French anti-corruption developments: Sapin II law proposes new anti-corruption rules for businesses

France's Finance Minister, Michel Sapin, presented a proposal for a new law on transparency, anti-corruption measures and the modernisation of the economy to the Council of Ministers on 30 March 2016.

The proposal includes innovations in various fields, including new rules on corruption and ethics violations. At the heart of these new anti-corruption rules lies an obligation for businesses of a certain size to be proactive in terms of preventing corruption. Compliance with this obligation will be monitored by a new agency for the prevention and detection of corruption, the "Service Chargé de la Prévention et de l'Aide à la Détection de la Corruption" (SCPADC). One of the most anticipated innovations of the proposed law is the creation of a protected status for whistleblowers from all sectors (public and private) and industries. The implementation of this new status was heralded as the conclusion of a legislative process that has gradually broadened the scope of the protective measures in place for whistleblowers, which were first defined in a law adopted on 13 November 2007 on reporting instances of corruption.

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The Panama papers: France returns Panama to its list of Non-Cooperative Countries and Territories

In the aftermath of revelations from the Panama papers, France is relisting Panama as a Non-Cooperative Country and Territory (NCCT) for tax matters.

France had withdrawn Panama from its NCCT list on 1 January 2012 after signing an agreement with Panamanian authorities on combating tax evasion.

However, since then, the Minister of Finance has come to view cooperation from Panama as unsatisfactory. On 21 December 2015, he announced that France would be "very attentive to how our exchanges with Panama progress" and that if Panamanian responsiveness to requests for assistance from French authorities did not quickly improve, France would return Panama to its NCCT list.

Secretary of State for the Budget specified on 5 April 2016 that relisting Panama on the NCCT list would open the way to "sanctions" or at least "substantial withholding (…) on transactions between French and Panamanian companies that lack economic justification".

Vote after a second reading of the proposed law imposing a duty of vigilance on parent or subcontracting companies

On 23 March 2016, the French National Assembly passed a proposed law on the duty of vigilance to be borne by parent or subcontracting companies for a second time.

The proposed law makes large French multinationals responsible for establishing and effectively implementing a "vigilance plan" that contains "measures to ensure reasonable vigilance" in preventing the infringement of human rights and fundamental liberties, personal injuries, serious environmental or health risks, and active or passive corruption arising not only from their own activities but also those conducted by "companies they control, as well as subcontractors or suppliers with which they have established business relationships" in France or abroad. In addition to ordinary civil liability, the law includes judicial authority to issue injunctions and order civil penalties of up to €10 million.

The following companies would be affected by the proposed law:

  • French companies with at least 5,000 employees;
  • French parent companies with at least 5,000 direct employees or 5,000 employees in their direct or indirect subsidiaries located in France;
  • French parent companies with at least 10,000 direct employees or 5,000 employees in their direct or indirect subsidiaries located in France and abroad.

This means the duty of vigilance would be borne by major French companies and groups – and by multinational groups if their parent company is located in France or their French subsidiary has over 5,000 employees in France.

There have been no substantial changes to the text adopted on the first reading, even though it was rejected in its entirety by the Senate due to concerns about the scope and extraterritorial dimensions of the duty of vigilance it would impose.

If no compromise can be reached between the two houses after this second vote, the decision will be in the hands of the Commission mixte paritaire (joint committee).

Reform of the criminal statute of limitations

On 2 March 2016, the National Assembly's Commission des Loisapproved the proposed reform of the limitation periods for criminal matters.

The Senate will now consider the proposed law which would increase the limitatation period for major crimes (crimes) from ten years to twenty, and for offences (délits) from three years to six. The limitation on minor offences (contraventions) is not affected and remains set at one year.

The reform also aims to clarify the law. A revision of the French Criminal Procedure Code would bring together isolated provisions that establish exceptions to the standard statutory limitation period, such as those relating to offences, terrorist acts, drug law violations, media law violations, and offences under the Elections Code.

The limitation period for enforcement for offences would increase from 5 years to 6 years, and no limitation period would apply to the prosecution of, and enforcement against, crimes against humanity.

Although in principle, the limitation period for public prosecution begins on the date the infringement is committed, the proposed law would allow the start of the period to be postponed, in cases of covert or concealed violations, to the date "on which the infringement became apparent and was ascertainable under circumstances allowing public prosecution to be set in motion." Financial misdeeds, such as breach of trust, misuse of company assets and corruption, are the direct target of this reform. 

France issues ministerial decree to freeze assets in respect to individuals and entities affiliated with Al-Qaeda and ISIL (Da'esh), North Korea's nuclear programme, and the Lord's Resistance Army.  

In March 2016, France issued three consecutive ministerial decrees freezing the funds, financial instruments, and economic resources held by individuals and entities affiliated with Al-Qaeda and ISIS/ISIL, North Korea's nuclear programme, and/or the Lord's Resistance Army (a rebel group in the Central African Republic).

These sanctions correspond directly to a recent UN Security Council Resolution targeting North Korea's nuclear proliferation programme, as well as the UN Security Council's decisions in regard to Al-Qaeda and Da'esh and the Lord's Resistance Army, all adopted earlier this year.

Article L.562-2 of the French Monetary and Financial Code permits the Minister for the Economy to freeze any and all funds, financial instruments, and economic resources held by entities or individuals targeted by the United Nations and the European Union, provided they have committed, commit, or facilitate or participate in such acts that are the object of the sanctions.