The French National Assembly has just adopted the law Sapin 2 relating to transparency, the fight against corruption and the modernisation of economic life, providing France with an arsenal to fight against corruption and “trafic d’influence” (influence peddling). 

This law has been adopted following regular criticism from international organisations concerned by the low number of convictions for transnational corruption in France. In October 2012, the OECD published a report recommending that France ensure that companies and their subsidiaries cannot avoid criminal liability. In addition, in Transparency International’s ranking of most corrupt countries, France was 23rd out of 167.

The law Sapin 2 therefore brings major changes to the prevention and punishment of corruption and “trafic d’influence”, notably:

  • the creation of an obligation on the representatives of companies that reach certain thresholds, in terms of turnover and employees, to implement a compliance program in order to detect and prevent corruption and “trafic d’influence”;
  • the creation of an anticorruption agency (Agence Française Anticorruption), which is an independent administrative authority with a sanctions committee that will be empowered to (i) monitor the effectiveness of the compliance program implemented by companies and (ii) punish breaches of the obligations provided by law;
  • the adoption of provisions to protect whistleblowers; and
  • the implementation of a French style Deferred Prosecution Agreement (DPA), which enables the public prosecutor to offer a legal person suspected of having committed bribery, or laundering of the proceeds of tax fraud, to enter into an agreement with the authorities in order to avoid a criminal trial and sentence.

However, please note that the law was referred to the French Constitutional Council (Conseil Constitutionnel) on 15 November 2016, which will delay its enactment and entry into force.

Who is responsible for implementing a compliance program?

The following persons are responsible for implementing a compliance program:

  • the presidents and directors of companies:

o employing at least 500 employees and whose turnover is over EUR 100 million; or
o belonging to a group of companies whose parent has its registered office in France, which employs at least 500 employees and whose consolidated turnover is over EUR 100 million;

  • the presidents and directors of industrial and commercial public entities (Etablissement Public à Caractère Industriel et Commercial):

o employing at least 500 employees and whose turnover is over EUR 100 million; or
o belonging to a public group employing at least 500 employees and whose consolidated turnover is over EUR 100 million;

  • members of the executive board of limited liability companies (sociétés anonymes) regulated by article L. 225-57 of the French commercial code:

o employing at least 500 employees and whose turnover is over EUR 100 million; or
o belonging to a group of companies employing at least 500 employees and whose consolidated turnover is over EUR 100 million.

The company can also be held liable for a breach of the obligation to implement a compliance program.

Furthermore, for groups of companies producing consolidated accounts, the law provides for a carve-out to the obligation to implement such a compliance program: subsidiaries or controlled companies are deemed to comply with the obligation to implement a compliance program where their parent or controlling company has implemented the measures and procedures mandated by the law and provided that those measures and procedures are applicable to all of the subsidiaries and companies it controls.

Which French subsidiaries of foreign groups are affected by the obligation to implement a compliance program?

French subsidiaries (or controlled companies) which employ at least 500 employees and whose turnover is over EUR 100 million are obliged to implement a compliance program.

What are the obligations these persons must comply with?

The abovementioned persons are obliged to adopt various measures in order to prevent corruption and “trafic d’influence” (the Compliance Program), namely:

  • a code of conduct which defines and illustrates the different kinds of behaviours that may constitute bribery or “trafic d’influence”;
  • internal system of alerts, dedicated to collecting alerts from employees reporting wrongdoing or situations that do not comply with the code of conduct;
  • risk mapping which shall consist of regularly updated documentation which identifies, analyses and classifies the risks of external solicitation of bribery to which the company may be exposed. This risk mapping is done with regard to the company’s sectors of activity and the geographical areas of the company’s activity;
  • procedures to assess clients’, suppliers’ and intermediaries’ situations in respect of the risk mapping;
  • internal and external accounting controls to ensure that the accounts are not used to hide acts of bribery or “trafic d’influence”;
  • a training program for those employees most exposed to the risks of bribery and “trafic d’influence”;
  • a disciplinary regime allowing for the sanctioning of employees who violate the code of conduct; and
  • an assessment program to monitor the efficiency of the internal procedures.

The implementation of these measures will be specified by the Agence Française Anticorruption.

What complementary measures will the international companies that have already a Compliance Program have to implement?

It would be risky for foreign companies that have already implemented a Compliance Program (pursuant to the UK Bribery Act or the FCPA for instance) to extend it to their French subsidiary in a standardised way, without taking into account the legal specificities of the country.

