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For years, France has ceaselessly been singled out for its alleged laxity in reports by the OECD and Transparency International. The paradox? This situation poses a considerable transnational risk to French companies confronted with the extraterritoriality of the FCPA and the Bribery Act. With the Sapin 2 Bill, the entire anti-fraud system is to be overhauled.
According to the “Top Ten” established by fcpablog.com, France tops the list of countries most sanctioned under enforcement actions brought by the United States on the basis of the FCPA: #2 Alstom: USD 772 million; #5 Total SA: USD 398 million; #8 Technip SA: USD 338 million. In 2014, furthermore, BNP Paribas pled guilty and agreed to pay a record penalty of 8.9 billion dollars.
French law is, in fact, poorly perceived abroad. The applicable sanctions are not considered dissuasive in comparison with the advantages that could be obtained. The procedural and legal subtleties tied to the criminal liability of companies and their executives make it so that the risks of criminal convictions are hardly foreseeable and business operators do not have an interest in reporting such violations.
The heavy sentences handed down in the United Stated and those being imposed with the Bribery Act in Great Britain illustrate the growing risk to which French companies are exposed in the economic war being waged. It is in this context that the Bill for transparence economic transparency – known as “Sapin 2” – comes into play. It is currently being examined by the Conseil d’Etat and will be presented to the French Cabinet (Conseil des Ministres) on 23 March 2016.
The bill will formalize the obligation to take measures for detecting the commission, in France or abroad, of corruption. The objective is to obligate companies to implement effective systems of governance and compliance.
The envisioned compliance programs would be monitored by a new National Agency of Corruption Prevention and Detection to monitor and enforce the implementation of these procedures through the publication of guidelines, the systems audit capacities and, finally, sanctioning powers. Beyond even the prevention and in case of sentencing, the new Agency would also participate in the implementation of an additional penalty known as prevention system “compliance”.
If the system is inspired by the “monitorship” integrated in the FCPA, practical questions are posed with regard to cultural differences and the fear of experiencing the National Agency’s action as an intrusion, which could limit the measure’s incentive effect and its effectiveness.
The anti-corruption programs must not remain declarative. In case of difficulty in the implementation, the new Agency could put the companies on notice and impose penalties, including against natural persons, and of which the amount could reach up to €1 000 000 for companies.
What should, then, these programs contain? The main themes to be followed would likely be set based on the guidelines of the current Central Service of Corruption Prevention, namely the commitment of leaders at the highest levels, the evaluation of risks and the establishment of reference, procedural and control documents.
Companies employing more than 500 employees and with more than €100 million in turnover would be affected. Debates will take place on the question of these thresholds because they do not, as is, meet any known definition in the SME or mid-cap company categories.
Even if the majority of companies with activity abroad have already integrated the risks associated with the Bribery Act or the FCPA, the scope of application and the question of timing imposed on companies to comply with the new obligations will be debated.
If one wants to ensure that the “compliance” systems are effective and that fraud is reported, it will be necessary to ponder the positive impact that these systems will have and to imagine how the criminal liability of the legal entity would not necessarily be incurred when the acts have been committed by an executive in isolation and in violation of internal rules. But also how to modulate the gravity and the type of penalty incurred, modify the conditions of recidivism and reflect on the means of avoiding the automatic exclusion from public procurements.
Companies should be even more vigilant regarding the detection of corrupt practices in their due diligence prior to their external growth transactions. An a posteriori audit could prove to be very useful in avoiding heavy financial sanctions and penalties related to the acquisition of a target not in compliance with the new legal obligations regarding corruption. The importance of a criminal audit combined with an upstream/downstream M&A audit for an acquisition would thus prove indispensable.
But would it be necessary to limit these reflections to only this field? Shouldn’t improvement of the combat against fraud and the competitiveness of French companies come from an evolution of the penal process? Our current process of pleading guilty, carried out by financial prosecutors and examining judges “in their sleep”, is disparate and results in a public conviction which carries the consequence of the automatic exclusion from public procurements.
Experience has shown, however, that through confidential negotiations with the Anglo-Saxon prosecutors, solutions could be found rapidly, within acceptable financial proportions and without the companies having to fear excessive media coverage or an exclusion from foreign public procurements.
Firmer and more rapid solutions such as the public interest netting agreement are foreseen under the “Sapin 2 Bill”. The fine could reach 30% of the average turnover over the last three years. An upheaval of French law which joins the introduction under the “Sapin 2” law of the ending of accumulation of prosecutions and sanctions in administrative and criminal matters.
The relationships between the Public Prosecutors, judges and economic actors should therefore be reconsidered and, in our estimation, it seems essential that these new procedures give precedence to the role of the judge in order to better protect the rights of the defense.
The undertaking is vast but it is an important component of the economic war waged against French and European companies. A different – and broader – undertaking is that of the reform and harmonization of the French and European tax systems. France should not react but act to finally rise to the international economic standards and make Paris a place of competitive law.
Caroline DIOT & Fabien POUCHOT
