France is in the process of launching the biggest overhaul of anti-corruption legislation in its recent history with the introduction of a bill which addresses internal corporate compliance, cooperation in criminal investigations, and enforcement. Should the bill pass through parliament, it is likely to have major implications for French companies and those looking to do business with them.
Since signing up to the Organisation for Economic Co-operation and Development’s Anti-Bribery Convention in 2000, France has come under repeated criticism for failing to give the fight against corruption the attention that it warrants. The country’s lack of legislation dedicated to tackling corruption abroad by French businesses, and its perceived inertia in enforcing existing laws, has resulted in the US authorities stepping into the breach on a number of occasions. The US Department of Justice has issued huge FCPA-driven penalties against French companies in recent years, including engineering firm Technip, power and transportation group Alstom, and oil and gas major Total. These three companies alone have collectively been fined over $1.2 billion.
Spurred by the growing sense that US authorities were both carrying out the duties of the French state and financially benefitting from the pay-outs, France’s finance minister, Michel Sapin, introduced the framework of a new anti-corruption bill in July 2015. The bill was presented to the French cabinet of ministers by Michel Sapin on 30 March and is expected to come into force shortly.
While the wording of the draft bill has not been publicly debated yet, its reported scope is impressive in its ambitions. It seeks to encourage better corporate practices (through obligatory internal compliance programmes); incentivise greater cooperation between law enforcement and corporations where those good practices have not been followed (via whistle-blower protection and prosecution off-setting provisions); and foster a stronger enforcement environment where compliance and cooperation are not forthcoming (through the creation of an anti-corruption agency with commanding penal powers, including the ability to fine a company up to 30 percent of its turnover).
Not to be outdone by the UK’s Bribery Act 2010, the law also proposes to introduce provisions enabling the prosecution of corruption offences committed abroad. This is likely to mark a major shift in the corporate culture of French businesses in a way that periodic prosecutions by the US authorities could not.
Enforcement of the Bribery Act has also stepped up. Although initially derided for its lack of bite, there has recently been a significant increase in successful overseas corruption prosecutions under the Bribery Act. In November 2015 the UK’s Serious Fraud Office also struck its first major deferred prosecution agreement with ICBC Standard Bank – with the latter agreeing to pay a large fine for failing to prevent bribery in Tanzania – showcasing the legislation’s range of enforcement powers. Such successes will increase the pressure on France to ensure that it is not simply paying lip service to the idea of curbing extra-territorial corruption.
The so-called Loi Sapin is very much in its infancy. A piece of legislation as ambitious as this is unlikely to make it through parliament in its entirety. There are also plenty of details to be ironed out, like the criteria under which the positive obligation to implement a compliance programme will apply.
Nevertheless, the legislation has momentum and those considering commercial relationships with French companies should expect a significant change in the enforcement landscape. Foreign companies will therefore need to have an even greater understanding of the risk profile of their French acquisition targets, joint venture partners and agents. That means knowing the risk profile of their owners and key decision makers and, most importantly in this context, the way in which they generate and carry out business.
By Goran Maksimovic
Head of Business Intelligence Europe