The Anti-Bribery and Anti-Corruption

Review

Law Business Research

Fifth Edition

Editor

Mark F Mendelsohn

The Anti-Bribery and

Anti-Corruption

Review

Fifth Edition

EditorMark F Mendelsohn

Law Business Research Ltd

PUBLISHER Gideon Roberton

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The publisher acknowledges and thanks the following law firms for their learned assistance throughout the preparation of this book:

ALLEN & OVERY LLP

ANAGNOSTOPOULOS

AZB & PARTNERS

BCL SOLICITORS LLP

BONN STEICHEN & PARTNERS

DECHERT

FERRERE

HERBERT SMITH FREEHILLS CIS LLP

HOGAN LOVELLS

JOHNSON WINTER & SLATTERY

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LEE HISHAMMUDDIN ALLEN & GLEDHILL

MONFRINI CRETTOL & PARTNERS

MORI HAMADA & MATSUMOTO

PAUL, WEISS, RIFKIND, WHARTON & GARRISON LLP

PINHEIRO NETO ADVOGADOS

SOŁTYSIŃSKI KAWECKI & SZLĘZAK

STETTER LEGAL

STUDIO LEGALE PISANO

VIEIRA DE ALMEIDA & ASSOCIADOS – SOCIEDADE DE ADVOGADOS, SP RL

ACKNOWLEDGEMENTS

iii

Editor’s Preface ..................................................................................................viiMark F Mendelsohn

Chapter 1 AUSTRALIA .............................................................................. 1Robert R Wyld and Jasmine Forde

Chapter 2 BRAZIL ................................................................................... 29Ricardo Pagliari Levy and Sofia Preto Villa Real

Chapter 3 CHINA .................................................................................... 41Kareena Teh, Fabian Roday and Lear Liu

Chapter 4 ECUADOR ............................................................................. 53Ernesto Velasco

Chapter 5 ENGLAND & WALES ........................................................... 67Shaul Brazil and John Binns

Chapter 6 FRANCE ................................................................................. 79Antonin Lévy

Chapter 7 GERMANY ............................................................................. 91Sabine Stetter

Chapter 8 GREECE ............................................................................... 101Ilias G Anagnostopoulos and Jerina (Gerasimoula) Zapanti

Chapter 9 HONG KONG ..................................................................... 110Kareena Teh and Fabian Roday

CONTENTS

iv

Contents

Chapter 10 INDIA ................................................................................... 123Aditya Vikram Bhat and Shwetank Ginodia

Chapter 11 ITALY .................................................................................... 136Roberto Pisano

Chapter 12 JAPAN ................................................................................... 149Kana Manabe, Hideaki Roy Umetsu and Shiho Ono

Chapter 13 LUXEMBOURG ................................................................... 160Anne Morel

Chapter 14 MALAYSIA ............................................................................ 169Rosli Dahlan and Muhammad Faizal Faiz Mohd Hasani

Chapter 15 MEXICO ............................................................................... 183Oliver J Armas, Luis Enrique Graham and Thomas N Pieper

Chapter 16 NETHERLANDS ................................................................. 196Neyah van der Aa and Jaantje Kramer

Chapter 17 POLAND .............................................................................. 209Tomasz Konopka

Chapter 18 PORTUGAL .......................................................................... 221Sofia Ribeiro Branco and Joana Bernardo

Chapter 19 RUSSIA .................................................................................. 231Vladimir Melnikov and Sergei Eremin

Chapter 20 SWITZERLAND .................................................................. 243Yves Klein

Chapter 21 TURKEY ............................................................................... 258Pınar Bülent, Begüm Biçer İlikay and Gözde Kabadayı

v

Contents

Chapter 22 UNITED STATES ................................................................ 268Mark F Mendelsohn

Appendix 1 ABOUT THE AUTHORS .................................................... 295

Appendix 2 CONTRIBUTING LAW FIRMS’ CONTACT DETAILS .. 309

vii

EDITOR’S PREFACE

This fifth edition of The Anti-Bribery and Anti-Corruption Review presents the views and observations of leading anti-corruption practitioners in jurisdictions spanning every region of the globe. The worldwide scope of this volume reflects the reality that anti-corruption enforcement has become an increasingly global endeavour.

Over the past year, the foreign bribery landscape has continued to grow increasingly complicated for multinational companies, particularly in light of the sweeping fallout from multiple high-profile corruption scandals. In Brazil, Operation Car Wash, the investigation that uncovered a sprawling embezzlement ring at state-owned oil company Petróleo Brasileiro SA (Petrobras), has ensnared politicians at the highest levels of the Brazilian government as well as numerous companies that engaged with Petrobras around the world. In March 2016, Brazilian authorities raided the home of former President Lula de Silva and detained him for questioning. Lula and his wife were subsequently indicted by Brazilian prosecutors on money laundering charges in September 2016. The Brazilian crackdown on corruption shows no signs of abating, and has expanded to include investigations related to Eletrobras, Brazil’s state-owned utility.

