Guest Post: Limited Corporate Criminal Liability Impedes French Enforcement of Foreign Bribery Laws

Frederick Davis, a lawyer in the Paris office of Debovoise & Plimpton, contributes the following guest post:

The U.S. Foreign Corrupt Practices Act (FCPA), adopted in 1977, prohibits bribery of foreign public officials. In 2000, France adopted its own law on foreign bribery, which generally prohibits the same conduct. Yet despite the similarity of the laws on the books, the FCPA has been vigorously enforced, with scores of settlements and large fines imposed on corporations, while in France, not a single corporation has been convicted of foreign bribery under the 2000 law—even though since that law’s passage, four large French corporations have entered into negotiated agreements with US authorities to settle alleged FCPA violations, paying more than US$3 billion in fines and other penalties. What explains this difference in enforcement?

While suspicions lurk that French authorities may not be terribly serious about fighting overseas corruption, the more plausible explanations lay the blame on other aspects of the French legal system. One difficulty is that French criminal investigations proceed very slowly, often taking ten years or longer. (At least some of the French corporations that negotiated outcomes with the U.S. DOJ were investigated for the same conduct in France; it’s likely that the U.S. authorities declined to defer to a French investigation without having any idea when it might end, or what the result would be.) Second, as Sarah Krys and Liz Loftus have pointed out in an earlier posts on this blog, France lacks a mechanism permitting a negotiated corporate outcome comparable to the “deferred prosecution agreements” and “non-prosecution agreements” (DPAs and NPAs) that the US authorities routinely used to resolve FCPA cases against corporations; even a corporate “guilty plea” is difficult and very rarely used in France. Just as important, though, and perhaps not sufficiently appreciated, is the difference between the two countries’ laws concerning corporate criminal responsibility, and the incentives those laws create for corporate decision-makers:

  • The U.S. federal courts (along with most U.S. state courts) apply a quite loose version of the principle of respondeat superior, holding that a corporation is automatically responsible for the acts of any agent or employee acting broadly in the scope of his or her employment and whose acts were at least in part intended to benefit the corporation. Thus most crimes—and certainly all financial, business, and other so-called “white collar” crimes—can be enforced against corporations, and a corporation facing a criminal investigation for the act of any employee or agent for such crimes has virtually no defense if the criminal conduct by the corporate employee or agent can be proven.
  • By contrast, in France there has traditionally been no general concept of corporate criminal responsibility; absent a special statute, it was only the individual people, not their corporate employers, who could be criminally liable. In 1994, the French legislature adopted Article 121-2 of the Penal Code, which provides that a corporation can be found criminally responsible for the acts of its “organ or representative” committed “on behalf of” the corporation. This relatively new statute has been the subject of inconsistent interpretation, which has included acquittals (or abandonment of a corporate prosecution) where there was doubt whether the complicit individuals involved, albeit employees or agents, were sufficiently senior to “bind” the corporation; further, a corporate parent may be criminally liable only for the acts of its own, direct employees or agents, and cannot be held criminally liable for the acts of its subsidiaries.

These rules on corporate criminal liability create very different incentives for corporate leaders who learn of, or suspect, possible foreign bribery violations by the corporation’s agents or employees. U.S. corporate leaders know that in every case, if there is proof that anyone within the corporation committed an illegal act for which the corporation might receive an advantage, the corporation will be automatically responsible for it. The corporation thus has a clear incentive to investigate the matter in order to identify as quickly as possible the facts and evaluate the risks; in many instances, senior management will also conclude that it is in the best interest of the corporation to self-disclose the violations to the government. The U.S. DOJ rewards such conduct with more attractive negotiated outcomes, and even the possibility of no pursuit of the corporation at all. No such incentive exists in France. Rather, a corporate decision-maker knows that the law on corporate criminal responsibility is sufficiently flexible that there is a decent chance of a corporate acquittal even if wrongdoing by individuals is established. In the view of many, making an early “self report,” and abandoning a defense under Art. 121-2 that might well prove successful, would not be in the best interest of the corporation.

French law-makers are earnestly attempting to amend the country’s criminal procedures to permit more flexible and pragmatic pursuit of corporate bribes paid overseas. A bill called the “Loi Sapin II” has been proposed that will introduce, for the first time, a negotiated outcome similar to a DPA. The outcome of the Loi Sapin II is uncertain: after extensive debate, it is now scheduled for possible vote later this month.  But even if a “French DPA” of some sort is adopted, very few if any French corporations will self-report to French authorities. Even though a “carrot” of a relatively lenient negotiated outcome may have some attraction, the “stick” of a real prosecution instills little fear, given the background rules on corporate criminal liability. A corporate decision-maker will be far more likely to conclude that there remains a real possibility of a corporate acquittal even if illegal acts were committed by employees. (On top of this, as noted above, there will likely be no definitive reckoning for a decade, and the maximum corporate fine in France remains to be minuscule by US standards.)

Thus the French record on pursuing its corporations for overseas bribery is not likely to improve, even if the Loi Sapin II becomes the law, without further changes in the law on corporate criminal liability. This is not to say that France would have to adopt a view on corporate criminal liability as broad as that in the United States. There are other possible models. Consider, for example, the United Kingdom, which has long adopted the so-called “directing mind” or “identification” principle under which a corporation is criminally liable only for acts that were committed with the authorization or acquiescence of individuals sufficiently senior to truly speak for, or bind, the corporation. Because of this background rule, which is even more demanding than the French rule under Art. 121-2, there have historically been few corporate convictions for criminal offenses. The UK legislature responded to this situation in a creative though limited way: The 2010 UK Bribery Act includes in Section 7 a new “corporate offense,” under which a corporation is criminally responsible on a strict liability basis if it failed to take “reasonable” measures to prevent (through a strong compliance program, for example) an act of bribery. Thus Section 7 imposes a clear obligation on corporations to take demonstrable steps to avoid specific crimes, yet avoids holding a corporation automatically liable if, for example, an employee engages in illegal acts despite a strong corporate culture to avoid them. French lawmakers would do well to evaluate the “corporate offense” under Section 7 of the UK Bribery Act, and perhaps develop some comparable provision.

 

2 thoughts on “Guest Post: Limited Corporate Criminal Liability Impedes French Enforcement of Foreign Bribery Laws

  1. Pingback: Limited Corporate Criminal Liability Impedes French Enforcement of Foreign Bribery Laws – Vostinato, LLC

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