Hamstrung by legal provisions that make it hard to bring a case, and coupled with a lack of appetite to properly investigate or prosecute French companies and individuals anyway, France has tolerated corporate corruption for too long.
The conspicuous lack of French scalps for bribery and corruption committed abroad speaks volumes. In September 2012 the Paris Criminal District Court fined (partly state-owned) French defence company Safran €500,000 (U.S.$520,643) for paying bribes to Nigerian officials to secure a contract to produce national ID cards. However, the Paris Court of Appeal overturned the ruling in January 2015 as an “insufficiently grounded” offence.
In July 2013 the Paris Criminal District Court acquitted French oil company Total for alleged corruption of foreign public officials in the United Nations’ oil-for-food programme in Iraq—an initiative that had been terminated a decade earlier. After the French public prosecutor appealed the ruling, the Paris Court of Appeal overturned the previous ruling and ordered Total to pay €750,000 (U.S.$780,964) in February 2016.
Since signing the Organisation for Economic Co-operation and Development’s (OECD) Anti-Bribery Convention in 2000, France had up until last year only prosecuted four foreign bribery cases—three of which resulted in minor fines of less than €10,000 (U.S.$10,413) (neighbouring Germany, meanwhile, had racked up over 70 prosecutions by 2015).
Indeed, the country’s dismal record in prosecuting bribery and corruption cases has been lampooned by several international observers. In 2014 the OECD’s Working Group on Bribery criticised France for being “insufficiently in compliance” with its Anti-Bribery Convention.
“To this day, no French company has yet been convicted for foreign bribery in France, whereas French companies have been convicted abroad for that offence,” the OECD report said, adding that it was concerned by the “lack of proactivity of the authorities in cases which involve French companies in established facts or allegations of foreign bribery.”
In response, anti-corruption group Transparency International’s (TI) current Corruption Perceptions Index ranks France in co-23rd position (with Chile, Estonia, and the United Arab Emirates) out of 168 countries—below the United Kingdom, United States, and Germany. TI also deems France to have a “moderate” level of enforcement with regard to the OECD’s Anti-Bribery Convention. It is hardly a ringing endorsement.
“To this day, no French company has yet been convicted for foreign bribery in France, whereas French companies have been convicted abroad for that offence."
Statement of the OECD Working Group
Fortunately, the country may be turning a corner. On 8 November France modernised its anti-corruption enforcement regime and adopted the “Law on Transparency, the Fight against Corruption and Modernisation of Economic Life”—more widely known as “Sapin II” after Michel Sapin, the current minister of finance who has championed them and who was also responsible for France’s first set of anti-bribery measures in 1993.
Sapin II aims to beef up French enforcement of French law over French companies, citizens, and non-French entities doing business in France. The law’s main provisions include expanded jurisdiction so that French authorities can prosecute acts of corruption committed abroad by any company that conducts business in France (even in part). Previously, French authorities only had jurisdiction over offences committed outside France if the victim or perpetrator was French; the conduct constituted an offence in both France and the country where the conduct occurred; and either a victim filed a complaint with the French authorities to investigate, or the foreign government officially denounced the conduct.
Sapin II also creates a new anti-corruption agency to monitor corporate implementation of anti-corruption compliance programmes, which are now mandatory for companies with over 500 employees and €100m (U.S.$104M) in revenue. It also affords whistleblowers more protection, and introduces deferred prosecution agreements (DPAs), similar to those used in the United States and United Kingdom, allowing prosecutors to fine companies for wrongdoing without a criminal conviction. Since the OECD Anti-Bribery Convention’s entry into force 16 years ago, two-thirds of foreign bribery cases have been resolved through settlements.
Below are some key points of Sapin II.
On 1 May 1 2017 Sapin II’s compliance obligations become effective. Companies with over 500 employees and revenues of at least €100m will be required to adopt compliance policies and procedures. This requirement aims to impose a burden on control persons within the companies to shoulder the responsibility of preventing corruption.
These compliance measures include promulgating an ethics code, internal whistleblowing procedures, risk assessment mechanisms, accounting controls, third-party due diligence processes, employee training, reporting chains and procedures for internal reporting of suspected illicit activity, and a disciplinary action policy.
