On August 1, 2013, amid mounting pressure from disgruntled sectors of the Brazilian society and unrelenting street demonstrations across the country's largest cities – not to mention historic low approval ratings – President Rousseff signed into law a rigorous anti-corruption bill (Federal Law number 12,846), also referred to as the "Brazilian Clean Company Act."

Under the new legislation – which is similar to the U.S. Foreign Corrupt Practices Act (FCPA) and is expected to take affect in 180 days – Brazilian as well as foreign companies having offices, branches, or agents in the country may be held strictly liable for acts of corruption against public authorities either in Brazil or abroad, including international organizations, diplomatic representations, and non-Brazilian state-owned companies. The new law defines as corrupt practices an extensive list of harmful offenses against the public administration, including promising, offering, or giving – directly or indirectly – an "undue advantage" to a public official or related third party; in any way defrauding the competitive nature of a public procurement process; and financing, funding, sponsoring, or in any way subsidizing the practice of harmful offenses against the public administration covered under the law. 

The law imposes strict administrative and civil (although not criminal) liability on infringing companies, irrespective of whether its executives, officers, or employees are found to be at fault or to have committed willful misconduct. The latter will only be held responsible to the extent they are considered culpable. In other words, employees are not to be held strictly liable for their companies' wrongdoings. 

Notably, infringing companies' liability may be extended against affiliated companies and joint venture members, which may be held jointly liable and required to pay hefty penalties and damages. Similarly, companies that acquire or merge with an infringing Brazilian company may also be held liable for past corrupt acts. However, the successor liability in these instances shall, in general, not exceed an amount equivalent to the transferred assets.

The sanctions are severe. Penalties will vary from 0.1 to 20 percent of the infringing company's annual gross revenue, or up to R $60 million (approximately US $26 million) in instances where the annual gross revenue criterion cannot be used. On top of that, infringing companies may be forced to forfeit assets, rights or sums deriving from illegal acts; have their activities temporarily suspended; be compulsorily dissolved; and be prohibited from entering into contracts with, or from receiving incentives, subsidies, or loans from, Brazilian state-owned or public entities for up to five years.

Despite the harshness of the sanctions, the new statute provides clear incentives for Brazilian companies to adopt good practices and internal compliance programs, bringing Brazil in line with developed nations in the area of corruption prevention. For instance, the existence of internal compliance mechanisms and procedures will be considered by Brazilian enforcement authorities as a mitigating factor in the assessment of penalties. Likewise, Brazilian authorities will have the ability to settle under rather favorable terms with infringing companies that are willing to collaborate with, and disclose wrongdoing information, to Brazilian authorities.

The Brazilian anti-corruption law has many similarities to the FCPA, the U.S. law that governs corrupt payments to foreign officials. Both the FCPA and the new Brazilian law apply to corruption of foreign officials, which includes individuals who have a job or function in a foreign government entity or hold public office in a foreign government.  However, the Brazilian law goes beyond the FCPA in that it also covers bribes made to domestic officials in Brazil. In further contrast to the FCPA, the Brazilian law also addresses fraud in government contracts and the public procurement process in Brazil, as well as efforts to hinder investigations or audits by public agencies. In the United States, such violations are enforced under other U.S. laws (not the FCPA). 

The new Brazilian anti-corruption law has other crucial differences from the FCPA. For example, the Brazilian law provides for strict liability of infringing companies in the case of all administrative sanctions and judicial sanctions that involve forfeiture of assets, rights, or valuables, whereas, under the FCPA, it must be proven that the person offering the bribe did so with a "corrupt" intent (except there is strict liability for violation of certain accounting provisions under the FCPA). The FCPA makes an exception for facilitating payments (also known as "expediting" or "grease" payments) made for the purpose of securing the performance of routine governmental actions that involves non-discretionary acts. There is no comparable exception for facilitating payments in the Brazilian anti-corruption law. Finally, under the FCPA, criminal liability is imposed on legal entities, whereas under the Brazilian law, this concept does not apply. In Brazil, criminal liability is personal and does not extend to legal entities, except for certain environmental crimes. However, as noted, legal entities will be subject to civil and administrative liability (not criminal liability) for acts of their executives, officers, or employees that have violated the Brazilian anti-corruption law.

While the full implications of the new legislation, including level of enforcement and further regulatory action, remain to be seen, foreign companies transacting business in Brazil should ensure that its local subsidiaries, affiliated or controlled companies, or business partners adopt and implement a proper anti-corruption compliance program before the new legislation comes into effect. Furthermore, anti-corruption due diligence of local companies will become highly advisable for foreign companies involved in M&A deals, public tenders and contracts, and joint venture arrangements in Brazil.