In Malaysia, the misappropriation of more than US$3.5 billion in funds by senior government officials from state-owned strategic development company 1Malyasia Development Berhad (1MBD) has sparked worldwide investigations and asset tracing and recovery exercises. Authorities in several countries, including the United States, the United Kingdom, Switzerland, Singapore, Hong Kong and Australia have all launched probes into lenders and banks with ties to 1MDB. In July 2016, the US Department of Justice (DOJ) filed civil forfeiture complaints seeking the forfeiture and recovery of more than US$1 billion in assets associated with the laundering of misappropriated funds from 1MBD, the largest forfeiture action ever brought under the DOJ’s Kleptocracy Asset Recovery Initiative.

Global efforts to combat corruption were further impacted by the massive leak in April 2016 of more than 11 million documents connected to Panama law firm Mossack Fonseca, dubbed the Panama Papers. Dating back over four decades, the Panama Papers revealed that, among other things, the law firm appears to have helped establish at least 214,000 secret shell companies and offshore accounts in known tax havens to shelter and hide the wealth of clients that included approximately 300,000 corporate entities, 12 current

Editor’s Preface

viii

and former world leaders, and at least 128 other public officials. While international law enforcement agencies have only begun to assess the contents and significance of the leaked documents, it is clear that prosecutors are looking to the Panama Papers as a  road map for uncovering foreign bribery, among other offences, and furthering international corruption investigations.

In the United States, enforcement authorities continue to vigorously enforce the Foreign Corrupt Practices Act (FCPA), with the past year’s cases showing a  significant increase in the number of enforcement actions from 2015. The Securities and Exchange Commission (SEC) alone brought more FCPA enforcement actions within the first six months of 2016 than in any year since 2011. The investigation and enforcement focus has cut across a range of industries, including pharmaceutical and medical device companies, airlines, financial services and the telecommunications sector. While these cases continue to cover many regions, business activity in China has remained a major FCPA enforcement priority. As this edition of The Anti-Bribery and Anti-Corruption Review goes to print, 15 corporate enforcement actions have implicated multinationals’ China operations, representing over half of all FCPA actions brought in 2016 to date.

Importantly, the past year’s FCPA cases have demonstrated that the DOJ and SEC will continue to actively and aggressively pursue large-scale corporate bribery cases. In February 2016, the DOJ and SEC, together with the Public Prosecution Service of the Netherlands, entered into a US$795 million global settlement with the world’s sixth-largest telecommunications company, Amsterdam-based VimpelCom Limited, a  foreign issuer of publicly traded securities in the United States, and its wholly owned Uzbek subsidiary, Unitel LLC. The settlement, which resolved allegations that VimpelCom and Unitel violated the FCPA and certain Dutch laws by funnelling over US$114 million in bribe payments to a shell company beneficially owned by a  government official in Uzbekistan, represents the second-largest global FCPA resolution to date and the sixth-largest in terms of penalty payments made to US regulators. The VimpelCom settlement was the culmination of significant collaboration between US regulators and international law enforcement agencies, with the DOJ proclaiming it ‘one of the most significant coordinated international and multi-agency resolutions in the history of the FCPA’. In September 2016, Och-Ziff Capital Management Group agreed to pay the DOJ and SEC US$412 million for FCPA violations stemming from the hedge fund’s use of third-party intermediaries, agents and business partners to pay bribes to senior government officials in Africa. The settlement represents the fourth-largest FCPA enforcement action to date.

Though not uncontroversial, self-reporting and cooperation by companies has continued to be a theme in the United States. In April 2016, the DOJ launched a one-year pilot programme to provide greater transparency on how business organisations can obtain full mitigation credit in connection with FCPA prosecutions through voluntary self-disclosures, cooperation with DOJ investigations and remediation of internal controls and compliance programmes. The DOJ memorandum announcing the initiative makes clear that any mitigation credit offered through the Pilot Program is separate from, and in addition to, any mitigation credit already available under the US Sentencing Guidelines. The DOJ further emphasised that voluntary self-reporting is the central aim of the Pilot Program, and is therefore an essential requirement for receiving maximum mitigation credit. Whether companies participating in the programme truly benefit, and whether the promise of greater transparency is realised, remains to be seen.

Editor’s Preface

ix

I wish to thank all of the contributors for their support in producing this volume. I appreciate that they have taken time from their practices to prepare chapters that will assist practitioners and their clients in navigating the corruption minefield that exists when conducting foreign and transnational business.

