Despite signing the OECD anti-corruption Convention in 1997, France has long been perceived as lacking necessary tools for domestic and international anti-corruption enforcement, particularly in comparison to the US Foreign Corrupt Practices Act of 1977 (“FCPA”) or the UK Bribery Act of 2010 (“UKBA”). The perception that France is lax on corruption was underscored by the fining and monitoring of several French corporations under the FCPA in the recent past (e.g., Alcatel, Alstom, and Technip).
This perception may soon change. On December 9, 2016, France enacted Law No. 2016-1691, entitled “Loi relative à la transparence, à la lutte contre la corruption et à la modernisation de la vie économique” (Transparency, Fight against Corruption, and Economic Modernization Act, which is dubbed “Sapin II” after its primary advocate, the French Minister of Finance, Mr. Sapin (the “Sapin II Act” or “Sapin II”). Although some decrees accessory to the Sapin II Act have yet to be adopted by the executive branch, the act came into effect on December 10, 2016 (save for Article 17 regarding compliance programs, which will become effective on June 9, 2017).
The Sapin II Act constitutes a major shift in French anti-corruption law as it has ambitions to elevate French anti-corruption law to the best international standards through five main changes: it extends the extraterritorial reach of French anti-corruption laws (I), creates a new anti-corruption body replacing the former anti-corruption body with extended powers (II), introduces an obligation to implement anti-corruption corporate compliance programs (III), improves protection for whistle-blowers (IV), and implements a system of deferred prosecution agreements (V).
I. Extension of Reach for French Anti-Corruption Regulation
The Sapin II Act provides for a clear expansion of French jurisdictional powers to prosecute corruption-related offenses committed abroad or involving foreign officials.
First, Sapin II creates a new offence known as “trafic d’influence d’agent public étranger” (influence peddling with respect to a foreign public official).
Second, Sapin II facilitates the prosecution of corruption offences committed abroad by stating that French anti-corruption laws should fully apply to acts of foreign corruption by French and foreign persons either residing or doing business in France:
“French law shall apply in all circumstances to the following offenses [relating to corruption] committed abroad by a French national or by a French resident or a person exercising all or some of its economic activities on French territory. (as translated from the original French text)”
Third, and most importantly, Sapin II eliminates prior requirements that had constrained French prosecutors by requiring that a foreign corruption offence be successfully prosecuted in the foreign jurisdiction before French authorities could intervene.
In light of these changes, French authorities will now be able to take a more active role in prosecuting corruption acts committed abroad. This should be of particular concern to international corporations active in France, as they now face potential French law liability for corruption acts committed outside of France.
II. Creation of a New Anti-Corruption Authority with Extensive Powers
Article 1 of the Sapin II Act created a new French Anti-Corruption Agency, named the Agence Française Anticorruption (“AFA”). It is placed under the joint supervision of both the Ministries of Justice and of Finance. The AFA replaces the previous Service Central de Prévention de la Corruption (“SCPC”)(Central Service for the Prevention of Corruption). Article 2 of the Sapin II Act subsequently provides the AFA with extensive powers to detect and sanction corruption acts. The AFA will profit from various mechanisms to gather evidence, especially in relation to the new anti-corruption compliance programs [on compliance programs, see also below, III]. A Commission des Sanctions (Sanctions Commission) is also created within the AFA. Pursuant to Article 17, this Sanctions Commission is vested with disciplinary powers, including the ability to fine companies not in compliance with French anti-corruption laws. Nonetheless, public prosecutors still have the final say on whether or not to prosecute corruption offenders, as they remain solely in charge of judicial action.
In addition, Article 3 of the new Act states that the AFA will issue recommendations in the future, with the aim of helping companies comply with French anti-corruption law. Interestingly, it is specified that these recommendations should vary depending on the size of the companies in question and the types of risks identified.
Finally, the French government has emphasized that the AFA should be provided with additional means in comparison to the former SCPC agency. According to the Ministry of Finance’s press release, the AFA will have 70 employees and an annual budget of EUR 10-15 million; to compare, the current SCPC staff number is 16. While it remains to be seen whether the AFA will be staffed and funded as announced, such an increase in resources clearly shows France’s intent to intensify its anti-corruption enforcement.
III. Implementation of Corporate Compliance Programs
Before the Sapin II Act, French or France-based companies were under no obligation to take proactive steps to prevent corruption. The introduction of mandatory compliance programs for corporations of a certain size is thus another major shift in French anti-corruption law. Pursuant to Article 17 of Sapin II, anti-corruption compliance programs will be required as of June 9, 2017 for both (i) French companies employing 500 or more employees and having a turnover above EUR 100 million and (ii) all subsidiaries of parent companies incorporated in France affiliated with a group of 500 or more employees in total and a consolidated turnover above EUR 100 million. Some 2,000 companies are expected to be implicated and Article 17 specifies that corporate officers will be responsible for implementing the anti-corruption plans. These plans would notably include: an internal code of conduct providing for disciplinary sanctions and corporate investigations in cases of wrongdoing; a reporting system enabling employees to report information regarding suspected wrongdoing [i.e., a sort of whistle-blowing line—on this issue, see below, IV]; a risk-mapping system (with updates every two years); a third-party risk assessment (i.e., due diligence on clients, suppliers and intermediaries); internal and external accounting controls; and training programs for employees most exposed to corruption risks.
