Trends and climate
Have there been any recent changes in the enforcement of anti-corruption regulations?
In terms of fighting corruption, France was generally considered to be lagging behind the trend. In 2012 the Organisation for Economic Cooperation and Development raised serious concerns regarding the lack of bribery convictions in France and stated that France should intensify its efforts to combat corruption. Concerning recent transnational cases prosecuted in France, in September 2012 the Paris Criminal District Court fined Safran €500,000 for paying bribes to Nigerian officials to secure a contract to produce national ID cards. However, the ruling was overturned by the Paris Court of Appeal on January 2015 as an "insufficiently grounded" offence.
In July 2013 the Paris Criminal District Court acquitted Total for alleged corruption of foreign public officials in the United Nations’ oil for food programme in Iraq. After the French public prosecutor appealed the ruling, the Paris Court of Appeal overturned the previous ruling and ordered Total to pay €750,000 in February 2016.
Are there plans for any changes to the law in this area?
Yes, the new French Anti-corruption Law on Transparency, the Fight against Corruption and the Modernisation of the Economy (the Sapin II Law) was adopted by Parliament on November 8 2016 and validated by the Constitutional Council on December 8 2016. The law entered into force on December 9 2016 and been supplemented by several decrees.
It provides for new compliance obligations for French companies and their managers and aims to promote better business ethics. At first glance, this prevention-oriented law appears to be less repressive than the provisions of the UK Bribery Act and the Foreign Corrupt Practices Act provisions. However, the implementation of certain mechanisms such as off-setting agreements could result in significant financial penalties.
Which authorities are responsible for investigating bribery and corruption in your jurisdiction?
Before the Sapin II Law, the public prosecutor and the Central Service for the Prevention of Corruption (SCPC) was responsible for investigating criminal offences.
In 2014 the SCPC urged the legislature to tighten applicable regulations concerning the fight against corruption and suggested a French Bribery Act inspired by the UK Bribery Act.
The Sapin II Law was a direct response to the SCPC’s request. This new regulation provides for the creation of a national anti-corruption agency that has replaced the SCPC and ensures compliance with the law – the Agency for the Fight against Corruption.
The agency is in charge of drawing up recommendations on prevention and assistance in detecting corruption for public and economic actors, as well as a plan for the prevention of corruption. It is also in charge of assisting administrations and local and regional authorities in the prevention of corruption.
The agency has also been given real control and monitoring power through the power to investigate within private companies, public companies and administrations. Investigations may be initiated following the receipt of information provided by a whistleblower. The agency will be able to investigate on site, request documents and interview any person in the company.
Failure to cooperate with the agency will result in a €30,000 fine per obstruction.
The agency has a sanctions commission with various powers, including the power to:
require the company to adapt its internal compliance procedures within a specified period, which may not exceed three years;
order the company to pay a financial penalty to an amount proportionate to the seriousness of the breach and the financial situation of the company or individual – such penalty may not exceed €200,000 for individuals and € 1 million for companies; and
order the publication or posting of the decision at the expense of the convicted company.
What are the key legislative and regulatory provisions relating to bribery and corruption in your jurisdiction?
The Criminal Code distinguishes between active and passive corruption:
- Articles 433-1 and following of the Criminal Code criminalise active corruption when a person, either directly or indirectly, unlawfully induces or attempts to induce a public official to accept a bribe by proffering an offer, promise, donation, gift or reward.
- Articles 432-11 and following punish passive corruption, which is characterised as when a public official, either directly or indirectly, solicits a bribe by requesting or accepting without right any offer, promise, donation, gift and advantage by another person.
- Articles 445-1 and following provide for the same rule in the private sector for commercial bribery.
One fundamental point is that the penalties concerning corruption are assorted under the law with ancillary provisions, which contain in particular the debarment of up to five years from public tenders. Economically speaking, this debarment risk is much more mitigated for a business than the penalties.
What international anti-corruption conventions apply in your jurisdiction?