Mark F MendelsohnPaul, Weiss, Rifkind, Wharton & Garrison LLPWashington, DCNovember 2016

29

Chapter 2

BRAZIL

Ricardo Pagliari Levy and Sofia Preto Villa Real 1

I INTRODUCTION

Corruption has been one of the hottest topics on the Brazilian agenda for the past few years for a number of reasons.

On the one hand, the country is going through a  political crisis, aggravated by a deep economic recession.2 Former President Dilma Rousseff has just been impeached by the Brazilian Congress, and former lower house speaker Eduardo Cunha, who resigned his leading position right after conducting the impeachment process against Dilma, has also been expelled from Congress, weighed down by alleged ethics violations.

On the other hand, the Brazilian legal framework has been enriched in recent years and public authorities have been conducting several high-profile investigations, notably Operation Car Wash, which has uncovered the largest corruption scandal in Brazilian history.3

This scenario translates into the fact that although Brazil has one of the 10 largest gross domestic revenues in the world,4 it still ranks 76th out of 168 countries in Transparency International’s Corruption Perceptions Index.5

Against this backdrop, it is important to shed light on the main developments in anti-corruption matters in Brazil.

1 Ricardo Pagliari Levy is a partner and Sofia Preto Villa Real is an associate at Pinheiro Neto Advogados.

2 As stated in The Guardian’s briefing on Brazil’s current situation: www.theguardian.com/world/2016/mar/17/brazil-government-crisis-briefing-dilma-rousseff-lula-petrobas.

3 lavajato.mpf.mp.br/entenda-o-caso.4 data.worldbank.org/data-catalog/GDP-ranking-table.5 www.transparency.org/cpi2015.

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II DOMESTIC BRIBERY: LEGAL FRAMEWORK

The payment and receipt of bribes has been prohibited in Brazil at least since the creation of the 1830 Criminal Code.6 Nowadays, the Brazilian legal framework is far more complex, framing acts of corruption and bribery not only as crimes, but also as civil and administrative offences. Nevertheless, the framework is limited to corruption and bribery in the public sector, as there are no legal provisions in Brazil penalising private commercial bribery.

Also, both individuals and companies can be held liable for bribery of a public official in civil and administrative spheres, but criminal liability itself is limited to individuals.

The Brazilian legal system considers criminal liability as personal and non-transferable, thus being imposed only on the individual who has in any way contributed to a  crime either by action (i.e., committing a criminal action) or by omission (i.e., remaining silent or refraining from action despite it being within the powers or duty of the individual to prevent the crime). Therefore, with a  very limited exception pertaining to environmental crimes, there is no corporate criminal liability under Brazilian law.

The current legal framework is mainly composed of:a the Criminal Code (Legislative Decree No. 2,848 of 1940);7

b the Public Procurement Law (Law No. 8,666 of 1993);8

c the Administrative Misconduct Law (Law No. 8,429 of 1992);9

d the Anti-Corruption Law (Law No. 12,846 of 2013);10 ande the Anti-Corruption Decree (Decree No. 8,420 of 2015).11

i Criminal Code

Criminal liability for corruption and bribery acts in Brazil is mainly governed by the Criminal Code, which sets out the crimes committed by public officials and private persons against the public administration.

For criminal law purposes, a  public official is anyone who, even if temporarily or without compensation, holds a position, an employment or a function within a public entity or agency, or state-owned or mixed-capital company, or works for a company hired to provide services or perform activities germane to the public administration.

Passive or active bribery is a corruption crime defined by the Criminal Code, which prescribes two to 12 years of imprisonment and a fine for:a any public official who directly or indirectly requests or receives an improper

advantage, or accepts the promise of such an advantage, for himself or herself or others, even if this occurs outside the function of the official’s office or before the office has been assumed; and

b any private person who offers or promises an improper advantage to a public official to induce the latter to perform, omit or delay any official act.

6 www.planalto.gov.br/ccivil_03/leis/LIM/LIM-16-12-1830.htm.7 www.planalto.gov.br/ccivil_03/decreto-lei/Del2848compilado.htm.8 www.planalto.gov.br/ccivil_03/leis/L8666compilado.htm.9 www.planalto.gov.br/ccivil_03/leis/L8429.htm.10 www.planalto.gov.br/ccivil_03/_ato2011-2014/2013/lei/l12846.htm.11 www.planalto.gov.br/ccivil_03/_Ato2015-2018/2015/Decreto/D8420.htm.

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Influence peddling is also penalised under the Criminal Code, which establishes two to five years of imprisonment and a fine for anyone who requests, requires, charges or obtains, for himself or herself or others, an advantage or promise of advantage, under the pretext of influencing an act committed by a public official in the exercise of his or her function.

ii Public Procurement Law

The Public Procurement Law establishes criminal liability for specific acts of corruption committed during a public tender procedure or during the performance of a public contract, such as:a illegally waiving a public tender procedure;b frustrating or committing fraud against the competitive character of a tender procedure;c modifying the contract to benefit the private party without good cause.

