GAB is pleased to welcome back Frederick Davis, a lawyer in the Paris office of Debevoise & Plimpton, who contributes the following guest post:
The ineffectiveness of French efforts to combat overseas bribery is well-known if not entirely understood. Put most simply, in the 17 years since France adopted comprehensive anti-bribery legislation, essentially similar to the U.S. Foreign Corrupt Practices Act (FCPA), France has not convicted a single corporation of classic overseas bribery under that legislation. This shortfall has been regularly documented in periodic reports by the OECD, and by NGOs such as Transparency International and others. Its causes are complex. They may include a simple deficit in willpower, but as others as well as I have pointed out, French criminal procedures, and in particular the difficulty of demonstrating corporate responsibility under French criminal law, impede effective prosecution.
Stung by the fact that four very large French companies entered into a variety of guilty pleas or deferred prosecution agreements (DPAs) with US authorities, pursuant to which these companies paid well over $2 billion in fines and other payments to the US treasury, in December 2016 the French legislature finally adopted a long-pending law, known as the Loi Sapin II, which progressively goes into effect during 2017. The law is unmistakably a reaction to US success in prosecuting French companies under the FCPA: it only applies to corporations, and only to allegations of overseas corruption or other crimes very similar to those prosecutable under the FCPA.
Several of new law’s provisions are unexceptional: it creates a new Anticorruption Agency, called the AFA, to replace an existing agency, known as the SCPC, which was widely viewed as ineffective; the law requires medium- and large-sized companies to adopt compliance programs pursuant to criteria to be developed by the AFA. (While the AFA can impose administrative sanctions for absent or deficient compliance programs, it will have no criminal investigative authority). The new law also slightly extends the territorial reach of French anti-bribery laws to make them applicable to companies that “carry out all or part of their economic activity on French territory,” and enhances whistleblower protection available under existing laws. But the Loi Sapin II’s most ambitious innovation by far is a series of amendments to the French Code of Criminal Procedure to permit negotiated outcomes generally similar to DPAs as practiced for many years in the United States, and since 2014 in the United Kingdom, that result in the payment of fines and other penalties but not in a criminal judgment. Under the new provisions, a French corporation may enter into an agreement, known as a “Judicial Convention in the Public Interest” (JCPI), under which the firm admits facts sufficient to show the commission of a relevant crime, and agrees to a fine that may be as high as 30% of the company’s annual turnover for the prior three years. The company may also agree to the imposition of a corporate monitor, to be supervised by the AFA.
The procedures for negotiating a JCPI work roughly as follows: During a “preliminary investigation” a JCPI agreement may be reached between the company and the public prosecutor; if a formal investigation (known in France as an instruction) has proceeded to a point where an investigating magistrate has found sufficient facts to qualify the company as a “mise en examen” – a status roughly the equivalent of a target, which gives the target company certain important procedural rights – then the JCPI must concluded with the investigating magistrate and any victims who have been formally identified, as well as with the public prosecutor. In either event, the JCPI must then be formally approved by a judge after a public hearing. It will then last for a period of up to three years, after which the charges are dismissed if the company has observed its terms. (The basic structure of the JCPI is closer to DPAs under British rules than to DPAs as practiced in the United States, principally because of the strict requirement of judicial review of its terms.)
Negotiated criminal outcomes have never been widely accepted in France; an amendment in 2009 that permitted corporations accused of certain financial crimes to negotiate a guilty plea has only been used once, by a non-French company. The new prospect of reaching an outcome without a criminal conviction obviously increases the allure of negotiation, but there are several reasons to suspect that the new procedure may catch on slowly:
- First, the Loi Sapin II does not change a provision of French criminal law that often gives companies a “corporate defense” that it is not responsible for the acts of its agents. Thus, many companies may conclude that it is better to allow an investigation (which often takes ten years or more) to maintain such a defense rather than waive it early on.
- Second, the procedures are fairly complex – especially after a mise en examen as noted above – and a maximum penalty based on a percentage of turnover may be higher than the maximum penalty applicable after trial, which is currently 5 million Euros.
- Third, and most importantly in the context of the political goal of the new law, French companies will in most instances still have to reckon with the threat of a separate US prosecution under the FCPA: other than in unusual circumstances where the company can be sure that US authorities lack power under the broad, and aggressively pursued, US principles of territoriality, the DOJ and other US prosecutors are unlikely to defer to a negotiated French outcome unless they determine that it is “adequate” under criteria that they have so far failed to articulate with clarity. In particular, under the so-called Yates memorandum of September 2015 and the Pilot Program announced in April 2016, US authorities increasingly link favorable negotiated corporate outcomes to “total cooperation” by the corporation against its officers and employees (and others) responsible for the acts in question; cooperation of this sort is not an element of the Loi Sapin II, and for a variety of legal and cultural reasons is highly unlikely to catch on in France.
My prediction is that for the foreseeable future US prosecutors will remain an “ultimate arbiter” of non-US outcomes reached with respect to corporate acts subject to the FCPA, and that a JCPI negotiated in France will not automatically be viewed as sufficiently “adequate” to justify a total declination by US authorities, as they did following an agreement negotiated between Dutch offshore company SBM Offshore with Dutch authorities in 2014. The more likely scenario is that French companies will turn to the new JCPI procedure mostly when under pressure by US authorities, and that French authorities will use it to negotiate with their US counterparts to reach coordinated multinational agreements where the two countries will share the receipt of fines and other payments, as the DOJ has done in several post-SBM cases including VimpelCom and Embraer in 2016. Even this would be a modest advance for France: In the DOJ’s four prior FCPA settlements with major French companies Total, Technip, Alcatel and Alstom, some of the DOJ press releases praised French authorities for their “cooperation” – but the DOJ did not share the huge penalties, all of which went to benefit US taxpayers.
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Thank you Frederick for this truly insightful view into France’s anti-bribery legislation. Your rationale for why the procedures may catch on slowly in France is persuasive and makes sense. I’m curious to hear more about how, as you mention towards the end of your post, France will use the new systems to negotiate with the US to reach coordinated multinational agreements, despite your conclusion that the procedures will take some time to catch on in France.
I’m curious about the decision to create the AFA rather than just reform the SCPC. Are there major differences between the two in terms of scope, structure, authorities, etc.? Are the reasons for the SCPC’s past ineffectiveness wholly addressed by the new laws?