France is a signatory of the Organisation for Economic Cooperation and Development Anti-bribery Convention 1997 and the United Nations Convention Against Corruption 2005. France is also a party to the Council of Europe Criminal Law Convention on Corruption and the Council of Europe Civil Law Convention on Corruption, both ratified in 2008. In 1949 France became a founding member of the Council of Europe Group of States Against Corruption.
Specific offences and restrictions
What are the key corruption and bribery offences in your jurisdiction?
Criminal Law punishes active and passive corruption of foreign and domestic public officials, as well as private commercial corruption. The offence is defined as unlawfully proffering, directly or indirectly, any offer, promise, donation, gift or reward to induce a public official to either carry out or refrain from carrying out any action linked with his or her functions or duties (Article 433-1 of the Criminal Code).
It is also an offence for the public official to directly or indirectly solicit or accept such offers, promises, donations, gifts or rewards (Article 432-11).
The offence is also defined in the private and commercial sector as the act of directly or indirectly making offers, promises, gifts, presents or other advantages to a person who is not a public official but holds or occupies a management position or any occupation for a private person, whether natural or legal, or for any other body, in order to obtain the performance or non-performance of an action in relation with his or her occupation or position.
Are specific restrictions in place regarding the provision of hospitality (eg, gifts, travel expenses, meals and entertainment)? If so, what are the details?
The Criminal Code does not provide specific rules on the provision of hospitality, but rather prohibits any kind of offer, promise, gift, present or other advantage that would serve as a bribe. However, there are specific rules for certain industries (eg, the pharmaceutical industry). Article L4113-6 of the Public Health Code prohibits companies which manufacture or market medicinal products from offering any benefits, either directly or indirectly, in cash or in kind, to healthcare professionals, medical practitioners, students or associations representing them.
However, the guidelines of the Pharmaceutical Companies Association specify that pharmaceutical companies can offer small benefits for an amount lower than €30 per year and per healthcare practitioner for the purposes of marketing their products.
What are the rules relating to facilitation payments?
There are no specific rules in relation to facilitation payments. Contrary to the US Foreign Corrupt Practices Act, there is no derogation regarding facilitation payments in France, and they are therefore prohibited.
Scope of liability
Can both individuals and companies be held liable under anti-corruption rules in your jurisdiction?
Yes, the Criminal Code allows both individuals and companies to be convicted of corruption.
In respect of companies, Article 121-2 of the code specifically provides that corporate entities can be held liable for offences committed on their behalf by their organisation or representatives.
The corporate criminal liability does not exclude the possibility of prosecuting an individual for the same offence. Therefore, a managing director can be held liable for acts committed within his or her company.
Can agents or facilitating parties be held liable for bribery offences and if so, under what circumstances?
Article 121-6 and Article 121-7 of the Criminal Code provide that an accomplice of the offence is as punishable as the perpetrator, with the same penalties.
Pursuant to Article 121-6, an ‘accomplice’ is defined as the person who knowingly, by aiding and abetting, facilitates the offence’s preparation or commission and also as any person who, by means of a gift, promise, threat, order or abuse of authority or powers, provokes the commission of a criminal act or gives instructions to commit it.
Can foreign companies be prosecuted for corruption in your jurisdiction?
Pursuant to Article 113-2 of the Criminal Code, a criminal offence is considered to be committed on French territory when one of its constituting elements took place in France. Therefore, in theory, any company, regardless of its nationality, can be prosecuted in France if the act of corruption took place in France.
However, in practice, France is often criticised for being lax regarding fighting transnational corruption cases and foreign companies are rarely prosecuted by the French public prosecutor. In the past 15 years, there has been only one example of a conviction by the Paris Court of Appeal (Total, February 2016)
Consequently, the Sapin II Law has extended the extra-territorial jurisdiction of French courts.
In accordance with Article 21 of the Sapin II Law (Articles 435-6-2 and 435-11-2 of the Penal Code), if a foreign company has all or a part of its economic activity in France, then French courts will be competent to hear the case, even if the acts of corruption were not committed in France.
