On November 8, 2016, the French National Assembly adopted the "Sapin II Law," landmark legislation that ushers in a new era of anticorruption enforcement in France. Named by reference to the "Sapin I Law," which was enacted in 1993, the Sapin II Law aligns French anticorruption law with aspects of U.S. and UK corruption enforcement. After withstanding a legal challenge in the country's Constitutional Court, the Sapin II Law was officially enacted on December 19, 2016. Described below is a summary of some of the most notable provisions of the Sapin II Law.
A FRENCH LEGAL AND CULTURAL REVOLUTION IN THE CONTEXT OF TRANSNATIONAL CORRUPTION
Underlying the Sapin II Law is the belief held by French political leaders that corruption, enhanced by trade globalization, is worsening and undermining economic interests. As noted by Minister for the Economy and Finance Michel Sapin, after whom this legislation is named, corruption is a real obstacle to economic development, distorting competition and damaging the reputations of French businesses.
France has never convicted a company for bribing foreign public officials, although, under statutes such as the U.S. Foreign Corrupt Practices Act ("FCPA") and the UK Bribery Act, French businesses with international operations often find themselves subject to prosecution and criminal investigation abroad for such conduct. Prior to the Sapin II Law, international anticorruption enforcement organizations such as the OECD were quick to point out that France lagged behind other countries in corruption enforcement and needed to improve its efforts to combat corruption.
Against this backdrop, the Sapin II Law quite clearly marks a major turning point in French anticorruption enforcement. As described below, the new legislation, among other things, creates a new anticorruption enforcement agency, expands the extraterritorial reach of France's anticorruption laws, and lays the foundation for increased penalties for individuals and entities convicted of corruption offenses. The statute also contains provisions requiring the implementation of corporate compliance programs under certain circumstances and allows companies to enter into a judicial settlement of public interest (Convention judiciaire d'intérêt public)—a mechanism akin to a Deferred Prosecution Agreement ("DPA"), which U.S. and, more recently, UK authorities have used to resolve corruption cases—such that, subject to the successful satisfaction of certain conditions, they may avoid a criminal trial and a conviction.
Whether the country's enforcement officials will now take full advantage of their enhanced enforcement tools of course remains to be seen, but regardless, companies that are, or may come, within the reach of the Sapin II Law would be well advised not to delay in readying themselves for this new enforcement regime, in particular by implementing, if and as necessary, the various measures made mandatory for corporate entities.
The Obligation for Major Companies to Implement a Compliance Program
Targeted Persons. Presidents, senior executives (directeurs généraux), managing directors (gérants), and Société Anonyme board of directors members of companies that (i) employ at least 500 employees or are part of a group with a parent company headquartered in France with at least 500 employees and (ii) have an annual gross profit or consolidated annual gross profit exceeding EUR 100 million, are required to put in place a corporate compliance program to prevent and detect corruption or influence trafficking in France and abroad. Where the accounts of a company subject to the Sapin II Law's compliance obligations consolidate the accounts of subsidiaries and other "controlled" companies, the same obligations also apply to those subsidiaries and other "controlled" companies. The company is also liable if it fails to fulfill the obligation to implement a compliance program as required.
Content of the Compliance Program. Such a compliance program must include:
- A corporate code of conduct defining and illustrating conduct to be avoided that constitutes corruption or influence-trafficking offenses. Such code should be appended to the company's internal rules and subject to the procedure of information and consultation of employee representatives, in accordance with article L. 1321-4 of the French Labor Code;
- An internal alert system to collect reports emanating from the company's employees reporting on the existence of conduct or situations violating the company's code of conduct;
- A regularly updated risk map in the form of documentation intended to identify, analyze, and prioritize the company's risk exposure to external corrupt solicitations, notably regarding the business sector and geographic area in which the company pursues its activities;
- Integrity review of clients, "first-rank" suppliers, and third parties in light of the risk map;
- Internal or external accounting controls to ensure that the company's records are not covering up corruption or influence-trafficking offenses;
- Training for employees and managers who are the most exposed to risks of corruption and influence trafficking;
- A sanctions policy, including disciplinary action against personnel found to have engaged in misconduct; and
- Internal controls and evaluation of the measures implemented.
Date of Entry into Force. These obligations will come into force on June 1, 2017.
