A welcome clarification regarding the expected behavior of companies and administrations under French criminal settlement procedures.
When Law No. 2016-1691 (Sapin II Law) created the convention judicaire d'intérêt public (CJIP), modeled after the American deferred prosecution agreement (DPA), it was feared that the existence of potentially dueling French agencies prosecuting corrupt practices of companies and administrations — the Parquet national financier (PNF) and the Agence française anticorruption (AFA) — might lead to a rivalry that undercut the effectiveness of their actions. But recent joint guidance highlights the PNF and AFA's common understanding of their relations with the stakeholders in pursuit of a common goal of fighting corruption. This alert explores guidance by the French authorities to the settlement of corruption cases in comparison with guidance offered by the U.S. Department of Justice (DOJ) and the British Serious Fraud Office (SFO).
Introduction: the French agencies responsible for anti-corruption
The PNF and the AFA have different purposes and are staffed by different individuals. The PNF, composed exclusively of prosecutors, is responsible for the prosecution and, if necessary, the imposition of criminal fines within the framework of the CJIP. In addition to imposing fines to protect the public, the PNF may require an entity to engage, for a maximum of three years, in a compliance program under the control of the AFA and pay restitution to the victims (Article 41-1-2, I of the French Code of Criminal Procedure (CCP)).
The AFA, an agency which is close to the ministers of justice and economy, is directed by a magistrate and is composed of magistrates and auditors, some of whom come from the private sector. It has a double mission of advice and control, but it also has sanctioning powers similar to those of the PNF. The AFA may order an audited entity to adapt its compliance procedures and/or impose fines of up to 200,000 euros for natural persons and 1 million euros for legal entities.
The AFA, at the request of the Prime Minister, also oversees compliance with Law No. 68-678,1 known as the "blocking statute," when a DPA entered into with a foreign agency, for example the DOJ or the SFO, requires the sanctioned entity to have a "monitor" for a renewable three-year term. The monitor — an independent person designated by these authorities — is responsible for transmitting regular reports, accompanied by any documents, attesting to whether the practices of the entity at issue are strictly compliant with anti-corruption legislation.
A prosecutor can propose a CJIP, either before the commencement of a prosecution, or during an investigation, even if a prosecution has already started. Once accepted by the subject company or the administration in question, the CJIP is submitted for approval to the president of the Tribunal de grande instance of Paris (TGI). The main advantage of these proceedings for the legal entity is that, similar to an American DPA, the approval of the president of the TGI does not include any acknowledgment of liability, and it is not registered in the criminal record.
On Jan. 31, 2018, the Minister of Justice issued a circular to the prosecutor's office on the procedures for implementing the criminal law provisions of the Sapin II Law.2 The Minister referred at length to the CJIP as an "alternative to prosecution" based on a "settlement mechanism between the public authorities and the legal entity under investigation." The circular insisted on the peculiarity of the proceedings compared with other alternatives, "since it makes it possible to ensure, through the compliance program under the control of the AFA that the legal entity puts in place an effective system to prevent the same facts from happening again."
However, this circular remained vague as to the way in which the subject company or administration must behave in order to benefit from a CJIP and thereby avoid criminal liability. On June 27, 2019, PNF and AFA published their first joint guidelines relating to the implementation of the CJIP, directly addressing the legal entities likely to be prosecuted by the PNF for bribery and influence peddling. This guidance acknowledges the interplay of the roles of the PNF and the AFA, expresses a common understanding of their roles in pursuing their common goal of fighting corruption, and addresses some of the issues left unresolved by the Minister of Justice's circular.
The main objective of the new guidelines is "to encourage legal entities to adopt a cooperative approach with both the judicial authority and the AFA" in order to guarantee minimum legal uncertainty to economic operators. The guidelines are also intended to enlighten foreign judicial authorities over French procedures. Indeed, it is expected that more frequent joint investigations will be carried out involving the PNF and judicial authorities such as the DOJ and the SFO, as was the case in the Société Générale case, in which the bank entered into a CJIP with the PNF and a DPA with the DOJ. There is also expected to be international cooperation when a monitor is appointed by a foreign authority, putting the AFA in charge of applying the French blocking statute.
1. Cooperation with the authorities, a condition sine qua non to benefit from a CJIP
First, the guidelines reiterate that the cooperation of the legal person concerned constitutes a "necessary precondition" to the consummation of the CJIP. This is in line with the practice of the DOJ3 and the SFO,4 which make cooperation the decisive criterion to benefit from a DPA. In addition, the guidelines specify the forms of cooperation taken into account by the PNF.
