FCPAméricas Blog
Brazil Senate Approves Anti-Bribery Bill: Now headed for President’s signature
7.05.2013
This post was written by Esther Flesch, Bruno Maeda, Erica Sarubbi and Carlos Ayres of the Trench, Rossi e Watanabelaw firm in Brazil. FCPAméricas has previously discussed the draft bill here, here, and here. We have discussed corruption risk in Brazil here and here.
Yesterday, July 4, 2013, the Brazilian Senate approved Bill of Law 6,826/2010 (“Anti-bribery Law”), which imposes civil and administrative liability on legal entities for acts committed in detriment of the local and foreign Public Administration, specially those related to corrupt practices.
With its approval by the Senate, the Bill of Law will be sent for Presidential approval. After that, it will come into force 180 days after it is published on the official gazette (it is expected to come into force in early 2014).
The main features of the text approved at the House are the following:
(i) Subjected Persons
The Anti-bribery Law sets forth that the following entities (legally or de facto organized, even if temporarily) will be strictly liable for the prohibited acts committed in their interest or benefit, exclusive or not:
I. business organizations and sole proprietorships, incorporated or not, regardless of the type of organization or the corporate model adopted,
II. any foundations or associations of entities or persons, and
III. foreign companies with office, branch or representation in the Brazilian territory.
(ii) Prohibited Acts
The Anti-bribery law is not applicable only to corruption cases It is also applicable to other illegal conducts committed against the local and foreign public administration. The following conducts are prohibited by the new law:
I. to promise, offer or give, directly or indirectly, an undue advantage to a public agent, or to third person related to him;
II. to finance, defray, sponsor or anyway subsidize, in a proven way, the performance of the wrongful acts provided for in the new law;
III. to make use of an individual or legal entity interposed to conceal or dissimulate its real interests or the identity of the beneficiaries of the acts performed, in a proven way;
IV. regarding public tenders and contracts:
a) to thwart or defraud, through an adjustment, arrangement or any other means, the competitive character of a public tender procedure;
b) to prevent, disturb or defraud the performance of any act of a public tender procedure;
c) to remove or try to remove a tenderer by fraudulent means or by the offering of any type of advantage;
d) to defraud a public tender or a contract arising therefrom;
e) to create, in a fraudulent or irregular manner, a legal entity to participate in a public tender or enter into an administrative contract;
f) to gain an undue advantage or benefit, in a fraudulent way, from modifications or extensions of contracts entered into with the Public Administration, without authorization provided by law or in the public tender invitation or the respective contractual instruments; or
g) to manipulate or defraud the economic and financial balance of the contracts entered into with the Public Administration.
V. to hinder the investigation or auditing activities by public agencies, entities or agents, or to interfere with their work, including within the scope of the regulatory agencies and supervisory bodies of the national financial system.
(iii) Sanctions
The sanctions set for in the Anti-Bribery Law are harsh and include:
Administrative sanctions:
I. fine in the amount of 0.1% to 20% of the gross revenue of the legal entity in the fiscal year (which in Brazil is the calendar year) previous to the initiation of the administrative proceedings, excluding taxes, which shall never be lower than the advantage obtained, when possible to estimate it; and
II. publication of the condemnatory decision.
If it is not possible to use the criteria of the value of the gross revenue of the legal entity, the fine will range from R$ 6,000.00 (around USD 3,000.00) to R$ 60,000,000.00 (around USD 30,000,000.00). The Anti-bribery Law also limits the amount of the fine to the total amount of the goods or services contracted or sought.
Judicial sanctions:
I. loss of the assets, rights or valuables representing, directly or indirectly, the advantage or benefit gained from the infringement;
II. partial suspension or interdiction of its activities;
III. compulsory dissolution of the legal entity; and
IV. prohibition to receive incentives, subsidies, grants, donations or loans from public agencies or entities and from public financial institutions or institutions controlled by the Government, from one to five years.
The application of the sanctions set forth in the Anti-bribery Law does not affect the application of sanctions arising out of violations of the Improbity Law (Law No. 8,429/92) or the Public Procurement Law (Law No. 8,666/93).
Strict Liability:
All administrative sanctions and the judicial sanction of loss of assets, rights or valuables shall be applied under the theory of strict liability. This means that the authorities only need to evidence that the illegal acts was committed in the benefit or interest of the legal entity. The application of the remaining sanctions will require a finding of fault or intent of the entities involved.
Successor Liability:
The Anti-bribery Law sets forth that there is successor liability in the event of amendments to the articles of association, transformation, merger, acquisition or spin-off of the company. In case of merges and incorporations, the successor liability will be limited to the obligation to pay fines and the full restitution of the damage cause, up to the limit of the assets transferred.
