On November 8, 2016, France modernized its anti-corruption enforcement regime and adopted the Law on Transparency, the Fight against Corruption and Modernization of Economic Life (known in France as "Sapin II," named after Michel Sapin, the current minister of finance). Sapin II went into effect November 10, 2016.
Sapin II is France's response to international criticism of its perceived hands-off attitude toward anti-corruption enforcement, which has caused the U.S. Department of Justice (DOJ) and other law enforcement and regulatory agencies to seek $1 billion in fines against French companies Alcatel, Alstom, Technip, and Total. To revitalize French enforcement of French law over French companies, citizens, and non-French entities doing business in France, Sapin II institutes aggressive new preventive measures and strengthens and increases the government's tools to fight corruption.
The main provisions of the law include:
- Expanded jurisdiction to enable French authorities to prosecute acts of corruption committed abroad by any company that carries on business or part of its business in France,
- Creation of a new anti-corruption agency to monitor corporate implementation of the now-mandatory anti-corruption compliance programs,
- Mandatory compliance programs for companies with over 500 employees and €100 million in revenue,
- Expansion of whistleblower protections, and
- Deferred prosecution agreements, similar to those used by the DOJ, allowing prosecutors to fine companies for wrongdoing without a criminal conviction.
Sapin II widened the reach of French enforcement activity. In the old anti-corruption landscape, French authorities had jurisdiction over offenses committed outside France only if the victim or perpetrator was French, the conduct at issue was an offense in both France and the country where the conduct occurred, and either a victim filed a complaint with the French authorities or the foreign government officially denounced the conduct.
The new law has removed these restrictions, opening the door for French investigations and prosecutions for misconduct committed outside France. Even foreign companies that operate only part of their business in France can be prosecuted under Sapin II for corrupt activities abroad.
Sapin II creates a French anti-corruption agency, the Agence Française Anticorruption (AFA), under the authority of the French minister of justice. This agency will be helmed by a presidentially appointed leader and will have a six-member Sanctions Commission to determine whether to impose certain financial penalties against those who violate the new compliance requirements.
The AFA's predecessor, the Central Service for the Prevention of Corruption (SCPC), had limited power and could only provide recommendations on creating effective compliance programs. In contrast, the AFA can require companies to implement compliance programs, sanction noncompliance with the law and supervise corporate monitorships. Notably, the AFA may request documents from companies that it suspects are not following their compliance obligations. The AFA, however, will not have authority to initiate bribery investigations or to impose criminal penalties. Violations of the law will be referred to French prosecutors to decide whether to commence a criminal action. The AFA will have the power to publish information relating to the prevention and detection of corruption and report on its enforcement activities annually.
On May 1, 2017, Sapin II's compliance obligations become effective. Companies with over 500 employees and revenues of at least €100 million will be required to adopt compliance policies and procedures. This requirement aims to impose a burden on control persons within the companies to shoulder the responsibility of preventing corruption.
These compliance measures include promulgating an ethics code, internal whistleblowing procedures, risk assessment mechanisms, accounting controls, third-party due diligence processes, employee training, reporting chains and procedures for internal reporting of suspected illicit activity, and a disciplinary action policy. If companies fail to meet these compliance obligations, the AFA's Sanctions Commission can impose fines, per breach, of up to €200,000 against individuals and €1 million against entities; issue warnings or injunctions ordering companies to adopt adequate compliance programs; and publish the decisions.
Sapin II extends whistleblower protection to any disinterested person who in good faith reports a violation of the law to his or her employers or to the relevant judicial or administrative authorities. The whistleblower's identity will remain confidential, and that person is protected from retaliation. The law punishes individuals with up to one year in prison and a fine of up to €15,000 if they retaliate against whistleblowers or attempt to prevent them from making a report. Those who disclose a whistleblower's identity can face up to two years in prison and a fine of up to €30,000. This is important because to qualify as a whistleblower, the person must first report the violation to his/her supervisor; thus, retaliation is a legitimate concern. If the supervisor does not act on the information, then the whistleblower can go to the relevant government authorities.
A shortcoming of the whistleblower policy is that the law lacks financial incentives. Sapin II does not offer financial remuneration as a "carrot" for blowing the whistle, as is done in the United States.
Deferred Prosecution Agreements (DPAs)
DPAs were a heavily debated provision of the law. In fact, although DPAs were included in the March 2016 version of the original bill, the Conseil d'Etat (France's highest administrative court) advised the French Parliament to remove the DPA provisions from the bill. After discussion within the legislative body, the language was removed but subsequently reinstated.
Under the law, companies seeking a DPA must agree to the stipulated facts but will not have to admit guilt. The penalties any company may face under a DPA are capped at 30 percent of its three-year average earnings, and the company can be required to hire an outside monitor to ensure it adheres to the law's compliance rules. Before final execution, the DPA will be reviewed publically in a court hearing.
Impact of Sapin II
French anti-bribery legislation prior to the passage of Sapin II was well-developed. Generally, the pre-existing laws prohibit bribery, domestic or foreign, in the public and private sectors. Facilitation payments are prohibited, as is the maintenance of improper books and records. The main challenge that Sapin II attempts to address is the structural gap in the anti-corruption regime that prevents proper enforcement of these laws.
As Sapin II is now officially in force, smaller companies not already subject to other international anti-corruption laws such as the FCPA and UK Bribery Act will now have to prioritize the creation and implementation of a compliance program to effectively monitor, detect and remediate corrupt activity in France and abroad. Further, even larger companies with robust compliance regimes will need to be aware of the potential individual liability that their executives face in the event of their companies' failure to comply with the law. A thorough assessment of the effectiveness of their compliance programs will be necessary to avoid sanctions by the French authorities.
Sapin II's broadened jurisdictional scope also brings many companies into the fold. Companies that were immune from French enforcement – such as foreign companies that perform some business in France – may now be in the crosshairs of the AFA and French prosecutors. As a result, the key takeaway here is that many more companies conducting business in France and abroad are now subject to the requirements, obligations, and sanctions of Sapin II, and those companies should re-evaluate their anti-corruption policies and procedures.
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