Is France at the cutting edge of anti-corruption legislation?

The saga of the Sapin II Bill has eventually reached an end: the Law was published on 10 December 2016.

The Constitutional Council received three requests from 60 members of the National Assembly, 60 members of the Senate, and the President of the Senate. The Prime Minister also referred the matter to the Constitutional Council on 07 December 2016. The Constitutional Council gave a decision approving the Bill on 08 December 2016 (Decision no2016-741 DC dated 08 December 2016), although it removed some articles considered unconstitutional.

Now that all appeal routes have been exhausted, the Bill was definitively passed into Law on 09 December 2016, and was published in the Official Journal of the French Republic on 10 December 2016 (Law no2016-1691 dated 09 December 2016).

The ministerial decrees are yet to be issued setting out the detailed content of the Law.

Please find below the contents of the Law on corruption as it now stands and, broadly, as will be implemented. The issues raised by the referral to the Constitutional Council, as well as the answers which have been provided, are set out below together with a description of each article of the Law.

Articles 1 to 5: creation of a French anticorruption Agency (FAC)

The Law provides for the creation of a national agency, tasked with the detection and prevention of corruption.

The aim of the FAC is to draft recommendations for public and private stakeholders, to be published in the Official Journal, with the aim of combating corruption through warnings and the imposition of penalties for compliance failures, either at its own initiative or upon the recommendation of ministries or recognized associations.

The new Agency also has investigative powers to request documents and to check their accuracy on the spot.

The French Assembly decisively voted for the FAC’s power to investigate and punish as well as its power to provide recommendations.

The Law also provides for sanctions against anyone who tries to prevent FAC agents from carrying out their duties.

Articles 6 to 16: definition and protection of whistleblowers

France's current legal framework contains no general provision ensuring the protection of whistleblowers, but instead consists of a patchwork of different regimes covering corruption, public health and environment, tax evasion and serious economic or financial crime, health and security at work, discrimination, abuse and sexual harassment, conflict of interests and information.

Now that the “Sapin II” Law has been passed, a broad definition for whistleblowers is created for alerts not only on environmental, health and security issues, but for any alerts in any fields when there is a threat to the public interest (article 6). However, medical secrecy, legal privilege and intelligence and national security secrets remain protected and, hence, cannot be disclosed.

The Constitutional Council’s view is that the definition of the whistleblower is constitutional, whereas 60 Representatives considered its definition to be too vague, and therefore unconstitutional.

Whistleblowers should first alert their managers (or other designated person within the company), then a public authority, and only as a last resort the public media. Companies with over 50 employees shall implement processes to enable their employees to do this.

The Constitutional Council approved the alert process in three steps. However it interpreted this article as only applying to whistleblowers within the company. External whistleblowers also defined in article 6 are therefore not covered by this procedure.

The alert should only be directed to the authorities and made public if strict conditions are met: after three months and only in case of serious and imminent danger or in case of irreversible damage.

The French Assembly reintroduced the offence of retaliation against whistleblowers and removed any sanctions for whistleblowers themselves.

According to the decision of the Constitutional Council, the “Defenseur des droits” (French Commissioner for Human Rights) is not entitled to award the whistleblower financial compensation and help him to bear any procedural costs in the event of litigation1.

The identity of the whistleblower must be kept confidential other than any disclosure required by the court. Any infringement is punishable by one year of imprisonment and a fine of  €30,000.

Article 16 of the Law provides for a whistleblower’s status to be recognized by the National Financial Market Authority (AMF) and the Prudential Supervisory Authority (ACP).

Article 17: a duty to prevent corruption

The Law creates an obligation for presidents, managing directors, managers and members of the economic board to actively manage corruption risks for those companies which have at least 500 employees and whose turnover is over €100m, or companies in a group meeting this requirement. The new Agency supervises this obligation.

The French Assembly restricted this obligation to (i) legal entities employing 500 employees and with €100m of turnover, whether they are part of an international group or not, and (ii) legal entities belonging to a group of companies (national or international) with its headquarters in France, which employs 500 employees, and with €100m of turnover.

This obligation to prevent corruption falls on the physical representatives of the company. It aims to impose a heavy burden on legal representatives so that they personally feel that they have a duty to prevent corruption.

The Constitutional Council made clear that according to article 17 both representatives and companies may be liable for failure to prevent corruption.

The obligations upon the representatives and the companies consist of implementing:

• a code of conduct
• an internal whistleblowing proceeding
• a register of corruption risk corruption for major clients and intermediaries (risk mapping)
• a system of accounting controls
• a training system of executives and the personnel the most exposed to corruption risk
• an internal disciplinary penalty system, and
• an internal system to control the implementation of the above measures.