Anyone who commits any of these offences is subject to up to six years of imprisonment and a fine of up to 5 per cent of the amount of the public contract involved.

The Public Procurement Law also imposes the following civil and administrative penalties on companies and individuals for acts of corruption during the performance of public contracts:a warning;b civil fine;c termination of contract;d temporary prohibition from participating in public tenders and from entering into

public contracts (debarment) for up to two years; ande declaration of permanent unsuitability to participate in public tenders.

iii Administrative Misconduct Law

The Administrative Misconduct Law sets out the sanctions applicable to public officials for misconduct detrimental to the Brazilian public administration.

In line with the Criminal Code, the definition of ‘public official’ set by the Administrative Misconduct Law for civil and administrative purposes is also quite broad. The definition encompasses any person who exercises, even temporarily or without compensation, by election, appointment, designation, contracting or any other form of investiture or bond, a mandate, position, job or office in any federal, state and municipal governments, independent agencies, regulatory agencies, state-owned or mixed-capital companies, or entities in whose assets or annual revenues the public treasury holds or has an interest of more than 50 per cent.

The Administrative Misconduct Law also applies to anyone who, whether a public official or not, induces or takes part in an act of misconduct or else benefits directly or indirectly from such an act.

In other words, the Administrative Misconduct Law may be – and is in fact – applied not only to public officials, but also to private persons or private companies interacting with the public sector that may benefit directly or indirectly from the acts in question. However, prosecution of such individuals and companies under the Administrative Misconduct Law only occurs when public officials are also involved.

The said acts of misconduct penalised under the Administrative Misconduct Law may be framed as those acts (1) entailing unjust enrichment; (2) causing losses to the public treasury; or (3) running against the principles of the public administration.

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The Administrative Misconduct Law prohibits public officials from receiving, directly or indirectly (through third parties such as agents and distributors), for themselves or for third parties, money, assets, properties or any other economic advantage in the form of a commission, percentage, bonus or gift from whomever may be favoured by nonfeasance, malfeasance or misfeasance in office.

Therefore, facilitating (or ‘grease’) payments are also forbidden. For instance, public officials must not facilitate the acquisition, exchange or lease of assets or properties, or the contracting of services, by public entities other than at market prices.

In relation to this, codes of ethical conduct12 forbid public officials from receiving any gifts, transportation, accommodation, meals and entertainment, except (1) those from foreign authorities in protocol cases where there is reciprocity; (2) those with no commercial value; and (3) those distributed by entities as a  courtesy, advertisement or during special events or holidays that do not exceed a token value of 100 reais.

As for penalties, the Administrative Misconduct Law provides that those liable for acts of misconduct are subject to the following sanctions:a full redress of the damage;b confiscation of assets or values embezzled from the public treasury, if any;c dismissal from public service;d suspension of political rights for a period of three to 10 years;e payment of a fine;f debarment; andg prohibition against receiving benefits or tax or credit incentives, directly or indirectly,

even if by the intermediary of a  company of which the offenders are majority shareholders, for a period of three to 10 years.

iv Anti-Corruption Law and Anti-Corruption Decree

The Anti-Corruption Law establishes corporate civil and administrative liability for injurious acts contrary to the Brazilian or foreign public administrations.

This Law, enacted on 1 August 2013, originates from a bill submitted to Congress by the executive branch and is aimed both at fulfilling international commitments assumed by Brazil upon ratification of various anti-corruption treaties, as well as at meeting the population’s growing demand for more effective mechanisms to fight corruption at the public administration level.

Legal entities are liable for wrongful acts against government agencies when the acts are carried out in the interest of or for the benefit of the entities.

Wrongful acts are defined as those committed against national or foreign public assets, against public administration principles, or against international commitments assumed by Brazil.

The Anti-Corruption Law provides for a  strict liability regime, meaning that the legal entity is accountable even if the wrongdoings are attributable to a  sole employee or service provider who acted despite the company’s compliance procedures or without the company’s knowledge.

12 Such as the Code of Ethical Conduct for Federal Public Officials Working in the Presidency: www.planalto.gov.br/ccivil_03/decreto/2002/d4081.htm.

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Companies belonging to the same economic group, consortium members or joint-venture partners are held jointly liable for wrongful acts under the Brazilian Anti-Corruption Law. Such joint liability, however, is limited to payment of fines and to full redress of damage.

