FCPAméricas Blog

Argentina Introduces Corporate Liability and Compliance Standards in New Anti-Corruption Law

Author: Matteson Ellis

Argentina new law

This article was originally published in Miller & Chevalier’s FCPA Winter Review 2018.

On December 1, 2017, Argentina introduced Law 27.401, amending certain corruption-related provisions already in the Criminal Code and establishing corporate criminal liability for certain corruption offenses, alongside broad vicarious liability provisions and significant potential penalties. The new law, which takes effect on March 1, 2018, allows companies potentially to escape liability by self-reporting violations and returning any undue benefits if the violation occurs after an “adequate” compliance program that meets minimum requirements set forth in the law is instituted. The law also introduces a settlement mechanism that offers lower and predictable penalties for companies that cooperate with enforcement authorities.

Offenses. The new law imposes liability for the following offenses:

  • Bribery of or influence peddling involving public officials, whether domestic or international, in accordance with Articles 258 and 258 bis of the Argentine Criminal Code;
  • The offense of “negotiations incompatible with the exercise of public functions,” in accordance with Article 265 of the Code, which imposes liability on a public official who acts upon a personal interest, whether directly or indirectly, in any contract or transaction in which the official plays a role by the virtue of his or her position;
  • The offense of “concusión” (loosely translated as “extortion”), in accordance with Article 268 of the Code, which imposes liability on a public official who converts, for the official’s own benefit or that of a third party, undue funds obtained through an improper request or demand;
  • Illicit enrichment of public officials and employees, in accordance with Articles 268(1) and 268(2) of the Code; and
  • The offense of “aggravated balances and reports,” in accordance with Article 300 bis of the Code, which imposes liability for the misrepresentation of certain books and records and accounting information by a founder, director, administrator, liquidator, or trustee of an entity with the intent to conceal the commission of offenses defined in Articles 258 and 258 bis, namely, bribery and influence peddling.

The new law governs the conduct of domestic and foreign legal entities, including those with state ownership or control. Geographically, the law amends the Criminal Code to apply to all offenses committed in or whose effects occur in Argentina, as well as offenses committed outside of Argentina by Argentine officials acting in an official capacity. With respect to bribery of foreign officials, the law also applies outside of Argentina to Argentine citizens and to legal entities domiciled in Argentina, whether under bylaws or through the existence of any establishments or branches in the country.

Vicarious Liability. A legal entity may be liable regardless of whether it committed the offense directly or if it was committed indirectly on the entity’s behalf, in its interest, or for its benefit. Indeed, an entity may be responsible if the action made in its interest or for its benefit is committed by an unauthorized third party, so long as the entity had even tacitly ratified the third party’s conduct. The only exception to vicarious liability is if the person who committed the offense acted strictly for his or her own benefit, without generating any benefit for the entity.

Limitations. The limitations period under the law is six years from the commission of the offense and it expressly provides for successor liability in case of an acquisition, merger, or other corporate transformation.

Penalties. The law provides a range of penalties, including fines of two to five times the undue benefit obtained or that would have been obtained; a total or partial suspension of the legal entity’s activities of up to 10 years; debarment, dissolution and liquidation of the entity’s legal status; and others. The law also grants courts discretion to consider a number of factors in determining a penalty. These factors are: failure to comply with internal rules and procedures; the number and seniority of officials, employees, and others involved; lack of oversight over the principal actors and other participants; the extent of the harm; the amount of money involved; the size, nature, and finances of the legal entity; self-reporting to the authorities; subsequent conduct; disposition to mitigate or repair the harm; and recidivism. With respect to the last factor, the law provides a presumption of recidivism if the legal entity is sanctioned for an offense within three years of a previous conviction. Notably, suspension and dissolution penalties do not apply if there is an essential need to maintain the operational continuity of the legal entity or some specific project or service, though the law does not clarify those circumstances.

Exemption. Notwithstanding the gravity of potential penalties, a legal entity may be completely exempted from liability if it takes the following steps, concurrently:

  • Self-reports the violation as a result of its internal detection and investigation;
  • Had implemented an adequate system of control and supervision before the conduct at issue, whose breach would have required an effort by the participants in the offense; and
  • Returns the undue benefit.

Compliance Programs. The second of these requirements references provisions of Law 27.401 that define the benefits and elements of an “integrity program” that companies subject to the law may adopt. As defined in the law, the program should be tailored to a company’s risk profile, including its activities, size, and financial capacity. The program must include (1) a code of ethics or conduct, or an equivalent set of integrity-oriented policies and procedures applicable to all directors, administrators, and employees; (2) specific rules and procedures to prevent unlawful conduct in the context of public tenders, the execution of public contracts, or any other interaction with the public sector; and (3) periodic training. Beyond these required elements, the program may include any of 10 additional components, such as periodic risk analysis, visible and clear support from senior leadership and management, reporting mechanisms, whistleblower protection, third-party monitoring, M&A due diligence, and more. Somewhat unique in the context of written global anti-corruption compliance standards, one of the optional elements is compliance with the regulatory requirements with regard to integrity programs of respective authorities at the national police, provincial, municipal, and community levels. Presumably, the rationale behind the optional elements is that companies would adopt them as appropriate based on their risk profile.

Although the law generally does not require companies to have an integrity program, it includes an exception for companies that contract with the Argentine federal government, which must have an integrity program in place to engage in certain types of government contracts (e.g., contracts that under local law require approval by a Minister or higher ranking government official and certain public works or concession contracts).

Settlements. The law also introduces a new settlement mechanism called “Effective Collaboration Agreement,” which has some commonalities with a DPA under U.S. enforcement practice and offers certain leniency to cooperating entities. In entering into such an Agreement with the authorities, an entity commits to providing accurate, useful, and verifiable information regarding relevant facts, identities of participants, and recovery of illicit proceeds. The entity would have to also agree to pay half the minimum applicable fine, return any illicit assets or proceeds, and forfeit any goods that would presumably be confiscated in case of conviction. Optional components of an Agreement include community service, disciplinary measures against direct participants, and implementation of or improvements to an existing integrity program. If a review of the Agreement by the prosecutors or the judge, conducted within one year of its execution, confirms that the information provided by the entity under the Agreement was truthful and useful, the imposed sentence cannot exceed that in the Agreement. If the information provided is not verified, the settlement is nullified and the process continues in accordance with applicable rules.

The Argentine Congress passed the law on November 8, 2017, and it was signed into law by President Macri on December 1, 2017. The law will take full effect 90 days after its official publication, on March 1, 2018.

One of the primary motivations behind the new law is a requirement by the Organization for Economic Co-operation and Development (OECD) – which Argentina has been seeking to join – that member states impose corporate liability for foreign bribery and the OECD’s finding that Argentina was not in compliance with this requirement, despite being a signatory to the OECD Anti-Bribery Convention. While it is too early to tell how the authorities might enforce the new law, the carrot-and-stick approach appears at least partly intended to motivate companies to implement meaningful anti-corruption compliance programs.

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.

© 2018 FCPAméricas, LLC

Matteson Ellis

Post authored by Matteson Ellis, FCPAméricas Founder & Editor

Categories: Anti-Corruption Compliance, Argentina, Enforcement, English

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