- French criminal procedure welcomes the European Public Prosecutor
- Paris Bar Council releases a Report and updates the Guidelines on the role of lawyers in internal investigations
- An environmental CJIP towards a greener transaction justice
- French Ministry of Justice reacts to the European recommendations for fighting international corruption
- The GRECO Fifth Evaluation Round report on France
- Some recent developments in criminal law in France amidst the Coronavirus pandemic
- Is there room for improvement in the French law on whistleblowers in the wake of the transposition of the European Directive of October 23, 2019 on whistleblowers protection?
- Incompatibility of French asset freeze measures with EU law
- France finalizes the transposition of the 5th Anti-Money Laundering Directive by adopting new provisions on the fight against money laundering and terrorist financing
- The French Anti-Corruption Agency releases updated guidelines on the corporate anti-corruption compliance function
- A major role for the AFA in the Anti-Corruption Authorities’ global mapping?
- The French Data Protection Authority releases guidelines on professional alerts
- Ne bis in idem: France stays on the sidelines of the European stance on the cumulation of criminal and fiscal sanctions after last decisions rendered by the French Supreme Court
- Key takeaways from the past year’s CJIPs
- French Supreme court ruled that the non-compliance with anticorruption provisions could enable co-contractor to terminate established business relations
- Lesson drawn from the two first decisions of the Enforcement Committee of the French Anti-corruption Agency
- The French Supreme Court confirms its position on the presumption of money laundering
- French Court approves dismissal of an employee for breach of company anticorruption policy
- The French administrative Supreme Court recalls the limits of the employer‘s internal investigation powers vis-à-vis employees
- French Prosecutors continue to conclude French Deferred Prosecution Agreements
- The French Anti-Corruption Authority releases its 2019 activity report
- New article 314-1-1 of the Criminal Code introduces the offence of breach of trust for violations of the EU’s financial interests
- The French Supreme Court confirms the importance of the French Financial Prosecutor’s Office in the fight against complex and international financial delinquency
- Transparency International sounds the alarm about the risks of corruption in the face of Covid-19
- French financial authorities warning on fraud increase in time of Covid-19
- French Prosecutor opened an investigation into potential mismanagement during the Covid-19 crisis
- The challenges brought to the independence of the French Public Prosecutor’s Office
- Navacelle promotes Clémentine Duverne and Julie Zorrilla to Partner
- Global Investigations Review (GIR) 40 Under 40 Clémentine Duverne
- Stéphane de Navacelle – alongside French Bar leaders – takes a stand in defense of Attorney-Client Privilege in France
- Stéphane de Navacelle co-authors Paris Bar ethical rules for internal investigations
- Stéphane de Navacelle selected in the Magistrat – Avocat – Juriste program to promote coworking between judges, lawyers and in-house counsel
- Some think we are “excellent” in White Collar Crime in 2020 & thought leaders in a bunch of fields
- Over the past year we’ve welcomed lawyers from Afghanistan, Armenia & beyond
Lawyers at Navacelle thought you might be interested in reviewing a selection we made of noticeable events which occurred in France in the fields of corporate criminal liability, criminal procedure, enforcement and compliance over the past 12 months so we put together our fourth Bastille Day Newsletter!
Unfolding in the field in France over the past fortnight would – alone – have warranted half a dozen “client alerts”: an official inquiry into the PNF by the Justice ministry, a shining new Justice Minister who – at best –thinks very little of the PNF and wants to cut short “preliminary” investigations, Judges’ union call the appointment of the Justice Minister by President Macron a “declaration of war”, spying by the PNF on several law firms to determine who may have stopped by, yesterday’s 2019 activity report by the French Anticorruption Agency, etc.
We’ve put some thinking into the following (and much more): are internal investigations still an oddity in the legal community?, Double jeopardy in tax & criminal matters catch 22?, European Public Prosecutor a landmark gone unnoticed?, What is the CJIP going to be extended to next?
Uncertain waters lie ahead, more than ever we are confident that the legal community, our friends here in Europe and around the world, are the cornerstone of “le monde d’après”. Stay safe & in touch!
Special thanks to Laurine Becker, Alice Béral, Princessa Fouda, Sarah Reilly, Clément Allais, Sara Deyhim, Amelle Djedi, Soukaina El-Mekkaoui, Alex Kodiane, Christelle Meda, Ekaterina Oleinikova & Julia Velho.
French criminal procedure welcomes the European Public Prosecutor
On March 3, 2020, the French Senate passed and communicated “the European Public Prosecutor’s Office and Specialized Criminal Justice” Bill1 to the National Assembly in order to adapt the French criminal procedure to the recent creation of the European Public Prosecutor’s Office (hereafter “the EPPO2”).
The EPPO, implemented on October 12, 2017 by the European Union3 to slow the negative impact on the Union’s annual budget, i.e. almost 4%4, has the power to directly pursue offenses, e.g. tax fraud or embezzlement, affecting the European Union’s financial interests within the 22 member countries (hereafter “participating countries”).
This judicial authority will rely on a two-level structure consisting of a central, i.e. a European level with a European Chief Prosecutor, two deputies and a college of 22 prosecutors, and of a decentralized national level with European Delegated Prosecutors (“EDP”) for each participating country. The central level establishes the principles guiding judicial action via strategic guidelines and supervision of the investigations conducted at national level by the EDP5. At decentralized level, the EDPs will oversee domestic investigations, prosecutions and bring to judgement cases under EPPO’s competence6.
Pursuant to French law, several judicial actors with respective specific roles are involved in the sanctioning of those having committed offences. The Public Prosecutor (Procureur de la République) represents the interests of the State in criminal proceedings and exercises prosecutorial discretion in deciding whether to press charges. The Public Prosecutor also carries out preliminary acts of investigation. The Investigating Judge (Juge d’instruction) is an independent and impartial judge, assigned to lead complex criminal investigations and decide whether to refer the case to the court for judgement or dismiss the charges. As a reflection of this impartiality of this judge, the investigation’s purpose is to find the truth, with equal emphasis on establishing innocence and establishing guilt.
The main purpose of the French Bill is therefore to adapt French criminal proceedings to this extensive and unprecedented mission of appointed EDPs.
I. The Bill establishes a special status to protect the independence of the European Delegated Prosecutors
In France, Prosecutors are placed under the authority of the Ministry of Justice, from which they receive instructions on criminal policy.
To guarantee the independence of the EPPO and avoid any national interference, the participating countries have committed to respecting the independence of the EDPs. They are prohibited from “seeking to influence [the EDP] in the performance of their tasks” 7.
To honor its commitment, the French Parliament decided that the EDPs, while remaining French prosecutors, will be considered as external to the national judicial body and therefore, external to the hierarchy of the Ministry of Justice.
Moreover, despite the Public Prosecutor of the Paris Court of Appeal having the authority to initiate disciplinary proceedings against national prosecutors, he will not have the authority to do so against the French EDPs8. The French EDPs will thus only report to and receive instructions relating to European prosecution mechanism from the EPPO.
In addition, to ensure the effectiveness of their mission and according to soon-to-be-implemented article 696-109 of the French Code of Criminal Procedure, the EDPs will be granted the right to represent the EPPO before a majority of French jurisdictions, i.e. the judicial courts, the Courts of Appeal, the Investigating Judge’s chamber, and to appeal against any decision taken by the courts of law.
II. The Bill establishes a new status for the European Delegated Prosecutors, revolutionizing French criminal procedure
De facto, the jurisdiction of the EDPs is limited as its scope pertains to offences against the financial interests of the European Union9. And although article 4 of the European Regulation states that the EPPO shall “exercise the functions of prosecutor in the competent courts of the Member States, until the case has been finally disposed of”, it has been decided that the EDPs appointed in France will not intervene before the French Supreme Court (Cour de Cassation)10.Despite these limits on the EDPs’ jurisdiction, the prerogatives granted to them constitute a marked turning point in French criminal procedure law.
Indeed, while the Bill facilitates the integration of the French EDP into the national procedural framework, it also aligns the EDP prerogatives with those of the French Public Prosecutor and those of the Investigating Judge. Some procedural acts normally within the competence of the Investigating Magistrate, will thereby be carried out by the EDPs directly11. The EDPs will be empowered to investigate with impartiality, to prosecute, to bring cases before court, to order judicial supervision or to decide on the status of the defendant, e.g. suspect, assisted witness or witness. Their investigations will be conducted within the existing investigative framework at both the investigation and the pre-trial stages.
Considering these significant changes in procedure, it was deemed appropriate to provide that the French EDPs must request the authorization of the liberty and custody judge (Juge des libertés et de la detention) to implement measures that infringe individual liberties, e.g. searches without consent, wire-tapping, geo-location and special investigative measures12.
Despite the explanations provided during the first parliamentary debates, many questions are still pending, namely with respect to defense rights. Close attention should thereby be paid to future debates before the National Assembly and the effective implementation of these EDP to avoid curtailing of defense rights.
- Bill approved in first reading by French Senate, March 3, 2020, “Projet de loi relatif au parquet européen et à la justice pénale spécialisée”, https://www.senat.fr/leg/tas19-067.html.
