of such commitment, or of a law or regulation; or a serious threat or harm to the public interest, of which he/she has had personal knowledge.” Disclosure of matters involving national defense, confidential medical issues or legal privilege are excluded from the scope of protection and cannot be disclosed.

Whistleblowers must first alert their supervisor, then a public authority (i.e., judicial or administrative authorities or professional boards) in case no action to verify the admissibility of the alert is taken within a reasonable time. Only as a last resort, if the alert has not been acted on within three months by the public authority, can the information be made public.

Obligation to Prevent Corruption for Certain Companies

The Law imposes a new obligation to actively manage corruption risks for companies with at least 500 employees (or companies belonging to a group of companies whose parent company is headquartered in France and whose workforce includes at least 500 employees) and with consolidated revenues in excess of EUR 100 million.

Presidents, managing directors, directors and managers of such companies are required to take appropriate measures to prevent and detect, in France and abroad, acts of corruption or influence peddling. The requirements include the implementation of (i) an ethics code, (ii) an internal whistleblowing procedure, (iii) risk mapping, (iv) assessment procedures for customers, major suppliers and intermediaries, (v) accounting checks, (vi) employee training, (vii) disciplinary sanctions, and (viii) an internal check and assessment system regarding the implemented measures. The Agency is in charge of overseeing compliance with this obligation and can issue a warning or an injunction directing legal entities and individuals to comply. The Agency can also refer the conduct to the Sanctions Commission, which is empowered to impose fines of up to EUR 200,000 for individuals and EUR 1 million for companies.

These measures will enter into force as of May 1, 2017.

Resolution by Deferred Prosecution Agreement (DPA)

A new form of French DPA (“convention judiciaire d’intérêt public“) has been introduced allowing companies suspected notably of international or national corruption offences to avoid prosecution and criminal sanctions by entering into an agreement with a court requiring either or both of the following:

1. payment of a public fine (limited to 30% the company’s three-year trailing average annual revenue and determined based on the proceeds of the offence), increased by damages to the victim and certain expenses incurred by the Agency within its mission
2. implementation of an internal compliance program to be overseen by the Agency for three years.

Any such fine and/or compliance program must be approveda judge in a public hearing. The settlement order and agreement and the fine amount must be published on the Agency’s website. In exchange, charges will be dropped and the company will not be required to make any admission of liability. Such DPAs are reserved for corporate entities, while individual offenders will remain subject to criminal sanctions even if the company enters into a DPA.

Creation of the French Legal Equivalent of U.S. Monitorships

The Law creates a penalty of “mandatory compliance” for companies convicted of acts of corruption. This additional sanction aims to ensure that sanctioned companies modify their behavior and implement effective compliance programs at their own expense, under the supervision of the Agency, within a certain court-defined time limit not to exceed five years.

The Agency will monitor the company’s fulfillment of this obligation, and will report the actions undertaken to the Public Prosecutor, at least annually. The Agency has authority to request any professional documents or necessary information, and to conduct interviews, similar to U.S. monitors. Based on the behavior and efforts demonstrated by the company over a period of at least one year, the Public Prosecutor can then petition the enforcement judge for early commutation of the sentence.

Conclusion

The “Sapin II” Law, which is part of a broader legislative package addressing transparency in economic activities, will enter into force in stages. The most critical area of focus for companies is the design and implementation of compliance programs that will effectively monitor, detect and remediate corruption in commercial transactions. Such programs must be implemented prior to May 1, 2017 to avoid sanctions.

GlobalComplianceNews

14 November 2016

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