Sapin II Law: The New French Anticorruption System
The new system strengthens the French anticorruption arsenal from this year, drawing upon the US and UK regimes.
Law No. 2016-1691, known as “Sapin II Law”, is aimed at bringing French legislation in line with the most exacting European and international standards in the fight against corruption and at improving France’s image on the matter abroad. Indeed, until then, France was ranked only 23rd with a score of 69 out of 100, according to the Corruption Perceptions Index 2016 published on the website of the NGO, Transparency International.
The Sapin II Law is modelled, in particular, on the US (Foreign Corrupt Practices Act or FCPA – 1977) and UK (United Kingdom Bribery Act – 2010) anticorruption regimes.
Most provisions of the Sapin II Law entered into force in June 2017.
The main additional provisions of the Sapin II Law are the following:
Creation of an anticorruption structure: Agence française anticorruption (AFA, the French anticorruption agency)
Implementation of a program to prevent and detect corruption for the relevant companies with at least 500 employees and a turnover exceeding €100 million ($119.5 million)
Establishment of a criminal settlement procedure, restricted to corporate entities, referred to as convention judiciaire d’intérêt public (judicial convention in the public interest), to avoid being convicted
Extension of the extraterritorial application of French criminal law in international corruption matters
Increased protection of whistleblower status and broadening of the definition thereof
1. Creation of an anticorruption structure: Agence française anticorruption
The AFA falls within the remit of the ministers of justice and of budget. It replaces the Service central de prévention de la corruption (SCPC, Central Corruption Prevention Department) with reinforced powers and broadened duties.
It is primarily entrusted with advisory, assistance, and control tasks, notably by
participating in preventing and detecting acts of corruption, influence peddling, misappropriation, illegal taking of interest, embezzlement of public funds, and favoritism;
drafting recommendations to help corporate entities comply with their obligations and implement appropriate internal procedures to prevent and detect corruption;
checking the reality and efficiency of the anticorruption compliance mechanisms in place, in particular by companies; and
punishing any identified breaches.
The AFA also ensures observance of Law No. 68-678 of 26 July 1968 (known as “Blocking Statute”) governing the procedure applicable in disclosing sensitive data outside French territory.
2. Implementation of a program to prevent and detect corruption for the relevant companies with at least 500 employees and a turnover exceeding €100 million
Article 17 of the Sapin II Law introduces a system for corruption prevention and detection aiming to prevent and detect acts of corruption or influence peddling, in France or abroad, for companies
with at least 500 employees, or belonging to a group of companies whose parent company has its registered office in France and which hires at least 500 employees, AND
whose turnover or consolidated turnover exceeds €100 million.
For subsidiaries and controlled companies, a distinction should be made according to whether a French or a foreign group is concerned:
Subsidiary or controlled company of a French group: Article 17 of the Sapin II Law applies to companies that do not have their registered office in France and that do not meet the conditions relating to the number of employees and turnover provided that (i) the parent company located in France generates a consolidated turnover in excess of €100 million and (ii) the group to which it belongs hires more than 500 employees.
Subsidiary or controlled company of a foreign group: Article 17 does not apply (unless the subsidiary or controlled company itself hires at least 500 employees and generates a turnover in excess €100 million).
The corporate entity and its management are both in charge of implementing this system, and they may both incur criminal liability.
Content of the system for corruption prevention and detection
The anticorruption system within the relevant companies must include
a code of conduct defining the types of behavior to be prohibited as they are likely to constitute acts of corruption or influence peddling. This code of conduct will have to be incorporated into the company’s rules of procedure;
an internal whistleblowing system intended to allow collecting the alerts issued by employees regarding situations that are contrary to the company’s code of conduct;
a risks mapping intended to identify risks according to the business lines and geographical areas where the company carries out business;
procedures for assessing the situation of clients, first and middle-tier suppliers in the light of the risks mapping;
accounting controls, whether internal or external, intended to make sure the books, registers, and accounts are not used to conceal acts of corruption or influence peddling;
a training program intended for the executives and staff members who are most exposed to risks of corruption and influence peddling;
disciplinary arrangements for imposing penalties on the company’s employees in case of breach of the company’s code of conduct; and
a system for internal control and assessment of the implemented measures.