- Regulation (EU) 2017/1939 of October 12, 2017 implementing enhanced cooperation on the establishment of the European Public Prosecutor’s Office.
- Regulation (EU) 2017/1939 of October 12, 2017 implementing enhanced cooperation on the establishment of the European Public Prosecutor’s Office.
- “Establishment of the European Public Prosecutor’s Office”, Peter Csonka, European Commission, 2017.
- Frequently Asked Questions on the European Public Prosecutor’s Office, European Commission, dated August 7, 2018, (“European Prosecutors will be tasked with carrying out investigations and prosecutions in their Member States, working closely with national law enforcement authorities and applying national law (…) The central level will supervise investigations and prosecutions at the national level. It will ensure “the coherence and efficiency of procedures in all Participating Member States”).
- judgement cases under EPPO’s
- Article 6.1 of the Regulation (EU) 2017/1939 of October 12, 2017 implementing enhanced cooperation on the establishment of the European Public Prosecutor’s Office.
- Article 3.1.1.B. of the impact study of the bill, January 29, 2020,“Etude d’impact : Projet de loi relatif au Parquet européen et à la justice pénale spécialisée”, https://www.senat.fr/leg/etudes-impact/pjl19-283-ei/pjl19-283-ei.html.
- Article 2 of the Directive (EU) 2017/1371 of July 5, 2017 of the European Parliament and of the Council on the fight against fraud to the Union’s financial interests by means of criminal law.
- Article 3.1.4. of the impact study of the bill, January 29, 2020,“ Etude d’impact : Projet de loi relatif au Parquet européen et à la justice pénale spécialisée”, https://www.senat.fr/leg/etudes-impact/pjl19-283-ei/pjl19-283-ei.html.
- Futur article 696-121 of the French Code of Criminal Procedure; Article 3.1.5.A. of the impact study of the bill, January 29, 2020,“Etude d’impact : Projet de loi relatif au Parquet européen et à la justice pénale spécialisée”, https://www.senat.fr/leg/etudes-impact/pjl19-283-ei/pjl19-283-ei.html.
- Article 1, Chapter II, Section 3, Sub-section 1 of Bill approved in first reading by French Senate, March 3, 2020, “Projet de loi relatif au parquet européen et à la justice pénale spécialisée”, https://www.senat.fr/leg/tas19-067.html.
Paris Bar Council releases a Report and updates the Guidelines on the role of lawyers in internal investigations
The strengthening of the French anti-corruption legal framework increases the number of corporate internal investigations and paves a new way for lawyers to provide assistance and advice to their clients. To better apprehend this relatively new practice, the Paris Bar Council issued guidelines in 2016 – the Vademecum on the Investigating Lawyer – annexed to the Internal Rules of the Paris Bar.
In the face of certain practical challenges, the Paris Bar Council also issued a report on December 10, 2019 in order to provide further solutions and guidance to lawyers. This report addresses the challenges and interests at plays in relation to the status and the role of the “investigating” lawyer in an internal investigation (the “Report”1) and calls for the amendment of the Vademecum2. Articles of the Vademecum were thus modified in 2020, namely to reaffirm the application of professional secrecy and independence of the investigating lawyer.
I. A uniform application of professional secrecy to the “investigating” lawyer
When issued in 2016, the Vademecumdistinguished between whether the lawyer was providing expertise or assistance and advice in order to determine the application of professional secrecy. The 2020 updated Vademecumremoves this distinction and calls for a consistent application of professional secrecy.
Indeed, the Paris Bar Council abolished the concept of lawyer expert by considering that internal investigations, insofar as they can serve and feed communications to the prosecuting authorities, are necessarily part of an assistance and advice mission and are thus covered by professional secrecy.
This position goes against the Guidelines on the implementation of the CJIP issued by the French Anticorruption Agency (“AFA”) and the communications of the National Financial Prosecutor Office (“PNF”) in that they indicate that not all documents in an internal investigation report are necessarily covered by the professional secrecy of the lawyer3.
The Vademecumalso specifies that professional secrecy shall apply to external experts and assistants the lawyer will have recourse to and commission during internal investigations.
Article 3 provides that “[a]s in all matters, the lawyer in charge of an internal investigation is bound by professional secrecy solely with respect to his/her client – no other person may request to benefit from it. In accordance with the rules of professional secrecy, when a report or any other document is drawn up by the lawyer during his/her mission, it is handed over to the client exclusively, who remains free to pass it on to a third party”.
II. The assessment of the independence of the “investigating” lawyer
Within the course of an internal investigation, the lawyer of the legal entity becomes an “investigator”, an information and “evidence collector”4.
In a context of a cooperation with the authorities, the AFA and PNF guidelines encourage “regular exchanges” between the lawyer and the authorities.
This incentive raises questions, particularly with respect to the extent of what a lawyer can disclose. The Report reaffirms the independence of the lawyer vis-à-vis authorities in the course of an internal investigation. Article 10 of the Vademecum provides that “[t]he lawyer conducting an internal investigation shall ensure that he/she is independent in the governance of the investigation and possible communications with an authority”.
Considering this principle of independence, the Vademecumalso defines the limits as to the intervention of the “investigating” lawyer. Indeed, “[i]f the internal investigation is called into question, the lawyer may recommend to his/her client to be represented by another lawyer for the separate stages of the internal investigation”. While the Vademecumdoes not prohibit the investigating lawyer to assist her/his client in investigative or judicial proceedings, relating to or arising from the internal investigation, it specifies that she/he “should refrain from doing so, to represent the client in proceedings brought by the client against a person the lawyer has interviewed during the internal investigation”. In any case, she/he “shall refrain from accepting an investigation that would lead to an assessment of work previously carried out by him/her”.
Although internal investigations have been carried out in France for several years, there are no dedicated standards governing them. While international standards are applied, and some rules are drawn from existing laws, the clarification of ethical rules for practitioners by the Paris Bar Council is a helpful way forward.
- Report on the interests at play in relation to the status and the role of the “investigation” lawyers in internal investigations of December 10, 2019, Basile Ader and Stéphane de Navacelle, http://www.avocatparis.org/system/files/publications/rapport_avocat_enqueteur_-_decembre_2019_2.pdf.
- AFA/PNF Guidelines on the implementation of the judicial public interest agreement, June 26, 2019, p. 10, (“[in] the event that the company refuses to transmit certain documents, it is for the public prosecutor’s office to determine whether such refusal appears justified under the rules applicable to such secrecy. In the event of a disagreement, the public prosecutor’s office shall assess whether the failure to hand over the documents concerned adversely affects the level of cooperation of the company. This assessment considers, where appropriate, the legal consequences that waiving professional secrecy could have under foreign laws”).
- “L’avocat et la preuve aujourd’hui et demain”, Dominic Jensen, in Exercer et entreprendre 2017, p.53.
An environmental CJIP towards a greener transaction justice
At a time where ecological and environmental considerations are at the heart of current concerns, the question arose around the use of negotiated justice to punish environmental offences.
On 3 March 2020, the French Senate passed a Bill aiming at strengthening criminal law’s response to environmental harm1. As part of this Bill, an “environmental CJIP” is introduced, based on the model implemented by the Sapin II law2 for probity offenses.
A few days after this Bill, on March 11, 2020, a subsidiary of Vinci accused of dumping concrete residues into the Seine river, was sanctioned by the Nanterre Criminal Court within a guilty plea procedure (“CRPC”). Although the company was sentenced to a 90,000 euros fine and to comply with the immediate remediation of the polluted site, the environmental NGOs have pinpointed the CRPC as an inadequate measure for environmental offences giving companies a de facto “right to pollute3”.
While the opening up of negotiated justice to environmental offences illustrates a willingness to fight against them, the sanctions will need to be adapted to the reality of the damages.
I. The shortcomings of the repression of environmental offences under French law
When it comes to environmental matters, the French justice system tends to be considered incomplete on multiple grounds. The processing times are long, the reparation of damage is often incommensurate to the harm caused, and the measures to ensure that violations will not occur again are insufficient4.
Few environmental offences are sanctioned in court, and sanctions do not seem adapted to the damage caused. Indeed, environmental litigation represents only 1% of criminal convictions and 0.5% of civil convictions. The former French Minister of Justice, Nicole Belloubet explained however that “these figures do not, […], reflect the reality of the damage that is done daily to the environment and biodiversity5”. For instance in 2018, out of 1,993 prosecuted individuals on charges pertaining to environmental damage, only 27 were sentenced to prison and 954 were fined. With respect to legal entities, 60 out of 139 convicted were fined6. As a remedy, the Bill aims at refurbishing the environmental justice system by providing a better judicial response to environmental harm. The environmental CJIP may contribute to the fight against harm to environment, by encouraging offending companies to cooperate rather than sanctioning perpetrators.
II. The introduction of a negotiated environmental justice in which sanctions remain to be adapted
The CJIP offers a new way of tackling high-stake financial crimes committed by legal entities.