The penalty for individuals and legal entities could be a warning, an injunction to comply by the Agency for the prevention of corruption, or a financial fine (max. €200,000 for individuals and €1m for legal entities), along with the potential publication of the decision. It is only an administrative penalty, however, and is not a criminal conviction.

Article 18: compliance penalty

The Sapin II Law creates a new Article 131-39-2 of the French Criminal Code, for companies convicted of corruption. It aims to ensure that companies convicted of corruption offences modify their behaviour and implement effective compliance programmes, within a certain court-defined time limit (five years maximum).

In the event of breach, new Article 434-43-1 of the Criminal Code provides for a sanction of up to two years imprisonment and a fine up to €50,000 for individuals, while legal entities could be fined up to the amount of the fine applicable to the offence of which they have been convicted.

The Agency oversees the company’s compliance with this obligation, and reports to the Public Prosecutor.

Article 18 also introduces in the French Criminal Code an extension of the obligation to publish the penalty and judgment for all offences involving “integrity breach”, meaning not just the criminal offences of corruption and trading with undue influence but also for preferential treatment, unlawful interference, misappropriation of public funds, etc.

Article 19: creation of an ineligibility penalty

A new penalty is introduced for those convicted of a corruption offence (including tax fraud), in the form of ineligibility for public office.

The Constitutional Council, however, ruled that this article was unconstitutional in so far as it applied to Representatives and Senators in central government, but could be maintained for locally elected representatives.

Article 20: creation of the criminal offence of corruptly influencing foreign public agents

The wording of the Law also provides for the offence of corruptly influencing a foreign public official. Previously the offence of trading in influence only applied where the individual targeted was employed by an international public organisation.

Article 21: extension of French authorities’ jurisdiction to cover offences committed abroad

This article widens the competence of French authorities to punish bribery committed abroad.

It extends jurisdiction of the French prosecution authorities for corruption and trade in influence committed abroad, with the removal of specific requirements, including:

• that the offence is also a crime in the jurisdiction where the acts occurred
• the requirement for a complaint from the victim or official denunciation from foreign authorities, and
• the requirement that the offence should be the subject of a decision from a foreign court (currently Article 113-5 of the French Criminal Code).

Article 22: A French DPA (Deferred Prosecution Agreement)

This article aims at reintroducing a “French DPA” (Transaction judiciaire) via article 42-1-2 of the French Criminal Procedure Code. This mechanism had been presented by the Government to the French Council of State in March 2016, but the Council considered that such a mechanism could not be implemented yet (see our article on this).

The form of DPA now implemented would allow companies to pay a fine, instead of being prosecuted, if they are suspected of international or national corruption offences (including tax fraud and money laundering). The fine could be up to 30% of an average of the annual turnover of a company over the past three years. The company would also have to implement internal compliance program improvements for three years. The FAC has the power of surveillance. Third parties affected by the corruption are entitled to compensation.

Companies therefore avoid a criminal sanction. The fine has to be approved by the French Prosecutor and the French Judge in a public hearing, and its content and amount shall be published on a website.

DPAs are reserved for corporate defendants, as is the case in the UK, and are not be available for individuals. Therefore if a company enters into a DPA, criminal sanctions could still be imposed upon individuals such as the senior executives of the company.

Article 25 to 33: creation of a public register for lobbyists and measures for transparency of public servants

The Law provides for the creation of a public online register for lobbyists, managed by the High Authority for Transparency in Public Life.

The definition of the targets of the lobbyists is wide, but does not include the French President. National and European French Representatives, regional representatives, etc. are covered. The French Assembly also passes into law the creation of a single register for both Chambers of the Parliament and the executive branch.

The Constitutional Council did not consider the definition of lobbyists to be too vague.

The Constitutional Council considered that the High Authority for Transparency in Public Life cannot impose and define relations between lobbyists and Representative. However it has allowed each Chamber to adopt specific rules on lobbying, and to sanction one of their members individually and according to internal procedures.

Lobbyists should communicate to the High Authority for Transparency in Public Life their actions as lobbyists, their expenditure, the number of employees dedicated to each action, and eventually their turnover. The High Authority for Transparency in Public Life has a power of investigation within the lobbyists’ premises.

Sanctions were set low, with fines for failure to provide the required information capped at €15,000 but they have been removed by the Constitutional Council which has stated that they are unconstitutional because criminal sanctions cannot refer to rules determined by the Chambers, not by the Law, and not yet known.

The Law also introduces an obligation for many categories of public servants to declare their interests and reinforces their obligations towards the High Authority for Transparency in Public Life, and the President and Prime Minister will be informed of any tax fraud committed by a member of the Government.

1Article 1 “Proposition de loi organique relative à la compétence du Défenseur des droits pour l’orientation et la protection des lanceurs d’alerte” and decision of the Constitutional Council no2016-740 DC dated 08 December 2016.