Anti-Corruption - Laurent Cohen-Tanugi Avocats · This is the second annual issue focusing on the...

Volume 4 • Issue 7

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Anti-Corruption

North America • Asia-Pacific • Europe • Latin AmericaEnforcement priorities • Compliance risk • Data privacy • 2017 trends

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Welcome to GTDT: Market Intelligence.

This is the second annual issue focusing on the latest global trends within anti-corruption regulation and investigations.

Getting the Deal Through invites leading practitioners to reflect on evolving legal and regulatory landscapes. Through engaging and analytical interviews, featuring a uniform set of questions to aid in jurisdictional comparison, Market Intelligence offers readers a highly accessible take on the crucial issues of the day and an opportunity to discover more about the people behind the most interesting cases and deals.

Market Intelligence is available in print and online at www.gettingthedealthrough.com/intelligence

Getting the Deal ThroughLondon

October 2017

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Global Trends ........................................................................................2Brazil ....................................................................................................7China ..................................................................................................12France .................................................................................................19Germany .............................................................................................25India ...................................................................................................30Italy ....................................................................................................35Mexico ................................................................................................38Netherlands ........................................................................................44Serbia .................................................................................................50Switzerland .........................................................................................56Turkey .................................................................................................61United Kingdom ...................................................................................66United States .......................................................................................73

In this issue

© Law Business Research 2017© Law Business Research 2017

GTDT: Market Intelligence – Anti-Corruption FRANCE \\ 19

ANTI-CORRUPTION IN FRANCEA member of the Paris and New York Bars, Laurent Cohen-Tanugi is the founder and managing partner of Laurent Cohen-Tanugi Avocats, a boutique international firm focusing on strategic corporate assignments in the areas of cross-border mergers and acquisitions, international arbitration and litigation, corporate governance and anti-corruption compliance.

Over a career of thirty-five years, Mr Cohen-Tanugi has been a partner at major international firms such as Cleary Gottlieb (1982-2003) and Skadden Arps (2005-2007), and Senior Vice President and General Counsel of the global pharmaceutical group Sanofi (2004).

He is to date the only member of the French bar to have served as independent corporate monitor on a worldwide FCPA matter, by appointment of the US Department of Justice and Securities and Exchange Commission. He is currently performing another independent monitorship on behalf of the World Bank.

Mr Cohen-Tanugi is a graduate of the Ecole Normale Supérieure, Sciences-Po Paris, and the Paris and Harvard Law Schools. He is the author of numerous influential books on the rule of law, European affairs, transatlantic relations and globalisation. He is a regular columnist and international lecturer, and was a visiting lecturer at Stanford Law School from 2012-16.

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20 // FRANCE www.gettingthedealthrough.com

GTDT: What are the key developments related to anti-corruption regulation and investigations in the past year in your jurisdiction?

Laurent Cohen-Tanugi: There are many. In December 2016, France adopted the wide-ranging Law on Transparency, the Fight Against Corruption and Economic Modernization. The statute is known colloquially as ‘Law Sapin II’ after Michel Sapin, the Finance Minister who sponsored it. Among other things, the law purports to enable France to take a more substantive role in global anti-corruption enforcement, in response to both the criticisms of the OECD and the enforcement of the FCPA against French companies by the US authorities. Here are the highlights.

First, Law Sapin II provides for the creation of a new French Anti-Corruption Agency (AFA), which will replace the Central Service for the Prevention of Corruption. The new agency will assist the French government in its efforts to detect and prevent all forms of corruption, including influence peddling, favoritism and misappropriation of public funds. In addition, it will assess the efficacy of mandatory corporate compliance programmes, which I will get to in a moment, and oversee any corporate monitorships. The agency does not, however, have the authority to conduct independent investigations and must forward its findings to the public prosecutors.

Second, in contrast with the US and the UK, the law imposes on CEOs an affirmative obligation to cause their companies to adopt a compliance programme to detect and prevent corruption by 1 June 2017. This obligation concerns all companies, or companies belonging to a group, with over 500 employees and with annual gross revenues exceeding €100 million. The compliance programme must be adopted at group level, as well as by all domestic and foreign subsidiaries and companies under the group’s management and control. Failure to implement such a programme may result in an administrative fine imposed by the AFA of up to €200,000 for individuals and €1 million for legal entities.

Pursuant to Article 17 of Law Sapin II and consistent with international best practices, this anti-corruption compliance programme must include eight key components: a code of conduct,

an alert gathering system, internal and external risk registers, third party due diligence procedures, accounting control procedures, training programmes, employee disciplinary regimes and evaluation procedures to ensure continued development and progress.

