Law n°2016-1691 (Sapin II) was adopted on 9 December 2016 and entered into force in the course of 2017. The purpose of Sapin 2 was to improve transparency, fight corruption and the modernisation of the economy. With this law, France essentially introduced a new legislative framework against corruption, along similar lines to the anti-corruption legislation implemented in the US by way of the Foreign Corrupt Practices Act (FCPA) and the UK’s Bribery Act (UKBA).
We wrote about Sapin 2, but in essence it provides for the following:
- an obligation of prevention and detection of corruption risks;
- the conditions for adoption of a compliance programme;
- the setting up of a new national agency, the Agence Française Anticorruption (AFA); and
- a dispute resolution procedure, the convention judiciaire d’intérêt public, equivalent in broad terms to the US deferred prosecution agreement.
In light of the introduction of the last of these, in the event of suspicion of corrupt practices, Sapin 2 offers an alternative to judicial proceedings, by providing a settlement procedure for offences of corruption, influence-peddling, money laundering and tax fraud.
In order to benefit from a settlement, companies must fulfill certain conditions and follow a specific procedure for the validation of the settlement agreement. At the beginning of 2018, the first settlement agreement was reached with the French authorities in a corruption case, considered further below.
Conditions for a French Deferred Prosecution Agreement (DPA) procedure
The company must fulfill the following conditions to benefit from the settlement procedure:
- Pay a criminal fine, proportionate to the amount gained from the offence and capped at a maximum of 30% of the average annual turnover calculated over the three previous fiscal years;
- Set up a compliance program, under the control of the AFA;
- Pay compensation, within a year, for the damage caused to the victims of the offence, if identifiable.
Individuals who were the legal representatives of the company who committed the relevant acts remain liable, and the authorities may prosecute them.
In addition to the criminal fine, the company will also have to bear the costs of the procedure including fees for the assistance of its legal and financial counsel.
Procedure for obtaining a French DPA
The option for a settlement agreement can be proposed by the Public Prosecutor prior to the commencement of a public prosecution.
If an agreement is reached between the company and the Public Prosecutor, the settlement agreement must be validated by the President of the French Civil court (“Tribunal de Grande Instance”). The settlement decision will, however, be published on the AFA’s website, together with the settlement agreement and the amount of the fine.
The company benefits from a right to withdraw for 10 days following the validation of the settlement agreement by the judge. If the company exercises that right, the agreement becomes null and void and, in the event of subsequent prosecution, the Public Prosecutor cannot use the company’s declarations or any documents disclosed during the settlement procedure in those subsequent proceedings.
If the agreement is not validated, the company withdraws, or if the obligations set out in the agreement are violated, the public prosecution will go ahead.
The decision to validate the agreement is not considered as an admission of guilt and will not appear in criminal records.
France’s first DPAs
The first DPA in France was signed with HSBC Private Bank in relation to allegations of money laundering and tax fraud on 30 October 2017. HSBC agreed to pay a fine of 300 million Euros for practices which took place in 2006 and 2007.
UBS also tried to negotiate a settlement agreement with the French authorities in relation to the same offences (money laundering and tax fraud) but an agreement could not be reached on the amount of the fine to be paid.
Following the signature of the first settlement agreement, two other companies (SET and Kaefer Wanner) reached a settlement agreement with the French authorities (Prosecutor’s Office of the Nanterre Court (west of Paris)) in February 2018 in a corruption case. The two companies agreed to pay fines amounting to approximately 3 million Euros.
This agreement relates to allegations of bribery of a third party to obtain maintenance services which took place between 2004 and 2011. The employees involved in such practices may still face criminal prosecution.
In our experience, most companies subject to Sapin II are unprepared and the number of sanctions and settlement agreements will certainly rise as the French authorities start to exercise their new powers more frequently.