According to former French Minister of Justice, the goal of the environmental CJIP is to “make companies more responsible and mobilize them on ecological issues instead of focusing on seeking the criminal responsibility of managers7”. The conclusion of an environmental CJIP will lead to the payment by companies of a fine proportionate to the benefit derived through the misconduct, up to a limit of 30% of the entity’s average annual turnover over the previous three years8. A CJIP will also include the implementation of an environmental compliance program, under the supervision of the Ministry of the Environment, and the reparation of environmental damages within a three-year delay9. The content of the compliance programs is yet to be determined – it could for instance, be based on internal procedures mirroring those in place for corruption matters such as a reporting procedure, the implementation of a code of conduct and risk mapping10.
As a tool of the new negotiated justice movement, the CJIP is recognized for its growing success in France since it came into force and appears fit to process the complexity of environmental matters and legislation. The intended measures regarding the amount of the fine may however not be adapted to all environmental damage. Indeed, environmental damage does not necessarily imply monetary exchanges, and it may for instance be difficult to evaluate a benefit that derives through accidental pollution or lack of diligence. Moreover, one of the main challenges following environmental damage is to restore the initial state of land and avoid aggravation or repetition of the damage.
Some NGOs thereby fear that such settlements could restrict the impact of sanctions and neglect the crucial educational aspect pertaining to environmental issues11.
- Bill approved in first reading by French Senate, March 3, 2020, “Bill on european prosecutor office and specialized criminal justice”, article 8, February 19, 2020.
- Law No 2016-1691, 9 December 2016, addressing transparency, anti-corruption and economic progress.
- “Vinci condamné à une amende pour avoir déversé du béton dans la Seine”, in Le Monde, March 12, 2020.
- “Une justice pour l’environnement”, French Ministry of Justice, January 30, 2020, http://www.justice.gouv.fr/publications-10047/rapports-thematiques-10049/une-nouvelle-justice-pour-lenvironnement-32905.html.
- “Environnement : une justice négociée pour mieux lutter contre les pollueurs”, J-B. Jaquin, in Le Monde, March 4, 2020, https://www.lemonde.fr/societe/article/2020/03/04/une-justice-negociee-pour-mieux-lutter-contre-les-pollueurs_6031805_3224.html.
- “Un projet de loi Justice rectificatif”, P. Januel, in Dalloz Actualité, January 31, 2020.
- “Parquet européen et justice pénale spécialisée : peu de modifications par le Sénat en matière de justice environnementale”, G. Marraud Des Grottes, in Actualité du droit, February 26, 2020.
- Op. cit. French Ministry of Justice.
- Projet de loi relatif au Parquet européen et à la justice pénale spécialisée, article 8 (“[…] As long as the public action has not been implemented, the public prosecutor may propose to a legal entity implicated in one or more offences provided for in the Environment Code as well as related offences, excluding crimes and offences against persons provided for in Book II of the Criminal Code, to enter into a judicial agreement in the public interest imposing one or more of the following obligations: 1° To pay a public interest fine to the Public Treasury. The amount of this fine shall be set in a proportionate manner, where appropriate in view of the benefits derived from the breaches observed, within the limit of 30% of the average annual turnover calculated on the last three annual turnover figures known at the date of the observation of such breaches. Payment may be made in instalments, according to a schedule set by the public prosecutor, over a period that may not exceed one year and that is specified in the agreement; 2° To rectify its situation with regard to the law or regulations within the framework of a compliance program lasting a maximum of three years, under the supervision of the competent services of the Ministry of the Environment; 3° To ensure, within a maximum of three years and under the supervision of the same services, compensation for the ecological damage resulting from the infringements committed”).
- “La convention judiciaire pour les infractions environnementales : vers une compliance environnementale”, J-B. Perrier, in Recueil Dalloz 2020, p.396.
- “Environnement : Belloubet va créer une procédure de plaider coupable”, J. Cossardeaux, in Les Echos, January 29, 2020.
French Ministry of Justice reacts to the European recommendations for fighting international corruption
On June 2, 2020, the French Ministry of Justice, issued a criminal procedure circular on the fight against international corruption which presents to all French Prosecutors the principles guiding judicial action at the stages of corruption detection, investigation, prosecution and sanction (“the Circular”) 1. Although this circular doesn’t have the same binding effect as a law or a decree, it will definitely serve as a guideline, along with the French National Prosecutor Office (“PNF”) and French Anti-corruption Agency (“AFA”) guidelines.
This Circular is in line with the latest developments in French legislation and judicial practice since the Sapin II law and an additional demonstration of the willing of France to intensify its fight against corruption. Moreover, this circular comes after the anti-corruption body of the Council of Europe (“GRECO”) has stated that France has made efforts but the overall level of implementation of the 2018 recommendations was still insufficient 2, and before the OECD’s review of France in 2021.
I. The consolidation of the central role played by the PNF
The Circular gives the PNF a central role in the fight against international corruption. Its technical and legal expertise and the specific means at its disposal make it a “respected and indispensable interlocutor” on the international scene3. According to Nicole Belloubet, the former French Minister of Justice, the goal is to regain control over cases involving French companies tried before foreign judicial authorities, essentially the United States 4.
The Circular thus advises that mutual assistance requests be systematically processed with a view to possibly opening a mirror investigation by the PNF and that the PNF must be systematically informed of any corruption case that reaches the public prosecutor’s offices all over France. The Circular also invites the PNF to pay special attention to “national and foreign press articles” that would be likely to warrant in-depth verifications.5.
The text also enshrines the central role of the PNF in the coordination with others administrations and State agencies that have a role to play in the detection of international corruption (i.e. Ministry of Finance, French Anti-Corruption Agency, the French Development Agency (“AFD”); tax administration, diplomatic and consular posts, economic services and regional economic services, TRACFIN 6).
II. The promotion of voluntary disclosure and cooperation
The Circular reminds that proceedings must be considered against both legal entities and individuals and provides guidelines for judicial action at all stages of criminal proceedings.
The Circular underlines that “the voluntary disclosure by companies of acts of corruption committed in the course of their international business activities by some of their members is a valuable source of detection” 7 and thus encourages companies to report themselves. It calls for the full application of the Sapin II law to any person “carrying out all or part of his economic activity on the French territory”8. It includes in particular the subsidiaries, branches and commercial offices of foreign companies. While the Ministry of Justice does not specify the degree of cooperation expected, it notes that companies should help prosecutors to identify key individual perpetrators 9. To encourage companies to demonstrate this cooperation and to inform them of the advantages of the CJIP the PNF is invited to “develop exchanges with organizations representing French companies (MEDEF, AFEP) in order to define and implement a framework and practical incentives for spontaneous disclosure” 10.
For individuals, the Circular gives a straightforward and explicit indication that this provision should be used in the future 11. Prosecution should be considered against employees involved in the corruption scheme, but also against executives and outside individuals involved in the commission of the offence. The Circular provides that any action by a guilty individual putting an end to the offence will result in a more lenient penalty. A procedure for prior admission of guilt – the Comparution sur Reconnaissance Préalable de Culpabilité (“CRPC”) – or referral to the criminal court, may be envisioned according to the background of the defendant as well as his degree of involvement 12.
This Circular is therefore a turning point, in that it stresses the importance of negotiated justice while recalling the tools that France has adopted to fight more effectively against international corruption, thus permitting efficient, proportionate and deterrent prosecution and sanction.
- “Criminal Policy Circular on the Fight against International Corruption”, June 2, 2020.
- “GRECO calls on France to do more to counter corruption in the executive and law enforcement agencies”, Council of Europe, January 9, 2020.
- “Criminal Policy Circular on the Fight against International Corruption”, June 2, 2020, 1. The central role of the National Public Prosecutor’s Office in the fight against international corruption, p.5.
- “Corruption : “la France doit retrouver sa souveraineté judiciaire”, selon Nicole Belloubet ”, in Affiches parisiennes, June 4, 2020.
- “Criminal Policy Circular on the Fight against International Corruption”, June 2, 2020, 2.2. The role of the PNF in research, analysis and use of information, p.9.
- “Criminal Policy Circular on the Fight against International Corruption”, June 2, 2020, 2.1. The different channels for gathering information that can be mobilized, p.6-8.
- “Criminal Policy Circular on the Fight against International Corruption”, June 2, 2020, 2.1. The different channels for gathering information that can be mobilized, p.6-8.
- Article 435-6-2 of the French Criminal Code.
- “France’s Justice Ministry spurs on self-reporting”, J. Thomas, in Global Investigation Review (GIR), June 11, 2020.
- “France’s Justice Ministry spurs on self-reporting”, J. Thomas, in Global Investigation Review (GIR), June 11, 2020.
- “Criminal Policy Circular on the Fight against International Corruption”, June 2, 2020, 2.2. The role of the PNF in research, analysis and use of information, p.9.
- “Criminal Policy Circular on the Fight against International Corruption”, June 2, 2020, 4. The determination of an appropriate mode of prosecution for effective, proportionate and deterrent sanctions, p.13-14.
The GRECO Fifth Evaluation Round report on France
The Group of States against Corruption (“GRECO”) was set up in 1999 by the Council of Europe to review and improve Members’ capacity to fight corruption. Anti-corruption policies are evaluated through the lens of the Council of Europe anti-corruption standards and the Group provides recommendations on potential legislative, institutional, and practical reforms.