Third, the law introduced a new criminal sanction that may be imposed on companies that violate French anti-corruption laws. Along with the financial sanctions already in existence, criminal courts can now impose an ancillary penalty, known as the ‘compliance penalty’, on companies that are found liable for certain categories of offences, including the active corruption of public officials, judicial officials or magistrates, and the passive or active corruption of private persons. The purpose of this ancillary penalty is to reinforce the French government’s strong stance against corruption. According to Article 18 of Law Sapin II, the compliance penalty imposes on companies the obligation to implement an anti-corruption compliance programme. Even companies that do not meet the size and turnover requirements for the positive obligation specified in Article 17 may be subject to this sanction. The idea is to ensure that companies that have engaged in corruption design and deploy a programme that is specifically aimed at preventing wrongdoing from occurring again in the future; companies may be required to keep these programmes in place for up to five years. The AFA is required to provide a yearly update on the status of the programme to the public prosecutors to ensure its efficacy.

Fourth, and perhaps most importantly, Article 22 of Law Sapin II introduced a new form of settlement agreement, referred to as a ‘judicial agreement in the public interest’ (CJIP). Prior to the enactment of the law, guilty pleas were the only form of settlement agreements that could be entered into, whereas CJIPs, on the model of US deferred prosecution agreements (DPAs), do not require any acknowledgement of guilt. CJIPs are available for all forms of active and passive corruption, as well as certain acts of influence peddling, both in France and abroad. A company wishing to avoid prosecution may enter into such an agreement without acknowledging liability. That is very new in France and was met with some resistance within traditional legal circles.

The specific terms of a settlement agreement will vary depending on the case at hand, but may include the payment of a fine proportional to the damage caused by the violation, capped at 30 per cent of the company’s annual gross turnover, the mandatory adoption of a compliance programme for up to three years and damages to identified victims unless the company can prove it has already mitigated the harm caused. The AFA is tasked with overseeing the implementation of the compliance programme, and may enlist the services of an external and independent monitor (although Law Sapin II does not expressly use the term ‘monitor’).

“The law imposes on CEOs an affirmative obligation to cause their companies to adopt a compliance programme to detect and prevent corruption”



It is important to keep in mind that, although inspired by US DPAs, the new French settlement agreements have some fundamental differences. These differences include the parties involved in the agreement, the types of acts they apply to, the potential financial sanctions involved and the level of judicial review required.

Fifth, Sapin II broadens the protection offered to whistleblowers. Employers are prohibited from engaging in retaliatory measures against whistleblower employees. Rejection from the hiring process, refusal to renew a work contract, unjustified dismissal and discriminatory conduct may all be considered retaliatory measures. Whistleblowers are afforded additional protection from retaliatory dismissal through two provisions in Law Sapin II. First, allegations of retaliatory dismissal can be raised before French labour courts using an accelerated procedure to ensure speedy resolution. Second, the burden of proof is reversed in favor of the whistleblowing employee. That is, in light of allegations raised by a whistleblower, the burden falls on the implicated company to show that the dismissal was based on objective and non-discriminatory grounds, and was unrelated to the alert raised. It is noteworthy that, unlike the Dodd-Frank Act, Law Sapin II does not provide financial incentives for engaging in whistleblowing activities.

Finally, Sapin II, and its Implementing Decree of 9 May 2017, introduced new regulations regarding lobbyists and companies employing lobbyists. These so-called ‘representatives of interests’ are required to comply with the following three obligations: (i) register themselves in the electronic register of lobbyists maintained by the High Authority for Transparency in Public Life (HATPL – an independent authority that seeks to prevent and mitigate instances of corruption by public officials), (ii) comply with the ethics code established by the French legislator and (iii) formally report their lobbying activities to the HATPL on an annual basis. Lobbyists have until the end of 2017 to register their information with the HATPL and the contents of the register of lobbyists will be made public at the start of 2018.

GTDT: What lessons can compliance professionals learn about government enforcement priorities from recent enforcement actions?

LCT: As Law Sapin II is still relatively new, no enforcement actions have yet taken place. However, the French government has already issued a number of implementing decrees. One of these decrees relates to the functioning of the AFA, providing further insight into the mission, obligations and competencies of the agency. Other implementing decrees cover an alert gathering system required for certain legal entities, the activities and rights of the HATPL and the use of the CJIPs.

Companies are currently waiting to see how the AFA and the national financial prosecutor’s office (PNF) will evaluate these compliance programmes. Neither the AFA nor the PNF has yet issued guidelines indicating how they will evaluate the efficacy of corporate compliance programmes. The First Deputy Financial Prosecutor stated during a public conference that he believes it likely that the PNF will publish a set of guidelines in the future, although it is not certain if and when they will be made publicly available. In any event, public statements from representatives of the AFA and the PNF suggest that the French authorities intend to enforce Law Sapin II vigorously, introducing US-style investigations and settlements, including in the public sector.