Consistent with the Jan. 31, 2018, circular, the guidelines indicate that the fact that the legal person has been previously sanctioned, whether by a French court or a foreign authority, is a serious handicap to a CJIP being proposed. The same is true for a DPA.
However, the existence of prior sanctions may be "offset" by giving consideration to other factors, such as how old the sanctions are and the nature of the events that gave rise to previous sanctions. This means that, like the U.S.5 and British authorities,6 the PNF takes into account recidivism when it comes to considering a CJI
2. Forms of cooperation: self-reporting and internal investigations
Cooperation begins on the initiative of the legal entity that is self-reporting. In France, it is necessary that self-reporting occur within a reasonable time for it to be favorably taken into account. This requirement echoes the DOJ7 and SFO guidelines.8
The self-reporting of the wrongdoing must be sufficiently detailed to allow the PNF to truly understand the facts. For this to be the case, the entity should not only discuss the facts, but must also conduct an internal investigation or an in-depth audit that clearly shows the nature, scope and circumstances of the conduct. The self-reporting entity must "actively participate to the unearthing of the truth" by transmitting the relevant documents and information in a time compatible with the needs of a judicial investigation. This internal investigation can be conducted in full before the disclosure to the PNF, or it can be continued later if the scale and complexity of the conduct at issue require further investigation. If the entity has not reported the practices that are the subject of a judicial investigation, the entity may still show that it is cooperating by conducting an internal investigation in parallel with the judicial investigation. In all cases, cooperation gives rise to regular exchanges between the entity's counsel and the prosecutor's office.
While the CJIP focuses only on the liability of the legal person — be that a company or an administration — the internal investigations carried out by the entity must also focus on the responsibilities of individuals. The individuals investigated may include legal representatives of the company (managers, executives or even directors) or third parties (intermediaries, external auditors or beneficiaries of corrupt practices). It should be noted that the Sapin II Law, like the U.K. Bribery Act,9 punishes passive corruption (e.g., demanding or accepting a bribe, which may be the case of a private person or a public official) and active corruption (e.g., offering or giving a bribe), whereas the Foreign Corrupt Practices Act (FCPA)10 is limited to active corruption.
With respect to active bribery, the PNF and AFA guidelines use the same approach as the SFO and the DOJ. In its guidelines on cooperation published on Aug. 6, 2019, the SFO specifies that the entity concerned must focus on identifying the individuals responsible within the company, regardless of their seniority within the organization.11 Similarly, the DOJ's 2015 memorandum titled "Individual Accountability for Corporate Wrongdoing"12 indicates that the DOJ takes into account the company's cooperation in providing all information on the individuals involved in the illegal practices. This cooperation obligation remains even though, since 2018, it concerns only individuals "substantially" involved in these practices.13
3. Documentation transmitted to judicial authorities
According to article 41-1-2 of the CCP, "if the president of the court does not validate the proposed agreement or if the legal person exercises his right of withdrawal, the public prosecutor cannot disclose the statements made or documents delivered by the legal person during the proceedings before the court." Previously, there was some doubt concerning whether the information resulting from the internal investigation carried out by the company or the administration was confidential only if the CJIP was concluded or also in case of failed negotiations ultimately not leading to a CJIP. The guidelines answer this question by providing that confidentiality covers only documents exchanged after the formalization of a CJIP proposal by the prosecutor. In other words, there is a risk that anything communicated by the company to the prosecutor during informal negotiations can be used by the prosecution before the court.
This tracks with the SFO guidelines, which list the documents (e.g., contracts, accounting documents, emails, internal investigation reports, witness statements) that can be used by the prosecutor in case of failed negotiations or if the court rejects a DPA proposal.14 However, records of discussions or negotiations prepared by the company for the purpose of entering into a DPA (e.g., the draft DPA and statement of facts, and any statement concerning the fact that the company has commenced negotiations for a DPA) cannot be subsequently used against the company.15 The U.S. procedure, by comparison, offers only limited protection depending on the circumstances: If the negotiations for a DPA fail and the company has produced documents pursuant to a voluntary request or subpoena, the prosecutor can use that evidence against the company. However, to the extent the DOJ interviews an individual or company, the individual or company can negotiate to have the substance of the interview protected by obtaining a proffer agreement, or agreeing with the government that the interview is conducted pursuant to Rule 410 of the Federal Rules of Evidence, which makes plea negotiations inadmissible against a defendant.
