France’s Sapin II Law was created in 2016 to address corporate corruption and implement antibribery measures. The legislation took effect in 2017, marking a significant shift in the country’s regulatory compliance landscape. The law, which tracks closely with similar laws in the US, UK, and other EU countries, requires large companies [1] to implement a robust compliance program, including anti-corruption policies, monitoring procedures, and accounting controls. The law also significantly changes the government’s prosecution strategies for white collar crime, particularly in light of guidelines issued in 2023 and discussed below. For large entities operating in France, understanding these changes and their impact is critical to business continuity.

International authorities: collaboration on the rise

The National Financial Prosecutor’s Office (“PNF”) is the French judicial authority charged with investigation of corporate malfeasance and corruption. The Sapin II legislation has given new life to the Office, and the PNF no longer hesitates to investigate and charge well-known, international companies or to target foreign entities. For example, substantial fines have been issued, including most recently for tax fraud.

The PNF has also been engaging in significant collaboration and investigation efforts with other international regulatory bodies, including with the US DOJ and UK SFO. These collaborative regulatory efforts have led to cases of corruption of foreign officials being initiated in France based on information received from other foreign judicial authorities. Authorities from the DOJ, SFO and PNF are now used to coordinating their investigations across borders. French authorities have agreed to the signing of a Convention Judiciaire d’Intérêt Public (“CJIP”)—effectively a French deferred prosecution agreement—simultaneously with the execution of deferred prosecution agreements with US and UK authorities, to resolve multi-jurisdictional investigations.

New incentives to enter into negotiations with the PNF

The PNF published its first set of CJIP guidelines in 2019, and recently issued additional guidelines that offer new insight to the authority’s areas of focus. The new guidelines are significantly more comprehensive and provide greater detail regarding the PNF’s expectations for compliance programs, cooperation with regulatory authorities, and remediation requirements.

More importantly, the guidelines detail the calculation method of the fine to be negotiated. In practice, the total amount of the fine is calculated in two steps:

• The first step is a review, calculated on the basis of the direct and indirect benefits derived from the misconduct. The calculation predominantly relies on the investigated company’s accounting records, as indicated in the initial 2019 guidelines.
• The second step is a penalty, equal to the amount of economic benefit determined to have been received by the company based on the misconduct. Additional factors can either increase or decrease the ultimate fine imposed.

The details added in guidelines are by far one of the most significant outcomes of the 2023 update. This includes a table detailing the percentages of increase/ decrease applied to calculate the penalty based on specific circumstances. These percentages were not specified in the 2019 guidelines.

For example, obstructing the conduct of the investigation, using company resources to conceal the misconduct, and creating tools to conceal it can increase the penalty amount. On the other hand, self-reporting the misconduct to the PNF can mitigate the penalty up to 50%; including evidence and findings of an internal investigation offers up to a 20% reduction; demonstrating active cooperation with the PNF provides up to a 30% penalty decrease; and instituting corrective measures can lower the penalty up to 20%.

Extract of the Guidelines on the implementation of the judicial public interest agreement (CJIP)

The PNF has provided clear and practical incentives aimed at encouraging companies to actively implement compliance programs, conduct an internal investigation when a compliance risk is determined, and collaborate with the authority to address any malfeasance. However, both the absence of defined criteria for each factor that will be considered, as well as the wide range of percentage that can be applied by factor, still leave significant room for interpretation. For these reasons, a thorough review, including a compliance risk assessment, should be considered before opting for a CJIP.

In our review of the CJIPs concluded to date, the average amount of the penalty is close to 90% of the determined economic gains from the alleged corruption. In other words, the fines levied thus far are approximately double the amount of the benefits derived from the wrongdoing.

Takeaways

While the Sapin II Law has been in effect for six years, the law and impact of its regulatory authority (the PNF), continue to evolve. New background and context for how the authority will consider voluntary compliance disclosures, calculate penalties and review opportunities for deferred prosecution agreements (CJIP), are developing as well. Companies under the parameters of Sapin II are wise to not only have robust compliance programs instituted, but to also be regularly performing risk analyses and audits of their compliance programs. Working with outside counsel can offer an independent review of any concerns, address potential supplemental remediations and assist with policy updates.

[1] Sapin II Law sets several antibribery compliance measures to be implemented by companies or group of companies above the following thresholds:

• 500 employees, should it be either in one entity, or 500 employees in a group whose parent company has its registered office based in France, and;
• Whose turnover or consolidated turnover exceeds €100 million.