GTDT: What are the key areas of anti-corruption compliance risk on which companies operating in your jurisdiction should focus?

LCT: One high-risk area that always merits particular attention is oversight of third parties. As I mentioned, one of the features of the compliance programme required by Article 17 of Law Sapin II is a third party due diligence programme. Third parties include customers, suppliers and sub-contractors. This provision brings France a step closer to the FCPA, which provides that a company

Laurent Cohen-Tanugi



can be held vicariously liable for the violations of third parties with which it is doing business.

The need to pay attention to the risks associated with sub-contractors and suppliers is increased by yet another new law, the Law on the Duty of Vigilance of Parent Companies and Contracting Companies, which was adopted by the French National Assembly on 28 March 2017. The law applies to all companies headquartered in France with either (i) 5,000 or more employees, including workers employed by direct and indirect French subsidiaries or (ii) 10,000 or more employees, including all workers employed by subsidiaries. Companies targeted by this law are required to adopt a sub-contractor and suppliers risk mitigation plan, including procedures for the regular and systematic review of these third parties, action plans to address identified risks and follow-up mechanisms to evaluate the efficacy of the mitigation tools adopted.

Another important point: all companies that conduct business in France, including foreign companies, should pay careful attention to the provisions of Sapin II. Article 21 of the law has expanded the extra-territorial application of French law in two ways. First, domestic courts now have jurisdiction over acts of corruption committed abroad if the act was done by a legal entity or individual that conducts all or part of his or her or its economic activity in France. It is no longer required that the wrongdoer be a French national or that the wrongdoing be also prohibited in the country in which it was committed. Second, courts may now impose sanctions on parties that seek to influence a foreign public official whereas, previously, parties were only liable if they sought to influence public officials of international organisations.

GTDT: Do you expect the enforcement policies or priorities of anti-corruption authorities in your jurisdiction to change in the near future? If so, how do you think that might affect compliance efforts by companies or impact their business?

LCT: As we just discussed, the implementation of the various chapters of Sapin II by the French

authorities should bring about a major change in the intensity of anti-corruption enforcement, and, beyond that, in the way white collar crime is prosecuted and sanctioned in France. This will take some time and there are still a number of uncertainties about how the AFA and the PNF will interact and about the role of internal investigations and the use of US-style cooperation, which are not mentioned in the law. But we are probably about to witness a sea change in anti-corruption enforcement and criminal defense strategies in France.

Even before that happens, Article 17 of Law Sapin II requires companies of a certain size to put in place a full-fledged anti-corruption compliance programme starting 1 June 2017, which entails a very significant effort. Many French companies subject to this requirement still have virtually no internal compliance function, and multinationals exposed to the FCPA or the UK Bribery Act tend to overestimate the strength and effectiveness of their existing compliance programmes, unless they have been subjected to the rigors of US or other international proceedings. I am not sure French CEOs fully understand the considerable amount of effort and resources they need to devote to this.

GTDT: Have you seen evidence of increasing cooperation by the enforcement authorities in your jurisdiction with authorities in other countries? If so, how has that affected the implementation or outcomes of their investigations?

LCT: The general trend around the globe has been an increase in international cooperation between domestic enforcement authorities. To my knowledge, France has not yet been a party to a large-scale transnational anti-corruption investigation, but it has asked for assistance in the Panama Papers investigations from other countries, including Australia and the UK, and cooperated with the DOJ in the Total Iranian corruption case. Also, in the Alcatel-Lucent DPA that I monitored, an inter-governmental agreement was signed between the US and France to conform the proceedings with French legal requirements.

“It is no longer required that the wrongdoer be a French national or that the wrongdoing be also prohibited in the

country in which it was committed.”



Going forward, one of the primary goals of Law Sapin II is to enable France to take a bigger role in fighting transnational corruption and not let the US government remain the sole enforcer of the FCPA against French companies. So, provided the French authorities succeed in bringing credible enforcement actions against companies under their jurisdiction, we should expect to see France participate in joint investigations and settlements of the types seen in recent years between the US and the UK, or between the US and the Dutch enforcement authorities.

GTDT: Have you seen any recent changes in how the enforcement authorities handle the potential culpability of individuals versus the treatment of corporate entities? How has this affected your advice to compliance professionals managing corruption risks?

LCT: While Sapin II imposes a number of compliance requirements on companies, this should not be read as a signal that French authorities will not pursue prosecutions against individuals. In fact, the responsibility to implement corporate compliance programmes lies with top management specifically.

