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Negotiated criminal resolution in France – Nicolas Brooke and Camille Gravis

By Nicolas Brooke & Camille Gravis

Partner Nicolas Brooke and Associate Camille Gravis discuss deferred prosecution agreements (DPAs) in France and the effectiveness of new anti-corruption measures, in Thomson Reuters Regulatory Intelligence.

Nicolas and Camille’s article was published in Thomson Reuters Regulatory Intelligence, 6 February 2020, and can be found here. This article has also been published in Lawyer Monthly, 23 March 2020, and Today’s General Counsel, 27 March 2020 and can be found here and here (pg 38 – 40).

A version of this article was also published in Fraud Intelligence, 8 April 2020, and can be found here.

The record fine that has just been paid by Airbus illustrates the effectiveness of the new anti-corruption measures implemented over the last decade, particularly in France and the United Kingdom, in the wake of the United States. For the first time, the French National Financial Prosecutor’s Office (“PNF”) joined efforts in investigating and reaching coordinated criminal resolutions with two other law enforcement authorities (the US Department of Justice and the UK Serious Fraud Office) inflicting fines totalling a staggering $4 billion on the aircraft manufacturer.

This resolution could not have taken place without the introduction of deferred prosecution agreements (“DPAs”) in the United Kingdom by the Crime and Courts Act 2013 (Schedule 17) and in France by Law No 2016-16910 of 9 December 2016, known as “Sapin II”.

Sapin II’s innovations in the French anticorruption legal framework 

Sapin II brought about a small revolution in the French corporate governance and criminal justice system. First, it created a duty for medium to large companies – ie, companies, or group of companies whose parent company is registered in France, that employ at least 500 employees, and whose consolidated annual revenue is greater than 100 million euros, to implement anticorruption programs. To assist them, Sapin II also created the French Anticorruption Agency (“AFA”), a new government agency in charge of (i) providing support and advice, through relevant guidelines, (ii) conducting controls, requesting various information and the production of documents and an onsite audit, (iv) referring cases to a sanctions commission that can impose financial penalties where appropriate, and (v) monitoring companies that concluded a French DPA with a compliance penalty.

Second, Sapin II has adopted various measures to make law enforcement more effective in this area. Sapin II significantly broadened French jurisdiction in international bribery cases. Before Sapin II, French prosecutors could only prosecute offenses committed abroad where the victim or the wrongdoer was a French citizen or company, and under restrictive conditions. Sapin II now allows the prosecution of persons or entities who reside on a regular basis or conduct all or part of their economic activity on French territory for offenses of corruption of foreign public official, without conditions. The French courts also have jurisdiction over a person who is guilty on French territory, as an accomplice, of acts of international public corruption committed abroad.

However, the most significant development introduced by Sapin II is the introduction of the French equivalent of US DPA, known as convention judiciaire d’intérêt public (“CJIPs”). Instead of facing trial, a company may agree to cooperate with the French authorities and to resolve matters by paying a fine. Companies can also be required to be supervised by the AFA for up to three years while implementing remedial measures. The agreement of a CJIP does not in law amount to a guilty verdict. Therefore, a CJIP won’t cause a company to be disbarred from public procurement or to lose vital trading or banking licences. French prosecutors can enter into CJIPs in respect of corruption, influence trafficking, tax fraud and laundering the proceeds of tax fraud.

The evolution of the French DPAs since 2017

Since its entry into force in March 2017, six CJIPs have been concluded relating to corruption (HSBC, Carmignac Gestion, Google, Airbus) and three as regards tax fraud (Set Environnement, SA Kaeffer Wanner, Poujaud, Société Générale, Egis Avia). Three were entered into by financial services companies, three by energy companies, one by a construction company, one by subsidiaries of Google, and finally by an aircraft manufacturer.

Airbus is not the first DPA where French authorities collaborate with their US counterparts in a cross-border investigation on the bribery of foreign public officials. The Société Générale matter involved a coordinated resolution where the French Parquet National Financier and the US Department of Justice shared a fine some USD 500 million. This was first time a CJIP formed part of a global resolution with multiple authorities.  Another case seems to have come close to a similar coordinated resolution: on 25 June 2019, Technip-FMP concluded a DPA with the DoJ and the Brazilian authorities. Interestingly, the PNF also took part in the investigation, but Technip-FMP failed to reach an agreement with it. It appears that the investigation is continuing in France.

New issues raised by the AFA’s latest guidelines on DPAs

Recent guidelines have been issued by the PNF and the AFA on 27 June 2019 to give clarity on the implementation of CJIPs contain a number of controversial propositions.

The guidelines say that prerequisites for a CJIP are timely self-disclosure, cooperation with the investigation, the absence of previous convictions by the corporation and the deployment of an effective compliance programme. The guidelines also suggest that all the materials turned over by the company before a CJIP is formalised can be relied on by the authorities in subsequent investigations or proceedings. If this controversial view were to prevail, the decision to self-report after having conducted an internal investigation will be all the more difficult to take, given that the corporation will run a very real risk of prosecution on the basis of a record voluntarily turned over to the prosecution if the parties do not succeed in concluding a CJIP.

This disclosure of evidence may also be detrimental to the defence of individuals, subsequently prosecuted, who are generally exposed by the company to protect its interests. As such, individuals are not entitled to conclude a CJIP, and while whistle-blower protections exist, there is no formal mechanism for individuals to gain immunity from prosecution, unlike in the US. As a result, individuals caught up in a cross-border investigation may be tempted to “forum-shop” to obtain protection.

The guidelines further describe a methodology for calculating the financial penalty under the CJIP.  The amount of profit derived from the criminal conduct is to be treated as a base amount and will be calculated by deducting costs from the revenue derived from the scheme. Any increased market share can also be considered, as well as aggravating and mitigating features. Fines are however supposed to be proportionate to the gains obtained from the corrupt scheme, with a ceiling fixed at 30% of the company’s average annual revenue during the previous three years.

In relation to lawyer-client confidentiality, the guidelines state that the company will have to determine what document will be disclosed to the prosecutors, and that “whereas the duty of lawyer-client confidentiality is binding on counsel in their relationship with their client, the client itself is not bound by such a duty”. This wording may be taken as implicitly suggesting that corporations are encouraged or even expected to turn over privileged materials from their internal investigation should they choose to conduct one. A clarification on this subject would be helpful as this would constitute a serious infringement of the lawyer-client confidentiality.

Despite the guidelines issued in June 2019, there are still inconsistent with that of other law enforcement authorities, which creates a risk of disruption in future cross-border resolutions, and uncertainties surrounding certain key issues, in particular regarding the fine calculation methodology. Hopefully, more clarity will come with the analysis of the Airbus agreement and as the practice of DPAs develops in France in the future.

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