Essential further regulation for Brazil’s new Anti-Corruption Law No. 12,846/13 (“the Act”) was published on 18 March 2015 by the signing of Decree 8,420/2015 (“the Decree”) by Brazil’s President Dilma Rousseff. The Act came into force in January 2014 and overhauled Brazil’s anti-corruption laws. See our related Law Now and the latest version of the CMS Guide to Anti-Bribery and Corruption Laws. The Decree puts the ‘flesh on the bone’, by setting out detailed rules and procedures for various aspects of the Act, including the calculation of fines, the factors which render a compliance programme effective, leniency agreements and the procedures for investigating corruption and determining liability.
Administrative procedure for determination of liability
The Decree establishes an administrative process for investigating and assessing the administrative liability of companies or other legal entities under the Act, which must generally be completed within 180 days. During this period, a commission consisting of at least two public officials have broad powers to carry out searches and seizures in connection with their investigations. The Comptroller-General of the Union (“CGU”) is given specific jurisdiction over enforcement involving bribery of non-Brazilian public officials and corruption involving Brazilian federal officials and federal government entities. After the investigation is concluded, the commission must produce a report based on their findings recommending any sanctions to be applied.
The Decree sets out details on the applicable sanctions including rules for calculating fines, with adjustments to be made for aggravating and mitigating factors. Such factors include the level of senior management involvement, the existence (or otherwise) of a compliance programme, the frequency of infringement and any collaboration with the authorities. Having a compliance programme in place can therefore significantly reduce the level of fine, although it cannot provide a complete defence.
The maximum fine is the lower of:
- 20% of the company’s gross revenues (BRL 60,000,000 when not possible to establish gross revenues); or
- 3 times the value of the benefit obtained or sought through the misconduct.
The minimum fine is the higher of:
- The value of the benefit intended or obtained; or
- 0.1% of the company’s gross revenues (BRL 6,000 when not possible to establish gross revenues).
Companies in violation of the Act can also be placed on one of two national registers:
- National Register of Companies Suspended and Not in Good Standing (“CEIS”) - lists administrative sanctions imposed on companies, restricting the right to take part in bidding processes or to execute agreements with the public entities
- National Register of Punished Companies (“CNEP”) - contains information on sanctions incurred by companies under the Act and any failure to comply with the leniency agreements made under the Act.
The Act recognised that internal compliance programmes should be considered in assessing sanctions, but expressly left the parameters for such assessment, to be defined later. The Decree addresses this and states that effective compliance programmes must be risk-based and take account of the company’s size and structure, the jurisdictions and industry in which it operates and its level of engagement with government entities.
The Decree lists factors to be considered when assessing the effectiveness of a compliance programme including:
- commitment of the company’s senior management to the programme
- level of implementation of ethics and conduct codes
- periodic training of employees and third parties
- conduct of audits and monitoring programmes
- existence of procedures to prevent fraud in bidding procedures and performance of government contracts.
A company in violation of the Act may enter into a leniency agreement at any time up to the completion of the investigative process, in a bid to reduce the sanctions that may be imposed. In order to enter into a leniency agreement, a company must:
- be first to show interest in cooperating with the authorities in relation to the specific wrongful act (when doing so is relevant)
- have ceased involvement in, and admit participation in the wrongful act
- fully and permanently cooperate with the authorities, providing relevant information including proof of the misconduct
- identify other parties involved where possibleadopt or improve an existing compliance programme upon entering into the leniency agreement.
While a leniency agreement will not allow a company to completely escape liability for damage it has caused, it may offer the following benefits:
- reduction in the fine imposed (reduced by up to two-thirds of the otherwise applicable fine)
- exemption from admittance to the public registers, CEIS or CNEP
- exemption from publication of the decision sanctioning its conduct.
The issuance of this Decree is another key step in anti-corruption enforcement in Brazil and serves as a reminder that authorities are now taking corruption seriously. In view of the severity of sanctions for breaching these new laws, companies must take great care to ensure that they have adequate internal compliance programmes in place as this not only reduces the likelihood of a breach, but is also treated as a mitigating factor if a breach occurs. Of course, this is also important where the US Foreign Corrupt Practices Act or UK Bribery Act may apply, which is the case for many multinationals active in Brazil.