Global Investigations Review - The law and practice of international investigations

The European, Middle Eastern and African Investigations Review 2018

France

White & Case LLP

France’s investigations landscape during 2017 and early 2018 revolved mainly around the implementation of the Sapin II law of 9 December 2016, in particular the oversight of the French Anti-corruption Agency (AFA) and the conclusion by French prosecutors of the first judicial public interest agreements (CJIPs) – similar to deferred prosecution agreements (DPAs). These developments confirm the paradigm shift initiated by Sapin II, which requires companies doing business in France to take a more proactive approach towards compliance and prevention of corruption-related risks, as well as cooperation with French authorities in anticipation of potential inspections and enforcement actions. In addition, the anti-money laundering and combating the financing of terrorism (AML/CFT) Directive (EU) 2015/849 of 20 May 2015 has been fully transposed into French law, and French courts have continued to develop important case law on France’s double jeopardy rules in light of the spread of multi-jurisdictional investigations and negotiated settlements.

Implementation of the Sapin II law

Whistleblowing procedures

The Sapin II law introduced a new legal framework that has enhanced the status and protection of whistleblowers in France.

This framework provides for:

  • a wide definition of a whistleblower;
  • protection against potential retaliation and discriminatory measures (such actions would be considered null and void under French labour law);
  • criminal penalties for anyone who tries to prevent a whistleblower from making a report (a year’s imprisonment and a fine up to €15,000 for an individual; up to €75,000 for a company); and
  • a three-stage reporting process that enables individuals to whistleblow anonymously to any company employee, including any specific person designated by the employer (the Whistleblowing Officer), or, in the absence of any response or in case of imminent danger, directly to judicial or administrative authorities and to the public.

On 19 April 2017, the French government issued Decree No. 2017-564 aimed at implementing this framework, which came into force on 1 January 2018. All companies having at least 50 employees in France are required to introduce measures such as setting up clear and confidential reporting procedures, determining the appropriate legal instrument for raising concerns (although there is no obligation to set up a hotline or any other electronic process), and specifying the Whistleblowing Officer’s identity (who can be a member of the same company or a third-party contractor).

Before implementing or modifying existing whistleblowing procedures, companies are advised to undertake a prior consultation of the relevant employees’ representative bodies (eg, works council, health and safety committees).

Mandatory compliance programmes

Since June 2017, all medium and large companies incorporated in France are required to have an anti-corruption compliance programme that meets certain specifications.

This requirement applies to any private company or public entity of an industrial or commercial nature, which has:

  • more than 500 employees or is part of a corporate group whose parent company is headquartered in France and employs more than 500 people; and
  • whose annual turnover or annual consolidated turnover exceeds €100 million.

Presidents, directors and managers of such companies, including members of the executive board for limited liability companies, may be held liable for failure to implement a compliance programme (company’s executives may face a fine of up to €200,000, while the legal entity can be fined up to €1 million. Any decision issued by the AFA can also be made public).

Compliance programmes under Sapin II law must be tailored to prevent acts of corruption and influence peddling, and must include the following measures:

  • a code of conduct;
  • an internal whistleblowing mechanism;
  • a regular corruption risk mapping exercise;
  • a risk assessment process;
  • third-party due diligence procedures;
  • accounting controls;
  • training programmes for employees exposed to high risks of corruption and influence peddling;
  • disciplinary procedure; and
  • an audit mechanism to assess the effectiveness of the compliance programme.

Although these measures may be very similar to those already implemented by companies to satisfy US and UK specifications, existing compliance programmes should be assessed and updated to match the French legal requirements. The mere transposition of an existing compliance programme to a French subsidiary of a foreign group is not recommended since there are specific procedures to be followed under French labour law when implementing such a programme.

AFA’s inspections and guidelines

The AFA was created by the Sapin II law to replace the former Central Service for the Prevention of Corruption (which was mainly seen as powerless) and it is tasked with controlling the effective implementation of compliance programmes by companies.

The AFA started to conduct its first inspections in December 2017 and has announced that around 100 controls will be performed in 2018. On 15 October 2017, the AFA published a charter specifying the respective rights and duties of the agency and the companies being inspected, setting out the procedures to be followed by the AFA in the context of off-site and on-site inspections.