According to the Anti-Corruption Decree, which regulates the Anti-Corruption Law, the acts treated as administrative offences in the Public Procurement Law or in other statutes regulating public contracts, if also regarded as violations of the Anti-Corruption Law, will be jointly investigated in an administrative proceeding as prescribed in the Anti-Corruption Decree. This provision is relevant because the existing laws clearly overlap – both the Administrative Misconduct Law and Public Procurement Law, for instance, have provisions leading to blacklisting.

Companies in breach of anti-corruption and anti-bribery provisions are subject to heavy penalties, some of which are imposed through administrative proceedings and others solely via court channels.

The administrative penalties set forth in the Anti-Corruption Law include fines and publication of the sentence in the media, and are imposed at the end of the administrative proceeding that will be initiated and decided by the highest authority of each body or entity of the executive, legislative and judiciary branches against which the wrongful act was committed. A conflict of interest may arise from this rule of jurisdiction as the highest authority of a public entity may also be under investigation.

The administrative fine ranges from 0.1 per cent to 20 per cent of the gross revenues in the fiscal year before that in which the administrative proceeding was initiated, less taxes; in no event will the fine be less than the advantage obtained, where it is possible for it to be estimated.

The Anti-Corruption Decree sets standards for the calculation of these fines, which take aggravating and mitigating factors into consideration. Each factor translates into a percentage of gross revenues (less taxes) in the fiscal year before that in which the administrative proceeding was instated.

A legal entity’s cooperation with investigations and the existence of compliance programmes do not preclude the imposition of sanctions but are taken into consideration when punishment is meted out.

A fine or other penalties imposed under the Law do not release the offenders (entities or individuals) from the obligation to fully redress the damage caused by the wrongful act.

In addition to the administrative penalties (fine and publication of the sentence in the media), the Anti-Corruption Law lists the following penalties imposable only at the end of a court action to be brought by the aggrieved public administration entity or by the Public Prosecutor’s Office:a confiscation of assets, rights or values representing an advantage or profit directly

or indirectly obtained by way of the wrongful act, with due regard for the rights attributable to the injured party or to third parties acting in good faith;

b suspension or partial shutdown of activities;c compulsory dissolution of the company; andd prohibition from receiving incentives, subsidies, grants, donations or loans from

public bodies or entities and from public financial institutions or publicly controlled institutions, for a period of one to five years.

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Under Brazilian law, neither companies nor individuals are compelled to disclose wrongdoing to public authorities. This privilege against self-incrimination13 applies in all spheres (criminal, administrative and civil).

Nevertheless, voluntary disclosure of wrongdoing (say, under a leniency programme) may help obtain a waiver or reduction of sanctions. To qualify for a leniency programme, the company must be the first to express its willingness to cooperate, cease and admit its participation in the wrongdoing, and fully cooperate with investigations.

Leniency negotiations are kept confidential until a settlement is reached. In practice, however, leaks are frequent. A  potential self-reporting does not provide immunity for employees and companies that participated in the wrongdoing within the same economic group. The effects of a leniency programme, however, may be extended to them, provided that they take part in the leniency agreement itself.

A company reaching a leniency agreement with authorities under the Anti-Corruption Law may enjoy one or more of the following benefits:a exemption from public disclosure of the sentence;b waiver of the prohibition from receiving incentives, subsidies, subventions, donations

or loans from public entities;c reduction by up to two-thirds of the fine, which could originally reach up to

20 per cent of the company’s annual gross revenues; andd waiver or reduction of the debarment sanction.

The leniency agreement covers only the facts described there. Should new facts surface during investigations or the applicant fail to report all relevant facts, the authorities may open new investigations into those facts.

As currently worded, the Anti-Corruption Law14 does not expressly provide for total remission of its penalties under a  leniency programme. Nevertheless, new regulations are expected to be enacted in the coming months, dealing specifically with leniency agreements.

III ENFORCEMENT: DOMESTIC BRIBERY

i Operation Car Wash

Operation Car Wash is an investigation being carried out by the Federal Police and the Federal Public Prosecutor’s Office, and which has been under way since March 2014. Initially a money laundering probe into a currency exchange company located in a petrol station, it has evolved to investigate acts of corruption at oil giant Petrobras.

The scheme involved cartel behaviour, bid rigging and illegal increase in profits by bribing some Petrobras executives in exchange for improper advantages. Those bribery acts took the form of sham services agreements executed between construction companies and companies owned by those Petrobras executives (or other pass-through companies). Political contributions to political groups involved in the bribery scheme are also under scrutiny.

Cooperation and exchange of sensitive information between Brazilian and foreign authorities have also been crucial to the success of investigations (e.g., Swiss authorities

13 Article 5, LXXIII of the Brazilian Federal Constitution and Article 186 of the Criminal Code.14 Refer to our comments in Section VIII, infra, about Provisional Measure No. 703 of 2015.

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provided important information on bank accounts held by Brazilians under investigation), as several of those under investigation used offshore bank accounts to hide money obtained illegally through bribery.

