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First Corruption Monitoring In France

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A guest post from David Père (Bryan Cave Paris) and Mark Srere (Bryan Cave Washington).

On 9 December 2016, France enacted the “Law on Transparency, Anti-Corruption and the Modernization of the Economy,” known as the “Sapin II Law.” Introducing new legal means into French Law to fight corruption, this law notably created the Agence Française Anti-corruption (French Anti-corruption Agency; the “AFA”) and a new legal instrument, namely the Convention Judiciaire d’Intérêt Public (Judicial Public Interest Agreement; the “CJIP”), enabling French Public Prosecutors to reach settlements with companies involved in offences of corruption, influence peddling or laundering of tax-fraud proceeds.

Following the United Kingdom, which introduced deferred prosecution agreements in 2014 pursuant to Schedule 17 of the Crime and Courts Act 2013, France has chosen to follow America’s example of “transactional justice.”

Given that this new prosecutorial tool truly initiates a cultural revolution in France that leads the way for transactions with Prosecutors, companies and lawyers have eagerly anticipated the first CJIPs to be concluded.  This post discusses the CJIP procedure, the first CJIPs applied to corruption, and what to learn from them.

The CJIP was introduced into the Code de procédure pénale (French Code of criminal procedure; the “CPP”) in new Article 41-1-2, which describes the conditions for negotiation of a CJIP as well as the obligations and sanctions that a CJIP can include; classically, new administrative texts specified the implementation of this new legal instrument (see Decree n° 2017-660 of 27 April 2017 and Ministerial Circular of 31 January 2018).

In the new French Law, a legal entity entering into a CJIP may have to comply with one or more of the following obligations: i) the payment of a “public interest fine” to the French Treasury[1], ii) the implementation, under the supervision of the AFA, of a compliance program[2] and iii) the compensation of any identified victims. Furthermore, Article 41-1-2, II, § 6 of the CPP specifies that CJIPs must be published on the AFA’s website. CJIPs are reserved only for legal entities, excluding natural persons; the conclusion of a CJIP allows the legal entity to avoid a criminal conviction and its registration on criminal records.

On 30 October 2017, the first CJIP was entered into between the National Financial Prosecutor of the Paris Court of First Instance and a Swiss-based subsidiary of a major financial institution allegedly involved in illicit banking solicitation and laundering of tax-fraud proceeds. This first CJIP, which did not relate to facts of corruption, received significant media coverage.

On 14 and 15 February 2018, the two first corruption-related CJIPs were entered into between the Public Prosecutor of the Nanterre Court of First Instance and two French companies.

These two CJIPs relate to the same facts and procedure.  In short, in 2011, the safety manager of a French public company (the “Public Company”) notified the police of a potential system of corruption within the Public Company’s purchase department, which allegedly involved a purchase officer requesting the payment of fees in exchange of the allocation or the continuation of certain contracts.

Following this information, an investigation was launched for active and passive corruption, misuse of corporate assets, breach of freedom to access public contracts, unlawful agreement, forgery and use of forged documents and collusion and concealment of these offences.

The investigations showed that numerous company managers and employees, including the President of a French company specialized in decontamination (“Company 1”) and some of the employees of another French company of the energy sector (“Company 2”), had paid heavy fees to the said purchase officer in order to obtain or maintain contacts related to maintenance of thermal power stations.

Respectively in May and June 2015, Company 2 and Company 1 were placed under formal investigation on the ground of active public corruption.

Two years later, pursuant to new Sapin II Law, they were then given the opportunity to enter into a CJIP: Company 1 agreed to a public interest fine of € 800,000 and Company 2 to a public interest fine of € 2,710,000. Both CJIPs provided that these two companies should pay € 30,000 of damages to the Public Company for the prejudice resulting from the corruption offences.

A few remarks on these two first corruption-related CJIPs.

