France’s New Anticorruption Law — What Does It Change?

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. Continue reading

Guest Post: The Case for Greater US Deference to Foreign Anticorruption Prosecutions–A Response to Maruca

GAB is pleased to welcome back Frederick Davis, a lawyer in the Paris office of Debevoise & Plimpton, who contributes the following guest post:

Last fall, I published two posts in which I raised concerns about overlapping jurisdiction in foreign bribery cases, and about the appropriate role of US enforcement authorities in such cases. My first post noted that the US is not bound by the outcome of criminal processes in other countries, but can—and sometimes does—bring FCPA cases against foreign companies that have already resolved investigations for the same conduct brought initiated by their home countries. (As I also observed, the absence of any such constraint on US authorities creates an asymmetry with respect to countries that endorse an international ne bis in idem/double jeopardy bar, which can block such countries from pursuing a corporation or person that has already been pursued in the US.) My second post urged that the US Department of Justice (DOJ) should be more transparent in articulating when it will defer to non-US prosecutions in the corruption area.

A few weeks back, Michael Maruca posted an interesting critical commentary on my posts. The main thrust of Mr. Maruca’s very thoughtful comment was that the DOJ should not unnecessarily defer to non-US counterparts, partly because he worries about downgrading the effectiveness of US FCPA enforcement efforts, and partly because he envisions competition among national authorities as encouraging a “race to the top” in achieving optimal enforcement of foreign bribery laws. He proposes that the DOJ, rather than being more deferential to foreign resolutions of conduct that might violate the FCPA, the DOJ should go further in sharing the monetary outcomes of multinational investigations, and he provides commonsense principles for how it might do so.

Mr. Maruca’s intervention usefully advances the discussion on a very important issue. I agree with much of what he says. Nonetheless, I continue to view the lack of sufficient US deference to foreign resolutions of foreign bribery cases as a problem, and I have the following concerns about the points Mr. Maruca’s makes: Continue reading

Good News in the Anticorruption War

I had planned to write a reply, and partial rebuttal, to last week’s posts by Matthew and Travis on ethics, corruption, and Donald Trump.  The more I tried to come up with something to say, however, the more depressed I grew.  Instead, as a tonic — for this writer and perhaps others born or living in Trumplandia — what follows is instead good news on the global anticorruption front –

Laos: Shedding Fancy Government Vehicles that Smack of Corruption.  A December decree orders all government officials to trade their government-bought Mercedes, BMWs, Lexus, and other high-end vehicles for more modest means of transport.  Prime Minister Thongloun Sisoulith and President Bounnhang Vorachit have both returned their BMW 7 Series and now drive Toyota Camry 2.5 cars instead. Other ministry and party officials must follow suit. (Details here.)

The Netherlands: Civil Society Attacks Money Launderers.  SMX Collective, a grassroots organization of Dutch and Mexican activists, academics, artists, journalists, curators and researchers concerned about the extreme impunity and violence suffered by Mexican people, has filed a complaint with the Dutch Public Prosecutor demanding the Dutch Bank Rabobank be charged with money laundering for its role in aiding Mexican drug cartels.  Vigorous pursuit of banks and other intermediaries for facilitating corrupt activities is urgently required, and Dutch civil society’s complaint is a welcome sign and an example others should copy.  For an English language summary of the complaint, click on “Continue Reading” at the bottom of the page.

France & Peru: Former Heads of State in Anticorruption Dock.  Prosecutors are pursuing charges against former French President Nicolas Sarkozy for campaign finance violations (NYT account here; Le Monde here) and former Peruvian President Alejandro Toledo for accepting a bribe (AP/NYT here; El Comercio here).  Neither case seems political.  Both have been brought by career law enforcement authorities who have no apparent ax, political or otherwise to grind.  The two may ultimately be found innocent by their nations’ courts, but the fact that high office in the two countries does not automatically carry with it immunity from prosecution for corruption crimes has to be considered very good news.