Non-compliant corporations will be exposed to injunctions from the AFA and, in case of persisting non-compliance, fines reaching up to EUR 1 million (EUR 200,000 for individuals). In addition, Sapin II will allow the AFA to publish the sanctions issued against the non-compliant corporations.
IV. Improved Protection for Whistle-Blowers
Whistleblower protection programs, rewarding and protecting individuals who take action to report corruption, are well-known in the United States. However, such programs are a relatively new feature in France. In this context, Chapter II of the Sapin II Act, labelled “Protection of whistleblowers,” is remarkable, as it introduces a very strong protection framework for individuals reporting a potential violation of anti-corruption laws or a “serious threat or damage to the public interest.”
Article 9 of the Sapin II Act requires relevant companies to guarantee confidentiality and protect the identity of the whistleblowers, while Article 10 prohibits employer retaliation against whistleblower employees. In addition, Article 7 offers immunity from criminal prosecution to whistleblowers and provides for a mechanism of conditional financial assistance to whistleblowers.
However, the new French whistleblowing regime applies only to disinterested parties with firsthand knowledge of the facts, since Article 6 defines a whistleblower as an individual “reporting selflessly and acting in good faith […] with personal knowledge [of the facts].” This means that French law does not protect or incentivize whistleblowing by implicated parties, or individuals with secondhand knowledge of the facts.
Finally, Article 13 states that any person who is found to have created an “obstacle” to whistleblowing may be fined EUR 15,000 and given a prison sentence of up to one year—further evidence of Sapin II’s high concern with the protection of whistleblowers.
V. Introduction of Deferred Prosecution Agreements in French Law
Amongst the most controversial features of the Sapin II draft bill was the introduction of an Anglo-Saxon style deferred prosecution agreements to French criminal law. Such prosecution agreements, as defined by the UK’s Serious Fraud Office, are understood as “an agreement reached between a prosecutor and an organization which could be prosecuted, under the supervision of a judge. The agreement allows a prosecution to be suspended for a defined period provided the organization meets certain conditions. DPAs can be used for fraud, bribery, and other economic crimes. They apply to organizations, never individuals.” The controversy was in regards to the specific nature of deferred prosecution agreements, i.e., a negotiated settlement whereby a company, without pleading guilty, agrees to a combination of monetary sanctions and compliance measures, which was perceived as “too commercial” for French criminal law. Despite having been removed at some point during the legislative process, deferred prosecution agreements were nonetheless later reintroduced in the final version of the Sapin II Act, under the label of Convention Judiciaire d’Intérêt Public (which may be literally translated as “judicial agreement of public interest,” i.e., a French Deferred Prosecution Agreement (“DPA”)).
Article 22 of the Sapin II Act enables French prosecutors to offer a DPA “as long as no public proceedings have been initiated”(as translated from the original French) without any admission of guilt on the part of the suspected company. DPAs are not allowed for individuals, such as employees or corporate officers, who may still be subject to criminal prosecution for their own violations even if their company has entered into a DPA.
A DPA can only be concluded under certain conditions. The agreement must include one or more of the following obligations for the suspected company pursuant to Article 22: payment of a fine to the French treasury, capped at 30% of the turnover; implementation of an AFA-monitored compliance program for up to 3 years; and payment of additional compensation to identified victims.
Importantly, the Sapin II Act provides that a DPA proposal accepted by the suspected company must be reviewed by a judge and subject to a public hearing that may be attended by victims of the corruption act. Following the hearing, the court may validate or deny the DPA. Afterwards, the private party to the DPA has a final right to retract its consent. Upon satisfactory performance of its DPA obligations, the company will be relieved of any criminal prosecution for the underlying facts. DPA will nonetheless be published on the AFA’s website, which may result in adverse publicity.
The Sapin II Act contains a number of new anti-corruption instruments largely inspired by US and UK law. As such, Sapin II is undoubtedly a move towards more active anti-corruption enforcement in France. At first glance, corporations may deplore that Sapin II adds an additional burden for ensuring compliance. Nonetheless, the knowledge that French companies are now subject to enhanced domestic anti-corruption oversight may serve to enhance their reputation in the international arena and therefore reduce the number of corruption cases brought by US authorities against French companies operating internationally.