France has recently taken a stronger stance on the fight against corruption. Whilst the adoption of the Sapin II anticorruption law in 2016 brought forth more stringent obligations on corporations1, the GRECO evaluation report published on January 9, 2020 focuses specifically on corruption amongst persons with top executive functions (“PTEFs”) and members of law enforcement agencies. It provided a fair assessment of recent progress that has been made in that regard but also identified vulnerable areas.
I. Preventing corruption amongst persons with top executive functions
Positive legislative developments were welcomed by the GRECO evaluation team (“GET”) but the report pointed out that there was still room for improvement in terms of transparency in public life.
It specifically underlined the lack of codes of conduct addressing integrity issues (conflicts of interest, obligations in terms of declarations, incompatibilities, gifts, post-employment obligations, contacts with lobbyists etc.) for PTEFs working in government.
While the Ethics Charter of the Presidency is seen as a step in the right direction, the adoption of codes of conduct was recommended along with the introduction of effective monitoring mechanisms and proportionate disciplinary sanctions in case of violation. The GET underlined that at present, the Ministry for Europe and Foreign Affairs was the only ministry that adopted a comprehensive code of conduct and argued that this practice could be extended to all ministries and PTEFs2.
Closer cooperation between the High Authority on Transparency of Public Life (“HATVP”) and the French Anti-Corruption Agency (“AFA”) was suggested in order to better assess and prevent the risks affecting PTEFs. The GET indeed noted that both these institutions already assist and advise ministries in drawing up risk assessments concerning PTEFs. Therefore, grouping this information together would likely result in a more accurate analysis3. It has to be noted however that just few days before the GRECO’s report was released, a new cooperation agreement was signed on November 26, 2019 between the HATVP and the AFA, aiming at strengthening the prevention and detection of collusion in public institutions4.
Transparency in exchanges between PTEFs and lobbyists was also identified as an area that can be improved. The Sapin II law introduced a digital register of lobbyists to inform the public on relations between lobbyists and the authorities5. However, only lobbyists who have initiated the contacts with PTEFs are required to register. This means that lobbyists who are contacted directly by the Government to engage on a specific topic are not required to register under the current system. An extension of that requirement to all lobbyists who have been in contact with PTEFs is seen as be desirable.
With regard to the criminal liability of PTEFs, the GET concluded that the establishment of the National Financial Prosecution Office (“PNF”) could facilitate the handling of corruption cases. It noted however that members of the governments are tried by the Court of Justice of the Republic (“CJR”) for acts performed in the course of their duties. The GET found that situation unsatisfactory as half of the members of the CJR are members of the Parliament, which may create suspicion on the independence and impartiality of the Court. Therefore, it was recommended that government members who are prosecuted for acts of corruption relating to the performance of their duties be brought before a court that ensures total independence and impartiality6.
II. Preventing corruption in law enforcement agencies
The GET examined measures aimed at preventing corruption in the main components of French law enforcement agencies: the Police Nationale and the Gendarmerie Nationale.
It recommended the adoption of a global strategy focusing on the prevention of corruption within law enforcement agencies on the basis of risk assessments.
Whilst it acknowledged the existence of a code of conduct incorporated into the Internal Security Code that applies to both institutions and which bears regulatory power, the GET took the view that concrete examples and situations should be included to illustrate situations that may present a risk with respect to integrity. A code with a commentary for the 32 articles has been prepared and the GET recommended that the commentary be revised to expand on integrity issues (conflicts of interests, gifts, handling of confidential information, contacts with third parties etc.) and provide concrete examples7.
Finally, the GET stated that the current reporting mechanisms set up for whistleblowers and the multi-layered procedure should be reviewed periodically and simplified. The entry into force of the European Directive on the protection of whistleblowers8, which deals with the simplification of the reporting channels9, should encourage France to improve its legislation on this point. In addition, it concluded that the training of law enforcement personnel should be strengthened to reflect those changes and provide for a more effective protection of whistleblowers10.
The report concludes on a series of recommendations and invites France to submit a report on the measures taken to implement those recommendations before June 30, 2021.
- Law No 2016‐1691 of December 9, 2016, J.O. n°0287 of 10 December 2016, “Sapin II Law”.
- Evaluation Report on France by the GRECO, January 9, 2020, Fifth evaluation round, Preventing corruption and promoting integrity in central governments (top executive functions) and law enforcement agencies, p.16.
- Evaluation Report on France by the GRECO, January 9, 2020, Fifth evaluation round, <em<Preventing corruption and promoting integrity in central governments (top executive functions) and law enforcement agencies, p.16.
- Article 25 of Law No 2016‐1691 of December 9, 2016, J.O. n°0287 of 10 December 2016, “Sapin II Law”.
- Evaluation Report on France by the GRECO, January 9, 2020, Fifth evaluation round, Preventing corruption and promoting integrity in central governments (top executive functions) and law enforcement agencies, p.22.
- Evaluation Report on France by the GRECO, January 9, 2020, Fifth evaluation round, Preventing corruption and promoting integrity in central governments (top executive functions) and law enforcement agencies, p.41-42.
- Directive (EU) 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.
- Article 10 of the Directive (EU) 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 (“Without prejudice to point (b) of Article 15(1), reporting persons shall report information on breaches using the channels and procedures referred to in Articles 11 and 12, after having first reported through internal reporting channels, or by directly reporting through external reporting channels”).
- Evaluation Report on France by the GRECO, January 9, 2020, Fifth evaluation round, Preventing corruption and promoting integrity in central governments (top executive functions) and law enforcement agencies, p.57-59.
Some recent developments in criminal law in France amidst the Coronavirus pandemic
In response to the coronavirus pandemic, the French government declared a nation-wide state of emergency on March 23, 20201, enabling the government for a period of 3 months, to take by decree any necessary measures to prevent further spread of the covid-19 in France. The lockdown was issued by decree of the French Minister of Health2.
Accordingly, on March 25, 2020, a decree amending French criminal procedure (the “March 25 Decree”) was enacted3.
Moreover, the law establishing the state of emergency amended the French Public Health Code introducing the offence of violating the lockdown4. Individuals are liable for a fine of 135 euros5. In case of a second violation occurring within a 15-day period, the fine is increased to 200 euros6. In case of a third violation occurring within a 30-day period, individuals face up to a 6-month jail sentence and a 3,750 euro fine7. The question of the constitutionality of this measure was brought to the Constitutional Council (Conseil Constitutionnel) which declared it in conformity with the Constitution8. On May 11, 2020, a new law extending the state of emergency and completing its provisions was enacted9 (the “May 11 Law”). The May 11 Law organizes the gradual end of the lockdown period and fixed the end of the state of emergency to July 23, 2020.
I. Protection of prisoners
It stands to reason that jails are especially susceptible to the spread of COVID-19 considering the difficult implementation of “protection measures” as well as the lockdown in cells. Therefore, articles 27 to 29 of the March 25 Decree allowed the Judge responsible for the enforcement of sentences to shorten by two months the sentence of convicted persons imprisoned during the state of emergency10, to grant early release to prisoners whose remaining detention period is 2 months or less11 and to convert sentences of 6 months’ imprisonment into community service and day-fines, inter alia.
On April 29, 2020, the French Minister of Justice stated that the number of prisoners had decreased by 11 500 since March 16, 202012. This unprecedented decline is due both to a decrease of court proceedings and to these early release measures.
However, these measures were rather paradoxical considering notably Article 16 of the March 25 Decree which extended automatically the custody time limits by two months when the prison sentence incurred was less than or equal to five years, by three months in other cases and by six months for the cases heard before the Court of Appeal. These extensions were widely criticized and gave rise to a number of procedures initiated before the French Administrative Supreme Court (Conseil d’Etat), notably by the Paris Bar Association as well as by the French National Bar Council requesting the suspension of the enforcement of the measures at stake. These requests were denied13. However, on May 26, 2020, the French Criminal and Civil Supreme court (Cour de cassation) specified these rules by stating that the extensions require the control of a judicial judge at short notice regarding the necessity of the custody. In all cases where such judicial control has not been or can no longer be carried out, the person in custody shall be released14. The debate went on, when the Cour de cassation transmitted to the Conseil Constitutionnel a question relating to the constitutionality of Article 11 of the March 23 Law, that is to say, to the possibility for government to directly legislate on custody. On July 3, 2020, the Council found this article compatible with the Constitution because it doesn’t preclude the intervention of a judge in a short delay in case of custody. However, the decision suggests that the violation of Constitution could come from a decree issued on the basis of these provisions15. This sentence could be understood as an incentive for a new question relating to the constitutionality of the March 25 Decree, adapting the rules of criminal procedure in accordance with the Law n°2020-29016.
This exceptional procedure has reached its end. The May 11 Law sets the principle of a gradual return to ordinary law of custody. It adds an article 16-1 in the March 25 Decrees providing that as of 11 May 2020, custody will no longer be extended without a decision of the competent judge taken after an adversarial debate17.
II. Protection of officers of the court
As part of early actions taken by the government all hearings were postponed except emergency cases to ensure protection of the officers of the court such as judges and lawyers as well as prosecuted individuals18.
In that respect, as of March 12, 2020, the prescriptive period for prosecution and punishment were suspended until one month after the end of the state of emergency19. If a legal act interrupted the prescriptive period such act remained legally valid but only took effect at the end of the suspension.
