The assessment of enforcement of Law No. 2016-1691 of 9 December 2016 “On Transparency, the Fight against Corruption and the Modernisation of Economic life” (Loi n°2016-1691 du 9 décembre 2016 relative à la transparence, à la lutte contre la corruption et à la modernisation de la vie économique, known as Sapin II), which entered into force in July 2017, is provided for by law four years after its adoption.
The report of the Commission addresses the main issues regulated by the Law, highlighting the achievements and the drawbacks and providing recommendations on how to improve current legal provisions.
1. Functioning of the French Anti-Corruption Agency
The authors of the report stress that the establishment of the French Anti-Corruption Agency (Agence Française Anticorruption – AFA), which is provided for by the Law, was an important step in streamlining corruption prevention activities at the domestic level: before that France had not had a specialised body fulfilling preventive functions. Since its establishment the AFA has held many consultations, published numerous guidance materials (including those on preventing corporate corruption, developing policies on gifts and hospitality and conducting verifications in the context of mergers and acquisitions) and carried out several verification procedures to ensure that organisations are compliant with the Sapin II requirements.
The assessment of the effectiveness of functioning of the agency showed that there are certain methodological problems that were particularly evident during the first verifications conducted by the AFA: in particular, the organisations under verifications expressed their dissatisfaction with the burdensome and lengthy verification procedures, shift of focus from the assessment of their compliance with the requirements of the Law to the detection of violations, infringement of the safeguards to bank secrecy and other provisions for protecting restricted information.
Additionally, the Commission notes that the AFA is understaffed to operate effectively: the agency is required to have 70 staff units, whereas the maximum number of its employees reached 60 in 2018 and only 55-57 in 2021.
The experts have also expressed doubt about the agency’s ability to successfully fulfill its functions of corruption prevention coordination.
Consequently, the Commission puts forward several recommendations in its report on how to improve the functioning of the AFA.
Firstly, it is necessary to narrow the scope of functions of the AFA. In particular, the Commission proposes to transfer responsibility for conducting verifications of corporate compliance with the Sapin II requirements and provision of relevant recommendations to the High Authority for Transparency in Public Life (Haute Autorité pour la transparence de la vie publique), which enjoys a higher degree of independence from the executive power than the AFA and considerable financial and operational autonomy. As a result, the functions of the AFA should be refocused on the coordination of domestic anti-corruption policy and publication and dissemination of awareness-raising and guidance materials.
Secondly, the authors of the report recommend establishing an interagency anti-corruption committee chaired by the French prime minister that will operate with the assistance of a technical committee led by the director of the AFA. This body will comprise the heads of central administrative services and departments along with the presidents of independent administrative authorities.
Thirdly, the experts deem it necessary to take steps to improve the mechanisms for detecting foreign corrupt practices primarily by encouraging the exchange of information among different French public bodies, including the AFA, law enforcement authorities, courts etc.
2. Prevention of corporate corruption
The obligation of organisations to adopt measures to prevent corruption was one of the most significant novelties of Sapin II: surveys undertaken by the AFA show that since the Law was adopted roughly 70 per cent of companies have introduced the relevant set of measures. The report stresses that the organisations subject to the relevant provisions of the Law have generally adopted all the measures provided for by it and have even gone beyond the list of measures that the legal act contains.
At the same time the experts point out that the established requirements are overly formal, as they contain an exhaustive list of anti-corruption measures and lay down strict criteria for their evaluation. On the one hand, this certainty facilitates the work of the AFA; on the other hand, it limits the capacities of the agency by preventing it from taking due account of the specific characteristics of the organisations subject to verifications and complicates the fulfillment of obligations by legal persons especially as regards the assessment of corruption risks and due diligence procedures: business community claims that only the initial investments in the implementation of the requirements of the Law can reach €1 million for medium enterprises and €2 to 5 million for transnational corporations. This problem is mitigated by the presence of a special Sanctions Commission in the structure of the AFA: in its decisions, the first of which was made in 2019 and the second one in 2020, the Commission specified that the recommendations of the AFA are not legally binding, which actually means that organisations can take into account their specific characteristics and resources when they implement the recommendations of the agency.
The authors of the report also stress that the legal provisions regulating the adoption of corruption prevention measures in the organisations of the public sector are too general and unclear if compared to the norms applicable to the private sector. Besides that, Sapin II does not provide for the sanctions against such organisations for their failure to comply with the established requirements. As a result, corruption prevention measures are introduced in few public bodies and not at all levels, are fragmented, incomplete and rarely based on a preliminary assessment of corruption risks. Consequently, the experts recommend supplementing the Law with clear provisions on the obligation of public bodies to adopt anti-corruption measures taking account of their size and corruption risks inherent in their activity.
The Commission further states that the “thresholds” (staffing level and annual turnover) set by Sapin II and determining the application of requirements to adopt anti-corruption measures to organisations cannot be reasonably explained. In particular, the branches of foreign companies that do not meet the established criteria and, as a consequence, their parent companies are not subject to the provisions of the Law, which hampers its effective enforcement. In this regard, the Commission proposes to extend the requirements of the Law to all subsidiaries of foreign companies if those companies themselves are compliant with the established criteria.
