Part two of this article focused on the culmination of nearly 10 years of frustration in France with U.S. enforcement against French companies. The Gauvain Report recognized that the Blocking Statute, thought to be a counteraction to U.S. measures, failed nearly completely on its own to prevent foreign investigations in the absence of a meaningful enforcement counterweight from French authorities. This third and final part analyzes the significance of the Gauvain Report and outlines some thoughts for the future.
Charting the Path Forward: Protecting a Right to Exercise Anticorruption Jurisdiction
The goals of the Gauvain Report’s recommendations are to “re-patriate” investigative jurisdiction and “re-territorialize” the law applied to acts of corruption. That strategy does not appear to take issue with the substance of the FCPA—it is not excusing or condoning corruption—but rather aims to assert meaningful French participation in the mechanics of investigations and related cooperation with U.S. inquiries.
Reform of the Blocking Statute appears to be one of the most important developments in that respect, along with a discussion of extending legal privilege protection to French in-house lawyers. In 2012, as noted by the Gauvin Report, in another parliamentary report on reforming the protection of business secrets, the French legislature had noted that the Blocking Statute had not fulfilled its objective. Intended to provide a procedural defense to French companies, U.S. courts instead have noted its non-enforcement (compared, for example, to Swiss enforcement of similar laws) and consider such essentially unenforced foreign laws to be insufficient grounds on which not to comply with U.S. discovery. The 2012 report acknowledged that in 30 years since the adoption of the Blocking Statute, only one violation had been sanctioned.
The revised Blocking Statute would subject cooperating with foreign authorities to the scrutiny of the French State. The Gauvain Report proposed to have a central entity involved throughout the process and increase the penalties for non-compliance. This idea is not without risks, for government involvement in screening private data supposes an alignment of interests between the company providing the data and the State. It also assumes that companies subject to French law will believe in the French authorities’ ability to protect them and that protection may, nonetheless, ultimately entail cooperating effectively with foreign authorities—albeit a cooperation at a more measured pace and filtered through French authorities. These changes will have to fit within the broader transatlantic information-sharing system currently negotiated at the EU-level and the recently signed CLOUD Act agreement between the U.S. and the U.K.
Finally, the Gauvain Report did not go so far as to recommend that France assert exclusive foreign bribery jurisdiction over the entities and individuals subject to French law. It sought instead to reinforce the French anti-corruption apparatus and position it in the global anti-corruption regime.
Anticorruption Policy and the Transatlantic Alliance
Europe and the United States share a common interest in combating international bribery. The investigation and prosecution of foreign bribery may affect vital state interests. The Gauvain Report chastises the U.S. for giving the FCPA a vital role in American foreign policy but indicates a clear readiness to have French anticorruption policy serve other strategic goals. Viewed from that perspective, the purported disagreement between the two long-standing allies is less severe than it would seem. Following the release of the Gauvain Report, the French Prime Minister observed that “compliance was introduced into [French] law as a result of a ‘healthy’ external pressure. But then the requirements of compliance began to threaten our legal sovereignty. Finally, in its American version, it became a major risk for our companies. We needed to react.”
Somewhat paradoxically, while criticizing the U.S.’s extraterritorial reach, the French response has also included introducing more extraterritoriality into French law. Article 435-11-2 of the Penal Code, introduced by Sapin II, extended French foreign bribery law to any person “performing all or part of its economic activity in France”. PNF–AFA Guidelines note that if a company seeking a foreign bribery resolution with French authorities performs all or part of its activity in France, then the AFA should serve as post-resolution compliance monitor if the settlement foresees one. Prosecutors may also decide to open “mirror investigations” following information requests coming from foreign authorities.
Has France induced the U.S. to moderate its approach to FCPA jurisdiction? On January 30, 2020, Airbus reached final agreements with the PNF, the U.K.’s Serious Fraud Office (SFO) and the DOJ to resolve investigations into allegations of bribery and corruption. The combined €3.598 billion resolution is the largest-ever combined anti-corruption resolution, and the largest of any type of resolution that the PNF has entered into. Under the settlement with the PNF, of this amount Airbus agreed to pay over €2 billion to the French treasury and committed to targeted audits carried out by the AFA. In its DPA with Airbus, the U.S. government noted that:
“the Company is neither a U.S. issuer nor a domestic concern, and the territorial jurisdiction over the corrupt conduct is limited; in addition, although the United States’ interests are significant enough to warrant a resolution, France’s and the United Kingdom’s interests over the Company’s corruption-related conduct, and jurisdictional bases for a resolution, are significantly stronger, and thus the Fraud Section [of the DOJ] and the [U.S. Attorney’s Office for the District of Columbia] have deferred to France and the United Kingdom to vindicate their respective interests as those countries deem appropriate, and the Fraud Section and the Office have taken into account these countries’ determination of the appropriate resolution into all aspects of the U.S. resolution.”
From a U.S. perspective, many will see the Airbus settlement as an example of jurisdictional restraint. While in this case the U.S. deferred to the interests of other jurisdictions and declined to assert a more extensive jurisdictional claim, that limitation was presented as one that was self-imposed in the context of the particular resolution. The U.S. recognized the mechanisms that France and the U.K. employed in this particular case to further their enforcement goals.
Regardless, from a French perspective, that achievement is significant. For now at least, a sense of balance has been found. Following decades of clashes and consternation with the U.S., this resolution could herald a new area of cooperation, and of the equilibrium that the Gauvain Report sought to achieve.
Because foreign bribery law by definition seeks to influence conduct abroad, in particular conduct that perverts and distorts international commerce, that field cannot be completely immune from geopolitics. However, in France there is now a potential roadmap for managing tensions that may arise from the sensitive nature of this area of law. Competing sovereign interests can coexist. France should be able to build on recent successes, taking its place as global anti-corruption regulator, and receive the recognition of that status from other international enforcers. That prospect hinges on whether France will continue to enforce its foreign bribery laws. Insufficient action may expose France to the vindication of others’ vital interests, not only those of the U.S., but also those of the U.K., Germany, Brazil, and other countries who should have every incentive—including as shown by recent French experience—to enhance, rather than reduce, their anti-corruption enforcement activity.
For Part I of this post, click here.
For Part II 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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