A lack of clarity remains in respect of what “having part of its economic activity” would entail. In light of other French regulations, the threshold for considering that an organisation has part of its present activity in France could be relatively low (ie, based on a few operations in France only).
Whistleblowing and self-reporting
Are whistle-blowers protected in your jurisdiction?
The Sapin II Law has created a judicial status for whistleblowers and sets forth protective measures. A whistleblower is an individual who is deemed to be acting in a selfless manner, which means not routinely alerting or reporting wrongdoings. The whistleblower must report in good faith (ie, have sufficient grounds to believe that the facts and risks reported are accurate). He or she must also have had personal knowledge of the alleged facts.
A number of measures have been introduced to protect the whistleblower:
from criminal prosecution after denouncing information covered by a secret; and
against possible repercussions by his or her employer.
However, the protective status of the whistleblower does not preclude liability in the event of misreporting. Further, the benefit of this protection is subject to compliance with the whistleblowing process (Article 10(I)(1) of the Sapin II Law).
Such whistleblowing process consists of three levels and requires the organising internal procedures for the collection of alerts:
Reports must be made to the immediate or indirect supervisor, the employer or a referee designated by the employer.
If no action is taken within a reasonable period to check the admissibility of the report, the whistleblower may refer the matter to the judicial or administrative authority or professional orders.
If the report is not processed by one of the three bodies within three months, the whistleblower may disclose the facts to the public.
Only in the event of serious and imminent danger or a risk of irreversible damage can the whistleblower refer directly to judicial or administrative authorities or professional orders.
The Sapin II Law compels legal entities that are governed by private or public law and that have at least 50 employees to put in place such a whistleblowing process. The details of this obligation were specified by Decree 2017-564 on April 19 2017, which became effective on January 1 2018 ( by virtue of Article 8 of the decree).
Companies must determine the best legal instrument to meet these obligations and implement them in accordance with the legislation (Article 1 of the decree). Companies must:
inform the whistleblower as soon as possible following receipt of the report of the reasonable and foreseeable time necessary for the process and how he or she will be informed of its consequences.
ensure strict confidentiality of the whistleblower; and
destroy the elements of the file which could allow the identification of the whistleblower or persons subject to the reporting if there is no action or at the end of two months from the closure of all admissibility or verification procedures (Article 5 II of the decree).
The Sapin II Law also punishes obstructions to whistleblowing. Thus, anyone who obstructs reporting by any means will be punished by up to one year of imprisonment and a fine of up to €15,000.
Is it common for leniency to be shown to organisations that self-report and/or cooperate with authorities? If so, what process must be followed?
Because of cultural differences with the common law system in the United Kingdom, the French legal system is not keen on encouraging self-reporting. It is therefore unusual for companies to voluntarily report an offence to the French public prosecutors or regulatory authorities.
The only field where French law has allowed leniency programmes is in antitrust matters. Like in the United States, companies in France can report cartel activity to the French authorities in order to avoid or reduce penalties. Under the French system, the company which is the first to report cartel activity that the authority is not already aware of can benefit from total immunity. Other companies which wish to report illegal activity and cooperate with the French authorities can be offered a fine reduction.
In relation to corruption, there is no such leniency programme in the existing legal framework, which means that self-reporting is still not an option that would be legally encouraged. In that respect, it must be clear that the so-called ‘public interest arguments’ are not leniency programmes.
Dispute resolution and risk management
Is it possible for anti-corruption cases to be settled before trial by means of plea bargaining or settlement agreements?
One of the main new legal tools set out by the Sapin II Law has established an off-setting agreement inspired by the deferred prosecution in United States called judicial convention of public interest or penal transaction. The introduction of this off-setting agreement is that it can be seen as a significant change to France’s secular legal tradition.
Each party can benefit from such a public interest agreement:
the person being prosecuted escapes the risk of a trial, its media coverage and exclusion from public procurement; and
the prosecuting authority can obtain a conviction with certainty within shorter time limits.