Additionally, the March 25 Decree, modified the procedural rules governing hearings. Thus, hearings could be led by only one judge subject to a decision of the president of the court20. It also provided that hearings and rulings could be closed to the public by decision of the president of the court. This measure was rare enough since hearings and judgment are to be pronounced publicly pursuant to article 6§1 of the European Convention on Human Rights. Moreover, the use of videoconferencing was generalized before all criminal courts, save for felony courts (Cour d’assises), without the need to obtain the agreement of the parties21.
III. A clarification on criminal liability for decision-makers
Decision-makers such as mayors and employers have been worried about the question of potential judicial consequences for the decisions they have made during the crisis22. The issue has been raised during the parliamentary debates before the adoption of the May 11 Law. It addressed the matter by creating a new article L. 3136-2 in the Public Health Code, which provides that for the application of article 121-3 of the Criminal Code relating to the conditions for establishing unintentional criminal liability, account must be taken of “the competence, power and means available to the perpetrator in the crisis situation that justified the state of health emergency, as well as the nature of his missions or functions, in particular as a local authority or employer” 23. Nevertheless, this provision seems to be more of a way to reassure elected officials than a juridical answer to a real risk. Indeed, a previous 2000 Law24 already restricted the conditions in which de liability of an elected official could be established.
- Law n°2020-290, emergency law to respond to the covid-19 pandemic, March 23, 2020.
- Decree n°2020-293, setting out the general measures necessary to face the covid-19 pandemic in the context of the state of health emergency, March 23, 2020.
- Decree n°2020-303, adapting the rules of criminal procedure in accordance with the Law n°2020-290, March 25, 2020.
- Articles L. 3131-1 and L. 3131-15 through L. 3131-17 of the French Public Health Code.
- Decree n°2020-264, establishing an offence for the violation of the measures aimed at preventing and limiting the consequences of serious health threats on the population’s health, March 17, 2020.
- Decree n°2020-357, regarding the lump-sum fine of the 5th class minor offence punishing the violation of measures enacted in the event of a serious health threat and the declaration of a state of health emergency, March 28, 2020.
- Article L. 3136-1, §4, French Public Health Code.
- French Constitutional Council, Decision n°2020-846/847/848 QPC, June 26, 2020.
- Law n°2020-546, extending the state of public health emergency and completing its provisions, May 11, 2020.
- Article 27 and 28 of the decree n°2020-303 exclude those convicted of terrorist offences, or offences committed within the couple or those who disrupt order, or who have behaved contrary to the rules of good citizenship imposed by the health context.
- Only to prisoners initially sentenced to a prison term of up to 5 years.
- “Nicole Belloubet : « Le taux d’occupation moyen des prisons est inférieur à 100 % »”, Le Monde, April 29, 2020.
- French Council of State, decision n°440039, April 22, 2020.
- Cass. Crim, n°20-81.971, May 26, 2020.
- French Constitutional Council, decision n°2020-851/852 QPC, July 3, 2020 (“Accordingly, the contested provisions do not preclude the intervention of a judge in the extension of a remand title which expires during the period of application of the state of health emergency. They therefore do not in themselves, nor by their necessary consequences, affect the requirements of article 66 of the Constitution requiring the intervention of a judge as soon as possible in the event of deprivation of liberty. The unconstitutionality alleged by the applicants could only result from the decree issued on the basis of these provisions”).
- “Pour le Conseil constitutionnel, pas de détentions provisoires sans l’intervention d’un juge”, Le Monde, July 3, 2020 (“This can be seen as an incentive to file a QPC on the decree, which would then risk formal censorship”).
- Law n°2020-546, extending the state of public health emergency and completing its provisions, article 1, III., 2°, May 11, 2020.
- Statement of the French Minister of Justice released by the French National Bar Council on March 16, 2020, “Covid-19: Fermeture des juridictions sauf “contentieux essentiels””.
- Article 3, Decree n°2020-303, adapting the rules of criminal procedure in accordance with the Law n°2020-290, March 25, 2020.
- Article 9, Decree n°2020-303, adapting the rules of criminal procedure in accordance with the Law n°2020-290, March 25, 2020.
- Article 5, Decree n°2020-303, adapting the rules of criminal procedure in accordance with the Law n°2020-290.
- “Responsabilité pénale des élus et calinothérapie de l’État”, P. Januel, in Dalloz-actualité, June 4, 2020.
- Law n°2020-546, extending the state of public health emergency and completing its provisions, article 1, II, May 11, 2020.
- Law n°2000-647 aiming to precise the definition of unintentional offences, July 10, 2000.
Is there room for improvement in the French law on whistleblowers in the wake of the transposition of the European Directive of October 23, 2019 on whistleblowers protection?
Whistleblowers legal protection being widely fragmented from one Member State to another, the European Union adopted on October 23, 2019 a new Directive (the “Directive”)1 offering a European level protection to persons who report breaches of EU law.
France which needs to transpose this Directive within two years, did not wait long to acknowledge the changes introduced by the Directive. Indeed, a first Bill on the adaptation of French law to European provisions has already been presented to the French Parliament and is currently in the hands of the Commission for Constitutional Laws, Legislation and General Administration of the Republic of France2.
However, this text is not final, and amendments are likely to be made in the future. In fact, in a press release dated June 4, 2020, the French Defender of Rights (“Défenseur des Droits”)3 has called for an “ambitious transposal” of the Directive4.
I. A possible extension of the French scope of reporting
While French law on whistleblowing mentions report of “”, the Directive covers all violations related to Union acts in ten areas (i.e. public procurement, environmental protection, public health, consumer protection, protection of privacy and personal data5) and breaches affecting the financial interests of the Union. Each Member State will be able to extend the material scope defined by the Directive6 giving leeway to France to extend the scope of areas or acts that can be reported.
In that vein, the Defender of Rights suggests that the French government takes the opportunity of the transposition to introduce a specific whistleblowing mechanism for national security and defence issues7.
In addition, while French law limits whistleblowers protection to workers, the Directive extends the scope of the protection to a wider public. Article 4 of the Directive indeed provides that whistleblowers can be any persons who work or worked in the public or private sector and who have obtained information on violations in a professional context, whether they are employees, self-employed workers, shareholders or members of management or management bodies, monitoring of companies, volunteers or trainees8.
The Directive also grants protection to facilitators and third parties who are close to the authors of reports and who incur, by extension, risks of reprisals9. The Defender of Rights press release has called for a clarification of the role legal entities (such as NGOs and unions) may play in the whistleblowing procedure.
II. A possible reinforcement of the French whistleblowers protection framework
Unlike French law, the Directive does not require the whistleblower to act in a disinterested manner10. Hence, in order to benefit from the protective regime, the author of the report must have had “
The Directive provides for internal and external reporting channels and encourages the primary use of internal channels “where the breach can be addressed effectively internally and where the reporting person considers that there is no risk of retaliation14.” The implementation of such internal whistleblowing systems is mandatory for companies over fifty employees and for cities of more than ten thousands inhabitants15.The Directive does not, however, prioritize internal reporting channels16.
According to the Defender of Rights, the transposal of the Directive should enable the consolidation of French reporting channels by strengthening the monitoring of the effective implementation of procedures for collecting alerts as well as designating external competent bodies to handle the processing of reports.
Whistleblowers’ anonymity must be guaranteed17. The principle arises from the duty of confidentiality binding entities and authorities collecting the alerts. Hence, the whistleblower’s identity or the information that could make it possible to identify her or him cannot, except within strictly limited exceptions, be disclosed without her or his consent. The Directive leaves the choice to the Member States to accept or not anonymous alerts18. This is not a major change in France since article 9 of the law Sapin II already requires “strict confidentiality on the identity of the reporting parties19”. The Directive requires that whistleblower’s protection measures explicitly prohibit reprisals and threats. Supporting measures to assist those who may be persecuted20, such as information and advice on remedies or even legal assistance, must also be implemented21. Each Member State is free to provide for financial assistance and psychological support measures for whistleblowers who face legal action22. Such provision was similarly discussed before the adoption of the law Sapin II, but was finally rejected by the Constitutional Council (Conseil Constitutionnel)23.
The European Directive on the protection of persons who report breaches of Union law clearly shows that the Sapin II law whistleblower protective framework is well advanced. The transposition is still an opportunity to go further by extending the scope of areas and acts that may be reported and by reinforcing the protective measures for whistleblowers.
- Directive (EU) 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, https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32019L1937&rid=4
- Bill for an effective protection of whistleblowers n°2600, http://www.assemblee-nationale.fr/dyn/15/textes/l15b2600_proposition-loi.
- The French Defender of Rights is a constitutional independent institution created in 2011. It has been entrusted with two missions: to defend people whose rights are not respected and to ensure equal access to rights for all.
- Press release of the French Defender of Rights, June 4 2020, https://www.defenseurdesdroits.fr/sites/default/files/atoms/files/ddd_cp_transposition-directive-lanceurs-d-alerte_04-06-2020.pdf.