All three stories lifted my spirits.  I trust it will help other readers recognize that despite the fact President Trump is unlikely to fall over corruption claims (nicely explained by New Yorker writer James Surowieki here), the war against corruption is proceeding apace.

Summary in English of SMX complaint:  Continue reading

Guest Post: Corporate or Individual Liability? Converging Approaches to Fighting Corruption

GAB is delighted to welcome back Gönenç Gürkaynak (Managing Partner at ELIG Attorneys-at-Law in Istanbul and 2015 Co-Chair of the B20 Anti-Corruption Task Force), who, along with his colleagues Ç. Olgu Kama (ELIG partner and B20 Anti-Corruption Task Force Deputy Co-Chair) and Burcu Ergün (ELIG associate), contributes the following guest post:

Combating international corruption has come a long way in the last decade. More and more jurisdictions are adapting and updating their legal systems in an effort to eradicate impunity for corruption crimes. Yet an important question persists: Who should be held primarily liable for corruption crimes, the individual or the company? The US and European countries have traditionally provided diverging answers to this question, but there now seems to be some evidence of an emerging convergence, though a consensus is yet to be reached.

In the United States—the pioneering legal system in terms of fighting international corruption—although individuals can be charged with violations of the Foreign Corrupt Practices Act (FCPA), it is the companies that are primarily held liable for FCPA violations. The US embraces a broad notion of corporate criminal liability, based on the principle of respondeat superior (the employer is responsible for the acts or omissions of its employees) and the US Department of Justice (DOJ) and Securities and Exchange Commission (SEC) have employed this theory as the basis for FCPA settlements with scores of corporations, raking in hundreds of millions of dollars in fines. However, there have been relatively few FCPA cases brought against individuals. This may be due in part to the fact that it is often difficult to attribute a corrupt act to any one specific individual, though it may also be due to the DOJ’s and the SEC’s traditional focus on going after the “deep pockets” of the corporations that come under their scrutiny.

In contrast to the US, the focus of criminal law in continental European systems has typically been on the culpability of individuals; thus, the introduction of the concept of “corporate criminal liability” is a relatively new development. Traditionally, the continental European systems have taken the view that criminal punishment can only be imposed on grounds of personal culpability, and that organizations cannot be held liable under criminal law (societas delinquere non potest). To that end, some European jurisdictions have preferred imposing administrative liability on corporations for actions that are considered to be administrative (rather than criminal) offenses.

In terms of deterring corrupt acts, a broad notion of corporate criminal liability goes a long way. The willingness of US authorities to impose significant fines on corporations provides powerful incentives for corporations to self-police. Furthermore, the threat of criminal FCPA sanctions—and the associated “moral sanctioning” of criminal liability—may have a more powerful effect on corporations than would similar fines imposed as administrative sanctions. On the other hand, the threat of corporate criminal liability is likely not sufficient, on its own, to foster a compliance culture within an organization. In a legal environment in which individuals face a credible threat of prosecution for their personal roles in organizational corruption, corporations could maintain a stronger culture of compliance as the employees themselves would be legally responsible for their misconduct and therefore less likely to engage in (or turn a blind eye to) corrupt practices.

Even though significant differences remain among jurisdictions, it is an encouraging development that there now seems to be gradually converging views regarding corporate criminal liability among these different legal systems. Continue reading

Guest Post: The US Needs To Show More Respect for Foreign Prosecutions

GAB is pleased to welcome back Frederick Davis, a lawyer in the Paris office of Debevoise & Plimpton, who contributes the following guest post:

The principle that the state may not criminally prosecute the same defendant twice for the same conduct—known in most of the world as ne bis in idem (“not twice for the same thing”), and known in the United States as the prohibition on “double jeopardy”—is well-settled and uncontroversial, at least in Western democracies. Much more controversial is whether that principle protects a defendant prosecuted by one country from prosecution by a different country for the same (or closely related) conduct. This question is of particular importance in the context of transnational bribery, where the same conduct might violate the criminal laws of multiple governments. As I discussed in my last post, in Europe, a mix of domestic legislation, international treaties, and court decisions have established an international version of the ne bis in idem principle, providing companies with a reasonable assurance that if they are prosecuted in one European country, they are shielded from further prosecution in another. In contrast, in the United States the prohibition on double jeopardy has been consistently interpreted to prohibit only multiple prosecutions by the same sovereign. US laws thus offer no protection against re-prosecution in the United States after a prosecution abroad.