(iv) Factors to be taken into consideration in applying sanctions
The Anti-Bribery Law sets forth a list of factors that will be taken into consideration in applying the sanctions, which include, the seriousness of the offense; the advantage gained or sought; whether the offense was fully or partially completed; the level of the damages; the negative effects produced by the offense; among others.
Specifically, it is important to note that the Anti-bribery Law includes two factors that incorporate significant changes to the Brazilian anticorruption legislation.
First, the legal entity that has an effective compliance program in place will get credit for it since the “the existence of mechanisms and internal integrity procedures, audit and incentive denunciation of irregularities in applying the code of conduct and ethics within the legal entity” will also be taken into consideration when determining the sanctions to be applied. The criteria of evaluation of compliance programs will be established by specific regulation to be issued by the Federal Executive Branch.
Another important factor that will be taken into consideration when applying the sanctions will “the cooperation of the legal entity with the investigation of the offense”.
In this context, in line with anti-corruption legislations adopted in other countries, specially the United Stated and the United Kingdom, Brazilian law will also expressly recognize that companies that have an effective compliance program in place and cooperate with the authorities with the investigation of the offenses shall receive a more favorable treatment.
(v) Enforcement authorities
With respect to the administrative sanctions, the initiation and judgment of a proceeding to determine the responsibility of a legal entity is an incumbency of the highest authority of the relevant Agency or entity of the Executive, Legislative and Judiciary.
The Office of the Federal Comptroller General (“CGU”) shall have authority to investigate, process and rule on the illegal acts set forth in the Bill of Law that are committed against the foreign Public Administration. At the Federal Executive Branch level, CGU will also have concurrent authority to initiate administrative proceedings against legal entities as well as to exam the regularity and correct the progress of proceedings handled by other authorities.
With respect to the judicial sanctions, it should follow the same proceeding of the Brazilian Class Action (Ação Civil Pública), set forth in law 7.347/85.
(vi) Leniency agreements
The Anti-bribery law allows the public administration to enter into leniency agreements with the legal entities responsible for the performance of prohibited acts established in this Bill of Law, provided that they effectively collaborate with the investigations and with the administrative proceeding and that such collaboration results in: i) the identification of the ones involved in the violation when applicable; and ii) the rapid obtaining of information and documents proving the illegal acts under investigation.
Leniency agreements may only be executed when the following requirements are cumulatively fulfilled:
I. the legal entity is the first one to come forward and demonstrate its interest in cooperating with the investigation of the illegal act;
II. the legal entity completely ceases its involvement in the investigated infringement as of the date of the proposal of the agreement.
III. the legal entity admits its participation in the offense and fully and permanently cooperates with the investigations and the administrative proceeding, always attending, at its expenses and whenever requested, to all procedural acts, until its end.
The leniency agreement does not exempt the legal entity from its obligation to restitute the damages caused. However, it will reduce the amount of the applicable fine in up to two thirds and will exempt the legal entity of all the administrative and judicial sanctions set forth in the Anti-bribery Law.
It is important to note that the Anti-bribery Law also allows the Public Administration to enter into a leniency agreement with a legal entity responsible for committing illicit acts set forth in articles 86 to 88 of the Public Procurement Law (Law No. 8,666/93).
The FCPAméricas blog is not intended to provide legal advice to its readers. The blog entries and posts include only the thoughts, ideas, and impressions of its authors and contributors, and should be considered general information only about the Americas, anti-corruption laws including the U.S. Foreign Corrupt Practices Act, issues related to anti-corruption compliance, and any other matters addressed. Nothing in this publication should be interpreted to constitute legal advice or services of any kind. Furthermore, information found on this blog should not be used as the basis for decisions or actions that may affect your business; instead, companies and businesspeople should seek legal counsel from qualified lawyers regarding anti-corruption laws or any other legal issue. The Editor and the contributors to this blog shall not be responsible for any losses incurred by a reader or a company as a result of information provided in this publication. For more information, please contact Info@MattesonEllisLaw.com.
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@2013 Matteson Ellis Law, PLLC
Post authored by Matteson Ellis, FCPAméricas Founder & Editor
Comments
July 8th, 2013 at 11:40 am
Contrary to what you state “in this context, in line with anti-corruption legislations adopted in other countries, specially the United Stated and the United Kingdom” …
The FCPA is silent as to cooperation credit and compliance programs. Rather, the DOJ and SEC, in non-binding guidance, say they will reward cooperation credit and pre-existing compliance programs.
August 12th, 2013 at 12:58 pm
[…] On August 2, 2013, Brazil’s new Anti-Bribery Law (“Anti-Bribery Law”), which imposes civil and administrative liability on legal entities for acts committed against local and foreign public administration, especially those related to corrupt practices, was published in the Official Gazette. The new law will come into force in 180 days. The main features of the new Anti-Bribery Law are described here. […]