After stalling for more than three years, the Brazilian Senate last week approved a new anti-corruption law that establishes direct civil liability for companies for the bribery of both Brazilian and foreign public officials.
The Brazilian Chamber of Deputies already approved the legislation in April, so it now goes to Brazilian President Dilma Vana Rousseff for her signature.
Prior to the law's enactment, only individuals could be prosecuted for corruption. Under the new anti-corruption law, however, civil and administrative liability will be imposed on corporate entities doing business in Brazil that engage in bribery of Brazilian or non-Brazilian officials.
This effectively means that foreign companies operating within Brazil could be subject to penalties for bribery of local officials, including employees of Brazilian subsidiaries of U.S. companies; major Brazilian companies that are publicly listed on U.S. stock exchanges; Brazilian agents of U.S. companies that have been subject to due diligence reviews; and Brazilian companies acquired by U.S. companies.
Moreover, the new law establishes civil liability against companies for the anti-bribery acts of its directors, officers, employees, and other agents acting on its behalf.
The law creates stiff penalties as well. A company found guilty of corruption can face fines up to 20 percent of its gross revenue from the previous year. In addition, penalties can include disgorgement of benefits obtained, suspension of the company's activities, and even the dissolution of the offending entity.
The good news for companies is that the Brazilian law includes a provision directing that sanctions may be reduced for companies with effective compliance programs in place, and those that self-disclose violations of the law to authorities.
Former Brazilian President Luiz Inácio Lula da Silva introduced an earlier version of the anti-corruption bill in 2010, but its passage stalled for nearly three years in Congress.
The anti-corruption law is expected to strengthen Brazil's commitments under the Organization of Economic Co-operation and Development Convention on Combating Bribery of Foreign Public Officials. Such legislation is also required as part of the United Nations Convention against Corruption, which Brazil ratified in May 2005.
Passage of the anti-corruption law also puts Brazil on par with other anti-corruption laws, such as the U.K. Bribery Act and the U.S. Foreign Corrupt Practices Act.
Léo Torresan, president of Transparency International's partner organization in Brazil, Amarribo Brasil, called the law a “wake-up call” for the management and shareholders of Brazilian companies.
“This should make management more vigilant about how it goes about business because the stakes just got seriously higher,” Torresan wrote in a blog on TI's Website. “This new law, which aims to provide a level playing field when it comes to business, is a serious step in the right direction.”
In TI's Global Corruption Barometer released today, the only worldwide public opinion survey on corruption, which interviewed more than 114,000 respondents in 107 countries, 35 percent said they believe corruption has stayed the same in Brazil, whereas 29 percent said it has "increased a lot." Fifteen percent said that corruption has decreased "a little," whereas only three percent said it has decreased a lot.
When asked how they would assess the Brazil's fight against corruption, the plurality (32 percent) described it as “ineffective," whereas 24 percent said it was "very ineffective."