Sapin II Act and criminal settlement: fight against corruption and extraterritoriality of French-style economic sanctions

By Gwen Green and Jean-Marie Salva

The “Sapin II” law n° 2016-1691 on transparency, anti-corruption and the modernization of economic life was published in the French Official Journal on December 10, 2016 (hereinafter “Sapin II Act”).

The main aim of this law, whose provisions came into force on June 11, 2017 and was immediately applicable, is to set up an innovative anti-corruption system. Inspired by the American Foreign Corrupt Practices Act (FCPA), it allows in particular:
– For French companies of a certain size, the mandatory implementation of an anti-corruption compliance program. Failure to comply will result in sanctions.
– The establishment of a criminal settlement system without admission of guilt for acts of corruption, tax fraud and money laundering, called “convention judiciaire d’intérêt publique” (CJIP), similar to the American deferred prosecution agreement model.
– The extraterritorial reach of the competence of French judges on matters of international corruption.

Recently, the “Parquet National Financier” (PNF), and the “Agence Française Anticorruption” (AFA) published on June 27th, 2019 their first guidelines regarding the implementation of the CJIP.

1) Criminal settlement without admission of guilt

The Sapin II Act introduced the CJIP, which makes it possible to carry out a criminal settlement for acts of corruption, money laundering and tax fraud without prosecution or admission of guilt.

The best advantage of the system lies in the fact that the procedure does not lead to a conviction. It is not considered as a judgment or conviction, which allows the company not to risk exclusion from foreign public procurement opportunities. The other main advantage for companies is that they avoid any negative media publicity around a trial.

Nevertheless, entering into the criminal settlement could lead to public perception of guilt by the company, although from a legal point of view, the CJIP does not lead to a conviction. In addition, the CJIP is published on the AFA website, which may damage the company’s image. Entering into the CJIP could also result in exorbitant financial penalties. As part of the CJIP, companies may be required to pay a public interest fine, which is calculated “in proportion to the benefits derived from the infringements”, and can reach up to 30% of the annual turnover calculated over the previous three years.

Only French and foreign legal entities “having all or part of their economic activity” on French territory may benefit from the criminal transaction mechanism. Natural persons are always exposed to criminal prosecution.

2) Compliance Program

Are solely concerned by the compliance program requirement companies:
– Based in France, with at least 500 employees in France, or any company that belongs to a group of companies that has at least 500 employees worldwide with the registered office of the parent company in France; and
– Whose consolidated or non-consolidated turnover exceeds 100 million euros.

All these companies are therefore required to set up an anti-corruption compliance program, in accordance with the criteria of the Sapin II Act, including an internal alert system.

In the event of a failure to establish an anti-corruption compliance program, the Sapin II Act allows the AFA to initiate an investigation. Following this audit, the AFA sends the company concerned “recommendations” to improve the program, or in the event of a breach, a “warning”, which can lead to an “injunction”.

However, the PNF’s investigation shall not be the only one. Indeed, the Guidelines refer to the cooperation of the company as “necessary pre-requirement” for the opening of the CJIP. The company is expected to launch internal investigation about fraudulent behavior, before or in parallel of the judicial investigation. The moral entity can also spontaneously disclose such behavior, which will be taken into account favorably by the authorities. Nonetheless, self-reporting is not regarded as a pre-requisite.

The Guidelines also refer to professional secrecy. As in-house counsels are not considered as independent attorneys in France, the professional secrecy is not applying to the internal investigations conducted by company lawyers. As such, the PNF can request the disclosure of documents obtained during the internal investigation. This can create a risk for the company if the CJIP process fails, and be disincentive for the conduct of internal investigation.

The penalties for compliance can reach 200,000 euros for natural persons and 1,000,000 euros for legal persons. They are accompanied by the implementation of an anti-corruption compliance program, under the “monitoring” of the AFA, at the company’s expense. In the case of a multi-jurisdictional process, the Guidelines state that the appointment of a single monitor is preferred. If the headquarter or all or parts of the company’s operations are located on French territory, then this single monitor shall be the AFA, according to the article 41-1-2 §3 of the French Code of Criminal Procedure.

Finally, in the event of refusal, the directors are liable to a penalty of two years’ imprisonment and a fine of 50,000 euros, as well as a fine of 1,000,000 euros or twice the proceeds of corruption for legal persons.

3) The extraterritoriality of anti-corruption sanctions

The Sapin II Act allows French criminal courts to prosecute international corruption offences, for persons of French nationality or habitually resident in France, but also companies “having all or part of their economic activity” in France.

The transnational cases, and cross-border investigations, can be an issue with the compliance with the French Blocking Statute. The amount and sensitivity of the information asked by the foreign authorities can be a tricky situation. The Guidelines specify that the AFA must verify any information before being transmitted to foreign authorities, making sure there is no violation of the Blocking Statute.

Thus, France is revolutionizing its fight against international corruption, opting for both a preventive and a punitive approach. The Sapin II Act allows France to compete directly with the American FCPA and the English UK Bribery Act.

4) International Coordination

In June 2018, the U.S. Department of Justice (“DOJ”) and French Parquet National Financier’s office (“PNF”) announced Société Générale S.A. (Société Générale), a global financial services institution based in Paris, France, and its wholly owned subsidiary, SGA Société Générale Acceptance N.V., agreed to pay $1.3 billion to French and U.S. authorities to resolve charges relating to a multi-year scheme to pay bribes to officials in Libya and violations arising from its manipulation of the London InterBank Offered Rate (LIBOR). This case represents the first coordinated resolution by U.S. and French authorities in a foreign bribery case and demonstrates France’s increasing commitment and aggressiveness in enforcing its anticorruption regulations.

Multinational companies operating in France and abroad should assess their compliance framework to ensure they have effective compliance programs to detect and deter potential fraud and other unlawful conduct in each of the nations in which the company operates.