Part one of this article surveyed the evolution of France’s policy perspective on the application of U.S. laws abroad and some of the reasons that led to the 2016 reform of the French anti-corruption framework. In this second part, the article discusses the context leading up to the 2019 parliamentary report and presents its recommendations.
The Sapin II law has had an effect on the articulation of U.S. and French interests in anti-bribery enforcement. Illustrative of the changes are the June 2018 parallel resolution of criminal charges with U.S. and French authorities in the Société Générale case, as well as the January 2020 achievement by Airbus of a tri-partite coordinated settlement with French, U.K. and U.S, authorities, as part of which by far the largest penalty went to France. In these respects, the Sapin II reform along with the Parquet National Financier (PNF) appears to have paved the way to restoring perceived balance in the Franco-American relationship.
Extraterritoriality in the Post-Liberal World Order
Several contemporaneous events, however, have exacerbated French concerns over U.S. enforcement anew. The March 2018 Clarifying Lawful Overseas Use of Data Act (the “CLOUD Act“) was perceived in France as granting the US government direct access to information and data stored on European territory. The May 2018 U.S. withdrawal from the Joint Comprehensive Plan of Action and the reinstatement of economic sanctions on the Islamic Republic of Iran left European leaders particularly aghast at this unilateral decision. These decisions by the U.S. government, coupled with the persistent suspicions that the U.S. bribery investigation of Alstom was steered to help General Electric acquire Alstom’s power and grid businesses (suspicions only deepened with the subsequent popularity of the biographical account published by one of the defendants), the fresh memory of the nearly nine billion dollar criminal fine paid by BNP, and active secondary sanctions enforcement increased the political pressure to present a response. The November 2018 U.S. Department of Justice China Initiative, an enforcement policy priority to “identify [FCPA] cases involving Chinese companies that compete with American businesses,” further fueled the narrative of some French commentators, pointing to this policy as evidence that French and European companies had previously been singled out.
The perceived overall erosion of multilateralism (in which the U.S. had previously participated), rising populism, and the trade war between the U.S. and China further placed the issue of extraterritorial regulation in a new context.
Against this backdrop, in July 2018 French Prime Minister Edouard Philippe issued a mission letter to Raphael Gauvain, a member of the National Assembly governing party, instructing him to identify protective measures for French companies confronted with litigation or administrative procedures giving effect to legislation with extraterritorial reach. On June 26, 2019, Mr. Gauvain presented a report to the Prime Minister entitled “Restoring French and European Sovereignty and Protecting our Companies from Extraterritorial Laws and Measures” (“the Gauvain Report” or “the Report”).
Overview of the Gauvain Report Findings and Recommendations
The Gauvain Report contains two main parts. In the first section, the Report argues that French companies are “particularly vulnerable” to the “weaponized” use of extraterritorial laws and measures by U.S authorities against “traditional allies in Europe.” It expresses significant concern about the impact of U.S. investigations on French and European companies through the production of information held in Europe. The second part discusses eight recommendations to protect French and European companies from the “abuse of extraterritorial measures” that represent a “threat to the world economic order [and a form of] unfair competition.”
The Gauvain Report asserted that the DOJ has prosecuted individuals and companies for acts committed outside of the U.S. with no nexus between the acts and U.S. territory. The Report further claimed that FCPA jurisdiction would be narrower and the fines lower if the settlements were submitted to judicial scrutiny.
The Gauvain Report expressed concern that competitive information is siphoned-off through U.S. information requests, whether in the context of pre-trial discovery in civil cases or government investigations, thus placing companies at business risk. Under the guise of law enforcement, the Report suggested, the U.S. is extracting information from French businesses that gives American enterprises an edge in the competition. The Gauvain Report asserted that U.S. authorities systematically bypass the rules of international evidence-gathering and administrative cooperation. Even if such procedures are followed, the Report added, French authorities typically did not substantively screen the nature of the information communicated and therefore left French companies unprotected to face these investigations.
The Gauvain Report strove to formulate a response, and made eight recommendations, with the first three recommendations identified as critical:
- Create an “in-house lawyer” status with legal privilege protection to limit the type of information shared with foreign authorities;
- Modernize the Blocking Statute through the creation of a central screening entity and heightened sanctions;
- Protect companies from the CLOUD Act by extending certain provisions of the General Data Protection Regulation to company information;
- Define a common position in the French government on which secrets to protect;
- Reinforce the use of corporate settlements;
- Ask the International Court of Justice to opine on extraterritorial jurisdiction;
- Launch an Initiative at the OECD to define multilateral rules on jurisdiction; and
- Propose to European Union members that they reinforce European defenses to foreign governmental and litigation requests.
For Part I of this post, click here.
For Part III of this post, click here.
Michael Huneke is a partner in the Anti-Corruption & Internal Investigations practice group, and Jan Dunin-Wasowicz is a litigation associate, at Hughes Hubbard & Reed.
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