FCPAméricas Blog

Corporations on the Hook in Latin America

Author: Matthew Fowler

HookA common feature of Latin American legal systems is that they grant authorities a limited ability to sanction corporations. If you are a corporation, this may sound like good news. But as the OECD’s Director of Legal Affairs Nicola Bonucci said at an ABA event in Washington, D.C. recently, it creates a “big loophole” in the anti-corruption enforcement efforts of Latin American governments. For companies subject to the FCPA and interested in a level playing field abroad, this loophole is not good news.

At the same time, legal changes taken by several Latin American countries to close this loophole have significantly strengthened their anti-corruption enforcement regimes. More importantly, these developments provide models for other Latin American countries to follow in meeting international standards for anti-corruption laws.

A driving force behind these recent changes is implementation of the OECD Anti-Bribery Convention. The OECD convention requires, among other things, that signatories “take such measures as may be necessary, in accordance with its legal principles, to establish the liability of legal persons for the bribery of a foreign public official.”

Differing approaches in Chile and Brazil

Latin American countries have generally not adopted corporate criminal liability because mens rea – criminal intent – is a required element of any crime and legal entities are not considered capable of having intent.

In 2009, Chile overcame this conceptual barrier and changed its law to create criminal liability for legal persons for bribery offenses. It also increased other penalties for bribery offenses to make them “effective, proportionate and dissuasive,” as required by the OECD. Prior to this change, the OECD had expressed “serious concerns” about Chile’s lack of action regarding the responsibility of legal persons (and other issues).

This year, as described in previous posts, Brazil also changed its anti-corruption laws. Brazil established strong penalties on legal entities, but did not establish criminal liability for them. The OECD Working Group on Bribery will review the new law in early 2014. It is unclear whether it will find Brazil’s alternative approach as sufficient to meet OECD requirements. Mr. Bonucci speculated that the Working Group will likely have focused discussions on this point. He also noted that Germany does not provide for criminal liability of corporations, but added that it is one of the most rigorous enforcers of foreign bribery laws.

Pending Implementation in Latin America

The Brazilian example should provide a welcome alternative to the other Latin American signatories to the OECD convention. Mexico, Argentina, and Colombia are all at different phases of implementation, and may be able to learn from Brazil’s approach to guide their own legislative changes.

Mexico signed the convention in 2007 and has since passed significant implementing legislation. However, as previously discussed by FCPAméricas, Mexico has delayed implementation of changes to corporate liability rules recommended by the OECD Working Group.

Argentina signed onto the OECD Convention in 1997, and the OECD has since expressed particular concerns about the lack of liability of legal persons there. According to Mr. Bonucci, recent bills intended to address those concerns have failed in Congress. While the necessary changes could be addressed in an ongoing review of its criminal code, Argentina’s deadline for meeting implementation conditions is approaching in December 2014.

Colombia signed onto the OECD convention last year, and has laws that provide for liability of legal persons. The OECD Phase One Report suggests that Colombia should extend such liability to trusts and to state-owned and state-controlled corporations.

The Next Wave?

Peru has applied to become a signatory of the OECD convention. As reported by FCPAméricas, Peru’s Minister of Justice has said that passing a law to create liability for legal persons is a priority for the government.

Costa Rica has been invited to be a member of the OECD, and while it is not a member of the OECD convention, it has joined a series of OECD instruments related to integrity, transparency and international business conduct. If it does join the OECD convention, it will also need to address corporate liability for bribery offenses.

Regional Change

The fact that such changes are being considered in these countries is a remarkable change in regional legal culture. Latin America is becoming an increasingly level playing field on anti-corruption issues – one that includes increased liability for companies.

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

Matthew Fowler

Post authored by Matthew Fowler, FCPAméricas Contributor

Categories: Argentina, Brazil, Chile, Colombia, Costa Rica, Enforcement, English, FCPA, Mexico, OECD, Peru

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