When a breach is identified, the AFA’s commission des sanctions (enforcement committee) can order the company to adapt its corruption prevention and detection system within a time period it shall determine (not to exceed three years), but can also impose a financial penalty of up to €200,000 ($239,000) for individuals and up to €1 million ($1.19 million) for corporate entities (this amount being “proportionate to the seriousness of the breaches established and to the financial situation of the relevant individual or corporate entity”).
In case of conviction for acts of corruption, the company may be compelled to complete, under the AFA’s control, for a maximum period of five years, a compliance program to establish the existence and implementation of the corruption prevention and detection system.
Finally, the AFA can order the publication of its decisions, which could harm the company’s image.
3. Establishment of a criminal settlement procedure, referred to as convention judiciaire d'intérêt public (judicial convention in the public interest)
The Sapin II Law introduces a criminal settlement procedure called “convention judiciaire d’intérêt public” (CJIP) (judicial convention in the public interest) for such offences as corruption, influence peddling, and laundering the proceeds of tax fraud. This procedure is similar to the deferred prosecution agreement (DPA) in US and UK laws.
The CJIP is restricted to corporate entities. It can be proposed either before the initiation of any public action or when the criminal proceedings have already been commenced.
Subject to the approval of the public prosecutor or the examining magistrate, the CJIP may impose one or more of the following obligations:
Payment of a fine (known as “in the public interest”) determined proportionally to the benefits resulting from the identified breaches, which can reach up to 30% of the company’s average turnover calculated over the previous three years.
Implementation, under the AFA’s control, for a maximum of three years, of an anticorruption compliance program.
Payment of damages to the victim of the offence, if identified.
The first CJIP was entered into on 14 November 2017, in the HSBC Private Bank Suisse SA case, in the context of the investigation for aggravated laundering the proceeds of tax fraud of €1.6 billion ($1.9 billion), where HSBC had been placed under judicial examination on 18 November 2014. HSBC accepted to pay a fine of €300 million ($358.6 million). Two former executives are still being criminally prosecuted.
Airbus is the first French company to use this procedure that can eventually lead to a CJIP, in return for its self-reporting and the implementation of preventive measures.
This CJIP does not give rise to a conviction certificate and has neither the nature nor the effects of a criminal conviction sentence (it is therefore not entered in Section 1 of the criminal record). Moreover, the information provided by the company as part of this procedure cannot be used for potential future criminal proceedings.
The CJIP is published in a press release of the public prosecutor and on the AFA’s website.
4. Extension of the extraterritorial application of French criminal law in international corruption matters
The Sapin II Law extends the territorial scope of corruption and influence peddling offences involving non-French individuals or corporate entities.
French criminal law is henceforth applicable when acts of corruption or influence peddling are committed abroad not only by a French citizen or by a person usually residing in France but also by a person “carrying out all or part of his economic activity on the French territory” (Article 435-11-2 of the Criminal Code).
This concept remains to be clarified (will the simple entry into a contract in France, sale of a product in France, solicitation of French clients, or payment of dividends to French companies suffice to be deemed to form “part of the economic activity”?), but should contribute to widening the extraterritorial scope of French criminal law.
5. Increased protection of whistleblower status and broadening of the definition thereof
Article 6 of the Sapin II Law defines a whistleblower as “an individual who discloses or reports, in a disinterested manner and in good faith, a crime or an offence, a serious and manifest breach of an international commitment duly ratified or approved by France, an unilateral act of an international organization adopted on the basis of such a commitment, of the law or regulations, or a serious threat or harm to general interest, which he or she has become personally aware of”.
While whistleblowing mechanisms already existed in certain areas, the Sapin II Law has created a common set of rights to all whistleblowers. These rights, the non-application of which is criminally punished, include inter alia
the guarantee to preserve the whistleblower’s anonymity;
the prohibition to dismiss, penalize, or discriminate against the whistleblower who has observed the whistleblowing procedure; and
the whistleblower’s lack of criminal liability provided that the definition criteria laid out by the Sapin II Law are fulfilled, that disclosure of the information “is necessary and proportionate to safeguard the interests at stake” and that it is made in compliance with the whistleblowing procedures.
However, the Sapin II Law does not provide for an incentive system for whistleblowers like those in place in the United States, where the whistleblower can receive a portion of the fines imposed on the company that breached its obligations.