Faced with pressure from international and non-profit organisations, such as the Organisation for Economic Co-operation and Development (“OECD”) who are criticising the lack of enforcement of anti-corruption laws in France, the French Ministry of Economics and Finance introduced a new bill to the French Government on 30 March 2016, the “Loi Sapin II pour la transparence de la vie économique” (“Sapin II”). Sapin II intends to significantly strengthen and improve the anti-corruption system currently in place in France.

Although the final content of Sapin II remains uncertain, the draft bill constitutes a major reform that will bear important consequences on the enforcement of anti-corruption laws in France.

The main provisions of Sapin II intend to introduce a new legal obligation on large companies to prevent corruption subject to heavy sanctions. Sapin II creates a national agency in charge of preventing and detecting corruption, and introduces a new criminal penalty of “mandatory compliance”.

Unfortunately, one of the key innovations outlined in previous drafts of the bill, i.e. the introduction of the possibility to enter into criminal settlements with judicial authorities in corruption cases, has been censored by the Conseil d’Etat.

  • The introduction of a binding obligation to prevent corruption remains the key innovation of Sapin II.

Under Sapin II, “bound entities”(i.e. companies with 500 employees or more, and all groups with 500 employees or more, recording a turnover of a minimum of 100 million euros) and their legal representatives will be required to have effective internal procedures in place to prevent and identify any act of corruption committed in France or abroad by any of their employees.

In particular, this obligation to prevent corruption would require the implementation of:

  • a compliance programme, including anti-corruption rules and procedures;
  • an internal whistleblowing process;
  • a risk-based approach to contractual relationships based on the geographical scope of the contract and the business sector;
  • internal audit and control procedures on contracting parties (intermediaries, commercial agents, partners, suppliers etc.);
  • internal or external accounting control procedures;
  • training sessions for employees and staff; and
  • disciplinary actions to sanction employees who breach the provisions of the company compliance programme.

Compliance with the new obligation to prevent corruption will be controlled on a regular basis by a new authority called the “Service chargé de la Prévention et de l’Aide à la détection de la Corruption” (service in charge of preventing and assisting in the detection of corruption).

Breach of the obligation to prevent corruption could be subject to heavy administrative penalties imposed by the Sanctions Committee of the “Service chargé de la Prévention et de l’Aide à la détection de la Corruption”.

  • The creation of the “Service chargé de la Prévention et de l’Aide à la détection de la Corruption” with effective sanctions prerogatives

Sapin II intends to create a new regulatory authority in charge of controlling and sanctioning companies that are under the obligation to prevent corruption.

The powers and objectives vested in this authority principally remain the same as in the first drafts, however,in the current bill the name of the authority has changed from “Agence Nationale de Prévention et de Détection de la Corruption” to “Service chargé de la Prévention et de l’Aide à la détection de la Corruption”.

Under the current bill, this service is composed of both judicial and administrative magistrates with the power to:

Publish specific recommendations for companies regarding the implementation of anti-corruption procedures;

Conduct extensive investigations, call on any person, request the transmittal of any document, or conduct onsite searches in order to verify that bound entities have complied with their obligation to prevent corruption; and

Impose administrative sanctions through its Sanctions Committee, in particular administrative fines of up to 200,000 euros on individuals, and 1 million euros on legal entities whose internal procedures are deemed inadequate in preventing corruption practices.

  • The scope and definition of the new criminal penalty of “mandatory compliance” is now detailed in the current bill

Under Sapin II, a legal entity convicted by a French criminal court on the grounds of corruption could be subject to an additional US-inspired criminal penalty of “mandatory compliance”.

This new penalty will be set out in article 131-39-2 of the criminal code and aims to impose an obligation on the convicted entity to implement, at its own expense, and within a maximum of five years (instead of the three years provided in the previous drafts), effective anti-corruption procedures, under the supervision of the “Service chargé de la Prévention et de l’Aide à la détection de la Corruption”.

The current bill now defines this duty of mandatory compliance as the implementation of:

  • a compliance programme, including anti-corruption rules and procedures;
  • an internal whistleblowing process;
  • a risk-based approach to contractual relationships based on the geographical scope of the contract and the business sector;
  • internal audit and control procedures on contracting parties (intermediaries, commercial agents, partners, suppliers etc.);
  • internal or external accounting control procedures; and
  • training sessions for employees and staff, as well as disciplinary actions.

Failure to comply with this obligation would itself attract criminal sanctions under a new article 434-43 of the criminal code, punishable with a two-year custodial sentence and a 30,000 euro fine for individuals. Legal entities will be subject to a fine equal in amount to the fine incurred for the offence under which it was originally convicted.

  • Has the possibility for legal entities to enter into settlements with the judicial authorities definitively been struck out?

Previous drafts of Sapin II provided the introduction of the possibility for legal entities prosecuted in France for corruption, to enter into a criminal settlement (“Convention de compensation d’intérêt public”) with the French authorities, similar to “Deferred Prosecution Agreements” (“DPAs”) in the US and the UK.

Indeed, under the current system in France, it is not possible to enter into a DPA with the prosecuting authorities, as is the case in the US and UK.

It is regrettable that this original provision of Sapin II was censored by the Conseil d’Etat. The French Administrative Supreme Court considered that this provision would deprive the judicial authorities of properly exercising their role and that the scope of application of this provision would be too broad.

However, in its opinion dated 24 March 2016, the Conseil d’Etat conceded that given that similar procedures already exist in France and taking into account the systems in other countries, the possibility to enter into settlements is “conceivable” in international corruption cases, provided that appropriate guarantees are implemented.

The Parliament may submit an amendment to reintroduce the possibility to settle international corruption cases with prosecuting authorities. The adoption of such a provision would enable France to finally comply with international standards and would improve the enforcement of anti-corruption laws. It would encourage French companies to report suspicions of corruption to the authorities and allow them to cooperate with the authorities, without risking a final conviction for international corruption and an administrative sanction, with the effect that it would be prohibited to participate in public procurement procedures for 5 years.

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Considering the demonstrated efforts of the French judicial authorities to severely sanction corruption practices, as well as the government’s commitment to reinforce the fight against corruption, we can strongly expect that the French Parliament will adopt Sapin II. It can only be hoped that the bill will be amended to reintegrate the possibility of settlements in international corruption cases.

… To be continued …