FCPAméricas Blog
Factors to Consider Before Entering into Leniency Agreements in Brazil
7.02.2014
One of the most innovative features of Brazil’s new Anti-Bribery Law is the ability of authorities to enter into Leniency Agreements with companies. This is a new concept in Brazil’s anti-corruption arena. Companies that enter into leniency agreements with public authorities and satisfy their conditions will have their fines reduced by up to two thirds, and certain judicial and administrative sanctions exempted.
The decision on whether or not to enter into a leniency agreement will be contingent upon several factual and strategic considerations. Below are some issues that companies operating in Brazil should consider (they are not exhaustive):
No duty to self-disclose. It is important to remember that companies have no duty to report an actual or potential violation of the new Anti-Bribery Law to authorities. As such, some companies may opt not to report illegalities they find. Although disclosure is not required, it may be strategically beneficial in certain situations.
Need to admit wrongdoing. Under the new Anti-Bribery Law, to qualify for leniency, the company must admit its participation in the wrongdoing and fully cooperate with the investigation. In cases where foreign authorities may also have jurisdiction over a wrongdoing, the obligation to admit wrongdoing can present problems. Other authorities may want to investigate the matter. Moreover, an admission in Brazil may lead to derivative lawsuits in other countries. Because of this, multinational companies considering self-disclosure should make sure they have a multi-country legal team formulating a strategy that takes into account potential legal actions in different countries.
Possible overlap with other laws. Before deciding to self-disclose to Brazilian authorities, companies should carefully analyze the facts in order to understand which laws apply. The new Anti-Bribery Law potentially overlaps with others laws (which do not authorize leniency). Therefore, a company could settle a violation under the new Anti-Bribery Law but later face legal actions based on other laws. Making the situation more complicated is the fact that the boundaries of the new Anti-Bribery Law are not yet well defined.
Involvement of all authorities with jurisdiction over the matter. The sanctions set forth in the Anti-Bribery Law include administrative sanctions (applied by the public administration directly) and judicial sanctions (applied by a judge). Companies that enter into leniency agreements with public authorities and satisfy their conditions will have their fines reduced by up to two thirds and exempted from the publication of the condemnatory decision. But certain judicial sanctions are not exempted. Companies could still be subject to loss of assets, partial suspension, and compulsory dissolution of the legal entity. While one would expect that partial suspension and compulsory dissolution would be used in more serious cases — perhaps those in which the legal entity was created for illegal purposes — to avoid being subject to loss of assets, companies should consider settling with all authorities with jurisdiction over the matter.
In recent public events, representatives of 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), have indicated that they plan to involve Federal Prosecutors and other relevant authorities, when applicable (e.g., CADE – Brazil’s Antitrust Authority; TCU – Federal Audit Court), in their leniency agreements. They hope to provide legal certainty to companies and incentivize them to come forward. It remains to be seen how this will operate and what approach will be taken at the state and municipal levels.
Verification of authorities with jurisdiction. Brazil’s new Anti-Bribery Law provides an extraordinary number of enforcement authorities authorized to enforce the law (see here). In cases where wrongdoing touches multiple jurisdictions, companies should consider involving all relevant authorities in the settlement to avoid a situation where one authority does not honor the leniency of other authority.
Each case will present its own sets of facts and circumstances and several other factors should be taken into consideration when balancing the advantages and disadvantages of entering into leniency agreements in Brazil. Companies considering this path should think about the particularities of the Brazilian system and develop a global strategy.
The federal regulation is expected to provide further details about the parameters for concluding leniency agreements. Perhaps some of the factors discussed above will be addressed in it.
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.
© 2014 FCPAméricas, LLC
Post authored by Carlos Henrique da Silva Ayres, FCPAméricas Contributor
Comments
July 2nd, 2014 at 3:49 pm
[…] Factors to Consider Before Entering into Leniency Agreements in Brazil by Carlos Ayres Published o… […]
July 7th, 2014 at 2:03 am
This is a relevant matter to consider as several clients might face jurisdictions overlap!
July 9th, 2014 at 6:26 pm
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