- Article 2 of the European 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 (“1. This Directive lays down common minimum standards for the protection of persons reporting the following breaches of Union law: (a) breaches falling within the scope of the Union acts set out in the Annex that concern the following areas: (i) public procurement; (ii) financial services, products and markets, and prevention of money laundering and terrorist financing; (iii) product safety and compliance; (iv) transport safety; (v) protection of the environment; (vi) radiation protection and nuclear safety; (vii) food and feed safety, animal health and welfare; (viii) public health; (ix) consumer protection; (x) protection of privacy and personal data, and security of network and information systems; L 305/34 EN Official Journal of the European Union 26.11.2019 (b) breaches affecting the financial interests of the Union as referred to in Article 325 TFEU and as further specified in relevant Union measures; (c) breaches relating to the internal market, as referred to in Article 26(2) TFEU, including breaches of Union competition and State aid rules, as well as breaches relating to the internal market in relation to acts which breach the rules of corporate tax or to arrangements the purpose of which is to obtain a tax advantage that defeats the object or purpose of the applicable corporate tax law”).
- Article 2 of the European 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 (“This Directive is without prejudice to the power of Member States to extend protection under national law as regards areas or acts not covered by paragraph 1”).
- Article 4 of the European 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 (“1. This Directive shall apply to reporting persons working in the private or public sector who acquired information on breaches in a work-related context including, at least, the following: (a) persons having the status of worker, within the meaning of Article 45(1) TFEU, including civil servants; (b) persons having self-employed status, within the meaning of Article 49 TFEU; (c) shareholders and persons belonging to the administrative, management or supervisory body of an undertaking, including non-executive members, as well as volunteers and paid or unpaid trainees; (d) any persons working under the supervision and direction of contractors, subcontractors and suppliers. 2. This Directive shall also apply to reporting persons where they report or publicly disclose information on breaches acquired in a work-based relationship which has since ended. 26.11.2019 EN Official Journal of the European Union L 305/35 3. This Directive shall also apply to reporting persons whose work-based relationship is yet to begin in cases where information on breaches has been acquired during the recruitment process or other pre-contractual negotiations. 4. The measures for the protection of reporting persons set out in Chapter VI shall also apply, where relevant, to: (a) facilitators; (b) third persons who are connected with the reporting persons and who could suffer retaliation in a work-related context, such as colleagues or relatives of the reporting persons; and (c) legal entities that the reporting persons own, work for or are otherwise connected with in a work-related context”).
- Article 4 of the European 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.
- Article 6 of the Law n° 2016-1691 of December 9, 2016,
- Article 6 of the European 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.
- Communication from the Commission to the European Parliament, the Council and the European Economic and Social Committee, Strengthening whistleblower protection at EU level, p. 9, https://ec.europa.eu/info/sites/info/files/placeholder_10.pdf.
- Communication from the Commission to the European Parliament, the Council and the European Economic and Social Committee, Strengthening whistleblower protection at EU level.
- Article 7 2. of the European 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.
- Article 8 of the European 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
- Article 10 of the European 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.
- Article 2.2 of the European 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.
- §34 of the European 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 (“Without prejudice to existing obligations to provide for anonymous reporting by virtue of Union law, it should be possible for Member States to decide whether legal entities in the private and public sector and competent authorities are required to accept and follow up on anonymous reports of breaches which fall within the scope of this Directive. However, persons who anonymously reported or who made anonymous public disclosures falling within the scope of this Directive and meet its conditions should enjoy protection under this Directive if they are subsequently identified and suffer retaliation”).
- Article 9 of the Law n° 2016-1691 of December 9, 2016 (“The procedures for collecting alerts, under the conditions mentioned in Article 8, shall ensure strict confidentiality on the identity of the reporting parties, of the persons on whom the alert is based and of the information collected by all the recipients of the alert. Information likely to identify the person issuing the alert shall not be disclosed, except to the judicial authority, and with the consent of that person”).
- Article 21.1 of the European 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.
- Article 20.1 of the European 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.
- Article 20.1 of the European 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.
- “Loi Sapin 2 : un contrôle exigeant du Conseil constitutionnel” Cons. const., 8 déc. 2016, n° 2016-740 DC, M-C de Montecler, December 13, 2016 Dalloz actualités.
Incompatibility of French asset freeze measures with EU law
France allows the introduction of national asset freezes. The free movement of capital is however one of the four fundamental freedoms of the EU single market1, and restrictions on capital movements between Member States as well as between Member States and third countries could only be allowed in exceptional circumstances2.
On November 8, 2019, the European Commission issued an Opinion3, stating that unilateral adoption of national asset freeze measures was incompatible with EU law.
The EU Commission’s position may thus have consequences for those Member States which, as France, have provisions in their national law, allowing the introduction of national asset freezes. Indeed, the Commission could bring legal action before the Court of Justice of the European Union (“CJEU”) against a Member State who it considers failing to comply with EU law4. Until then however, an Opinion of the Commission has no binding force5, which can raise question on its effectiveness.
I. European Commission considers incompatible with EU law unilateral adoption by a Member State of national asset freeze measures
The Opinion issued by the European Commission states that unilateral adoption of national asset freeze measures, introduced by the Member States to support the achievement of the EU Common Foreign and Security Policy (“CFSP”) objectives, would have a clear impact on the functioning of the internal market and would undermine the purpose and effectiveness of Article 215 TFEU6. Such measures would therefore not be compatible with EU law.
Measures such as assets freezes of EU or third countries nationals might affect movement of capital, including exports, imports, transfers of funds, investment, as well as access to the EU’s capital markets. Heterogeneous measures taken unilaterally by the Member States may also affect, without any economic justification, the competitive position of certain economic operators, creating competition distortion. Finally, they might also affect the exercise by economic operators of their right of establishment and to provide services.
The Commission based its position on the CJEU decision Kadi I7 of September 3, 2008, in which CJEU confirmed that Article 215 TFEU is the sole appropriate legal basis for the implementation of sanctions such as assets freezes adopted under the CFSP that can be used without a risk of potential distortions of the internal market. It also considered that unilateral restrictive measures adopted by the Member States would undermine the effectiveness and the purpose of this provision. The Court added that the sanctions are implemented through the adoption of Council Regulations and become immediately applicable in the Member States. Hence, their implementation is harmonised all over the EU territory.
The Commission finally emphasised that unilateral national restrictions to the free movement of capital within the EU that are allowed under Article 65 TFEU8 (such as capital controls that Cyprus and Greece were forced to introduce in 2013 and 2015 respectively in order to prevent an excessive outflow of capital during the European sovereign debt crisis9), cannot be considered as a legal basis for restrictions such as assets freeze that are adopted pursuant to Article 215 TFEU.
II. French law allows adoption of national asset freeze measures in contradiction with the Opinion
The asset freeze measures that apply in France10 derive from the EU Regulations on restrictive measures11 adopted under the CFSP and also from the national provisions listed in the French Monetary and Financial Code (CMF)12. Indeed, Article L. 562-2 of the CMF provides for the possibility to implement asset freezes measures against persons that commit, attempt to commit, facilitate, finance, incite or participate in acts of terrorism. It meets the requirements set out by the Financial Action Task Force and the United Nations Security Council (UNSC). Such measures can be introduced by decree issued conjointly by the Minister of the Economy and Finance and the Minister of the Interior and apply to financial institutions following a publication of the decree in the Official Journal of the French Republic. Their validity is limited to 6 months, renewable by a new decree13.
Article L. 562-3 of the CMF also allows to adopt national asset freezes against persons that have attempted to commit, facilitate or finance actions sanctioned or prohibited by resolutions adopted under Chapter VII of the Charter of the United Nations14 or acts adopted pursuant to Article 29 of the TEU15 or Article 75 of the TFEU16. It is to be noted that, as regards UNSC resolutions, they do not create obligations for the countries until they have been transposed into national law. Asset freeze measures under Article L. 562-3 are implemented following a decree issued by the Minister of the Economy and Finance and are automatically repealed when the EU Regulation establishing the asset freeze measures enters into force.
Consequently, while under Article L. 562-3 of the CMF a ministerial decree introducing asset freezes is usually issued following a UNSC resolution (that is or will be transposed into EU law) or an EU Council decision, under Article L. 562-2, asset freezes can be introduced independently from any international decision. This mechanism allows therefore unilateral national measures, which might not be included in the EU legislation, and which have been condemned by the Commission in the November 8, 2019 Opinion.
That being said, unless an intervention of a legally binding act or a decision by the CJEU confirms the Opinion, the French national asset freeze mechanisms should continue to be considered compliant with the EU law until otherwise decided.
- The principle of free movement of capital within the EU is stated in Articles 63-66 TFEU.
- Articles 75 and 215 of the TFEU provide for such exceptions, allowing to introduce financial sanctions either to prevent and combat terrorism or based on decisions adopted within the framework of the EU Common Foreign and Security Policy (CFSP), which is determined and implemented by the European Council.
- Commission Opinion on the compatibility of national asset freezes imposed by Member States with Union law, November 8, 2019, Brussels, C (2019) 8007 final, https://ec.europa.eu/fpi/sites/fpi/files/20191108-2_fr_act_part1_v2.pdf.
