On 8 November 2016, the French Parliament approved new
anti-corruption legislation. Championed by the Minister of Finance Michel
Sapin, the law that is commonly known as Sapin II will fundamentally change the
compliance landscape for French companies.
In particular, it will place a
positive obligation on large companies, and their subsidiaries, to implement
anti-corruption compliance programs. Failure to comply with this mandatory
obligation will open the company, and its directors, to sanctions. This
can include a fine of up to 200,000 Euros imposed on the CEO or board of
directors, and a fine of up to 1m Euros for the company itself.
Companies falling within
the scope of this obligation include those whose head office is located in
France, employ at least 500 people and have revenue of at least 100m
Euros. The compliance program must include a code of conduct,
whistleblowing procedures, risk assessments, due diligence on suppliers and
third parties, accounting controls, training, and disciplinary policy for
non-compliant staff.
These new rules will be
enforced by a new anti-corruption agency created under Sapin II and headed by
Xaviere Simeoni. The aims of the new agency are to assist companies in
setting up compliance programs, perform controls, sanction non-compliance and
supervise monitorships. Guidelines setting out its policies and procedures in
more detail are anticipated.
In addition to the new
offences regarding compliance programs, the existing sanctions will remain in
force for acts of bribery, with individuals found guilty of these offences
facing up to 10 years of imprisonment and a fine of up to 1m Euros, which
can be increased to twice the value of the profits made through the criminal
activity. For companies found guilty of bribery offences the fine may be up to
five times the value of the profits. Other sanctions include publication of the
judgment, exclusion from participating in public bids and even liquidation of
the company.
The agency will also have the ability to make use of deferred
prosecution agreements in order to emulate the methods of regulation and
enforcement successfully employed in the U.S. and, more recently, in the UK and
the Netherlands. The lack of incentives for self-reporting, however, such
as reduced penalties, means that there is some speculation about how this will
work in practice. Indeed, a company that enters into a deferred prosecution
agreement may still find itself subject to fines of up to 30% of its average
annual turnover. A further new sanction introduced by Sapin II is the potential
imposition of a monitorship, under the supervision of the anticorruption
agency, for up to three years.
Sapin II is expected to
enter into force before the end of 2016. For all large companies active
in France that do not have effective anti-corruption compliance programs in
place, remedying this should be a matter of priority for the company and senior
management. In doing that, lessons can be learnt from the experience in
the U.S. and UK of designing and implementing effective anti-corruption
compliance programs that will satisfy the Sapin II requirements, but remain
proportionate and appropriate for the businesses in question.
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