Until recently, Brazil’s anti-corruption statute, which implemented the 1997 OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, imposed liability only on natural persons and lacked the element of corporate liability that is a cornerstone of anti-bribery enforcement in other jurisdictions.
This lack of an effective anti-corruption law created compliance difficulties for international companies operating in Brazil, given the potential for corruption in private and public sector transactions and the strict enforcement of anti-bribery rules by U.S. and UK authorities. These factors also posed challenges for Brazilian companies adapting to operations in the international market.
On 4 July 2013, the Brazilian Senate approved a new anti-corruption law and took an important step in putting Brazil on par with other jurisdictions with modern and effective anti-corruption laws, such as the UK Bribery Act and the U.S. Foreign Corrupt Practices Act. The proposed bill has been sent to President Rousseff for final approval. It is expected that President Rousseff will approve the law, in which case it will become effective 180 days after approval, most likely in the beginning of 2014. This new anti-corruption law is much more comprehensive in scope and establishes harsher sanctions for violations than under the existing regime.
Significantly, the new anti-corruption law establishes civil liability of entities for the bribery of public officials. As noted above, under the current law only individuals can be prosecuted for corruption. Also, under the new anti-corruption law, judicial and administrative sanctions can be imposed on foreign entities doing business in Brazil that engage in bribery of Brazilian or non-Brazilian officials.
Foreign companies operating in Brazil that are subject to other anti-corruption laws (such as the Foreign Corrupt Practices Act or the UK Bribery Act) will now have an additional substantial compliance obligation under Brazilian law, but the compliance obligations will be substantively similar to the FCPA. Under the new law, foreign companies operating within Brazil can be subject to severe sanctions for bribery (or attempted bribery) of local officials by employees, agents or other authorized representatives of the foreign company in Brazil, whether acting on behalf of a local Brazilian subsidiary or directly on behalf of the foreign company.
Unlike the current law, the new anti-corruption law imposes harsh sanctions for violations. Administrative fines may be imposed of up to 20 percent of the company’s gross revenue from the previous year. If the offending company’s gross revenue cannot be determined, a fine of up to R$60 million may be imposed; however, the fine cannot exceed the value of the services or goods that were being sought by the illegal act. The new law also establishes civil penalties, including disgorgement of benefits obtained, suspension of the company’s activities, prohibition from obtaining government incentives or contracting with the government for five years, and even the dissolution of the offending entity.
In addition, the new anti-corruption law establishes strict liability for all administrative sanctions and certain civil sanctions (such as disgorgement of benefits). The Brazilian enforcement authorities only need to prove that the illegal acts were committed to benefit the company or were perpetrated in the company’s interest. This applies to bribery acts perpetrated by directors, officers, employees and other agents acting on behalf of the company. The application of all other sanctions will require a finding of fault or intent of the entities involved.
The new anti-bribery law also imposes successor liability in the event of amendments to a company’s articles of association, merger or acquisition of the offending company. With regard to acquisitions, successor liability of the acquiring entity will be limited to fines and the full restitution of the damage caused, up to the value of the transferred assets.
Finally, it is important to note that the new anti-corruption law establishes that some sanctions may be mitigated for companies that have effective compliance programs in place as well as those that self-disclose violations and cooperate with anti-corruption investigations. It is therefore critical for companies operating in Brazil, either through affiliated entities or through the use of agents or representatives in Brazil, to put in place comprehensive and effective compliance programs in advance of the entry into force of this new anti-corruption law, so as to prevent any violation of the anti-corruption law and, if needed, to mitigate the severity of any sanctions imposed for non-compliance.