The guidelines also refer to AFA's role in enforcing the French blocking statute when the convicted entity is subject to an anti-corruption compliance program imposed by a foreign authority. The blocking statute seeks to regulate the transmission of documents or information to foreign authorities, the communication of which would likely result in the endangerment of major public interests, such as "the essential economic interests of France."16 However, the guidelines do not discuss the application of this statute in the course of the investigations conducted by a foreign authority, before the legal entity is ultimately sanctioned. This delicate subject is addressed by the report of Raphael Gauvain, MP, on the extraterritoriality of foreign legislation, which makes a number of proposals in this regard.17
However, the guidelines address attorney-client privilege by reminding that it is up to the legal person to determine which documents are not to be transmitted to the prosecutor's office because they are privileged. The guidelines also suggest a reluctance of the authorities to admit that privilege can be a basis for refusing to produce documents. The guidelines emphasize that, in the case of refusal of the legal person to transmit certain documents, the prosecutor's office will make an assessment as to whether this refusal is justified. In the event of a disagreement between the prosecutor and the individual regarding privilege, the refusal to produce the documents will weigh on the assessment of the level of cooperation.
The guidelines recognize that this approach may be problematic as it may entail the waiver of the attorney-client privilege by the legal entity vis-à-vis production to foreign authorities, even though these authorities may not be as concerned as the French authorities when attorney-client privilege is at issue.
While in general the guidelines have an approach to cooperation similar to that of the PNF's foreign counterparts, the reluctance of the French authorities to yield to the attorney-client privilege is not completely in line with the practice of the DOJ and, to a lesser extent, the SFO.18 As to the DOJ, the assessment of the level of cooperation of a company "is not in any way predicated upon waiver of the attorney-client privilege or work product protection."19 The SFO, on the other hand, does not seem to penalize companies which rightly invoke the attorney-client privilege, while also considering that any voluntary waiver constitutes a non-negligible manifestation of the will to cooperate.20 However, companies asserting privilege before the SFO must provide certification by independent counsel that the material in question is privileged, which adds to the burden of the investigation.21
4. Implementation of an effective compliance program
The Sapin II Law also requires certain legal persons to adopt an anti-corruption compliance program. According to the guidelines, noncompliance with this obligation is not without consequences, and it will be weighed in the prosecutor's decision to propose a CJIP or in setting the amount of a fine. Those entities not subject to this obligation who create anti-corruption compliance programs are viewed favorably with respect to any CJIP proposal. The prosecutor may consult the AFA to determine the adequacy and the effectiveness of an anti-corruption compliance program.
The SFO22 and the DOJ23 have the same approach, as both emphasize that it is not enough for an entity to have a compliance program; it also has to be effectively applied. The prosecutor also considers whether the compliance program existed at the time of the offense or whether it was implemented only during the process of negotiating a DPA.
While a monitor is generally designated by the competent authority — be it the DOJ, the SFO or the PNF — following a DPA or a CJIP, there are examples in Europe (Rolls-Royce, Airbus) where monitors "ex ante" have been appointed by the prosecuted company to evaluate ongoing investigations and the development and implementation of new compliance rules. Even though appointed by the company, these monitors act independently to regularly report to the company's CEO and board on ethics and compliance progress made and areas needing further remediation.
5. The voluntary compensation of the damages
In addition, the guidelines specify that a company's compensation of victims on its own initiative, even before it is offered a CJIP, is an additional indicator of cooperation. Even if the victims have already been compensated, the prosecutor informs them of any proposal to enter into a CJIP.
6. Cooperation and setting of the fine
The guidelines do not provide further details on how cooperation is accounted for in setting a fine. This is not in line with the British or American guidelines, which contain additional details on what a company can expect if it cooperates. For example, the U.K. has published sentencing guidelines in cases of fraud, corruption and money laundering,24 giving companies a sense of the benefit they can hope to draw from cooperation. Similarly, in the U.S., the penalties imposed under the FCPA are determined based on the application of the U.S. Federal Sentencing Guidelines,25 which provide an "objective" process for setting the amount of the fine. It should also be underscored that, with respect to the FCPA, companies which voluntarily disclose incriminating facts, cooperate, and take appropriate preventive and remedial measures benefit from a presumption that aggravating circumstances will not be applicable to them.26
In conclusion
The latest guidelines explain — this time to the stakeholders — how stakeholder behavior can favorably impact an investigation, be that in terms of benefiting from a CJIP or receiving a more moderate fine, accounting for their cooperation.