- Pursuant to Article 17 of the TEU where an EU country fails to comply with EU law, after a formal notice was sent, the Commission may bring the case before the Court of Justice of the European Union (under Article 258 of the Treaty on the Functioning of the European Union (TFEU)), https://eur-lex.europa.eu/summary/glossary/community_law_application.html.
- EU official website, Types of EU law (“An ‘opinion’ is an instrument that allows the EU institutions to make a statement, without imposing any legal obligation on the subject of the opinion. An opinion has no binding force”), https://ec.europa.eu/info/law/law-making-process/types-eu-law_en.
- Article 215 TFEU (“1. Where a decision, adopted in accordance with Chapter 2 of Title V of the Treaty on European Union, provides for the interruption or reduction, in part or completely, of economic and financial relations with one or more third countries, the Council, acting by a qualified majority on a joint proposal from the High Representative of the Union for Foreign Affairs and Security Policy and the Commission, shall adopt the necessary measures. It shall inform the European Parliament thereof. 2. Where a decision adopted in accordance with Chapter 2 of Title V of the Treaty on European Union so provides, the Council may adopt restrictive measures under the procedure referred to in paragraph 1 against natural or legal persons and groups or non-State entities”).
- CJEU, Joined Cases C-402/05 P and C-415/05 P, ECLI:EU:C:2008:461, paragraph 230.
- Article 65 TFEU (“1. The provisions of Article 63 shall be without prejudice to the right of Member States: (a) to apply the relevant provisions of their tax law which distinguish between taxpayers who are not in the same situation with regard to their place of residence or with regard to the place where their capital is invested; (b) to take all requisite measures to prevent infringements of national law and regulations, in particular in the field of taxation and the prudential supervision of financial institutions, or to lay down procedures for the declaration of capital movements for purposes of administrative or statistical information, or to take measures which are justified on grounds of public policy or public security”).
- “Free Movement of Capital”, Ch. Scheinert, April 2020, https://www.europarl.europa.eu/ftu/pdf/en/FTU_2.1.3.pdf.
- 20190617, Joint guidelines issued by the directorate general “Treasury” and the ACPR on the implementation of asset freezes, p. 5.
- Resulting from Article 215 TFEU.
- Articles L. 562-1 et seq. and R. 562-1 et seq. of the Monetary and Financial Code.
- Joint guidelines issued by the directorate general “Treasury” and the ACPR on the implementation of asset freezes, June 17, 2019, p. 9.
- Chapter VII of the Charter of the United Nations, “Action with respect to threats to the peace, breaches of the peace, and acts of aggression”.
- Article 29 TEU (“The Council shall adopt decisions which shall define the approach of the Union to a particular matter of a geographical or thematic nature. Member States shall ensure that their national policies conform to the Union positions”).
- Article 75 TFEU (“Where necessary to achieve the objectives set out in Article 67, as regards preventing and combating terrorism and related activities, the European Parliament and the Council, acting by means of regulations in accordance with the ordinary legislative procedure, shall define a framework for administrative measures with regard to capital movements and payments, such as the freezing of funds, financial assets or economic gains belonging to, or owned or held by, natural or legal persons, groups or non-State entities”).
France finalizes the transposition of the 5th Anti-Money Laundering Directive by adopting new provisions on the fight against money laundering and terrorist financing
On February 13, 2020, the French government published an Order1 transposing into French law the fifth European Anti-Money Laundering Directive2 entered into force on July 10, 2018. The provisions of the Order are transposed into Articles L. 561-1 to L. 566-3 and R. 561-1 to R. 562-5 of the Monetary and Financial Code (CMF) and aim to strengthen the AML/CFT mechanism by taking account the evolution in money laundering patterns.
I. Modification of the scope of entities subject to AML/CFT obligations3
The Order brings the scope of persons subject to AML/CFT obligations in line with European requirements, notably by including in the perimeter of AML/CFT control subsidiaries of financial sector companies, as well as tax advisory activities carried out by legal professionals4. The latter, previously excluded from the list, now join other legal counsels offering fiduciary and transaction advisory services and become subject to customer due diligence obligations. In addition, the autonomous funds for lawyers’ pecuniary settlements (CARPA) are now also subject to the AML/CFT obligations, as are the clerks of the commercial courts. Conversely, professionals in the art and property rental sectors will only be subject to the AML/CFT obligations for transactions above 10,000 euros and property management companies will no longer be subject to any obligations6.
II. Clarification of supervisory authorities’ obligations regarding AML/CFT control
The Order further clarifies AML/CFT control requirements expected to be met by the supervisory authorities. They must develop a good understanding of the specific risks of money laundering and terrorist financing presented by the supervised entities and need to adapt their control mechanism on a case by case basis to reflect these risks in the assessment. They are also required to review the assessment periodically or when major changes occur in management or activities. The authorities shall determine the frequency and intensity of their documentary and on-site inspections, taking into account, in particular, the risk profile of the persons subject to AML/CFT control7. In addition, a procedure for reporting breaches related to AML/CFT obligations through secure and anonymous channels is systematised for all supervisory authorities8. In fact, the reporting procedure issued from the Sapin 2 law which created a status of whistleblower in French law is also applicable to AML/CFT alerts.
III. Adjustment of the obligation of complementary vigilance
The Order also adjusts specific customer due diligence obligations. Additional due diligence measures are required to be introduced against high-risk third countries identified by the European Commission and the Financial Action Task Force9. Remote business relationships, however, are no longer considered to present a high risk of money laundering, requiring the systematic implementation of additional vigilance measures10. In addition, the concepts of correspondent banking and transit accounts, which receive special attention from regulatory bodies because of the risks inherent in these processes, have been clearly defined11.
IV. Register of beneficial owners: new rules for public access and strengthened liability for violation of declaration requirements
The beneficial owners are required to provide information allowing their identification. Beneficial owners who fail to make a declaration or report inaccurate or incomplete data may be subject to criminal proceedings12, leading to sanctions such as fines, ban from managerial responsibilities, and partial deprivation of civil and political rights. The supervisory authorities as well as persons subject to AML/CFT are required to report the absence of registration or any discrepancy between the information registered and the information available to them13.
Until recently, the public access to the register of beneficial owners was conditioned to a demonstration of a legitimate reason before the judge in charge of keeping the register14. The new rules no longer mention any specific requirement for public access to the register15. They however limit the scope of information that can be freely accessed by the public. That being said, information contained in the register is fully accessible to the authorities involved in the AML/CFT control16 and to persons subject to the AML/CFT legislation if their request is related to the abovementioned obligations17.
V. Enhanced role of TRACFIN18
The Order reinforces the confidentiality of the right of opposition that TRACFIN may address to any person subject to the AML/CFT obligations concerning a transaction suspected of constituting a money laundering operation19. Going forward, supervisory authorities cannot, under penalty of pecuniary sanctions, communicate to any unauthorised third persons, as well as to the author of the suspected operation, the existence of TRACFIN’s decision to stop the operation. TRACFIN’s ability to exchange information with its foreign counterparts is also reinforced20. Furthermore, provisions enabling it to exchange information with other French intelligence services are added21.
VI. Reinforced cooperation between supervisory bodies at national and European level
The information exchange between national and foreign supervisory authorities has been amplified. Notably, the Prudential Control and Resolution Authority (“Autorité de Contrôle Prudentiel et de Résolution” or “ACPR”), the Customs Administration and the French Anti-Corruption Agency (“AFA”) might exchange the information that can be useful for the performance of their respective missions22. Similarly, the Order also provides for enhanced coordination between national and European authorities, including the European Central Bank23.
- Order n°2020-115 of February 12, 2020 transposing the 5th Anti-Money Laundering Directive.
- Directive (EU) 2018/843 of the European Parliament and of the Council of 30 May 2018.
- Article L. 561-2 of the French Monetary and Financial Code.
- Article L. 561-3, I of the French Monetary and Financial Code.
- Report of the French Republic President on the order n° 2020-115 of February 12, 2020 strengthening the national scheme of fight against money laundering and terrorism financing, 5https://www.legifrance.gouv.fr/eli/rapport/2020/2/13/ECOT1932860P.
- Article L. 561-36, IV of the French Monetary and Financial Code.
- Article L. 634-1 of the Monetary and Financial Code.
- Article L.561-11 of the Monetary and Financial Code.
- Decree n° 2020-118 of February 12, 2020 strengthening the national system for fighting against AML/CFT.
- Article L. 561-10-3 of the Monetary and Financial Code.
- Articles L. 574-5 and L. 574-6 of the Monetary and Financial Code.
- Article L. 561-47-1 of the Monetary and Financial Code
- Former Article R. 561-59 of the Monetary and Financial Code.
- Article L. 561-46 of the Monetary and Financial Code.
- Article R. 561-57 of the Monetary and Financial Code.
- Article R. 561-58 of the Monetary and Financial Code.
- Traitement du Renseignement et Action Contre Les Circuits Financiers Clandestins – Intelligence Processing and Action Against Clandestine Financial Circuits.
- Article L. 561-24 of the Monetary and Financial Code.
- Article L. 561-29 of the Monetary and Financial Code.
- Article L. 561-31 of the Monetary and Financial Code.
- Article L. 631-1 of the Monetary and Financial Code.
- Article L. 632-1 of the Monetary and Financial Code.
