The lower house of France’s parliament has approved what is considered to be the final version of a new anti-corruption law that will have extraterritorial application and will introduce DPAs to the country.
On 29 September, the French National Assembly approved a new version of “Sapin II” that requires companies to adopt an anti-corruption compliance programme within six months or face a penalty of up to €1 million.
The bill, which is named after French finance minister Michel Sapin, will also introduce deferred prosecution agreements (DPAs) to the country and create a new agency, the Corruption Detection Agency (CDA), to investigate corruption cases before they are passed on to the Financial Prosecutor’s Office (PNF).
The CDA will replace the Central Service for the Prevention of Corruption, which sits under the Ministry of Justice and lacks investigative powers.
The bill will now be considered by the senate in October. However, GIR understands that the 29 September National Assembly bill is final and will probably be passed into law in November, without any further amendments.
The news comes after months of wrangling over what should be included in the provisions of the bill. In July, the upper house of France’s parliament recommended that a previous version of the bill, which was approved by the National Assembly on 14 June, be amended. In particular, the senate said that the provision that gave the CDA powers to impose administrative fines on companies and individuals for failing to implement compliance programmes should be stripped out of the bill.
However, the National Assembly has rejected all the senate’s July recommendations and has instead ratified its original June draft of the bill, with a few additions.
A major addition to the bill is that it will apply extraterritorially to foreign companies and individuals that conduct business or part of their business within French territory.
Jonathan Mattout at Herbert Smith Freehills in Paris said this signifies a new approach in French criminal law and enforcement and shows a very strong will to tackle foreign bribery.
“Here, the bill doesn’t go as far as the UKBA, in creating a strict liability as a result of acts committed by associated persons, but this is still a very important extension of the jurisdiction of the French criminal courts in the field of international corruption,” Mattout said.
The newly approved bill gives the CDA the power to impose a €1 million administrative fine on companies that fail to implement compliance programmes within six months. Under the bill, the CDA can also fine a corporate’s top management €200,000 if the company fails to implement the programme.
Most lawyers GIR spoke to said the six-month period is too short. However, Charles-Henri Boeringer at Clifford Chance in Paris said that it depends on the size of the company in question. For larger companies, Boeringer said, the six-month implementation period is manageable, as they are likely to have compliance programmes in place already, which they will need to update to meet the requirements. However, medium-sized companies without such programmes will struggle.
“However, the agency is unlikely to impose fines on companies for at least one to two years,” Boeringer added.
The newly approved bill will also create an enforcement committee within the CDA. The committee will be staffed by magistrate judges, who will oversee the implementation of the new rules.
Arnaud de La Cotardière at Linklaters in Paris said that it would have been wise of the government to include business professionals within the committee to help the judges understand the practical issues of implementing compliance programmes.
“It’s always quite important for judges to understand the practical aspects of putting in place such a programme,” Cotardière said. “It could have been someone who is currently a compliance officer or a retired compliance officer, much like the US Department of Justice has.”
The US Department of Justice’s compliance counsel Hui Chen, who was previously worked as Standard Chartered’s head of anti-bribery and corruption compliance, trains prosecutors at the authority to better assess corporate compliance programmes.
Expansion of DPAs
Another significant addition to the bill is the expansion of DPAs to offences other than corruption. Under the June draft, companies could only enter into a DPA with PNF over corruption offences. Under the newly approved bill, companies can also be eligible for a DPA if they commit the laundering of tax fraud offence found in the French Criminal Code. The offence specifically targets companies and individuals that launder proceeds illicitly obtained through tax fraud.
Dmitri Lecat at Freshfields Bruckhaus Deringer in Paris said he was unsure why the National Assembly didn’t expand the DPAs to general tax fraud and money laundering offences. However, Lecat said, the lower house may have been unable to expand DPAs to tax fraud offences because of the specific ways such offences are investigated and prosecuted in France.
Whereas the PNF can investigate and prosecute the laundering of tax fraud offence under the French Criminal Code, it cannot investigate tax fraud offences without first receiving a complaint from the French Tax Administration. The administration itself can only make a complaint after it receives authorisation from the Tax Offences Commission, which sits within the Ministry of Economy. If there is no authorisation, the public prosecutor can do nothing, Lecat said.
“This is very different for the laundering of tax fraud offence because it does not need to go through this very specific process,” Lecat said. “The public prosecutor will be entitled to investigate and prosecute on the basis of laundering of tax fraud without receiving a complaint from the tax administration.”
Lecat said that the National Assembly may therefore have been reluctant to include general tax fraud offences within the scope of a DPA as there may be a clash of powers between the PNF and the tax authority.
Under the June proposals, a whistleblower – which is defined as either an individual or entity in the bill – may only report in good faith “a crime or an offence, a serious breach of the laws or the regulations, or facts presenting risks or serious harm to the environment, to health, to public safety”.
The newly approved bill expands the scope of offences a whistleblower can report to offences committed in breach of international treaties France is a party to. It also expands it to anything which is considered “a serious threat or a serious damage to the public interest of which he has personal knowledge”.
Under the newly approved bill, a whistleblower now has two paths to report suspected misconduct, depending on the nature of the potential wrongdoing. A whistleblower is still required to report misconduct first to a line manager or compliance officer. However, where the whistleblower is in serious or imminent danger, he or she can alert the authorities first.
Lecat said it is significant that the bill was expanded to allow whistleblowers to report matters they deem seriously damaging to public interest. Lecat said this measure is aimed at ensuring whistleblowers, such as those who alerted the French public on Lux Leaks, are protected by French legislation.
In June, former PwC employee Antoine Deltour was handed a 12-month suspended sentence in Luxembourg after he leaked documents in 2014 exposing tax avoidance schemes by companies around the world. The release of documents came to be known as the Lux Leaks. According to British newspaper The Guardian, at the time of Deltour’s conviction Michel Sapin praised him and said he stands in solidarity with the whistleblower.
“This is another signal that the National Assembly wants to give protections to whistleblowers and is favourable to making sure whistleblowers receive a legal status that protects them against retaliation,” Lecat said.
A long road
Sapin II was first proposed in July 2015. Parisian lawyers lamented the length of time it has taken for the bill to reach this stage of the legislative process.
Frederick Davis at Debevoise & Plimpton in Paris said there has been a lack of urgency to get something done probably because it was in few people's interest to change the status quo. In March, France’s Council of State, which advises the government on the preparation of legislation, struck down proposals to include DPAs in the bill. This was reversed in June by the National Assembly.
“It’s coming up to a year and they still haven’t adopted a bill, although now there’s hope that this will finally be the case shortly,” Davis said. “Keep in mind also that getting this law adopted is only a first step; much depends on how it will be implemented by French authorities, and how French corporates will react to it.”
The French National Assembly did not respond to a request for comment.