3. Non-trial resolutions
Another important novelty of Sapin II is the possibility to conclude non-trial agreements (in France, they are called “judicial public interest agreement”, Convention Judiciaire d’Intérêt Public) that are being actively used primarily in foreign bribery cases.
The development of this instrument, which has been used for a long time by the countries that possess outstanding record of holding persons liable for foreign bribery (first of all, the United States and the United Kingdom), has allowed France to reach a new level of international law enforcement: since the Law was adopted, 12 agreements have been concluded; the National Financial Prosecutor’s Office (Parquet National Financier) has gained international standing and strengthened the position of the country in transnational corruption proceedings against not only French but also foreign companies.
However, the application of non-trial resolutions in France is still in its initial stages of development and therefore it has a number of flaws.
In the first place, the safeguards provided to the legal persons throughout the negotiation of the agreement terms are not sufficient and duly regulated by law. Although it is unlikely that the prosecution will misuse the agreements, this matter still reduces the probability that organisations will self-disclose.
In the second place, the Law strongly encourages the initiation of internal investigations into offences by organisations, but does not regulate the procedure for their conduct.
In this context, the Commission makes the following recommendations on how to improve the non-trial resolution mechanisms:
- extend and incorporate into law the safeguards for the legal persons related to the conclusion of non-trial resolutions, in particular, by establishing a clear procedure for calculating potential penalties; prohibit to use the documents provided throughout the negotiation of the agreement terms in court proceedings if the agreement is not concluded in the end; grant legal persons the right to access the case files at the preliminary investigation stage etc.;
- amend the terms of conclusion of non-trial agreements also by extending the timelines for introducing compliance programmes, obliging the AFA to inform companies about the outcome of verifications, clearly setting out the rights of the companies cooperating with investigations etc.;
- adapt the existing similar instrument for the natural persons – the pre-trial guilty plea (Comparution sur reconnaissance préalable de culpabilité) – to the cases of corruption offences so that a natural person can simultaneously conclude an agreement with authorities and the employer company;
- expand the list of crimes to which non-trial resolutions are applicable also by incorporating in it favouritism and other similar offences.
The experts admit that the inclusion of the provisions on corruption whistleblowers and measures to protect them in Sapin II is aimed at enhancing the effectiveness of detection of corruption offences. However, the report stresses that in practice the relevant provisions of the Law are rarely enforced: whistleblowers fall often victim to serious retaliations both in the public and private sectors whereas the competent body (organisation) cannot provide them with the necessary protection.
The Commission states that in order to enhance the effectiveness of mechanisms for the protection of whistleblowers it is necessary to introduce a number of changes such as:
- specify the good faith criterion (this criterion means that the information disclosed by a whistleblower is true and the disclosure is not motivated by the intent to cause harm to certain persons) and exclude the integrity criterion (the current version of this criterion often denies whistleblowers the right to protection, for instance, in cases of disclosure of acts of corruption in a competing organisation or in a company with which the whistleblower is in dispute;
- re-arrange the reporting tiers and provide whistleblowers with the possibility to go directly to the law enforcement or other public authorities to raise an issue without having to alert their companies beforehand;
- revise the procedure for gathering and processing reports, in particular, by introducing the obligation to inform whistleblowers about the follow-up actions, guarantees of anonymity and an independent mechanism for data collection and processing;
- in the public sector: create institutional platforms for gathering and processing reports in the bodies (organisations) that do not have their own reporting channels;
- scale up the support measures for whistleblowers also by extending the powers of the Defender of Rights (Défenseur des Droits) in the matters of granting the status of whistleblower, administering and monitoring of the processing of reports, and provide the necessary human and financial resources to these defenders;
- incorporate in law the right of whistleblowers to financial aid from a special fund created to this end;
- improve the legal protection of whistleblowers from any kind of retaliation also by incorporating penalties for relevant actions in law.
It is highlighted that the implementation of Directive 2019/1937 of the European Parliament and of the Council of 23 October 2019 on the protection of persons who report breaches of Union law that should be concluded by the end of 2021 will allow for introducing the necessary changes.
5. Register of lobbyists
With the adoption of Sapin II, France created a Register of lobbyists that promote interests of certain groups in the public decision-making.
However, the Commission argues that the application of the Register cannot be described as effective. This is primarily due to the vague language, including the definition of a “lobbyist”, and the limited capabilities of the regulators for assessing the activities of lobbyists. Moreover, although the Register provides much of the information about parliamentary work, some data are still not reflected in it, including the participation of lobbyists in making decisions on bills.
In order to ensure that the Register is used as effectively as possible, the Commission recommends as a first step expanding its content by including the information on the activities initiated by politically exposed persons and the list of persons consulted throughout the drafting of legal acts; it further suggests increasing the frequency of declarations submitted by lobbyists; finally, the Commission recommends developing and adopting a code of ethics for lobbyists.