This off-setting agreement provided for in Article 22 of the Sapin II Law can be proposed by a public prosecutor or the investigating judge to companies that are under investigation. However, it seems possible that it could also be made following self-reporting.
The procurator may propose that the legal person conclude an agreement containing one or more of the following obligations:
an agreed fine limited to 30% of the average annual turnover, which therefore entails a significant financial risk as convictions outside of the sign of such public interest agreements are capped at €1 million – this consideration discrepancy can be explained by the fact that if there is no conviction there is also no automatic side effect (eg, debarment from public tenders which apply to any conviction on the ground of corruption) and potentially high fines are therefore the waiver for such important additional penalties;
submission to a compliance programme for a maximum of three years, which is extended to five years if the sentence is imposed following a trial; and
to repair the damages caused to the victim.
Before entering into force, this off-setting agreement must be validated by a judge. The validation order does not qualify as a conviction and does not produce the effects of a conviction judgment.
This off-setting agreement does not prohibit action against directors. Further, it does not seem to obstruct the prosecution and conviction of a company for the same acts by foreign authorities. This risk must be considered because of the publicity of the agreement, which is the subject of a press release and the publication of the validation order on the French Anti-corruption Agency website. The company will then have to assess the possible consequences in other countries before concluding an off-setting agreement.
On October 30 2017, in a case involving HSBC, a precedent was set in respect of the implementation of the public interest agreement:
The precedent has been used in a case that concerned tax fraud, not corruption.
The public prosecutor made full use of the maximum applicable fine (ie, 30% of the average actual turnover), which is composed of two amounts relating to the return of profits, disgorgement and a complementary penalty justified by the gravity of the acts, their usual nature and minimal cooperation from HSBC. This complementary penalty should lead companies to consider voluntary self-disclosure or subsequent cooperation in exchange for a more lenient fine.
HSBC has had to pay damages to the victim, which shows that the fine and damages are cumulative.
The agreement has been published on the French Anti-corruption Agency website in French and English.
Are any types of payment procedure exempt from liability under the corruption regulations in your jurisdiction?
No, there is no type of payment procedure exemption under French law.
What other defences are available and who can qualify?
There are no general defences in French regulations on corruption. However, the defendant can challenge the material element of the offence and the intent of committing the offence. Article 121-3 of the Criminal Code requires the intent of the defendant as a legal basis for the conviction.
Another defence that can be used by companies is that the bribe was not made by an organisation or representative of the company, since such condition is required by the law.
Contrary to the UK Bribery Act, there is no such defence for companies as that based on the implementation of an adequate compliance programme. However, the French draft legislation foresees the possibility of imposing an obligation on companies to implement a compliance programme. That being said, the draft legislation targets only companies with at least 500 employees and a yearly turnover above €1 million. It is unclear whether these criteria will be alternative or cumulative. It is also unclear whether the draft legislation will contain guidelines similar to those set out by the UK Bribery Act.
What compliance procedures and policies can a company put in place to assist in the creation of safe harbours?
The Sapin II Law considerably improves risk management by imposing a compliance programme on all medium to large-sized companies that include guidelines similar to those of US best practice and UK Serious Fraud Office recommendations.
In that respect, companies concerned must establish the following eight preventive anti-corruption measures which constitute an anti-corruption plan:
a code of conduct, which will be incorporated into the internal rules to define and illustrate prohibited behaviour;
a risk mapping procedure, which will allow for the identification and analysis of the risks of corruption to which society is exposed;
a procedure for customers, suppliers, business partners and intermediaries assessment with respect to such risk mapping;
a training programme for managers and employees on corruption risks and influence peddling;
an internal and external audit system to ensure that books, records and accounts are not used to cover up corruption or influence peddling;
a disciplinary system to punish employees in the event of a breach of the code of conduct;
a whistleblowing system; and
a system for internal monitoring and evaluation of measures.
The French Anti-corruption Agency published several guidelines in that respect in December 2017 which confirm that the implementation of a compliance programme should tailored to each organisation, starting with risk mapping.
