by Margot Sève

This post is an abstract of the article published under the same title in the Revue Trimestrielle de Droit Financier / Corporate Finance and Capital Markets Law Review (Thomson Reuters), as part of the thematic section edited by Michel Perez and Margot Sève entitled “International Financial and White Collar Crime, Corporate Malfeasance and Compliance.”

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On December 9, 2016, France adopted law n° 2016-1691 on transparency, the fight against corruption, and the modernization of the economy.  The law has been commonly called the “Sapin II” law, after French Minister of Finance Michel Sapin who, in 1993, authored the first Sapin law on transparency in politics and public procurement, and sought in 2016 to further enhance transparency and combat corruption.

While France has in recent years certainly made efforts towards more severe punishment for corruption-related offenses, it has nonetheless been criticized for its weak enforcement track record.  For example, while the sanctions for active and passive corruption of domestic officials, active and passive corruption in the private sector, corruption of foreign officials, and influence peddling were increased in 2013, only one company (Total S.A.) was fined between 2000 and 2016 for acts of corruption of foreign public officials.  This lack of enforcement efficiency has led the OECD, as part of its monitoring of countries’ implementation and enforcement of the OECD Convention on Combatting Bribery, to report serious concerns regarding “the lack of foreign bribery convictions in France.”

Shortcomings in France’s corruption cases enforcement are due, in part, to the limited scope of powers granted to France’s pre-Sapin II anti-corruption body, the “Corruption Prevention Central Service” (Service Central de Prévention de la Corruption – “SCPC”). Indeed, the SCPC was never granted investigation or enforcement powers, only corruption prevention missions. Consequently, as noted in the “Impact Report” of the Sapin II draft bill, “France does not have to date a specific agency capable of preventing and helping to detect acts of corruption.”  In contrast, most of France’s neighboring countries (e.g., the Netherlands, Italy and the United Kingdom) have set up dedicated agencies that detect, prevent, coordinate on, and sanction corruption-related offenses.

Moreover, the widespread view that French companies would not have been fined by U.S. authorities if France had implemented a more competitive, efficient international anti-corruption enforcement framework, has been one of the main rationale put forth for passing Sapin II. Indeed, leveling the playing field between France and the U.S. has been at the heart of the Sapin II parliamentary discussions.

In light of the shortcomings highlighted by the OECD (and NGOs such as Transparency International), as well as the increased regulatory competition created by U.S. enforcement actions against French companies, the French government’s declared ambition in drafting Sapin II has been to “bring France into line with the highest international standards in the area of transparency and the fight against corruption.”

To reach that goal, the authors of Sapin II created a new set of ex ante measures, and reinforced France’s ex post framework.  Ex ante, Sapin II sets up a set of measures requiring companies to take on compliance obligations with respect to corruption (1) – a first in French law.  Ex post, Sapin II reinforces France’s sanction and enforcement framework (2), in part by creating the “convention judiciaire d’intérêt public” (“CJIP” – roughly translated as “judicial agreement of public interest”), close in spirit to the American “Deferred Prosecution Agreements.”

All in all, Sapin II is a groundbreaking piece of legislation, first and foremost because the culture of compliance, which it sets in hard law, requires companies to internalize the public functions of rule-making and enforcement. This changes the way companies need to look at compliance and legal risk, including how companies need to organize their compliance and risk functions. Moreover, internal policies and procedures will not only become the object of corporate liability, but also of corporate value, as they will, for example, need be reviewed and upraised as part of M&A deal due diligences.  As for the creation of the CJIP transaction, it will most likely be considered a game changer as well, which could very well be extended to other offenses if proven efficient.

However, it remains to be seen whether, as expected by the drafters of the law, French companies that sign CJIP agreements in France will be able to claim the application of the ne bis in idem principle to shield themselves from foreign prosecution.  While only future cases will tell whether the ne bis in idem principle will be recognized by foreign authorities, the implementation of the CJIP mechanism might at the very least lead foreign and French authorities to cooperate in their investigations, and eventually agree to sharing a single fine imposed on the same company.  Such was, for example, the case for Siemens in December 2008, where the U.S. and German authorities shared the USD 1.6 B fine paid by the company for having engaged in corruption of foreign government officials.

The full article is available.

Margot Sève, Ph.D., is a member of the Paris Bar and practices in the Paris office of Skadden, Aprs, Slate, Meagher and Flom LLP.  As part of the Financial Institutions Regulation and Enforcement practice group, Margot Sève advises clients on compliance, investigation and enforcement matters.

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