Investigative measures to uncover this multimillion money laundering scheme have ranged from the enforcement of hundreds of search and seizure warrants to temporary and preventive arrest and compulsory deposition. The operation is the largest corruption and money laundering investigation Brazil has ever had.

ii SBM leniency agreement

On 15 July 2016, it was publicly announced15 that SBM Offshore, a  Dutch oil services company, entered into a  leniency agreement with four Brazilian authorities: the Ministry of Transparency, Supervision and Control (the Ministry of Transparency) (formerly the Comptroller General’s Office), the Attorney General’s Office, the federal Public Prosecutor’s Office, and Brazilian state-controlled oil giant Petrobras.

This was the first time a leniency agreement was signed by both administrative and criminal enforcers under the Brazilian Anti-Corruption Law. The deal resolved allegations that SBM had won contracts by bribing officials at Petrobras between 1996 and 2012.

As part of the deal, SBM was to hand over US$328 million to Petrobras, of which US$149 million was by way of a fine and US$179 million was to be offset against payments under existing contracts between the companies. A further US$13.6 million was to be paid to the Ministry of Transparency and to the anti-money laundering authority – the Council for Financial Activities Control. In consideration, SBM would not be debarred and would be allowed to bid for new contracts with Petrobras, which would in turn refrain from suing for damages.

However, on 1 September 2016 one of the high chambers of the Federal Public Prosecutor’s Office refused to recognise the leniency agreement as signed. Unless this decision is reversed, SBM will not be immune from debarment, may lose its current contracts with Petrobras and may be subject to investigations.

The SBM leniency agreement showed that such settlements are possible in Brazil between federal prosecutors and administrative anti-corruption authorities. It also exposed, however, that leniency agreements on corruption matters are quite difficult to negotiate, as some of the authorities, such as the Federal Public Prosecutor’s Office, lead confidential investigations, information from which cannot be shared with other public bodies. On the basis of such confidential information, some authorities may be unwilling to enter into leniency agreements but even so cannot disclose the reasons for their refusal.16

This gridlock arises from the current legal framework in Brazil: as several public administration bodies have concurrent authority to investigate acts of corruption, for any leniency agreement to be ‘bulletproof ’, it must involve all of these bodies, otherwise the private persons and companies may remain subject to investigations and lawsuits by any of

15 www.cgu.gov.br/noticias/2016/07/ministerio-da-transparencia-celebra-acordo-de-leniencia-com-a-sbm-offshore; www.mpf.mp.br/rj/sala-de-imprensa/noticias-rj/mpf-celebra-acordo-de-leniencia-com-a-sbm-offshore.

16 www.globalinvestigationsreview.com/article/1018378/deltan-dallagnol-prosecutor-brazil%E2%80%99-petrobras-investigation.

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the public bodies kept out of the settlement talks. The non-recognition of the SBM leniency agreement, at least for the time being, does little to provide assurances regarding the legal certainty of leniency programme negotiations.

iii Federal Supreme Court decision on political contributions

The Brazilian Federal Supreme Court declared on 17 September 2015 that political contributions from domestic or foreign companies to political parties or candidates are unconstitutional. Thus, the 2016 local elections have solely relied on public funding (especially government-funded television and radio advertisements), contributions from individuals and resources from the Political Parties Fund.

The effects this ban on corporate contributions will have on the Brazilian political landscape are still unknown. On the one hand, the prohibition will tend limit the amount of money invested in political campaigns, which means candidates will have to win more votes through political debate than through electoral marketing. On the other hand, this decision may actually increase the risk of the use of slush funds during the 2016 elections, instead of preventing their use.

IV FOREIGN BRIBERY: LEGAL FRAMEWORK

Both the Criminal Code and Anti-Corruption Law impose liability for acts against foreign public administrations.

In terms of criminal liability, the Criminal Code has specific provisions regarding both active bribery and influence peddling in international business transactions.

Active bribery in international business transactions is a  crime by which anyone directly or indirectly promises, offers or gives an improper advantage to a  foreign public agent or a third party, to influence him or her to practise, omit or delay an official act related to an international business transaction. The established penalties are one to eight years of imprisonment and a fine.

As for influence peddling, the Criminal Code sets two to five years of imprisonment and a fine for anyone who requests, demands or obtains, for himself or herself or for another, a promise of advantage or benefit, under the pretext of influencing an act to be performed by a foreign public official in connection with an international business transaction.

Furthermore, the Anti-Corruption Law provides for corporate civil and administrative liability for injurious acts contrary to foreign public administrations, including acts of corruption and bribery. In general, all statutory provisions concerning domestic wrongdoing extend to foreign bribery as well. The main difference between the two lies in the fact that the Ministry of Transparency – and not highest authority of the public entity aggrieved by the wrongful act – has exclusive jurisdiction to initiate and conduct the administrative proceeding through which the acts against foreign public bodies will be investigated.