Penalties. Should a president, senior executive (directeur général), managing director (gérant), or Société Anonyme board of directors member fail to comply with his or her obligation to implement an adequate compliance program, the individual and/or company could be subject to injunctions and financial penalties (up to a maximum of EUR 200,000 for individuals and EUR 1 million for companies). The decision imposing the injunction/penalty could be published or otherwise publicly disclosed.
Creation of a French Anticorruption Agency
Missions. The Sapin II Law creates a new French Anticorruption Agency ("Agency") to replace the existing Service Central de Répression de la Corruption ("Service"). The Agency changes the approach to corruption enforcement in France, as the Service currently has no investigative power and also lacks the authority to impose penalties. Indeed, the Service is empowered merely to collect information on corruption and to communicate such information to the Public Prosecutor. The Agency, on the other hand, is provided with broad supervisory powers relating to anticorruption enforcement. For example, it has primary authority for ensuring that companies effectively implement anticorruption compliance programs. The Agency can also make recommendations to help both private- and public-sector entities prevent and detect corruption and influence-trafficking offenses.
The Sanctions Commission. The Agency includes a Sanctions Commission that could also impose penalties on noncompliant individuals and/or companies.
Reinforced Protection for Whistleblowers
Definition of "Whistleblower." The Sapin II Law defines a "whistleblower" as follows: any individual who reveals or reports, selflessly and in good faith, a crime, offense, serious threat or harm to the public interest, or serious and manifest breach of (i) an international commitment duly ratified or approved by France, (ii) a unilateral act of an international organization adopted on the basis of such commitment, or (iii) a law or regulation of which he/she has had personal knowledge.
Reporting Procedure. A whistleblower must first alert his/her direct or indirect supervisor or another, specifically designated person to the conduct at issue. The person who receives this report must then check its "acceptability"—that is, determine: (i) whether the reporter in fact qualifies as a whistleblower under the Sapin II Law, and (ii) whether the prescribed reporting procedure has been followed. If no action is taken on the report within a reasonable time, the whistleblower may address the report to a public authority (i.e., judicial or administrative authorities or professional boards). And, in such cases, if the public authority involved does not take action on the report, the report may be disclosed to the public. Private and public sector entities employing at least 50 employees have the obligation to implement such a procedure. A government decree will specify the conditions and modalities under which it should be implemented.
Protection for the Whistleblowers. Under the Sapin II Law, workplace retaliation against whistleblowers who convey information on alleged misconduct is strictly prohibited. However, matters of national security secrecy, medical secrecy, and legal privilege are not covered by the whistleblower provisions of the Sapin II Law and therefore cannot be disclosed. Finally, a whistleblower cannot be held criminally liable for disclosing a secret protected under French law, provided the disclosure is necessary and proportionate to safeguard the interests involved and complies with the aforesaid reporting procedures.
Extraterritoriality of French Anticorruption/Influence Trafficking Legislation: Enlarging Capacity for Prosecution
France's existing domestic anticorruption/influence-trafficking law is applicable to all prohibited conduct committed within the territory of France. An offense is deemed to have been committed within the territory of France if one of its constituent elements was committed within that territory. Under certain circumstances, however, France's anticorruption/influence-trafficking law can also reach conduct outside France. For example, the law is applicable to corruption or influence trafficking outside France if the victim is a French national.
Under the Sapin II Law, French law's applicability is no longer limited to corruption or influence trafficking engaged in by French nationals outside France. It is now applicable to wrongful conduct outside France by "persons habitually residing in France" or "having all or part of their economic activity in France."
As to wrongful conduct constituting corruption or influence trafficking engaged in by French nationals outside France, the Sapin II Law removes the requirement that the conduct at issue be prohibited under the law of the country in which it was committed and also removes the requirement that the prosecution be instigated only at the behest of the Public Prosecutor. This provision notably expands the authority of French prosecutors to pursue French nationals acting abroad.
In addition, the law creates the offense of influence trafficking in relation to foreign public officials.
Under French law, corruption and influence-trafficking offenses are punished as follows: EUR 500,000 to EUR 1 million and five to 10 years' imprisonment for individuals, and EUR 2.5 million to EUR 5 million for companies.