For example, it is worth noting that the code of conduct will have to be attached to the internal regulation of the French company and adopted following a particular procedure provided for by French labour law, i.e. it will have to be assessed by the work council or, if not, the employees’ delegates, and then communicated to the labour inspector.

Foreign companies with subsidiaries (and controlled companies) situated in France will have to review and adapt as necessary any compliance programs already implemented.

What is the deadline to adopt the Compliance Program?

The measures to fight against corruption will have to be adopted by the first day of the sixth month following the enactment of the law in question. However, as the law Sapin 2 has been referred to the Constitutional Council on 15 November 2016, it is not possible, as of today, to indicate the date on which the law will be enacted and will enter into force.

What are the sanctions applicable in case of breach of the obligation to implement a Compliance Program?

The Agence Française Anticorruption monitors the implementation of the Compliance Program.

As part of this mission, the agents of the Agence Française Anticorruption can be authorised, by decree of the Council of State (décret en Conseil d’Etat), to obtain any professional document, regardless of its medium, or any useful information, from the representatives of the controlled company. If needed, they can copy it. In addition, they are allowed to verify the accuracy of the information provided, in the premises of the company. They can also communicate with any person whose cooperation seems necessary, under conditions ensuring the confidentiality of their discussion.
Following this investigation, the Agence Française Anticorruption makes a report that contains observations and, if needed, recommendations on the procedures to prevent corruption and “trafic d’influence” implemented by the monitored company. This report is sent to the authority that requested an investigation (the High Authority for Transparency of Public Life, the Prime Minister, a minister or a representative of the State) and to the representatives of the monitored company. In case of breach, it can (i) send a warning to the representatives of the company, and if needed, (ii) refer the matter to the sanctions committee. The sanctions committee will be empowered to:

order the company and its representatives to adapt the internal Compliance Program, following its recommendations and within a set deadline that cannot exceed three years;

  • if needed, cumulatively, fine the legal person up to EUR 1 million and fine individuals up to EUR 200,000; and
  • order the publication, broadcast, or display of the injunction order or the fine or an extract thereof.

Does the law provide for new sanctions for bribery and “trafic d’influence”?

The law does not modify the existing sanctions applicable to corruption and “trafic d’influence” but it creates a new complementary sanction: the company can be ordered to implement, at its own expense, a Compliance Program, subject to the control of the Agence Française Anticorruption and the public prosecutor, for a maximum duration of five years.

Should the representatives of the company ordered to implement a Compliance Program fail to implement the necessary measures or block compliance with the obligations, they could face a criminal sanction of two years’ imprisonment and a fine up to EUR 500,000. Similarly, legal persons may be ordered to pay a fine up to the amount of the fine applicable to the offence of which they have been convicted. Legal persons can also be condemned to additional sanctions applicable to the offence of which it has been convicted.

Individuals and legal persons can be ordered to display or broadcast the judgment handed down.

How does the French DPA work?

One of the most significant measures of the law Sapin 2 is the creation of an alternative procedure to criminal prosecution in the form of a deferred prosecution agreement (convention judiciaire d’intérêt public). This agreement can be offered to a legal person suspected of having committed bribery, “trafic d’influence”, and/or laundering of the proceeds of tax fraud, at the initiative of:

  • the public prosecutor, if a public action has not been launched; or
  • the investigating judge. In this case, the file is sent to the public prosecutor and the agreement must be adopted within three months of the transmission of the file.

This agreement obliges companies to:
(i) pay a financial penalty which is proportionate to the profit derived from the breach, up to 30% of the average annual turnover of the last three years at the time the offence is committed; and/or
(ii) set up a Compliance Program at their own expense, and under the control of the Agence Française Anticorruption for three years; and if needed,
(iii) remedy, within a deadline of one year, the prejudice suffered by any identified victim of the offence. In this regard, the agreement shall set out the amount of the remedy and the modalities for indemnifying victims.

Despite the conclusion of a deferred prosecution agreement, the representatives of the company can still be held liable for the potential offences committed, as individuals.

The deferred prosecution agreement shall be validated by the President of the court of first instance after a public hearing. The validation order does not give rise to a declaration of guilt and is not and does not have the effect of a judgment handing down a punishment. In addition, the deferred prosecution agreement is not recorded in the criminal record of the company, but the public prosecutor shall publish a press release about it. The validation order, the amount of the fine and the agreement are displayed on the website of the Agence Française Anticorruption.

The public prosecutor will be able to prosecute the case if (i) the agreement is not validated by the President of the court of first instance, or (ii) the legal person withdraws its consent to enter into an agreement within ten days of the validation order, or (iii) the company fails to comply with all the obligations set out in the agreement.