Brazil’s Senate has passed a piece of legislation that, if signed by President Dilma Rousseff, is expected to drastically change the way local and foreign companies do business in Brazil.
The bill, passed on July 4, is being referred to as the “clean company law.” To some extent, it is stricter than the US Foreign Corruption Practices Act, widely regarded as one of the most stringent anti-bribery laws in the world. The FCPA prohibits paying (or offering to pay) anything of value to a foreign official in order to secure a business advantage. The scope of the Brazilian clean company law is even broader, including civil and administrative liability for legal entities that engage in acts committed against both Brazilian and foreign public administration bodies. Among the acts covered by the bill are bribery, fraud in public procurement, bid rigging, fraud in contracts signed with public bodies, impairing public officers’ investigative activities and influencing or financing others to engage in illegal acts against the government.
The goal of the bill is to introduce an effective corporate compliance culture. Fines for companies that are found guilty will be significant and may range from 1 percent to 20 percent of the company’s gross turnover in the year before the investigation started. The bill also stresses that, “whenever possible,” the fine should not be less than the economic advantage obtained by the company.
The amount of the fines is clearly inspired by the penalties imposed by Brazil’s Antitrust Law, in force since 2012. The Bill has also found inspiration in the Antitrust Law in its inclusion of a leniency program, under which companies will be able to negotiate with the government for full immunity or lighter penalties provided they cooperate with the investigation and provide evidence attesting that illegal practices took place.
It is reasonable to see this action by Brazil’s Senate as a response to the numerous massive protests that have been taking place in many Brazilian cities over the past few weeks. Although protesters’ criticisms of the government were quite diverse, corruption clearly was one of the most profound sources of distress for the many Brazilians who took to the streets.
If President Rousseff signs the bill, it will take effect 180 days after its final version has been published in the Brazilian Official Gazette. During this 180-day timeframe, both companies and public bodies will swiftly need to relearn how to do business in Brazil as well as adapting to a much stricter legal framework.
FROM THE ARCHIVE
Brazil-US tax information exchange agreement is now in effect
* André Marques Gilberto is a partner in the Public Law, Antitrust and Regulatory practices at Campos Mello Advogados, based in São Paulo. Contact him here.