Almost five years ago, France enacted its anti-corruption legislation, Sapin II.¹ The law was considered ground-breaking at the time and introduced a number of important innovations, including the ability for companies to be offered and to negotiate French-style deferred prosecution agreements called Convention judiciaire d’intérêt public (CJIP), the broadening of the scope of certain criminal law provisions, and the creation of the French Anti-Corruption Agency (AFA).

In December 2020, the Law Commission of the French Parliament asked two members of the French National Assembly to prepare a report assessing the implementation of Sapin II. Their July 2021 report included 50 recommendations and inspired a bill introduced at the National Assembly on 19 October 2021 (the “Bill”) proposing to strengthen the legal framework underpinning the fight against corruption in many significant ways. In this article, we provide an overview of the changes proposed which, if adopted, will dramatically change the current Sapin II framework, providing additional protections for companies and their employees, but which will also significantly increase obligations and risks for companies operating in France.

New compliance obligations for French subsidiaries of foreign companies

Sapin II currently requires companies that have more than 500 employees and a turnover above €100 million per year at group level and where the parent company is headquartered in France to have appropriate compliance programmes in place, including internal whistleblowing mechanisms, accounting controls and third-party due diligence procedures.

The Bill would extend the scope of compliance obligations to any foreign parent company exceeding the cumulative thresholds of 500 employees and €100 million in turnover at group level, regardless of where the parent company is incorporated. The proposal therefore removes the requirement for the parent company to be headquartered in France, requiring local subsidiaries of large foreign companies to maintain compliance standards at the same level as the largest corporations in France.

If adopted, French subsidiaries of foreign companies meeting the 500 employee and €100 million in turnover thresholds at group level would thus need to have thorough compliance programmes in place regardless of their footprint in France. Such companies would need a corruption risk-mapping system and a risk assessment process for clients/suppliers/intermediaries, thorough accounting controls, internal whistleblowing mechanisms and appropriate disciplinary procedures for ethics violations. Needless to say, if adopted, the Bill would radically change France’s anti-corruption and compliance landscape.

New failure to prevent offence

Under the proposed Bill, companies could be held criminally liable for failing to supervise employees who commit criminal offences. Companies could fight such a charge if they could prove they put sufficient measures in place to prevent the criminal conduct but the Bill does not specify what measures would be considered as sufficient. This proposal was inspired by the “failure to prevent” offence in the UK Bribery Act 2010, a measure that impacted UK corporate culture and caused UK companies to completely overhaul their compliance programmes.

New protections for companies: access to the case file and increased confidentiality

The Bill would also further incentivise companies to negotiate CJIPs. Article 6 makes plain the Bill’s objective to “encourage the self-reporting of corruption, and to strengthen the rights of companies when CJIP negotiations are taking place.”

The mechanisms to strengthen current processes include:

• Granting companies access to the case file from the moment the Public Prosecutor considers that a CJIP may be appropriate until a CJIP is proposed to the company. This would considerably change the landscape providing information to companies facing a preliminary investigation, a practice currently banned by the French Code of Criminal Procedure, and one that would make companies aware of allegations against them and charges they may face.
• Extending confidentiality to all documents and information exchanged during the CJIP negotiation process even if the company refuses the CJIP proposal made by the Public Prosecutor or renounces the CJIP. If enacted, this proposal will provide comfort to companies and their advisers since the CJIP guidelines currently suggest that materials shared by the company before a proposal for a CJIP is formalised can be used by the authorities in subsequent investigations and proceedings.
• Allowing companies (with the consent of the Public Prosecutor) to nominate an ad hoc representative or special committee to represent the company’s interests during CJIP negotiations. This would limit potential conflicts of interest where senior management is alleged to be involved in the wrongdoing for which the company is being investigated.
• Extending the offences which could be settled through a CJIP by including the crime of favouritism, which is defined under French law as offering or trying to offer an illegitimate advantage in public procurement.²

New role for the AFA and new powers for the High Authority for Transparency in Public Life

The Bill would require that all work currently carried out by the AFA that necessitates independence from the executive be entrusted to the High Authority for Transparency in Public Life (HATVP). The AFA’s mission would be redefined and refocused on administrative coordination and strategic planning and the HATVP would assume new powers to oversee public entities (for example monitoring the quality and the efficiency of the frameworks put in place by relevant public authorities).

The AFA would still carry out monitoring duties and ensure compliance with the French Blocking Statute. However, the Bill would amend the sanctions procedure for breaches of anti-corruption compliance obligations. At the moment CEOs, directors and managers of companies subject to Sapin II as well as the companies themselves can be held administratively liable for failing to implement a compliance programme. The AFA can impose financial penalties of up to €200,000 for individuals and €1 million for companies and can also order the publication of the sanction in the press. Under the Bill, it would be compulsory for the President of the AFA to issue a formal notice (mise en demeure) before referring the matter for sanctions. Sanctions could then be imposed within six months to two years of the formal notice unless the President of the AFA seeks direct sanctions for serious breaches (for example if a company acts in bad faith or fails to cooperate).

More defence rights during internal investigations

The Bill would enhance the defence rights of individuals where (i) individuals and their companies are the subject of an ongoing criminal investigation; and (ii) the company is carrying out an internal investigation based on the same facts. In those circumstances, individuals interviewed during internal investigations must:

• Receive reasonable notice of the proposed interview and the proposed amount of time the interview will take.
• Be informed of their right to make spontaneous statements, answer questions or remain silent.
• Be informed of their right to be assisted by legal counsel of their choosing or an interpreter.
• Be informed of their right to terminate the interview at any time.
• Be given a right to re-read and sign the minutes of the interview and provide written comments on the interview which would be appended to the minutes.

Note, however, that these protections are not available where internal investigations are spontaneously carried out or are unrelated to any ongoing criminal investigation.

Conclusion

The proposed Bill would significantly strengthen the enforcement of anti-corruption laws while also providing added protections for companies and their employees. Companies would welcome some provisions, such as (i) the ability to access the case file when facing a preliminary investigation; (ii) the fact that all documents and information exchanged during the CJIP negotiation process will remain confidential; and (iii) the proposals to enhance individuals' defence rights. But companies would also face significant increased obligations and risks, such as (i) the creation of a new failure to prevent offence; and (ii) the extension of compliance obligations to companies operating in France that hit the triggering thresholds regardless of their place of incorporation.

It remains to be seen whether the Bill as currently drafted will be adopted. If it is, companies will need to pay careful attention to their increased obligations, responsibilities and risks.

Footnotes

1) Loi n° 2016-1691 du 9 décembre 2016 relative à la transparence, à la lutte contre la corruption et à la modernisation de la vie économique, in force as of 1^st June 2017.

2) See Article 432-14 of the French Criminal Code.