The Sapin II Law dated December 9, 2016 and its application decree dated March 14, 2017 create new momentum concerning anti-corruption efforts. France is now making significant advances in aligning its legislation with existing international anti-corruption standards.
Although the purpose of the Sapin II Law is multifaceted (its aim is to enable a more transparent and effective financing of the French economy), this article focuses specifically on anti-corruption provisions concerning:
the creation of an independent French anti-corruption agency;
new requirements for internal compliance programs;
the establishment of new sanctions for non-compliance;
the creation of a French deferred prosecution agreement;
the prosecution of corrupt practices committed outside of French territory; and
the development of a broader and more comprehensive whistleblower protection.
I. Creation of an independent Anti-Corruption Agency
The Sapin II Law establishes an Anti-Corruption Agency whose role is to help preventing and detecting corrupt practices, influence peddling, misappropriation of public funds, embezzlement and favoritism. The agency is also in charge of evaluating the quality and effectiveness of anti-corruption policies and procedures implemented by the French public entities and corporations. To this end, the agency may issue official guidelines and its enforcement committee may impose sanctions and remedies.
II. New obligations for corporate executives
The Sapin II Law imposes an obligation on the corporate executives of French companies with at least 500 employees at the company or group levels (if the holding company is incorporated in France) and with an annual turnover (individual or consolidated) of more than €100 million, to implement prevention and detection measures against corruption and influence peddling in France and abroad.
This compliance program must comprise:
- an internal code of conduct;
- an internal whistleblowing procedure;
- a comprehensive and regularly updated risk assessment of the company’s exposure to corruption;
- evaluation procedures assessing the integrity of clients, direct suppliers and intermediaries with regard to such risk assessment;
- accounting controls and audits aimed at detecting corrupt or influence peddling practices;
- staff training for employees most likely to encounter high-risk situations;
- disciplinary sanctions triggered by the violation of this internal code of conduct;
- internal audit of the impact of the different measures applied.
III. Sanctions for non-compliance
In case of failure to implement the above compliance program, the French anti-corruption agency may:
- issue a warning to the company’s representatives;
- refer the matter to its enforcement committee, which may decide to:
(i) issue an injunction requiring that the company adapt its compliance program;
(ii) impose a fine on the corporate executive officers of up to a €200,000 maximum, and on the company of €1 million maximum (warning: both the company and individual corporate executive officers may be held liable); and
(iii) make its decision fully or partially public.
Furthermore, for certain compliance-related offences, courts may impose (in addition to the applicable fines) an obligation upon the corporate entity to implement a compliance program, under the monitoring of the French anti-corruption agency and at the company’s expense, for a maximum period of five years.
IV. Creation of a French deferred prosecution agreement
Principles. Before any criminal charges are pressed, the prosecutor can offer the company the option of entry into a settlement agreement – the French deferred prosecution agreement (“FDPA”). Its purpose is to avoid prosecution, provided the company fulfills a number of commitments. Sanctions that may be imposed upon the company in the context of a FDPA are of two types:
- a fine proportionate to the profits drawn from the unlawful conduct, the amount of which may not exceed 30% of the company’s average annual turnover over the last three years; and/or
- monitorship, for a maximum period of three years and under the Agency’s control. All costs related to the compliance program and monitorship are to be borne by the company.
Judicial approval. The draft deferred prosecution agreement must be approved by the President of the French Tribunal de grande instance, during a formal public hearing involving the company and the injured parties. The court’s decision cannot be appealed. If approved, the FDPA is published on the Agency’s website.
Implications of the FDPA on the criminal record. In principle, the approval of an FDPA does not qualify as a criminal sentence and does not imply an admission of guilt on the part of the company. The FDPA does not, however, deprive third parties harmed by the alleged offence from their right to pursue a civil claim against the company.
Referral by an investigating magistrate. The negotiation of an FDPA requires that no charges have been pressed yet. If charges have been pressed, the investigating magistrate (juge d’instruction) may, by way of exception, refer the case to the public prosecutor for a settlement negotiation. In this case, in order to benefit from the FDPA, the company must acknowledge the alleged facts and accept the magistrate’s finding thereof as an offence.
Criminal liability of individuals. Regardless whether the FDPA is approved or not, the legal representatives of the company remain criminally liable in their individual capacity.
International aspect. The signature of a FDPA in France does not necessarily prevent companies from being prosecuted in another country based on the same facts.
V. Facilitating prosecution of acts committed outside French territory
The Sapin II Law reinforces the extraterritorial reach of French anti-corruption legislation, as it facilitates the prosecution of corrupt practices committed outside France by French nationals, residents, or by any person conducting its business (entirely or partially) in France. The Law also makes influence peddling of foreign officials on foreign soil a punishable offence.
VI. A more comprehensive protection for whistleblowers
The Sapin II Law establishes a mechanism to protect whistleblowers. A “whistleblower” is defined as an individual who, in good faith and without seeking personal gain or advantage, discloses or alerts to any of the following acts that it has personal knowledge of:
(i) a crime or an offence;
(ii) a serious and obvious violation of a law, regulation, or an international treaty to which France is a party (and any act issued by an international organization on the basis of such treaty); or
(iii) a threat or serious harm to public interest.
Information relating to attorney-client privilege, military defense or medical records is excluded from the scope of whistleblower disclosure.
A whistleblower may not make the information public immediately. It must:
(i) alert its direct or indirect supervisors, employers, or the designated contact identified by its employer;
(ii) in case of failure of such persons to address the issue, alert a judicial or administrative authority, or a professional body; and
(iii) if none of those authorities have acted on the alert within three months, the information may then be made public.
If there is an imminent serious threat or a risk of irreversible harm, whistleblowers may directly alert the relevant authorities and disclose the information to the public.
In order to ease this process, all companies with more than 50 employees need to implement an appropriate whistleblowing procedure.
Whistleblowing procedures must ensure the strict confidentiality of whistleblowers’ identity, of the person involved, and of the information disclosed. The identity of persons or entities targeted by the whistleblowing cannot be disclosed to anyone other than the judicial authority before the confirmation that the whistleblowing is substantiated.