The Sapin 2 Law: Several questions remain

On 30 March 2016, the draft bill on Transparency, Anti-corruption and Economic Modernization was introduced in the Council of Ministers.For years, France has ceaselessly been singled out for its alleged laxity. This paradoxical situation poses a considerable transnational risk to French companies. The anti-corruption system has thus been redesigned, but still leaves several issues unmet.

The prevention of corruption will become an obligation

The draft bill creates an obligation to take measures intended to prevent and detect the commission, in France and abroad, of acts of corruption or influence peddling. The obligation will be imposed upon Presidents and CEOs of companies, as well as board members of public limited-liability companies according to their respective powers, employing at least 500 employees or belonging to a group of companies whose workforce is at least 500 employees and whose revenue or consolidated revenue is greater than 100 million euros. This would represent 1570 companies in France, which, however, have for the most part already adopted prevention systems.

The principle prevention measures imposed are the following

• A code of conduct;
• An internal alert system
• Regularly updated risk mapping targeted at the identification, analysis and prioritization of external exposure and solicitation risks;
• Client, supplier and intermediary evaluation procedures;
• Accounting audit procedures, internal and external
• A training program for managers and personnel with the highest exposure;
• A disciplinary penalty system

A new Prevention Agency will be able to investigate and sanction

The audits shall be carried out by the new National Agency for the Prevention and Detection of Corruption at its own initiative or upon request from the Justice or Budget Minister (Article 4 and 8). The Agency, which will take over the services of the previous Central Service of Corruption Prevention (Service Central de Prévention de la Corruption) and whose financial and human resources will be increased, will be able to:

• request any professional document from the company’s representatives and make a copy thereof
• conduct on-site audits of the accuracy of the information provided
• meet, confidentially, with any person whose cooperation seems necessary.

Upon the audit’s completion, a report containing the observations regarding the quality of the system and recommendations for its improvement shall be established and transmitted to the Minister and to the company.

In case of a breach, and after formal notification, the matter shall be referred to a sanction commission who may impose a fine of €200,000 for natural persons and up to €1 million for legal persons. It may also order the publication, diffusion or display of the decision.

The disclosure and repression of corruption will be facilitated

The Sapin 2 draft bill extends whistleblower protection to the financial sector as for market abuse (Article 7). In continuation of previous laws on whistleblower rights, it also entrusts the new Agency with a mission to receive, direct and protect whistleblowers (Article 6).

After verification; the agency may even adopt the alerts to its own behalf and transfer the information to the Justice, thus anonymizing the original disclosure.

In case of conviction for acts of corruption or influence peddling, the draft bill creates a supplementary compliance penalty, executed under the control of the public prosecutor, which includes the obligation for the convicted person to implement a monitoring system (Article 9). The non-compliance with the penalty will constitute a new criminal offense.

The monitoring shall not exceed 5 years and the enforcement judge may end it earlier upon request from the public prosecutor.

Acts committed abroad shall be sanctioned

The draft legislation provides for the extension of the territorial application of French criminal law. It also creates the offense of influence peddling of a foreign official and provides the possibility to convict foreigners residing regularly in France for acts of corruption and influence peddling committed abroad (Article 12).

Some essential points for effectively fighting corruption are missing

While expectations were high in the economic and legal world, we nevertheless regret that:

• following the Council of State’s 24 March 2016 opinion, the draft legislation no longer contains the elements on the creation of a form of penal transaction called the Public Interest Compensation Agreement, considered in light of work with representatives from the corporate world;
• no reflection was undertaken to modernize the criminal procedure for economic and financial matters, with regards to, for example, the current guilty plea;[i]
• the rights of defense or the place of the judge, guardian of freedom, are not really broached even though the administrative body is granted new investigative and sanctioning powers;
• efficacious compliance systems are not more highly valued in the event of detection of isolated acts;
• nothing has been envisioned in terms of modulation of the gravity and the type of penalty imposed, of conditions related to a legal person’s recidivism or the removal of the automatic exclusion from public procurements.

The Draft Bill on Transparency, Anti-corruption and Economic Modernization constitutes a risk and a challenge to which French companies are going to have to continue to pay attention during the parliamentary debates.

Caroline Diot

[i]On this point, see the article “Corruption: France Finally Responds!” by Caroline Diot and Fabien Pouchot http://www.advant-altana.com/en/medias/corruption-la-france-reagit-enfin