Companies should also keep in mind that due diligence and investigations should be conducted in accordance with data protection laws while processing employer personal data.
Record keeping and reporting
Record keeping and accounting
What legislation governs the requirements for record keeping and accounting in your jurisdiction?
The rules for record keeping and accounting are set forth by the Commercial Code (Article L123-12 and following).
What are the requirements for record keeping?
Article L123-12 of the Commercial Code provides that companies should keep accounting records of all transactions. Transactions will be recorded chronologically. They must carry out an inventory on an annual basis of all company assets and liabilities.
Companies must also draw up annual accounts at the close of the financial year on the basis of the record and the inventory. These annual accounts include:
- the balance sheet, which reflects the patrimonial situation of the company;
- the expenditure account, which shows the income and expenses of the financial year; and
- an annex which includes comments on the information provided by the balance sheet and expenditure account.
These three documents form an indissoluble whole, which is generally referred to as the company’s accounting information (Article R123-183 and following of the Commercial Code).
Companies should retain all accounting records and supporting documentation (ie, invoices and contracts) for a 10-year period (Article L123-22).
The annual financial statements must be submitted to, and approved by, the shareholders and filed at the Registry of the Commercial Court to be made available to the public.
Improper accounting records cannot be used as evidence in case of litigation (Article L123-23).
In addition, managers who have not properly drawn up an inventory, annual accounts and management report at the end of each financial year can be fined €9,000.
Finally, in cases where annual accounts do not provide an accurate image of the company, managers can be fined up to €375,000 and imprisoned for up to five years.
What are the requirements for companies regarding disclosure of potential violations of anti-corruption regulations?
Because of cultural differences with the common law system, the French legal system is not keen on encouraging self-reporting. It is therefore unusual for companies to voluntarily report an offence to the French public prosecutors or regulatory authorities.
The only field where French law has allowed leniency programmes is in antitrust matters. Similar to the United States, companies in France can report cartel activity to the French authorities in order to avoid or reduce penalties. Under the French system, the company which is the first to report cartel activity that the authority is not already aware of can benefit from total immunity. Other companies which wish to report illegal activity and cooperate with the French authorities can be offered a fine reduction.
In relation to corruption, there is no such leniency programme in the current legal framework
What penalties are available to the courts for violations of corruption laws by individuals?
For individuals, the principal penalties for corruption offences are imprisonment of up to 10 years and a fine of up to €1 million or twice the profits drawn from the offence. There is no clear guidance as to how to assess such a profit (Article 433-1 and 432-11 of the Criminal Code).
The other penalties that can be imposed on individuals are:
- loss of civic, civil and family rights;
- disqualification from holding public office or any professional or social activity related to the offence; and
- prohibition against undertaking industrial or commercial activity, including management functions and confiscation of the profits resulting from the corruption (Article 433-22 of the Criminal Code).
Companies or organisations
What penalties are available to the courts for violations of corruption laws by companies or organisations?
Concerning companies or organisations, the principal penalty is a fine of up to €5 million for corruption (Articles 433-1, 432-11, 433-25 and 131-38 of the Criminal Code).
Other penalties that can be imposed on companies include:
- temporary or definitive prohibition against undertaking an activity related to the infringement;
- judicial supervision;
- debarment from public tenders; and
- confiscation of profits related to the offence (Article 433-25 and 131-39 of the Criminal Code).
The Sapin II Law introduced an additional penalty for when a company is convicted of bribery or influence peddling, which involves submitting a compliance programme under the control of the French Anti-Corruption Agency for a maximum period of five years. The company will bear all the costs of setting up such compliance. It is a mechanism close to the monitoring which exists in US and UK legislation. Failure of the representatives of the legal person to take the necessary measures or obstruct the proposed execution of the resulting measures is punishable by up to two years’ imprisonment and a fine of up to €50,000.
Admnistrative penalties may be imposed by the Sanctions Committee of the National Anti-corruption Agency (a maximum of €200,000 for individuals or €1 million for companies).