The power of US prosecutors to go after companies that have already been prosecuted in other countries is enhanced by other powers that European prosecutors can only dream about. As noted in an earlier post, a US prosecutor can pursue a corporation when anyone within that corporation can be shown to have committed a crime, giving the prosecutor considerable leverage. US prosecutors also have finely tuned procedural mechanisms, such as deferred prosecution agreements (DPAs) and non-prosecution agreements (NPAs), that are only tentatively being explored in other countries, such as the United Kingdom and France. The DOJ regularly asserts aggressive notions of its territorial powers, claiming, for example, that the use of dollars as the currency of an illegal transaction may subject the participants to US prosecution. US prosecutors have essentially unreviewable discretion their investigative decisions, because unlike many countries in Europe, criminal investigations (and, crucially, the decision to charge) are not supervised or reviewed by judges, as the DC Circuit has recently held.

Taken together, these circumstances risk causing two problems: Continue reading

Guest Post: Does International Law Require an International Double Jeopardy Bar?

GAB is pleased to welcome back Frederick Davis, a lawyer in the Paris office of Debevoise & Plimpton, who contributes the following guest post:

Most countries prohibit multiple prosecutions for the same acts or offenses. This is known in the United States as the prohibition against “double jeopardy”; in Europe and elsewhere the principle is known as ne bis in idem. But what happens if a person or company is pursued in more than one country? This question is particularly relevant to the fight against foreign bribery, where the same act will often offend the criminal laws of multiple countries. The OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, adopted in 1997, clearly anticipated the possibility of multi-state prosecutions, but provided in Article 4.3 only that the relevant authorities should “consult with a view to determining the most appropriate jurisdiction for prosecution,” a provision that has been consistently interpreted as precatory, not providing an individual right against double prosecution.

The law in the United States provides no protection against duplicate prosecution by a different sovereign. The situation is more complex in Europe. In some countries, such as France, domestic legislation limits a prosecutor’s power to pursue a person or entity already the object of a prosecution in another country, but only if the exercise of French jurisdiction is “extraterritorial” (that is, where no constitutive act of the alleged crime took place on French territory, but the prosecution based on some other factor, such as the French nationality of the accused or the victim).  Within Europe, a series of overlapping treaties—Protocol Number 7 of the Convention for the Protection of Human Rights and Fundamental Freedoms (CPHRFF), adopted in 1984 by the Council of Europe and signed by most but not all of its members; Article 54 of the Convention to Implement the Schengen Agreement (CISA), adopted in 1990; and Article 50 of the Charter of Fundamental Rights of the European Union (CFR) adopted in 2009—all contain ne bis in idem provisions, though they are not identical. (The CISA provision, for example, protects against re-prosecution based on the same “acts,” while the CFR and CPHRFF protect against multiple prosecutions for the same “offense.”)  The CISA provision has been expansively interpreted by the European Court of Justice, which has noted that CISA mandates a “mutual trust” in the criminal justice systems of other signatory countries, and respect for their decisions “even when the outcome would be different if [the second country’s] own national law were applied.”

Lurking behind these and other developments in Europe is the possibility that protection against multiple prosecutions may one day be viewed as right, grounded in international treaty obligations, that is cognizable under domestic constitutions. No court has yet so ruled, but there are sufficient intimations of such a possibility in some French decisions, for example, that the issue is frequently raised there. Continue reading

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: Continue reading