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What to Expect from the Upcoming Regulation of Brazil’s New Anti-Bribery Law

Author: Carlos Ayres

FCPA.BrazilIn August this year, Brazil passed a new Anti-Bribery Law (an unofficial translation of the law into English is available here), which will come into force on January 29, 2014 (and does not apply retroactively), holding legal entities civilly and administratively liable for bribery of local and foreign officials. The law also prohibits fraud in public procurement, bid rigging, and other illegal acts.

The Anti-Bribery Law gives credit to companies that have compliance programs in place and requires the Federal Government to issue a regulation on compliance programs. The Office of the Federal Comptroller General (“CGU“), the body with authority to investigate and sanction illegal acts prohibited by the law that are committed against foreign Public Administrations (CGU also has concurrent authority to investigate local bribery at the Federal Executive Power) was involved in drafting the new law and is now working on the required regulation.

Continuing its positive gestures of discussing the law and debating the upcoming regulation, representatives of CGU have been participating in public events about it (see here and here). Based on these discussions, below are some of the main areas that are expected to be part of the upcoming regulations:

Compliance programs. The law only requires the Federal Government to regulate the criteria for evaluation of compliance programs (though the regulation will cover much more, as detailed below). It will likely provide a substantive list of elements of compliance programs that companies will need to have to get credit. It is unclear how the regulation will accommodate companies of different sizes and subjected to different levels of risk.

Definition of local officials. The Anti-Bribery Law defines foreign officials but not local officials, which has raised questions in the local legal community. It is likely that the regulation will address that topic and use the definition included in the Brazilian Penal Code (Article 327). This article defines public officials as those who, even transitorily or without compensation, hold a public position, job or office in government agencies and entities, as well as those who work for entities controlled, directly or indirectly, by the government (e.g., government-owned corporations or state-owned enterprises). It also includes employees of private companies that are hired to carry out activities that the public administration typically performs.

Calculation of gross revenue. Under the Anti-Bribery Law, legal entities are subject, among other sanctions, to a fine in the amount of 0.1% to 20% of the gross revenue of the legal entity in the fiscal year previous to the initiation of the administrative proceedings, excluding taxes. Companies have raised questions about how the “gross revenue” will be calculated for purposes of imposing the fine and CGU has indicated it may clarify this aspect of the law.

Enforcement authorities. Violations committed against the Brazilian administration will be investigated and sanctioned by the “… highest authority of the relevant Agency or entity of the Executive, Legislative and Judiciary …”. This feature of the law has been subject to several criticisms, not only because it is not clear who are competent authorities. The extraordinary number of enforcement authorities in the country could result in, among other things, excessive fragmentation of efforts, problems in achieving coherent outcomes, lack of specialized expertise, and potential conflicts of interest. Representatives of CGU say that they plan to clarify who the enforcement authorities are.

Criteria for the fine. The new law sets forth that fines will range from 0.1% to 20% of the gross revenue of the legal entity (or from R$ 6,000.00 – around USD$ 2,580.00 – to R$ 60,000,000.00 – around USD$ 25,580,000.00 – if not possible to use the gross revenue criteria). CGU will likely provide the criteria that will be used to determine where the fine will fall within that range. This is most likely a response to current concerns over the fact that an extraordinary number of enforcement authorities could lead to potential abuses, especially at the local level.

The regulation of Brazil’s new Anti-Bribery Law is not expected to be released until January 2014. Certain aspects of it may not be mandatory at the State and Municipal levels, but may serve as guidance for these authorities.

Ed. Note: FCPAméricas has been tracking the bill’s progress for the last year and a half. You can review its progression over time below:

Brazil considers foreign bribery law overhaul.

Brazilian Congress revises the foreign bribery bill.

Business pushback against the bill.

Things that the Brazilian Congress might consider with respect to the draft bill.

The context of passage of the draft bill.

How the bill might not meet OECD standards.

The bill passes the Brazilian House of Representatives.

Brazil Senate Approves Anti-Bribery Bill: Now headed for President’s signature.

Brazil President Signs Sweeping Anti-Bribery Bill Into Law.

Key provisions for companies.

What the law could mean for Brazilian companies and compliance.

The opinions expressed in this post are those of the author in his or her individual capacity, and do not necessarily represent the views of anyone else, including the entities with which the author is affiliated, the author`s employers, other contributors, FCPAméricas, or its advertisers. The information in the FCPAméricas blog is intended for public discussion and educational purposes only. It is not intended to provide legal advice to its readers and does not create an attorney-client relationship. It does not seek to describe or convey the quality of legal services. FCPAméricas encourages readers to seek qualified legal counsel regarding anti-corruption laws or any other legal issue. FCPAméricas gives permission to link, post, distribute, or reference this article for any lawful purpose, provided attribution is made to the author and to FCPAméricas LLC.

© 2013 FCPAméricas, LLC

Carlos Henrique da Silva Ayres

Post authored by Carlos Henrique da Silva Ayres, FCPAméricas Contributor

Categories: Anti-Corruption Compliance, Brazil, Enforcement, English, FCPA, Foreign Official/Instrumentality

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