Another important point is that, contrary to the situation in the US, the new French-style DPAs are only available to corporate entities and not individuals, who will remain subject to regular criminal prosecution. So, you may have situations where companies enter into settlement agreements with the French authorities while their executives involved in potential wrongdoing would remain subject to prosecution and sanctions. How this dual regime will play out in practice remains to be seen.

GTDT: How have developments in laws governing data privacy in your jurisdiction affected companies’ abilities to investigate and deter potential corrupt activities or cooperate with government inquiries?

LCT: When thinking of data privacy in the context of France, one must consider both French and EU laws.

In France, the processing of personal data is regulated and protected by the French Data Protection Authority, often referred to as ‘CNIL’. CNIL is an independent administrative authority that seeks to protect and regulate the processing of data in France. Certain data collection systems require direct approval from CNIL before they can be established in France, while other categories are granted automatic approval. Law Sapin II requires targeted companies to adopt internal alert systems for a number of categories of information, including alerts raised by whistleblowers. CNIL confirmed in June 2017 that it will extend automatic approval to the collection system for whistleblower alerts, which increases companies’

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THE INSIDE TRACKWhat are the critical abilities or experience for an adviser in the anti-corruption area in your jurisdiction?

Since France and French lawyers have little experience in anti-corruption enforcement and related advisory work, experience with international, and particularly US, anti-corruption enforcement proceedings is in my view critical, not only because most French multinationals are exposed to US and international enforcement, but also because the French authorities are expected to follow international enforcement standards. I also find experience as a general corporate lawyer, as opposed to a purely compliance specialist, to be particularly valuable in advising management on anti-corruption, given the breadth of what is involved.

What issues in your jurisdiction make advising on anti-corruption compliance unique?

There are, of course, legal issues that are specific to France and other European countries, such as labor law and data privacy considerations, or the existence of a ‘blocking statute’ restricting the communication of sensitive economic information to foreign authorities. But the uniqueness in my view stems more from the novelty of this whole area

in French legal practice, and from the cultural change that anti-corruption and other white collar crime compliance and enforcement entails for both in-house and external defense counsel.

What have been the most interesting or challenging anti-corruption matters you have handled recently?

Undoubtedly the independent monitorship of Alcatel-Lucent I have conducted by appointment of the US DOJ and SEC. This was a rather unique three and a half year-long, worldwide mandate as an independent delegate of public authority. Acting as a monitor over such a long period of time, with the powers associated with it, gives you much deeper insight into corporate behavior and the expectations of international regulators, and greater leverage with senior management to bring about compliance and governance reform, than an in-house chief compliance officer or an external advisor will ever benefit from.

Laurent Cohen-TanugiLaurent Cohen-Tanugi Avocats Pariswww.laurentcohentanugiavocats.com

internal abilities to investigate potential acts of corruption. There is a narrow exception for alerts related to national security, medical confidentiality, and attorney-client privilege, all of which require specific approval from CNIL.

Law Sapin II also requires that the procedure for compiling ethics alerts guarantees the confidentiality of the identities of the whistleblower and the subjects of the alert, as well as all information gathered by the recipients of the alert, which may limit the ability of companies to conduct internal investigations. Divulging the identity of either the whistleblower or the subjects of the alert is punishable by up to two years imprisonment and a fine of €30,000, unless the situation falls within one of the narrow exceptions described above.

On the EU side, the most significant development is the new General Data Protection Regulation, which entered into force in April 2016. The regulation will become applicable on 25 May 2018 to all member states of the EU without any additional implementation legislation. The French government promulgated the Law for a Digital Republic on 7 October 2016 in part to bring French law in line with the requirements under the new EU Regulation. CNIL has published several memos and tips advising companies on how to prepare

for the implementation of the new regulation. For example, the July 2017 memo notes that the appointment of a specialised data privacy officer will be required for all public authorities or bodies, as well as all companies that employ over 250 people. During internal corporate investigations, this data protection officer will be responsible for overseeing data protection procedures.

The complete package of programmes included in the regulation, which took four years to negotiate, will result in a wide swath of changes in data privacy laws across Europe. For example, the right to be forgotten grants data subjects the right to demand the erasure or a termination in the circulation of their personal data. Whether the data controller is required to comply with the demand is based on a balancing test that considers the individual’s interest in safeguarding the information and the public’s interest in the availability of the information.

Another key feature of the new EU Regulation is the concept of ‘privacy by design’. Companies are required to ensure that the internal policies adopted and implemented are effective in protecting personal data, and that all new internal procedures are in accordance with data privacy laws.


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