Brazil: New Anti-Corruption Law: Progress Or A Pitfall For Businesses?

Last Updated: 21 February 2016
Article by Rodrigo Da Fonseca Chauvet

Rodrigo da Fonseca Chauvet, Guest Professor at PUC/RJ for Administrative Law on the Bidding Process and Public Administration Contracts Course master of Economic Law and Development. Partner at Trigueiro Fontes Advogados in Rio de Janeiro

When read for the first time, the new law 12846/2013 appears to be yet another weapon in the fight against corruption in Brazil. Theoretically, the so-called "Anti-Corruption Law" was created to make legal entities administratively and civilly liable for acts detrimental of the government.

The law itself explains what these detrimental acts are, such as offering unfair advantages to government employees, defraud or undermining the competitive nature of bidding processes and making it difficult for government bodies or personnel to inspect the company.

The penalties applicable in the administrative sphere are fines ranging from 0.1% to 20% of the company's gross revenues for the business year prior to the institution of the administrative proceeding. Civil liability, in turn, will basically consist of indemnification for losses and damages arising from the crimes committed.

In a word, the above is an overview of the new law. However, a debate appears to us to be in order, evaluating Law 12846/2013 together with article 37, Section 6 of the Constitution, Law 8112/1990 (which governs the legal regime for federal government public servants), with the Law on Corruption by Public Servants (Law 8429/1992), in addition to the practical reality underlying the accountability of government employees who commit acts detrimental to the government.

The new Anti-Corruption Law focuses on the liability of the private sector which has business of any nature with the government. The Constitution, in turn, governs the extra-contractual liability of the government and its agents, by establishing that public law legal entities will be held accountable for any damage caused by their agents to third parties, "with entitlement to right of recourse against the person responsible in cases of fraud or fault".

Law 8112/1990 establishes that public servants governed by its regime must be held civilly, criminally and administratively liable for the improper exercise of their duties. Liability will arise from any acts or omissions, whether intentional or unintentional, that result in losses to the exchequer of to third parties.

In the same vein, the Law on Corruption by Public Servants (Law 8429/1992) provides for reimbursement of damages and sanctions against public employees whose acts or failure to act, whether intentional or unintentional, are detrimental to public property.

In practice, however, what one notices is that in cases of tort on the part of the Public Administration, in most cases the Public Authorities fail to exercise their right or recourse against the person (government employee) committing a certain act or omission, whether intentionally or unintentionally. Unfortunately, in many cases we have to put up with impunity in cases of losses caused by public servants to the exchequer through the improper exercise of their duties or through damage to public property caused by dishonest acts. This reality feeds a context where the state is often not in control, inefficient and where corrupt practices are encouraged.

Does an in-depth study of law 12846/2013 not reveal the intention implicit therein, namely to serve as support for this model of impunity, lack of control and inefficiency, in practice dropping into the lap of the private sector the blame and the penalties for these "detrimental acts"?

Here it is necessary and convenient to refer to "Administrative Law of Spectacles", so well contextualized by Marçal Justen Filho. In the practical and cold reality of the today's State, "certain people take and retain power in the society of spectacles, taking advantage of it out of personal interest. What is more, "the main concern in the 'State of Spectacles' is not the change of reality itself, rather the development of activities intended to generate sights and sounds and to keep the audience entertained". One of the objectives of the "State of Spectacles" is to ensure the status quo by creating new mechanism for attaining ends that, in practice, there is no intention of reaching.

If Law 12846/2013 "gets off the drawing board", business will, more than ever, be inspected and liable for losses caused to the government. In this respect, notwithstanding several nuances worthy of criticism (such as the provision that within the scope of the Federal Government, a single body, the Office of the Controller-General of the Federal Government – CGU, will institute, conduct and rule on the administrative proceeding), the new law deserves applause because one is not defending here the impunity of the private sector.

However, simultaneously with the new legislation, a sharp and continuous change is required in the government's attitude to overseeing and penalizing its agents (politicians, technicians and managers etc.) when they are provably liable for any detrimental acts they commit.

It is not enough to target the private sector, as if it were the main cause of inefficiency and corruption in Brazil, without doing one's own house cleaning, in other words, the debilities and weaknesses, intentional or otherwise, existing at the center of the government."

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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