Alerts

Two Years Since Sapin II: Is France Now a Player in the Global Anti-Corruption Enforcement Arena?

Alerts / June 24, 2019
Sapin II: An Overview

In December 2016,[1] the French Parliament passed a landmark anti-corruption law, Law No. 2016-1691 on Transparency, Fighting Corruption and Modernising Economic Life (the “Sapin II” or the “Law”), which strengthened the country’s enforcement regime.[2]

The principal measures of Sapin II are intended to place French regulators on an equal footing with their U.S. and U.K. counterparts. Specifically, Sapin II features (i) required implementation of compliance programs for companies that meet certain staff size and turnover thresholds, (ii) a new French Anti-corruption Agency (the Agence Francaise Anticorruption, or “AFA”) to monitor the compliance programs, (iii) expanded French jurisdiction, enabling French authorities to prosecute acts of corruption committed abroad and (iv) procedures for negotiating settlement agreements (convention judiciaire d’interet public, or “CJIP”) without the burden of a criminal conviction. The CJIP drew inspiration from the American and British deferred prosecution agreement (“DPA”) models.

The Law was enacted partly to reduce the risk of foreign authorities bringing enforcement actions against French companies.[3] Sapin II is already showing its effectiveness, as evidenced by the approval of several high-penalty CJIPs (discussed in detail below).

Now, two years since Sapin II’s enactment, this client alert examines the AFA and the resolution of five enforcement actions, and comments on the anticipated trajectory of French global anti-corruption enforcement.

The AFA, Its Guidelines, and Its Limitations

Sapin II established the AFA, which operates under the authority of both the French Ministry of Justice and Ministry of Budget to assist in preventing and detecting acts of corruption, influence peddling, misappropriation of public funds, and favoritism.[4] The AFA has a broader mandate than its predecessor, the Service Central de la Repression de la Corruption, in that it has audit powers, including the ability to perform on-site controls inspections. It can also issue administrative guidelines and impose sanctions against companies that fail to demonstrate that their compliance programs conform with the Law.

In 2017, the AFA published the following guidelines aimed at helping companies comply with Sapin II:[5]

  • Foster a management-led culture of compliance.
  • Create a written code of conduct.
  • Implement a whistleblower protection program.
  • Draft corruption risk mapping.
  • Standardize third-party due diligence procedures.
  • Conduct training.
  • Formulate internal controls to evaluate compliance programs and accounting controls to maintain integrity of books and records.

Although not legally binding, the guidelines provide insight into what the AFA will consider when auditing a company’s compliance program. It is critical for companies subject to Sapin II to follow these guidelines.

While the U.S. Department of Justice (“DOJ”) and the U.K. Serious Fraud Office (“SFO”) inspired the creation of the AFA, some commentators regret its limitations in that the AFA cannot investigate or prosecute criminal offenses. The AFA also cannot settle with target companies through the CJIP process; it can only refer Sapin II violations to the French Public Prosecutor, the Parquet National Financier (“PNF”). The PNF is the lead French agency charged with investigating and prosecuting bribery and corruption cases. It is therefore more akin to the DOJ and SFO and, like those agencies, the PNF can enter into settlements, or CJIPs.

CJIPs

Included in the Law after much debate, the CJIP is considered to be a groundbreaking tool in French anti-corruption enforcement, aligning the PNF with its U.S. and U.K. counterparts, which use DPAs. The primary criticisms during discussions surrounding the passage of Sapin II were that CJIPs prevent public debate and exclude the victim from the settlement process.[6] After initially being discarded from earlier drafts of the Law, the CJIP was reintroduced and adopted as a means to allow faster and more efficient resolutions for companies. Note that a CJIP is available only to companies (not individuals) in cases of corruption, influence peddling, and/or laundering of proceeds of tax fraud, and requires court approval before finalization.

Recent cases resolved under Sapin II support the argument that CJIPs are efficient and serve the public interest.

HSBC[7]

In November 2017, the PNF announced the first CJIP under Sapin II with a Swiss subsidiary of HSBC in which HSBC agreed to pay €300 million to settle criminal charges regarding laundering proceeds of tax fraud. In November 2014, HSBC was formally put under criminal investigation for the offenses. The investigation stemmed from a 2009 document leak that revealed HSBC’s role in offering wealthy customers an avenue to hide assets from the French tax authorities. The CJIP states that several HSBC clients failed to disclose to the French government assets held in their HSBC accounts.

Because the CJIP was negotiated and agreed upon in the later stages of the investigation, statutorily, HSBC was required to admit facts in the CJIP, albeit without admitting guilt. And although Sapin II can require HSBC to undergo certain compliance and reporting obligations and monitoring, none was required in this case, likely because HSBC had already begun certain improvements in this area.