However, the guidelines represent only a first step, and it would be useful to have additional guidance on other aspects of the implementation of this criminal settlement procedure, which, unlike in common-law countries, is a novelty for the French legal tradition.
Specifically, it seems necessary for authorities to clarify the issue of the transmittal of documents to the French or foreign authorities. In this respect, there are three main possible measures: the first, impacting only foreign authorities, arises out of the application of the French blocking statute, which still lacks clarity and effectiveness (which the Gauvain report tries to address); the second is the application of attorney-client privilege applied in France as it is in the U.S. and the U.K.; and the third device, which is the "legal privilege" applicable to in-house counsel, is not mentioned in the guidance. Here again, progress is possible on the basis of the proposals of the Gauvain report, which advocates for legislative reforms in this respect.27
Footnotes
1 Law No. 68-678 of July 26, 1968, relating to the communication of documents and information of an economic, commercial, industrial, financial or technical nature to foreign natural or legal persons, amended by Law No. 80-538 of July 16, 1980.
2 Circular of Jan. 31, 2018, on the presentation and implementation of the criminal provisions provided for by Law No. 2016-1691 of Dec. 9, 2016, on transparency, the fight against corruption and the modernization of economic life, CRIM/2018-01/G3.
3 FCPA Corporate Enforcement Policy, 9-47.120.
4 SFO, Deferred Prosecution Agreement Code of Practice, 2014, para 2.8.2(i).
5 Justice Manual, 9-28.300.
6 SFO, Deferred Prosecution Agreement Code of Practice, para 2.8.1(i) and (iv).
7 FCPA Corporate Enforcement Policy, 9-47.120.
8 SFO, Deferred Prosecution Agreement Code of Practice, para 2.8.2(i).
9 Section 2 of the U.K. Bribery Act 2010.
10 15 U.S.C. §§ 78dd-1, et seq. It is important to note that the FCPA is just one potential avenue for liability. While the FCPA does not criminalize the receipt of a bribe by a foreign official, such liability can exist under other U.S. statutes.
11 SFO, Corporate Co-operation Guidance, 2019, p. 1.
12 DOJ, Individual Accountability for Corporate Wrongdoing, 9 September 2015.
13 Principles of Federal Prosecution of Business Organizations, 9-28.700.
14 SFO, Deferred Prosecution Agreement Code of Practice, para 4.6.
15 Schedule 17, para. 13 of the U.K. Crime and Courts Act 2013.
16 Article 1 of the French blocking statute.
17 R. Gauvain, Rétablir la souveraineté de la France et de l'Europe et protéger nos entreprises des lois et mesures à portée extraterritoriale, report to the French Prime Minister, April 2019; see also our previous newsletter on the Gauvain report: https://www.kramerlevin.com/en/perspectives-search/the-gauvain-report-and-other-recent-legal-developments-reaffirm-the-importance-of-the-french-blocking-statute.html.
18 See our previous newsletter: https://www.kramerlevin.com/en/perspectives-search/uk-court-of-appeal-extends-privilege-in-internal-investigations.html.
19 FCPA Corporate Enforcement Policy, 9-47.120.
20 SFO, Corporate Co-operation Guidance.
21 Id. at 5 (noting that "organisations seeking credit for co-operation by providing witness accounts should additionally provide any recording, notes and/or transcripts of the interview....").
22 SFO, Deferred Prosecution Agreement Code of Practice, para. 2.8.2(iii). The SFO states that one of the factors that the prosecutor may consider when deciding whether to enter into a DPA is "the existence of a proactive corporate compliance programme both at the time of offending and at the time of reporting but which failed to be effective in this instance."
23 Justice Manual, 9-28.300: "In conducting an investigation, determining whether to bring charges, and negotiating plea or other agreements, prosecutors should consider the following factors in reaching a decision as to the proper treatment of a corporate target: (...) the adequacy and effectiveness of the corporation's compliance program at the time of the offense, as well as at the time of a charging decision."
24 U.K. Sentencing Council, Fraud, Bribery and Money Laundering Offences, Definitive Guideline, 2016.
25 U.S. Sentencing Commission, Guidelines Manual, 2018.
26 FCPA Corporate Enforcement Policy, 9-47.120.
27 Noëlle Lenoir, Le Rapport Gauvain et la protection des intérêts économiques essentiels de la France », in La Semaine Juridique, Edition Générale, n° 29, July 22, 2019.
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