An inspection will always start with the AFA sending a letter to the company’s executives announcing the inspection, its scope and expected duration. The AFA inspectors are granted the authority to:

  • obtain any document or information necessary to conduct their inspection;
  • access company’s premises; and
  • in a way that ensures confidentiality, speak to any person they deem necessary for the inspection (ie, executives and employees), as well as third parties connected to the company (such as service providers, clients and intermediaries).

Companies’ duties in the context of an AFA’s inspection include:

  • designation of a representative in order to respond to correspondence and procedural requests;
  • communication of the organisation’s chart to the chief inspector; and
  • to provide all requested documents to the AFA in electronic format (either on a USB drive or a dedicated online platform).

The company cannot rely on professional secrecy to refuse to comply with the above-mentioned obligations (obstructing the inspection may be punishable by a fine of up to €30,000).

During an on-site inspection, the company’s representative may be legally represented.

Following its inspection, the AFA provides a report on the company’s compliance programme and, where necessary, recommendations to improve it. In view of the sanctions that can be imposed by the AFA, companies and their directors are advised to anticipate and prepare for inspections, including:

  • ensuring that the company’s representative is designated;
  • the anti-corruption programme is effectively implemented (eg, has been evaluated through an external audit);
  • all the internal procedures are accessible swiftly and electronically; and
  • employees are properly trained for on-site inspections.

Furthermore, to assist relevant entities with the establishment of their compliance programme, the AFA published on 22 December 2017 its ‘Guidelines to help private and public sector entities prevent and detect corruption, influence peddling, extortion by public officials, unlawful taking of interest, misappropriation of public funds and favouritism’.

These guidelines are aimed at helping companies to develop their anti-corruption compliance programmes as part of their risk management strategy, based on the following specifications:

  • top management’s commitment to preventing and detecting corruption (‘tone-at-the-top’);
  • an anti-corruption code of conduct;
  • an internal whistleblowing system;
  • a risk mapping exercise;
  • third-party due diligence procedures;
  • accounting control procedures to prevent and detect corruption;
  • regular corruption risk trainings; and
  • an internal monitoring and audit system.

Although not legally binding, these guidelines represent a policy standard applicable to all organisations (regardless of size, legal structure, business area, revenue or number of employees) that each company should adapt according to its own risks, business model and issues, so as to calibrate its risk management strategy. Accordingly, companies should consider risk mapping as the cornerstone of their compliance programme to ensure that the procedures in place are proportionate to both the issues at stake and the risk exposure.

First French DPAs (CJIPs)

The Sapin II law introduced some significant amendments to the French Code of Criminal Procedures, one of the most important being the CJIP.

A CJIP can be reached either during a preliminary enquiry (ie, before the initiation of a formal prosecution) or during a criminal investigation conducted by an investigating magistrate (ie, once a formal prosecution has been initiated). The latter option is only available when the legal entity placed under investigation acknowledges its liability in respect of the charges brought against it, as well as the legal qualification attached to these charges.

To date, three CJIPs have been reached by French prosecutors, all during a criminal investigation.

The first CJIP was concluded on 30 October 2017 between the French National Financial Prosecutor (NFP) and the Swiss subsidiary of a major British bank, to settle an investigation for laundering of proceeds from tax fraud. The CJIP was subsequently approved on 14 November 2017 by the president of the Paris court.

In total, the bank agreed to pay €300 million to enter into a CJIP with the NFP. This amount was composed of:

  • a €158 million ‘public interest fine’, which represents 30 per cent of the bank’s average annual turnover over the previous three years (2014–2016) and is the maximum authorised under the Sapin II law; and
  • €142 million to be paid within a year to the French State, which had formally joined the prosecution as a victim.

This case is the first in which the lack of voluntary disclosure and minimal cooperation has been mentioned in the context of French criminal proceedings. This appeared to confirm the NFP’s willingness to sanction companies with higher fines if they fail to self-report and provide full cooperation.

Additionally, two further CJIPs were entered into on 14 and 15 February 2018 between the Public Prosecutor’s Office of Nanterre and two French companies in respect of bribery charges. The CJIPs were approved by the vice president of the High Court of Nanterre on 23 February 2018, and are the first negotiated outcomes reached in the context of an investigation for corruption, which lay behind the adoption of the Sapin II law.