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V ASSOCIATED OFFENCES: FINANCIAL RECORD-KEEPING AND MONEY LAUNDERING

The Brazilian anti-corruption legal framework does not punish money laundering or wrongdoing related to financial record-keeping. Liability for such activities is only established by specific laws, such as the Tax Crimes Law (Law No. 8,137 of 1990)17 and the Anti-Money Laundering Law (Law No. 9,613 of 1998).18

Frauds involving financial record-keeping are considered crimes under the Tax Crimes Law, and are punishable by up to five years of imprisonment and fines.

Money laundering is described as the act of concealing or dissimulating the true nature, origin, location, availability, transaction or ownership of assets, rights or valuables directly or indirectly arising from criminal offences. This crime is punishable by three to 10 years of imprisonment and a fine.

VI ENFORCEMENT: FOREIGN BRIBERY AND ASSOCIATED OFFENCES

Despite the existence of legal provisions on criminal and civil liability for foreign bribery acts, there are no reports of their application as yet. This lack of precedent may be due not only to the fact that this legal framework is still quite new, especially concerning civil and administrative liability (enacted by means of the Anti-Corruption Law in 2013), but also because the Brazilian authorities have focused on fighting domestic bribery.

VII INTERNATIONAL ORGANISATIONS AND AGREEMENTS

Brazil has so far ratified several conventions related to anti-corruption, including:a the OECD Anti-Bribery Convention, ratified on 24 August 2000 and enacted by

Decree No. 3,678 on 30 November 2000;b the Inter-American Convention against Corruption, enacted by Decree No. 4,410 on

7 October 2002;c the United Nations Convention against Transnational Organized Crime, ratified on

29 January 2004 and enacted by Decree No. 5,015 on 12 March 2004; andd the United Nations Convention against Corruption, ratified on 15 June 2005 and

enacted by Decree No. 5,687 on 31 January 2006.

Brazil has also signed cooperation agreements with other countries to fight corruption and bribery. Brazil and Switzerland entered into a cooperation agreement on 12 May 2004, enacted by Legislative Decree No. 300 on 13 July 2006. Brazil also entered into a technical cooperation agreement with India and South Africa during the second annual India-Brazil-South Africa Dialogue Forum on 17 October 2007, with the purposes of fighting commercial fraud, money laundering and other illicit international trade activities.

17 www.planalto.gov.br/ccivil_03/leis/L8137.htm.18 www.planalto.gov.br/ccivil_03/leis/L9613compilado.htm.

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The international commitments undertaken by Brazil have mostly been fulfilled with the enactment of the Anti-Corruption Law and through the considerable efforts of the Brazilian authorities (such as the Ministry of Transparency) in recent years.

VIII LEGISLATIVE DEVELOPMENTS

i Leniency agreements provisional measure

Provisional Measure No. 70319 was issued on 18 December 2015 by the Executive Branch to implement several changes to the Anti-Corruption Law, especially with regard to voluntary disclosure and leniency agreements. However, it was not converted into law by the National Congress, which led to its expiration on 29 May 2016.

The main changes introduced by the Provisional Measure, now no longer in effect, were the following much less stringent requirements for leniency agreements:a companies would be able to submit an application after the commencement of

administrative investigations. Conversely, however, a  company was likely to be granted lesser benefits if applying at a later stage;

b the application for leniency would no longer require an acknowledgement of guilt;c other companies could also engage in voluntary disclosure after the first company had

done so, if they were in a position to cooperate with the authorities;d the first applicant would be exempted from fines based on the company’s gross

revenues, whereas fines imposed on other applicants would still be reduced by two-thirds;

e companies would be released from the debarment sanction provided in the Public Procurement Law;

f leniency agreements would also (1) cover wrongdoing committed before the Anti-Corruption Law entered into force (29 January 2014); (2) prevent indemnity claims; and (3) preclude prosecution regarding the facts covered in the agreement if the Public Prosecutor’s Office were to take part in negotiations;

g the parties would be able to agree on a payment plan regarding the compensation for damage; and

h pending investigations would be suspended at the time the company applied for leniency, and dismissed in the event of an agreement being signed.

Under the Brazilian Federal Constitution, no other provisional measure may be issued concerning the same subject matter as Provisional Measure No. 703 during the term of the same legislature (i.e., until February 2017). Therefore, until that date, any changes to the Anti-Corruption Law may only occur by means of a law, not a provisional measure. Bills to modify these and other provisions of the Anti-Corruption Law are currently under discussion in the National Congress.

ii Public Companies Law

In the wake of corruption scandals involving state-owned companies such as Petrobras, the Brazilian National Congress enacted the Public Companies Law (Law

19 www.planalto.gov.br/ccivil_03/_Ato2015-2018/2015/Mpv/mpv703.htm.