If companies fail to meet these compliance obligations, the AFA’s Sanctions Commission can impose fines, per breach, of up to €200,000 against individuals and €1m against entities. The AFA can also issue warnings or injunctions ordering companies to adopt adequate compliance programmes, and publish the decisions.
Under the law, companies seeking a DPA must agree to the stipulated facts but will not have to admit guilt. The penalties any company may face under a DPA are capped at 30 percent of its three-year average earnings, and the company can be required to hire an outside monitor to ensure it adheres to the law’s compliance rules. Before final execution, the DPA will be reviewed publicly in a court hearing.
Gérard Cohen, partner at Paris-based law firm Cohen Amir-Aslani, says that the need for companies to establish a compliance programme is one of the key aspects of the legislation. Furthermore, the compliance programmes are very specific, and must include (at least) a code of conduct; procedures for assessing/monitoring the conduct of customers, main suppliers, and intermediaries of the company; accounting control procedures; an internal warning system to flag up bribery and corruption risks and hot-spots; appropriate training for professionals and staff exposed to bribery and corruption risk; an ability to map the company’s major risks; a disciplinary regime; and a monitoring system to evaluate the adequacy of all these different measures.
The legal department of the company will have a crucial role to play in the implementation of the compliance programme, as well as in a preventative role, says Cohen. “The legal department must be able to assess when the company crosses a red line, and to send that information to the highest levels,” he says. “Compliance also requires a global approach as it concerns the whole company,” he adds.
“The risk-mapping work of the company is paramount and must be carried out with diligence: companies must consider where the temptation for bribes exists—in which country, in which market, with which customer or supplier, and so on,” says Cohen.
Lawyers broadly welcome the reforms. Laurent Cohen-Tanugi, managing partner of French law firm Laurent Cohen-Tanugi Avocats, told delegates at Compliance Week’s European Conference in Brussels in November that “for a long time we have needed anti-corruption legislation in France, especially as the fines that French companies are paying for bribery and corruption offences are going to the United States rather than staying at home.”
In fact, three of the top ten U.S. Foreign Corrupt Practices ACT (FCPA) payouts have involved French companies: rail transport company Alstom was hit by a U.S.$772M penalty in 2014 (the second highest so far, after German electronics manufacturer Siemens’ U.S.$800M fine in 2008); oil company Total paid U.S.$398M in 2013; and energy construction firm Technip forked out U.S.$338M in 2010.
Outside the top ten, Alcatel-Lucent agreed a U.S.$137M settlement in 2010 with the Justice Department and Securities and Exchange Commission and entered into a three-year deferred prosecution agreement after admitting bribing officials in Costa Rica, Honduras, Malaysia, and Taiwan.
Two years ago, France’s biggest bank, BNP Paribas, was fined U.S.$9B by U.S. authorities over violations of sanctions against Sudan, Cuba, and Iran.
By penalising companies on their home turf thanks to Sapin II, the French Treasury estimates the bill could boost economic growth by 0.2 percent annually through improved business confidence.
However, lawyers have already pointed out there are limitations. For example, while Sapin II creates a French anti-corruption agency—the Agence Franc¸aise Anticorruption (AFA)—it does not have authority to initiate bribery investigations or to impose criminal penalties. Instead, any violations will be referred to French prosecutors to decide whether to commence a criminal action or not. This may mean that cases are once again slow to proceed—if at all.
Furthermore, the whistleblowing protections may not be as effective as hoped. While people who retaliate against whistleblowers or who try to intimidate them can be fined up to €15,000 (U.S.$15,619) (and anyone who discloses their identity risks a €30,000 (U.S.$31,239) fine and/or a maximum two-year jail term), whistleblowers risk more—not least their careers.
As in the United Kingdom (but unlike the United States) Sapin II does not offer financial remuneration as a “carrot” for informing. The fact that few whistleblowers are ever employed after making their complaint makes for a dismal prospect. Added to that, the protection only kicks in if the complaint is made in “good faith” (so people with an axe to grind don’t qualify for protection—even if they’re right), and if violations are first reported internally to a supervisor (they can, however, report the alleged criminal behaviour to relevant government authorities if no action is taken).
While there may be some areas of weakness, Sapin II is regarded widely as a positive step to deter bribery and corruption. However, its success depends on how willing the AFA and French prosecutors are to smell blood and go for the kill.