The two companies were fined in relation to the amount of benefit resulting from the payment of the bribes, being calculated based on their respective gross operating surplus and the cap of 30 per cent of average annual turnover over the previous three years (2014–2016), as required by the Sapin II law.

It is worth noting that the calculation of the fines was adjusted based on several factors. The aggravating factors included the duration of the scheme and the fact that the offence had involved public officials. The mitigating factors included:

  • cooperation provided by the companies during the investigation;
  • their willingness to enhance an existing compliance programme, such as:

• appointment of ethics officers and managers;

• creation of an internal website on ethics and compliance;

• disseminating a whistleblowers’ charter;

• raising awareness of employees on risks of corruption and cartels;

• keeping the compliance programme up to date with e-learning training, risk mapping, integrity guide; and

• whistleblowing procedures managed by an independent service provider external to the company; and

  • implementation of disciplinary, remedial and restorative measures, such as:

• departure and termination of managers and employees; and

• changes in management and shareholding.

The CJIPs do not specifically list the absence of disclosure of facts as an aggravating factor, but seem to suggest that adequate cooperation by the company could mitigate the lack of self-reporting.

These cases also confirm that, despite the existence of a CJIP, French prosecutors will continue to pursue individuals in respect of their own personal liability.

Taken together, the first CJIPs demonstrate that companies should anticipate the AFA’s inspections by ensuring their compliance programme runs effectively. If they discover any misconduct, they would be well advised to carefully assess the situation before eventually starting a dialogue with the AFA or initiating a disclosure process with French judicial authorities.

Register for interest representatives

Following in the footsteps of the law regarding the transparency of public life adopted on 11 October 2013, Sapin II law has also created a register of ‘interest representatives’ (ie, lobbyists) under the supervision of the High Authority for Transparency in Public Life (HATVP).

The Decree No. 2017-867, published on 10 May 2017, specifies what kind of legal entities can be considered as ‘interest representatives’ depending on whether the representation of interest is:

  • a main activity – this would include any corporation, regardless of where incorporated, whose director, employee or member has, on his or her own initiative, devoted more than half of his or her time within the last six months to an activity consisting in undertaking actions with French public decision-makers and whose purpose is to influence one or several French public decisions; or
  • a regular activity – this includes any corporation, regardless of where incorporated, whose director, employee or member has entered into communication at least 10 times within the last 12 months with French public decision-makers, on his or her own initiative, in order to influence one or several French public decisions.

The Decree also details the types of obligations to which public interest representatives are subject, notably:

  • registering with the HATVP and disclosing certain information about the company, such as:

• identities of the legal entity, its directors and any individual in charge of the activity of interest representation;

• the scope of the activities of interest representation;

• trade union organisations and associations related to the interest represented; or

• any third party for whom the interest representatives act as part of the interest representation; and

  • completing an annual statement with the HATVP no later than 30 April 2018 (this statement will have to be renewed every year within three months of the end of the company’s financial year, and contain information regarding the different actions of representation of interest carried out between 1 January and 31 December of the previous year).

Since 1 January 2018, companies qualifying as interest representatives are subject to close monitoring by the HATVP, which may obtain any document it considers necessary and carry out on-site inspections after having obtained authorisation from the custodial judge of the High Court of Paris. A failure to disclose relevant information to the HATVP is an offence punishable by a year’s imprisonment as well as a fine of €15,000 for individuals and up to €75,000 for companies.

As a consequence, legal entities considered as interest representatives are therefore well advised to prepare for potential inspections undertaken by the AFA and the HATVP.

Transposition of the Fourth EU AML/CFT Directive

Record of beneficial ownership

The EU AML/CFT Directive of 20 May 2015 was transposed into French law on 1 December 2016. Companies and other legal entities registered in France had until 1 April 2018 to record the identity of their ultimate beneficial owners (UBOs) with the Register of Commerce and Companies of the competent commercial court. This obligation was detailed through the Decree No. 2017-1094 of 12 June 2017, in force since 1 August 2017 and amending the French Monetary and Financial Code.

For companies not yet registered in France, the initial declaration must be filed when a company is first registered with the Register of Commerce and Companies or, at the latest, within 15 days of the receipt of registration being issued (ie, when it is created or opens a branch in France).

