France claims it waging war on corporate fraud. On November 16th, the country adopted the Law on Transparency, the Fight Against Corruption and Modernization of Economic Life (Sapin II). Some see the law more as a reaction to international pressure and less as a sign that France intends to crack down on corruption and bribery. In fact, despite claims to the contrary France has a long history of simply looking the other way in case involving corruption in public procurement. This post will analyze the law using the US Foreign Corrupt Practices Act (FCPA) as a benchmark.
Sapin II
For purposes of this post, we will refer to the Law on Transparency, the Fight Against Corruption and Modernization of Economic Life as Sapin II. The nickname comes from France’s current Minister of Finance, Michel Sapin.
Highlights of the new law include the creation of an anti-corruption agency, the ability of courts to impose deferred prosecution agreements, and whistleblower anti-retaliation provisions. Like the US FCPA, the law also extends to conduct occurring outside the country’s borders.
French Anti-Corruption Agency
Sapin II creates the “Agence Française Anticorruption.“ The new agency will work with both the Ministries of Justice and Budget. It’s hard to tell how it will function but on paper, it should perform the same functions as the United States SEC and Justice Department do under the FCPA. Notably, the new agency has investigative abilities.
Deferred Prosecution Agreements
The new law gives courts the ability to enter agreements that are akin to a U.S. deferred prosecution agreement. The French courts must approve these agreements. A company suspected of engaging in either international or national public corruption can avoid criminal prosecution by paying a fine and implementing an internal compliance program.
The law also gives the court the right to impose mandatory monitoring much like a U.S. corporate integrity agreement. The new agency will monitor compliance.
Notably absent from Sapin II, however, is the ability of individual defendants to seek deferred prosecution. The law appears limited to companies only.
Sapin II Whistleblower Anti-Retaliation Protections
Under the new law, companies that retaliate against whistleblowers are subject to fines. That doesn’t do much for individual whistleblowers although the law also allows workers harmed by the law to seek compensation.
Getting whistleblowers to come forward is key if the law is to be successful. If workers feel afraid, they won’t step forward. The reaction of the new agency, the French Public Prosecutor and the courts to the first few retaliation cases will set the tone for years to come.
Bribery of public officials has long been illegal in France. The public has a pretty good trust of the courts and police but when it comes to public procurement, France’s reputation is poor. A European Commission report in 2014 found that most French company officials found that political favoritism and corruption were problems, especially in the public procurement sector.
Alstom FCPA Action
Alstom S.A. is a very large French power and transportation company. In November of 2015, the company agreed to pay the then largest ever criminal penalty for foreign bribery, $772 million. The company admitted to bribing officials in Saudi Arabia, Indonesia, the Bahamas and Egypt.
What makes this case unique is that Alstom was prosecuted by the U.S. Justice Department under the FCPA and not the French government!
Under the U.S. Foreign Corrupt Practices Act, the Justice Department and SEC can investigate cases involving the payment, offering, receipt or solicitation of bribes involving foreign officials. Like Sapin II, the FCPA also gives prosecutors the right to act on activities outside the United States.
The U.S. law extends jurisdiction over foreign companies if any part of the illegal activity takes place in the U.S. or if the company sells shares of stock on U.S exchanges or is required to file reports with the U.S.
Should French Whistleblowers Report Under Sapin II or the FCPA?
Sapin II doesn’t fully kick in until May of 2017. It is too early to see what will happen but our initial reaction is that French whistleblowers should report under both the French Law on Transparency, the Fight Against Corruption and Modernization of Economic Life (Sapin II) and the FCPA.
Why the FCPA? U.S. law allows whistleblowers who report foreign corruption and bribery to receive an award based on a percentage of what the government collects. In the Alstom case, that could have been an award of over $200 million USD!
There is no requirement under the FCPA that whistleblowers be U.S. citizens or residents either.
The Bottom Line
France long needed improved measures to fight foreign bribery and corruption. We like the fact that the new Sapin II law also extends to bribery within the country as well. The only way these laws are effective, however, is if the government vigorously protects whistleblowers who bravely step forward. For that we need to wait and watch.
Even if France does do a great job protecting whistleblowers, the financial awards offered by US courts should remain a powerful incentive. We hope to see more French whistleblowers in the days ahead.
MahanyLaw – FCPA Whistleblower Lawyers
The whistleblower lawyers at MahanyLaw have helped our clients collect tens of millions of dollars in awards. We have represented people around the world. Our goals are simple: Help whistleblowers stop greed and corruption. Help them collect the maximum awards possible. And protect our whistleblower clients from corruption.
For more information, contact attorney Brian Mahany at *protected email* or by telephone at (414) 704-6731 (direct). All inquiries are protected from disclosure under US law and kept strictly confidential, even if you don’t hire us. You can also visit our FCPA whistleblower page for more information or use our text searchable blog.
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