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No. 13,303 of 30 June 2016).20 This law establishes specific rules that government-owned and government-controlled companies, as well as their subsidiaries at the federal, state and municipal levels, must follow in terms of corporate governance, public tenders and contracts, compliance and supervision by public control bodies. These companies will have 24 months to adapt to the new provisions.

IX OTHER LAWS AFFECTING THE RESPONSE TO CORRUPTION

The Law on Access to Information (Law No. 12,527 of 18 November 2011)21 establishes that all public entities and private entities receiving public resources must disclose online all information of public interest, particularly institutional, financial and budgetary data, except those ranked as classified, secret and top secret.

The Conflict of Interest Law (Law No.  12,813 of 16 May 2013)22 is applicable to high-ranked officials from the federal public administration with access to sensitive information. If an official subject to this Law makes improper use of sensitive information, exercises private activities that may conflict with his or her public function, or acts as an informal consultant for private persons or companies, the penalties set out in the Administrative Misconduct Law will apply.

X COMPLIANCE

i Compliance programmes

The Anti-Corruption Decree provides generic standards for evaluation of compliance programmes implemented by corporate entities. The compliance programme must be structured, applied and updated according to the specific characteristics and risks of those activities carried out by each corporate entity, and must evolve constantly to ensure its effectiveness and avoid exposure.

If a  company is subject to the administrative sanctions prescribed in the Anti-Corruption Law, its compliance programme may be taken into consideration to reduce the administrative fine.

In evaluating the effectiveness of a  compliance programme and considering it as a mitigating factor, the public authorities will consider the company’s profile and the tenor of its compliance programme.

To that end, the Brazilian Ministry of Transparency has issue Ordinance No. 909 setting guidelines for companies to develop the reports on which public authorities will rely when considering a reduction in the administrative fine under the Anti-Corruption Decree.

The company must prove its allegations and ensure that reported information is accurate, complete and organised, which may be evidenced by means of official documents, electronic mail, letters, declarations, correspondence, memoranda, minutes of meetings,

20 www.planalto.gov.br/ccivil_03/_Ato2015-2018/2016/Lei/L13303.htm.21 www.planalto.gov.br/ccivil_03/_ato2011-2014/2011/lei/l12527.htm.22 www.planalto.gov.br/ccivil_03/_Ato2011-2014/2013/Lei/L12813.htm.

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reports, manuals, computer printouts and screenshots, audio-visual and sound records, photographs, purchase orders, invoices, accounting records or other documents, preferably in digital media.

XI OUTLOOK AND CONCLUSIONS

The Brazilian legal framework has been enriched over the past few years, but its application and enforcement are still at the early stages.

Recent developments in corruption investigations, such as Operation Car Wash, have, however, raised hope across the country that the fight against corruption and bribery may pay off. Brazilian authorities have been working to keep up with growing demands from both the international community and Brazilian society in this regard.

The fight against corruption continues unabated, even in the light of the economic and political crisis. Furthermore, there seems to be an ongoing change in the corporate culture as a whole, as anti-corruption precautions are routinely being taken by both multinational and local companies doing business in Brazil.

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Appendix 1

ABOUT THE AUTHORS

RICARDO PAGLIARI LEVYPinheiro Neto AdvogadosRicardo is a  partner at Pinheiro Neto Advogados, which he joined in 1995. Based in São Paulo, he specialises in anti-corruption and administrative misconduct, and has wide experience in investigations. He works in the field of public law, especially in relation to public procurement and government contracts, public services concessions and PPPs, and regulatory issues (especially railways, roads, ports, airports, defence and water). He holds an LLB from the Pontifical Catholic University of São Paulo and an LLM from the University of Nottingham, United Kingdom. He is fluent in Portuguese, English and French.

SOFIA PRETO VILLA REALPinheiro Neto AdvogadosSofia is an associate at Pinheiro Neto Advogados and works closely with the public law team in São Paulo. Her practice focuses mainly on advising local and foreign clients on Brazilian anti-corruption and compliance issues, as well as on administrative and regulatory law. Sofia has participated in investigation projects and assisted clients in the development of their compliance systems. She holds an LLB from the Faculty of Law of the University of São Paulo and has been an exchange student at the Panthéon-Sorbonne University (Paris I) on the master 1 degree course in public law. She is fluent in Portuguese, English and French.

PINHEIRO NETO ADVOGADOSRua Hungria, 110001455-906 São PauloBrazilTel: +55 11 3247 8477Fax: + 55 11 3247 8600rlevy@pn.com.brsreal@pn.com.brwww.pinheironeto.com.br