On 9 December 2016, following recommendations made two years previously by Transparency International, the Sapin II law on the transparency, fight against bribery and modernisation of the economy was enacted in France.
As corruption was already criminally punishable under French law, the main objective of this law was to issue clearer rules to prevent and detect bribery.
The obligation to implement an anti-bribery compliance program
The Sapin II law requires companies (exceeding certain thresholds) and their executives to adopt an anti-bribery compliance program that satisfies specific requirements set out in the law.
This obligation to implement internal procedures to reduce the risks of bribery applies to:
- companies with their registered office in France (including French overseas territories) which employ more than 500 employees and realise a turnover exceeding €100 million; and
- groups of companies which employ more than 500 employees and realise a turnover or consolidated turnover exceeding €100 million, where the holding company has its registered office in France. In such case, the obligations detailed below lie on the holding company itself but also on its subsidiaries or controlled companies, including those outside of France.
Companies exceeding these thresholds have until 1 June 2017 to:
- adopt a code of conduct, describing the behaviours likely to constitute bribery acts. This code should be adapted in accordance with the company’s particular activities and give some clear and practical guidance tools to employees;
- set up a whistleblowing system allowing employees to report behaviours or situations breaching the internal code of conduct. This whistleblowing system should define the process for investigating complaints in a confidential way. Sapin II also provides for certain protections for such whistle-blowers;
- create a risk map, ranking and classifying the company’s risks of exposure to corruption, by sector and geographical area and taking into account the company’s major clients, suppliers or intermediaries;
- run due diligence on the company’s major clients, suppliers and intermediaries;
- implement internal or external accounting auditing processes in order to make sure that accounting books are not used to conceal corruption or influence peddling acts;
- train the employees that are more at risk;
- set up a disciplinary process that enables employees that breach the code of conduct to be punished; and
- set up an internal process to control and evaluate the measures implemented.
Sanctions for breach
To ensure compliance with these newly created rules, Sapin II provides for serious financial sanctions. A new authority, the National Agency for Prevention and Detection of Bribery, has been established to enforce Sapin II. The Agency can issue an injunction to comply with the law as well as order the payment of fines by both the legal representative of the company (up to €200,000) and the company itself (up to €1 Million).
Non-compliance with Sapin II also carries significant reputational risk: the decision by the Anti-Corruption Agency issuing an injunction or imposing a fine can be made public under ‘name and shame’ powers.
Complying with the US Foreign Corrupt Practices Act or UK Bribery Act does not necessarily mean complying with Sapin II
Companies falling under scope of Sapin II may be tempted to consider that if they are compliant with the FCPA and the UKBA, they are automatically compliant with French anti-bribery law.
This is, however, not true.
Unlike Sapin II law, the UKBA and the FCPA do not provide that failing to prevent bribery is per se a corporate offence. Under the UKBA and the FCPA, the adoption of preventive programs is encouraged by the fact that in case of actual bribery, companies can try to avoid or mitigate their liability in demonstrating their commitment to anti-corruption by having implemented preventive “adequate procedures”, which is a defence under each of those acts.
The Sapin II, however, goes further than the US and UK regulations by enacting a legal requirement to implement an anti-bribery compliance program obeying to very specific requirements.
Nevertheless, at €1 million for companies, the potential financial sanctions for breaching Sapin II are nowhere near the level of those under the FCPA or the UKBA – both of which have been used to establish prosecutions or settlements in the hundreds of millions.
What will the new Agency’s role be?
The new Agency replaces the previous Central Service for Prevention of Bribery. As well as enforcement powers, the Agency will have a role in preventing bribery and corruption. Amongst other things, it will provide guidance for public authorities and private companies on prevention and detection of bribery and corruption; and will monitor compliance by public authorities and private companies.
Early indications are that the new Agency will take an interventionist approach, as its counterparts in the UK and US currently do, in order to ensure compliance with the new law.
What do companies need to do to prepare?
Companies falling under the scope of Sapin II will now need to ensure that they are able, in case of investigation by the new Agency, to demonstrate that they comply with each of the eight measures listed above.
Companies not falling under the Sapin II specifications would also do well to comply with these requirements in order to minimise the risk of bribery and, in the event of actual bribery, to mitigate their liability under separate bribery offences and/or to being able to negotiate the level of fine for such offences under the procedure of the Deferred Prosecution Agreement.
Given the tight timeframe before the effective date of Sapin II, it is highly recommended that companies do not delay the development and adoption of the adequate action plan for compliance.