Under the Sapin II Law, convicted entities could also be required to implement an anticorruption compliance program under Agency supervision and bear all the compliance costs incurred. Those under Agency supervision who continue not to fulfill their obligations with respect to corporate compliance programs would face additional fines (for individuals, a fine of up to EUR 50,000 and up to two years' imprisonment; for companies, a fine equivalent to that imposed for the underlying offense). Decisions imposing such additional penalties could be published or otherwise publicly disclosed, further highlighting the conduct and potentially damaging the reputations of the companies involved.
The Possibility for Companies to Enter into a Judicial Settlement
The "French DPA." The Sapin II Law implements the French equivalent of a DPA, referred to in the statute as a "judicial settlement of public interest." More specifically, the law authorizes the Public Prosecutor to negotiate DPAs with companies.
Content. The Sapin II Law lays out a process by which the Public Prosecutor could consider the appropriateness of entering into a "judicial settlement of public interest" with a "legal person suspected" of corruption and influence-trafficking offenses. Such a settlement would allow companies to avoid a criminal conviction by:
- Paying a public interest fine to the Public Treasury. The amount of this fine is proportionate to the gains derived from the company's wrongdoing, with the amount of the fine to be capped at 30 percent of the company's average annual turnover over the past three years. Payment could be staggered by the Public Prosecutor over a period that cannot exceed a year; and/or
- Being subject to a compliance program for a three-year maximum period under the control of the Agency.
Scope. Under the Sapin II Law, a DPA can apply only to legal persons (where one of their organs or representatives is suspected of having committed the offense on the person's behalf), not natural persons. Offenses committed by a mere employee, even on behalf of a legal entity, will therefore be excluded from the scope of the settlement. In other words, a DPA is appropriate only where the conduct was engaged in by (i) an employee—an organ or representative of the company—who, by virtue of his position and authority within the company, can act for and bind the company, or (ii) an employee who has been expressly granted a delegation of power.
Procedure. The Public Prosecutor is entitled to bring the settlement to the court's president for its final validation during a public hearing. Following this hearing, the court's president would validate or invalidate the settlement by checking (i) the appropriateness of resorting to a DPA, (ii) the regularity of the process, (iii) the conformity of the fine's amount to that permitted under the law (capped at 30 percent of the annual turnover of a company over the past three years), and (iv) the fine's proportionality to the gains derived from the company's wrongdoing. The decision of the court's president cannot be appealed. Should the court's president grant an order validating the settlement, the legal person would have a 10-day period to reject it. If the legal person were to accept the settlement, it would be bound to comply with the settlement's obligations. If it were to refuse the settlement, the settlement would be null and void.
Effect of Entering into a Settlement. The order validating the settlement would not amount to a declaration of guilt and would not be in the nature, or have the effect, of a conviction. The settlement would not be registered as a criminal record. However, it would be disclosed by press release. Furthermore, the fine amount, the president's validating order, and the settlement would be published on the Agency's website.
Impact on International and Multijurisdictional Investigations. This new mechanism will allow French authorities to sanction companies suspected of corruption. Any such resolution, however, would not prevent law enforcement authorities in other countries from undertaking investigations of the same conduct under their respective anticorruption laws. As French authorities develop additional experience and expertise in international corruption enforcement, it stands to reason that they will increase coordination with their counterparts in other jurisdictions, which, in turn, should afford opportunities for companies under investigation in France to reach "global" resolutions that address their legal exposure across all jurisdictions involved.
The adoption of the Sapin II Law constitutes a landmark step for French anticorruption enforcement. Among other major reforms, the law requires the implementation of anticorruption compliance programs, subject to the supervision of the new anticorruption Agency, by both large companies operating in France and France-based companies operating abroad.
For such companies, these and other provisions of the Sapin II Law indicate that French authorities are prepared to get much tougher in their anticorruption enforcement activities and that companies must likewise beef up their corresponding compliance programs.
A government decree will specify the conditions and modalities under which the law will be implemented. Companies will also rely on the Agency's recommendations on how to prevent and detect corruption and influence trafficking. It is hoped that the Agency will follow the U.S. Department of Justice's practice by publishing concrete and specific guidance to assist companies in their compliance efforts.
Jones Day will continue to monitor and report on developments with the Sapin II Law.