Kaeffer Wanner (“KW”), Set Environment (“Set”), and SAS Poujaud (“Poujaud”)[8]

The PNF announced in March 2018 three CJIPs involving KW, Set, and Poujaud resulting from allegations that these companies agreed to bribe an employee of Electricité de France (“EDF”), a French utility company, in exchange for contracts. After commencement of the investigation into the EDF employee, KW and Set agreed in February 2018 to enter into CJIPs. KW and Set admitted their responsibility for the activities giving rise to the charges and agreed to pay penalties of €2,710,000 and €800,000, respectively, and to compensate EDF €30,000 each. In addition, they agreed to be monitored by the AFA for 18 and 24 months, respectively. Importantly, the KW CJIP highlighted KW’s efforts to change its management and governance rules, train its employees, and strengthen its ethics program.

In May 2018, Poujaud entered into a CJIP and agreed to pay a fine of €420,000 and restitution to EDF of €30,000. The company was additionally required to implement a compliance program and be supervised by the AFA for two years. The PNF noted that unlike KW, Poujaud did not cooperate in the investigation and did not self-report. Regardless, the PNF acknowledged that the company implemented an ethics code, which likely factored into the CJIP negotiations.

Société Générale (“SG”)[9]

In May 2018, SG entered into a CJIP with the PNF. It agreed to pay a fine of €250,150,755 and agreed to have its compliance policy assessed by the AFA for two years. The French authorities investigated SG for financing luxury trips and gifts to the director of the Libyan Investment Authority in exchange for investments.

This is the first CJIP to be entered into during preliminary investigative stages, unlike the four cases described above, which were resolved once the companies were in the later stages of investigation. Therefore, SG did not have to accept the facts in the CJIP. Instead, SG only had to acknowledge them, which differs from the CJIPs described above, for which the companies were required to admit to the facts.

What Is Next

Sapin II has established France as a player in the anti-corruption enforcement world. The new tools at the government’s disposal – such as the AFA’s audit powers, the Law’s compliance requirements, and the PNF’s ability to enforce the Law efficiently through CJIPs and significant fines – give the French enforcement regime flexibility without sacrificing justice.

It is likely that going forward, the PNF will strengthen relationships with its counterparts in the U.S., the U.K. and other countries and use the expanded jurisdictional powers granted by Sapin II to conduct global investigations. Companies should therefore allocate significant resources to enhance their compliance programs and be prepared for the increased risk of scrutiny by French authorities.

Authorship Credit: George A. StamboulidisSusrut A. Carpenter and Sophie Rouach


[1] Sapin II went into effect in the summer of 2017.
[2] For background on the Law, please refer to our previously published client alert
here.
[3] The U.S. Department of Justice pursued French companies such as Technip S.A., Total S.A., Alcatel-Lucent S.A. and Alstom S.A. All of these companies paid hundreds of millions of dollars in fines and penalties to the U.S.
[4] Agence Francaise Anticorruption, available at
https://www.economie.gouv.fr/afa/lagence.
[5] “Recommandations de l’Agence française anticorruption destinées à aider les personnes morales de droit public et de droit privé à prévenir et à détecter les faits de corruption, de trafic d’influence, de concussion, de prise illégale d’intérêt, de détournement de fonds publics et de favoritisme,” available at https://www.agence-francaise-anticorruption.gouv.fr/files/2018-10/French_Anticorruption_Agency_Guidelines.pdf.
[6] See Conseil D’Etat Opinion, available at https://www.legifrance.gouv.fr/Droit-francais/Les-avis-du-Conseil-d-Etat-rendus-sur-les-projets-de-loi/2016/Projet-de-loi-relatif-a-la-transparence-a-la-lutte-contre-la-corruption-et-a-la-modernisation-de-la-vie-economique-FCPM1605542L-30-03-2016 (claiming the CJIP is inconsistent with the mission of criminal justice).
[7] Convention judiciaire d’intérêt public between the National Finance Prosecutor and HSBC Private Bank (Suisse) SA, Oct. 30, 2017.
[8] Convention judiciaire d’intérêt public entre le procureur de la République financier près le tribunal de grande instance de Nanterre et la SAS Set Environnement (signed Feb. 14, 2018); Convention judiciaire d’intérêt public entre le procureur de la République financier près le tribunal de grande instance de Nanterre et la SAS Kaefer Wanner (signed Feb. 14, 2018); Convention judiciaire d’intérêt public entre le procureur de la République financier près le tribunal de grande instance de Nanterre et la SAS Poujaud (signed May 6-7, 2018)
[9] Convention judiciaire d’intérêt public conclue entre le procureur de la République financier et la société Société Générale SA (signed Oct. 18-30, 2017).

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