Regarding the procedural context: in accordance with Article 180-2 of the CPP, when a legal entity which has been placed under formal investigation by an investigation judge (“juge d’instruction”) is given the opportunity to enter into a CJIP, as it is the case here, it must acknowledge the alleged facts and accept the criminal offence(s) held against it in order to be able to reach a settlement with the Public Prosecutor. A CJIP may also be entered into before the company is charged with offences by such investigating judge, when there is a simple investigation under the control of the Public Prosecutor  and, in that case, there is no obligation to acknowledge the facts and accept the criminal offence

Concerning the calculation of the public interest fine: the market was eager to know how aggravating and mitigating factors would be taken into consideration. The above-mentioned Ministerial Circular of 31 January 2018 provided that, in order to calculate the public interest fine, the direct or indirect benefit drawn from the obtained contract should be multiplied by a factor which could be either aggravating or mitigating. As aggravating factors, the Circular listed examples: the seriousness of the facts, the duration of the offences, and the past behaviour of the legal entity. As mitigating factors, the Circular suggested to take into consideration the fact that the offences had been committed a long time ago, the voluntary disclosure of the facts, the degree of cooperation with the police and judges, the measures taken by the legal entity to remedy the inappropriate behaviour, to indemnify the victims, and to avoid any new offence.

The two CJIPs under consideration took into consideration those aggravating and mitigating factors in the calculation of the final amount of the public interest fine.

Regarding Company 1, the CJIP set the amount of the public interest fine at € 800,000. In short, the CJIP calculates that Company 1 obtained an illicit gain of € 680,000 from the offences; As to aggravating factors, it underlined the duration of the offences (4 years) and the fact that they had been committed in the context of a contractual relationship with a party entrusted with a public service task.  As to mitigating factors, it emphasized the resignation the President, the dismissal of the General Secretary and the Chief Financial Officer and the existence of new shareholding and management; this justified the addition of a complementary penalty of € 120,000 In addition to the imposition of a public interest fine, the CJIP provided that Company 1 be subjected, under the supervision of the AFA, to a two-year monitoring program.

Regarding Company 2, the CJIP set the amount of the public interest fine at € 2,710,000. The CJIP calculates that Company 2 obtained an illicit gain of € 3,000,000 from the offences. It underlined the same aggravating factors as for Company 1 but noted as mitigating factors the fact that Company 2 cooperated in the investigation and implemented measures to detect and prevent corruption by itself. This justified reducing the public interest fine to € 2,710,000. Having already established and started to implement its own anti-corruption measures, Company 2 was subjected to a monitoring program by the AFA for 18 months in order to control the effectiveness of the said measures .

What are the consequences of the conclusion of a CJIP on the criminal liability of the legal entity? The statute of limitations is interrupted during the execution of the obligations provided for by the CJIP ; after full completion of the said obligations, the Public Prosecutor will request the criminal investigation to be closed with a dismissal of the case.

Negotiating with a Public Prosecutor. The negotiation of a CJIP with a French Public Prosecutor poses new challenges; the old roles need to evolve (prosecutors switch from prosecution authorities to negotiation partners), but the evolution of mindsets will take time and the implementation of this new option will not be easy. For instance, the Circular provides that a legal entity can notably enter into a CJIP by an oral declaration before the Public Prosecutor, it is crucial for the management to be well prepared for this hearing which could lead to release of facts that could trigger a new prosecution for other offences. Hence, it is imperative that companies which negotiate CJIP be accompanied by counsels having a strong judicial experience in order to avoid the traps of this new procedure.

The role of the Court. The Court approved these two CJIPs on February 23, 2018 (as was the first one); in its rulings, the Court stated that the Public Prosecutor had been asked to justify the amount of the public interest fine, and that it was satisfied by the explanations given. From our experience to similar procedures in France, we believe the Courts will analyze the CJIPs they have to approve, and, undoubtedly, refuse such approval when they will feel that the amount of the public interest fine is too low.

In conclusion, these first two corruption CJIPs have made it clear that the Public Prosecutor will use this new legal enforcement tool to leverage quick settlements with legal entities. It also appears that the Public Prosecutor wants to use the new legal tool of “monitoring” under the supervision of the AFA. It is not clear how much credit will be given to a company that voluntarily discloses a potential corruption program.  Unlike the US DOJ’s Corporate FCPA Enforcement Policy, there are no guidelines to the discounts to penalties that may be available.  We will have to wait for other CJIPs to analyze.

See here for a related FCPA Flash podcast with David Père.

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[1] Article 41-1-2, I, 1° of the French Code of criminal procedure provides that the amount of the public interest fine should be set proportionally to the profit drawn from the offences and that it should not exceed 30% of the average yearly turnover of the legal entity, calculated on the basis of the last three yearly turnovers as of the date the offences were discovered.

[2] Article 41-1-2, I, 1° of the French Code of criminal procedure provides that the compliance program should not last more than three years.

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