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.
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About the Author
Matteson Ellis is founder and principal of Matteson Ellis Law PLLC, a law firm focusing on U.S. Foreign Corrupt Practices Act (FCPA) compliance and enforcement. He has extensive experience in a broad range of international anti-corruption areas. Before forming Matteson Ellis Law, he worked on FCPA and anti-corruption matters in the Washington, D.C., offices of Miller & Chevalier Chartered, Coudert Brothers LLP and The World Bank.