Brazil Amends Leniency Agreement Rules under the BCCA

^[1]By Esther Flesch, Bruno Maeda, Carlos Ayres, Erica Sarubbi, Leopoldo Pagotto, Camila Steinhoff, and Fernanda Bidlovsky*

On December 21, 2015, the Brazilian President amended Law No. 12,846/13 (“Brazil Clean Companies Act” or “BCCA”), which has been in force since January 2014 and was regulated by Decree No. 8,420/2015 in March 2015 (see further details about the regulation here ^[2]). The Provisional Measure attenuates the sanctions and helps correct certain legal uncertainties.

Importantly, the Provisional Measure changes the requirements for use of leniency agreements. In particular, (i) the legal entity no longer needs to be the first to show interest in cooperating with the investigation of a specific illegal act; (ii) the legal entity does not need to confess its involvement in the illicit activity; and (iii) a requirement of the legal entity to implement or improve its compliance program has been included.

The Provisional Measure allows the legal entity responsible for the acts against the Public Administration, set forth in the BCCA, to enter into a leniency agreement with the applicable administrative agencies in conjunction with the Public Prosecutor’s Office and the Public Advocacy (the legal body that represents the federal government, states and municipalities in court). It makes the following key changes:

If the Public Prosecutor’s Office and the Public Advocacy jointly enter into a leniency agreement with the administrative authority, other entities are barred from filing public class actions otherwise provided in Law No. 8,429/92 (Administrative Improbity Law), or are prevented from continuing actions if they have already been filed (this has been an issue for companies entering into leniency agreements in Brazil, as discussed here ^[3]). In this way, no longer will companies settle a violation under the BCCA with the competent administrative authorities only later to face legal actions under other laws or by other Brazilian authorities that express interest later. Brazilian authorities must notify the Public Prosecutor’s Office when an administrative investigation starts and when a leniency agreement is entered into.
A leniency agreement may also exempt the legal entity from debarment-like restrictive sanctions (g. limitations to the right to bid and contract with the Public Administration) provided for in Law No. 8,666 (“Public Procurement Law”), and other acts dealing with bidding and contracts. In addition, the first entity to self report will benefit from full immunity in relation to the financial sanctions. Entities that disclose issues later and enter into leniency agreements may benefit from up to two-third reduction of the financial sanctions set forth in the BCCA.
Entities are incentivized to create and develop an effective compliance program, in addition to promptly investigating possible problems and entering into leniency agreements with Brazilian authorities.

The Provisional Measure has been in force since its publication. It must be voted on by both the Senate and the House of Representatives. If the Provisional Measure is not approved by vote within 45 days, all the other federal legislative decisions will be blocked, meaning that the agenda of Congress will require deliberation on the Provisional Measure before other matters are resumed.

* Esther, Bruno, Carlos, and Erica are partners of the compliance team of Trench, Rossi e Watanabe Advogados in São Paulo. Leopoldo, Camila and Fernanda are of counsel / senior associates within the compliance team of the firm.

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