In particular, the declaration must set forth the owner’s name and personal address, as well as the nature of the control exercised by the UBO and the date on which he or she became beneficial owner. Should the information require updating at any stage, this should be filed within 30 days.

Likewise, trust administrators should provide adequate, accurate and current information on beneficial ownership regarding a trust – if the settlor or at least one of the beneficial owners is domiciled in France for tax purposes. This information should include details of the content and current value of property held within the trust. This information will be held by the Ministry of Economy and Finance.

These two records are both accessible to the French financial intelligence unit (TRACFIN), judicial authorities, customs, tax administration, as well as AML/CFT authorities.

Failure to declare UBOs to the Registry of Commerce and Companies or filing a declaration involving incomplete or inaccurate information is punishable by six months’ imprisonment and a fine of €7,500.

Enforcement actions and double jeopardy

In recent years, French courts have been questioning the interpretation of the French double jeopardy principles to determine whether a negotiated criminal outcome in one country – guilty pleas or DPAs – could bar subsequent prosecution for the same facts in France. Although this jurisprudence may still evolve, two interesting decisions have recently confirmed that French criminal courts will not consider foreign plea agreements as a defence precluding prosecution and conviction in France for the same charges.

First, in a case involving a British citizen who had pleaded guilty to Foreign Corrupt Practices Act (FCPA) charges in a Texas federal court and who was subsequently prosecuted in France for the same facts, the French Supreme Court ruled on 17 January 2018 that this guilty plea did not prevent proceedings taking place in France since part of the misconduct took place on the French territory. This decision overturned the rulings of the first trial judges dated 24 June 2014 and of the Paris Court of Appeal of 21 September 2016. Interestingly enough, the latter had upheld the double jeopardy protection initially granted to the defendant, declaring notably that:

  • the US guilty plea was not freely negotiated because the defendant lacked sufficient free will facing the ‘American judicial authorities armed with such powers and capable of proceeding against him to obtain particularly lengthy sentences (several decades)’, and;
  • because the defendant was not allowed to challenge his US plea – notably the statement of facts – before another jurisdiction, this situation had deprived him of his right against self-incrimination and his right of self-defence.

Second, in the landmark Oil-for-Food prosecution divided into two rounds (Oil-for-Food I and Oil-for-Food II), France’s Supreme Court decided on 14 March 2018, as part of Oil-for-Food I, that article 14(7) of the United Nations’ International Covenant on Civil and Political Rights – which provides that ‘[n]o one shall be liable to be tried or punished again for an offence for which he has already been finally convicted or acquitted in accordance with the law and penal procedure of each country’ – was limited to the scenario of multiple prosecutions initiated within the same jurisdiction, and did not protect against further convictions by foreign sovereigns. The court therefore confirmed the Paris Court of Appeal’s conviction dated 26 February 2016 of the French company Total SA and the Swiss company Vitol SA for offences of bribery of foreign officials.

In a case related to allegations of bribery, in 2007 Vitol had entered into a guilty plea with the New York state court in respect of the offence of ‘grand larceny’, notably because New York’s state law did not have any statute similar to the FCPA that could enable a prosecution for foreign bribery. Later becoming the target of the French authorities along with Total, Vitol claimed that the New York guilty plea protected it against subsequent enforcement action in respect of the same facts in France. While the court rejected this reasoning in Oil-for-Food I, four additional defendants are still awaiting an appeal in the ancillary Oil-for-Food II proceeding on similar though ultimately different grounds (in relation to DPAs and a NPA settling FCPA charges).

In conclusion, these decisions shed further light on how French judges are likely to consider foreign negotiated settlements in the context of cross-border disputes, and confirm the aggressive stance taken by French authorities in relation to overseas bribery since the adoption of the Sapin II law. To avoid the alarming situation where a legal entity – and its representatives – may face multiple investigations by different national authorities at the same time, companies are urged to step up their anti-corruption efforts by ensuring effective implementation and regular auditing of their compliance programmes, and by adopting a pragmatic approach based on a thorough risk assessment when discovering any potential misconduct.

Previous Chapter:Norway: Enforcer Overview

Next Chapter:Germany