This article originally appeared in the FCPAmericas Blog and is reprinted here with permission.
Not only are they concerned that the country will not pass and implement the law in time for the OECD Working Group’s 2014 review (see a discussionhere about the OECD peer review process that assesses compliance with OECD Anti-Bribery Convention commitments – during the review, Brazil’s legislation and enforcement efforts will be evaluated by international experts). Many are also worried that the eventual legislation might not meet actual OECD Anti-Bribery Convention standards.
The specific area of concern is Article 3 of the Convention. It provides that signatory countries must ensure that, in the case of applying non-criminal penalties to legal entities (which is the case with the draft bill), the penalties must be “effective, proportionate, and dissuasive.” But recent changes proposed to Brazil’s draft legislation would water down the penalties. In particular, two features of the revised bill would likely not pass the OECD’s test of effectiveness, proportionality, and dissuasiveness.
Level of sanctions: The proposed changes would limit the sanctions to between 0.1% and 20% of the gross revenue in the previous year of the specific line of business involved in the company’s wrongdoing. Given the difficulties in defining the exact contours of a specific line of business, the amendment could result in costly and time-consuming litigation, complicating enforcement.
The proposed change would also limit the amount of fines to the amount of the contract obtained or sought. Some believe that this change might not create a sufficient dissuasive effect. Ultimately, there might be companies that would simply prefer to run the risk of being caught and paying the penalty. In addition, in some situations, the misconduct under review might not be directly related to a “contracted good or service,” for example, where a legal entity bribes a public official in order to obtain a license for its factory to operate. This might complicate the ability of authorities to enforce the law in a meaningful way.
Excluding debarment as a possible sanction: The proposed changes would exclude debarment from the list of possible penalties to be applied to legal persons that commit the misconduct covered by the bill. Many believe that the threat of debarment is important because, for some companies, other penalties might not be sufficient to prevent misconduct. Debarment also has an important prevention effect as it excludes legal persons who have engaged in wrongdoing from entering into public contracts. The OECD Anti-Bribery Convention Commentaries expressly state that countries should consider including, among other sanctions, debarment for cases of bribery of foreign public officials. Though debarment will not always be an appropriate penalty for misconduct, it is a helpful option for authorities to have at their disposal among other possible sanctions.
Civil society and many in the local business community are responding to these proposed changes. For example, Instituto Ethos, a well-respected local civil society organization focused on anti-corruption initiatives that congregates some of the largest companies operating in Brazil, strongly supports the bill. It is also concerned about the proposed changes described above. It is planning to launch a campaign against the changes.
The Anti-Corruption and Compliance Committee of IBRADEMP (the Brazilian Institute of Business Law) has also been active in testifying before Congress and submitting reports to help clarify and improve the bill. In the past, Congress adopted several important amendments proposed by IBRADEMP. At the end of last year, IBRADEMP submitted to Congress a report explaining why these latest proposed changes and others would cause the future anti-bribery legislation to fail to meet OECD requirements.
It is still unclear whether the latest proposed changes will be incorporated into the new version of the bill, but some say it is likely. It is also unclear whether there will finally be an actual vote. To date, there have been six scheduled votes on the bill, and each one has been cancelled.
The FCPAméricas blog is not intended to provide legal advice to its readers. The blog entries and posts include only the thoughts, ideas, and impressions of its authors and contributors, and should be considered general information only about the Americas, anti-corruption laws including the U.S. Foreign Corrupt Practices Act, issues related to anti-corruption compliance, and any other matters addressed. Nothing in this publication should be interpreted to constitute legal advice or services of any kind. Furthermore, information found on this blog should not be used as the basis for decisions or actions that may affect your business; instead, companies and businesspeople should seek legal counsel from qualified lawyers regarding anti-corruption laws or any other legal issue. The Editor and the contributors to this blog shall not be responsible for any losses incurred by a reader or a company as a result of information provided in this publication. For more information, please contact Info@MattesonEllisLaw.com.
Matteson Ellis serves as Special Counsel to the FCPA and International Anti-Corruption practice group of Miller & Chevalier Chartered in Washington, DC. He is also founder and principal of Matteson Ellis Law PLLC, a law firm focusing on FCPA compliance and enforcement. He has extensive experience in a broad range of international anti-corruption areas. Previously, he worked with the anti-corruption and anti-fraud investigations and sanctions proceedings unit at The World Bank.
Mr. Ellis has helped build compliance programs associated with some of the largest FCPA settlements to date; performed internal investigations in more than 20 countries throughout the Americas, Asia, Europe and Africa considered “high corruption risk” by international monitoring organizations; investigated fraud and corruption and supported administrative sanctions and debarment proceedings for The World Bank and The Inter-American Development Bank; and is fluent in Spanish and Portuguese.
Mr. Ellis focuses particularly on the Americas, having spent several years in the region working for a Fortune 50 multinational corporation and a government ethics watchdog group. He regularly speaks on corruption matters throughout the region and is editor of the FCPAméricas Blog.
He has worked with every facet of FCPA enforcement and compliance, including legal analysis, internal investigations, third party due diligence, transactional due diligence, anti-corruption policy drafting, compliance training, compliance audits, corruption risk assessments, voluntary disclosures to the U.S. government and resolutions with the U.S. government. He has conducted anti-corruption enforcement and compliance work in the following sectors: agriculture, construction, defense, energy/oil and gas, engineering, financial services, medical devices, mining, pharmaceuticals, gaming, roads/infrastructure and technology.
Mr. Ellis received his law degree, cum laude, from Georgetown University Law Center, his masters in foreign affairs from Georgetown’s School of Foreign Service, and his B.A. from Dartmouth College. He co-founded and serves as chairman of the board of The School for Ethics and Global Leadership in Washington, D.C. He is a member of the District of Columbia, Texas, New York, and New Jersey bar associations.