In January 2014, following nationwide protests prompted by concerns about widespread corruption, the Brazilian Congress enacted a new Anticorruption Law. The 2014 Anticorruption Law was a landmark in part because it represented the shift from the traditional focus on individual bribe-takers to the bribe-paying corporations. Although a few prior statutes did address the conduct of alleged bribe payers, the Anticorruption Law both authorized much more stringent penalties on bribe-paying companies (including fines of up to 20% of a company’s gross revenue in the prior year, and even mandatory dissolution of the company in extreme cases), and also adopted a revolutionary strict liability regime for corporate corruption offenses.
More than six years have passed since the Brazilian Anticorruption Law entered into force. Has the law been effective? What do we know so far about its enforcement? On the whole, the enforcement numbers seem rather disappointing, suggesting that the law has not (yet) been deployed aggressively to sanction bribe-paying corporations in most parts of Brazil. Nonetheless, there are a variety of reasons why it would be premature to conclude from these numbers that the law has not been, or will not be, effective.
Let’s start with some statistics on the law’s enforcement. Administrative proceedings under the Anticorruption Law are called “PARs” (processos administrativos de responsabilização), so the number of PARs is, in effect, a measure of the number of cases (both open and closed) brought government agencies to enforce the act. A prior study found that by January 2018 (four years after the law was enacted), the Federal Government had opened 183 PARs and punished 30 legal entities. (This might be misleading, though, because the federal government also uses the PAR designation to refer to proceedings under other statutes). But looking only at federal enforcement statistics is insufficient, because the Anticorruption Law also authorizes enforcement by state and municipal governments. To gather more data about subnational enforcement, last year I led a research team that compiled information about the statute’s enforcement by the 27 Brazilian states (including the Federal District) and 26 capital cities, using a combination of Freedom of Information Act requests and publicly available data. Though our expanded database is still incomplete (in part because some jurisdictions simply did not respond to our requests), this database allowed a much more in-depth evaluation of the statute’s enforcement.
We found that as of January 2019 (five years after the statute came into force), Brazilian states had opened 132 PARs against 306 legal entities, and capital cities had opened 42 PARs against 49 legal entities. But these aggregate numbers mask substantial variation across jurisdictions. Of the 27 states, eight had not even enacted the necessary implementing regulations that must be in place before state agencies can enforce the Anticorruption Law in their jurisdictions. And of the 19 states that had adopted such regulations, nine had still not opened a single PAR. Moreover, only 24 of the 132 state PARs had resulted in punishment of legal entities. The story is similar with the capital cities: Out of 26 capital cities, 17 had not yet adopted the necessary implementing regulations, and of the remaining nine, the city of São Paulo was responsible for the vast majority of the enforcement actions: 34 of the 42 capital city PARs were in São Paulo, as were 22 of the 23 administrative orders that punished legal entities. Furthermore, the number of PARs and sanctions imposed is not necessarily a good indicator of the use of the Anticorruption Law against bribery, since the law, despite its name, proscribes other acts as well, such as bid rigging and related wrongdoing. Indeed, our research found that only a minority of PARs by states (21 out of 132) actually concerned bribery, while 94 concerned bid-rigging. And out of the 42 PARs opened by capital cities, only two related to bribery allegations, while 18 concerned bid-rigging.
While it is certainly troubling that many Brazilian states and municipalities do not seem to be aggressively employing the Anticorruption Law to sanction bribe-paying corporations, we should hesitate before we conclude from this that the statute is not accomplishing its goals. Indeed, while the enforcement numbers may be helpful as a starting point, they cannot by themselves tell much us about the success or failure the Anticorruption Law. There are several reasons for this:
- First, the Anticorruption Law does not apply to conduct that took place before the law came into force on January 29, 2014. That means, for example, that the Law doesn’t apply to the entities investigated for their involvement in the Lava Jato (“Car Wash”) scandal, which took place before the Law’s effective date.
- Second, anticorruption enforcement in Brazil is not limited to the Brazilian Anticorruption Law. Prosecutions of individuals take place under other sections of the criminal code, and Brazilian prosecutors also make use of other statutes, such as Administrative Improbity Law, to take action against legal entities involved in corruption cases.
- Third, focusing only on enforcement of the substantive terms of the Anticorruption Law overlooks another important feature of the statute: its authorization of leniency agreements. The Anticorruption Law established the legal framework for this settlement instrument, which can be and has been used to resolve corruption-related cases that do not fall under the scope of the Anticorruption Law. Indeed, many of the most important cases in the Lava Jato investigation, including those of Odebrecht and J&F, were resolved pursuant to the leniency agreements authorized by the 2014 Anticorruption Law.
- Fourth, it is simply too soon to reach any conclusions on Brazilian Anticorruption Law’s effectiveness. Illustratively, the U.S. Foreign Corrupt Practices Act (FCPA) took more than 20 years to produce significant results. Prior to 2001, the US government had never initiated more than five FCPA enforcement actions in a single year.
So, while the numbers are suggestive—and do tend to indicate less aggressive enforcement of the Anticorruption Law than proponents may have hoped—we should be careful not to exaggerate their significance.
Still, there is room for improvement. One area that deserves attention concerns the fact that the administrative agencies in charge of enforcing the Anticorruption Law lack several investigative methods commonly used in corruption cases, such as telephone intercepts and plea bargains for cooperating witnesses. In Brazil, these tools are only available in criminal investigations, and since enforcement of the Anticorruption Law is administrative, those charged with enforcing the Anticorruption Law often depend on evidence produced in related criminal investigations. In practice, this means that the Anticorruption Law’s effectiveness depends on different enforcement agencies working together, or at least exchanging information effectively. Unfortunately, Brazilian agencies have been known to compete among themselves for the spotlight in the fight against corruption. Overcoming that problem – and encouraging agencies to work together towards a common goal – will be crucial to the long-term success not only of the Anticorruption Law, but of Brazil’s broader anticorruption struggle.