Today’s post is from Cecile Terret and David Pere (attorneys with Bryan Cave Leighton Paisner in Paris).
On June 27, 2019, the French financial prosecutor (Procureur de la République Financier – PRF) and the French Anti-Corruption Agency (Agence française anticorruption – AFA) published new 18-page guidelines about an alternative system to corporate prosecutions which dates back to 2016. (See here).
These guidelines specify the conditions of application of the anti-corruption law known as “Sapin II”, adopted by France in 2016, which provides the possibility for the PRF, as an alternative to prosecution, to enter into a settlement agreement (known in French as the “Convention Judiciaire d’Intérêt Public”, – CJIP).
Nevertheless, this new option, based on the American corporate prosecution model, had to overcome a difficulty: the different provisions are laid down in various texts and the legal regime needed to be clarified. To that end, the PRF and the AFA wished, by these guidelines, to establish and disseminate uniform guidance.
These guidelines should thus provide predictability and legal certainty for the companies concerned, by covering various issues. However, it should be stressed that these guidelines are not binding and must be considered as soft law: they reflect only the position of the PRF and the AFA on these matters.
The different stages of the CJIP procedure
As explained above, the PRF is the only party which may initiate a proposal to enter into a CJIP; however, in practice, a legal entity which realizes that it has committed an offence may contact the PRF to negotiate such a settlement. In principle, this first preliminary discussion is unwritten and informal.
The PRF then expects the legal entity to have actively investigated the malfunctions of its internal compliance system that led to the commission. This investigation should lead to a confidential report provided with the PRF’s office with the greatest possible accuracy.
Following the informal exchanges, if the settlement is conceivable, the PRF’s office notifies the victims by a notice.
Once accepted, the CJIP must be validated by the president of the court, in a public hearing.
The CJIP is then published on the AFA website and a press release from the PRF.
If the CJIP so provides, a compliance program of up to 3 years can be set up by the AFA, the modalities of which are provided for in the guidelines. To summarize, the compliance program is funded by the legal entity (expert and legal fees are borne by the company) and should allow the latter to better structure itself to avoid corruption.
On the other hand, if the judge refuses the CJIP, if the legal entity withdraws or if the obligations of the CJIP are not honored, then the PRF initiates the traditional procedure of judgment before a court.
The conditions for benefiting from a CJIP
In order to benefit from a CJIP, certain conditions must be considered as fulfilled by the PRF.
First, only legal persons may benefit from the CJIP regime. The managers of the companies therefore remain liable as natural persons.
Secondly, the CJIP, as an alternative to prosecution, depends on the will of the PRF, which is the only party which has the initiative to propose it “until the public action has been initiated“. It must therefore be entered into during the criminal investigation, or at least before the court is seized. In making its decision, the PRF must take into account the seriousness of the offence but also the circumstances: the legal entity’s background, the voluntary disclosure of the facts and the degree of cooperation.
Thirdly, the offense must be one of those listed in Article 41-1-2 of the French Code of Criminal Procedure, e.g., active corruption or influence peddling by an individual or a foreign public official and/or corruption or influence peddling vis à vis a member of a foreign judicial institution and/or active and passive private corruption and/or active and passive sports corruption and/or corruption or active influence peddling vis à vis a member of the judicial institution. It should be noted that although the law of 23 October 2018 relating to the fight against fraud extended the scope of the CJIP to tax fraud, the guidelines do not cover tax fraud. (See here).
Fourthly, sufficient evidence must be gathered to constitute the offence; otherwise the judge would not validate the settlement.
And finally, the legal person must not have been previously convicted of corruption or influence peddling.
Guidelines aiming to highlight the positive effects of the CJIP
The CJIP may include various obligations for the company: the obligation to pay a public interest fine (which take into account the benefits unduly derived from the offences; the amount of which may not exceed 30% of the annual turnover, calculated on the average of the last three financial years) and/or the implementation of a compliance programme for its anti-corruption procedures for a period of maximum 3 years and/or compensation for damage to the victim.
However, the guidelines highlight the merits of entering into a CJIP:
- Under French Criminal Law, the maximum amount of fines which may be assessed against legal persons corresponds to those applicable to natural persons, but multiplied by five: under these conditions, it may be interesting to settle, in order to reduce the financial impact of a potential sentence.
- The CJIP aims to reduce the potential damage to the company’s reputation.
- The CJIP does not have the effects of the conviction: it is not registered in the entity criminal record, does not lead to a conviction, nor does it lead to exclusion from national public procurement. The execution of the CJIP simply extinguishes the public action against the legal person.
The efficiency of this new alternative to prosecution
Since 2016, six settlements have been reached, which resulted in a total of $1.3 billion in fines, including the Société Générale case which has been prosecuted by both US and French authorities.
Compared to a full-fledged criminal procedure, the CJIP offers for a company a certain possibility to rapidly settle a criminal matter; it also offers the possibility to coordinate various transnational investigations as was the case for Société Générale.
Those uniform guidelines from the regulators also offer a harmonized position for the companies concerned and their counsel.
What is expected from a company to benefit from a CJIP?
Even if it could appear as an advantage for the company to enter into a CJIP, the guidelines show that certain obligations are required from the regulators to enter into a CJIP.
These guidelines provide that the company should cooperate during the criminal investigation but in any case, the pre-requisite is that the company has or will (parallel to the opening of the criminal investigation) conduct(ed) internal investigation. The company will have in that respect to provide the PRF with a comprehensive report having the objective to ascertain the truth. The guidelines also expressly mention that the report should establish individual responsibilities, the key witnesses should be identified and the relevant documents in possession of the company should be provided to the PRF.
It appears that the company (and a fortiori its counsels) will bear the burden of proof in this regard, which is quite contrary to the French criminal system where the prosecution usually conducts the investigation.
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