The French Anti-corruption Agency releases updated guidelines on the corporate anti-corruption compliance function
French entities were particularly solicited in the past few years to be proactive on compliance matters, in particular as regard to anti-corruption regulations. On December 19, 2019, the French Anti-corruption Agency (“AFA”), which has the mission to assist all person and entity to prevent and fight against corruption, released updated guidelines on the corporate anti-corruption compliance function1.
These Guidelines, which first version has been initially published in February 2019, gives the keys elements of what is expected by the AFA regarding the anti-corruption compliance function in a company.
I. The anti-corruption compliance function, a multi-task and intersecting function
The Guidelines highlights the strategical interest for a company to have a compliance process integrating dedicated anti-corruption compliance functions. These functions may be assigned to a dedicated person, depending on the entity’s characteristics (status, size, activity). The anti-corruption compliance officer shall however coordinate her/his action with the entity others compliance areas (such as competition law, fight against money laundering and terrorism financing, protection of personal data, export control etc.) and be applied at each stage and to each employee of the entity.
A variety of missions are attributed to the anti-corruption compliance officer. She/he will be responsible for designing a compliance program, managing the implementation and the update of her/his functions, spread an anti-corruption culture within the entity by implementing training sessions, be the reference contact of business partners, report on the efficiency of the program to the management. She/he will also have a key role for the implementation and the follow-up of any investigation related to allegations of corruption2.
Depending on the organization of the entity, the anti-corruption compliance officer will have responsibilities, or a consultative role shared with the entity’s others key managers (general counsel, human resources manager, internal audit manager, etc. 3).
II. The compliance functions governance coordinated and shared with the management
Even though the designation of a compliance officer is not mandatory, the AFA recalls that entity management is responsible for the implementation an efficient anti-corruption governance, which implies to clearly identify the person handling such functions4. In addition, the management will have to ensure a regular follow-up and update of the anti-corruption programs. Furthermore, the anti-corruption compliance officer will need to be provided with enough resources and means to fulfill her/his mission (a dedicated compliance team, external counsels, IT tools, etc.). She/he shall also be guaranteed to be supported and listened by the management and she/he might be helped by anti-corruption compliance referents deployed within the entity5.
The Guidelines recommend ensuring that the position of the compliance officer guarantee her/his objectivity and independence. She/he shall have an effective access to all useful information and is encouraged to be part of the decision-making process. She/he is however required to report on her/his activity to the management. 6 In case of delegation of powers, the management however remains administratively of criminally liable for anti-corruption breaches7. Also, Article 17 of the Sapin II law8 charges responsibility for the implementation of the compliance measures on the entity’s manager9. She/he can thus be held personally liable (as well as the legal entity) before the AFA Enforcement Committee10.
III. Specifications on the compliance function’s profile and skills
Notwithstanding that no specific background is required to embody anti-corruption compliance functions, the Guidelines provide a series of recommendation for recruiting the compliance officer. Independently of being recruited among the entity’s employees, she/he will need to (i) have a good knowledge of the entity (ii) be able to handle transversal functions (management, communication, impartiality, team spirit, patience, prudent) (iii) have good knowledge of the regulations and an experience of risk mapping, internal control and analyze tools. As to the Guidelines, being specifically qualified for anti-corruption compliance shall also be valorized11.
IV. Compliance functions imply specific liabilities
The Guidelines specify that the anti-corruption compliance officer cannot be held liable under article 17 of the Law Sapin II. It also indicates that from a criminal law perspective, a breach committed within the compliance officer functions cannot be considered as a constituent element of the offence of corruption. To be held liable, the law requires an active participation to the acts of corruption. Hence, weak or incomplete measures do not answer to this definition. The Guidelines however recall that an anti-corruption compliance officer might face disciplinary sanction in case of breach committed within her/his functions. It could for instance be the case if she/he failed to report o prevent a breach for which she/he was provided with the appropriate means to do so12.
The Guidelines send a strong and useful message to entities subject to anti-corruption regulation. Although the function is not mandatory, the anti-corruption compliance officer is presented as one of companies’ vital component for the fight against corruption.
- AFA’s guidelines on the corporate anticorruption compliance function, December 19, 2019, https://www.agence-francaise-anticorruption.gouv.fr/files/2020-06/Pratical%20Guide%20The%20corporate%20anti-corruption%20compliance%20function_0.pdf.
- AFA’s guidelines on the corporate anticorruption compliance function, December 19, 2019, p.6.
- AFA’s guidelines on the corporate anticorruption compliance function, December 19, 2019, p.7.
- AFA’s guidelines on the corporate anticorruption compliance function, December 19, 2019, p.9.
- AFA’s guidelines on the corporate anticorruption compliance function, December 19, 2019, p.13.
- AFA’s guidelines on the corporate anticorruption compliance function, December 19, 2019, p.12.
- AFA’s guidelines on the corporate anticorruption compliance function, December 19, 2019, p.5.
- Sapin II Law No 2016-1691 of December 9, 2016, on transparency, the fight against corruption and the modernization of economic life.
- AFA’s guidelines on the corporate anticorruption compliance function, December 19, 2019, p.16.
- As it was the case in the two firsts decisions recently rendered by the AFA Enforcement Committee, decision No19-01 Société S. SAS et Mme C., July 4, 2019 and decision No19-02 Société I. et M. C. K., February 7, 2020.
- AFA’s guidelines on the corporate anticorruption compliance function, December 19, 2019, p.14.
- AFA’s guidelines on the corporate anticorruption compliance function, December 19, 2019, p.17.
A major role for the AFA in the Anti-Corruption Authorities’ global mapping?
The fight against corruption has spread worldwide, resulting in the establishment of a large number of anti-corruption institutions. The diversity of their strategies and the general lack of up-to-date information prompted the French Anti-Corruption Agency (“AFA”), in partnership with Council of Europe’s Group of States against Corruption (“GRECO”), the Organization for Economic Co-operation and Development (“OECD”), and the Network of Corruption Prevention Authorities (“NCPA”) to launch a global mapping of these national anti-corruption authorities (“ACAs”).
A first analysis report was published on 14 May 2020 and announces a framework for effective cooperation of Anti-Corruption Agencies around the world, the responsibility of which falls under the responsibility of the NCPA chaired by the AFA1.
I. An international taskforce launched to identify areas of collaboration between ACAs
Before the creation of this international taskforce, previous attempts to gather information and to connect these institutions have been already undertaken.
In 2010, the World Bank, in cooperation with the European Commission, the United Nation Office of Drugs and Crime and the US State Department, created a virtual platform, the “Anti-Corruption Authorities Initiative”, in order to provide the staff, practitioners of the ACAs and international actors with the opportunity to connect and learn about each other’s experiences. The first step of this initiative was to establish a diagnostic survey that collected factual and structural information on each participating Anti-Corruption Authority2. Since 2010, 60 countries have submitted their surveys, the last one being Botswana in 20153.
The second effort was the “Network for Integrity initiative” created by several institutions that have decided to join in order to develop an international culture of integrity and to facilitate the exchange of information and best practices among members. To date, the ‘Network for Integrity’ includes 14 institutions from 14 different countries on 4 continents4. Although the council of Europe lists the European national Anti-Corruption Authorities in Europe, no further information is disclosed however5.
Therefore, before the creation of the above-mentioned taskforce, no comprehensive source of information on ACAs was available.
To remedy the lack of cooperation between ACAs at the operational level and in view of the failures of the previous initiatives, the AFA, the Italian National Anti-Corruption Authority and the Serbian Anti-Corruption Agency decided to launch the NCPA6. The GRECO and the OECD then came to strengthen the forces to create the aforementioned ACAs’ global mapping. The project finally involved 171 national authorities committed to the fight against corruption from 114 countries7.
The purpose is to gather information to understand ACAs’ specific needs and to identify areas of collaboration between ACAs. Charles Duchaine, AFA’s Director and 2020 President of the NCPA Network, states that “[b]y learning from each other’s experience and joining our efforts, our goal is to prevent corruption more effectively, and to promote a global culture of integrity”8.
II. The outcome of the global mapping reveals common trends and an urge to develop an international network of Anti-Corruption Agencies
The first phase of the mapping was an online survey focusing on the missions and prerogatives of anti-corruption bodies sent worldwide9. The findings indicate that ACAs share similar prerogatives around the world. Indeed, a clear majority of the ACAs oversee the implementation of anti-corruption policies within their countries and are usually in charge of translating international standards into national actions. Besides, ACAs provides a comprehensive assessment of a state’s compliance situation regarding international standards. However, it appeared that the supervisory role differs from one ACA to another. Indeed, only 63% of these institutions are authorized to conduct investigations and/or criminal proceedings and only less than half of the latter have sanctioning powers10.
However, the main conclusion of the report is the willingness of ACAs to develop the network with their foreign counterparts and to share best practices.
It has therefore been decided that the NCPA will be in charge to develop cooperation between the ACAs and will create a dynamic center to connect ACAs around the world. The AFA which chairs the NCPA will thus be responsible for this implementation.Through its role in this international project, the signature of several cooperation protocols around the world with many ACAS11, the AFA clearly shows its willingness to appear more and more as a major player in global cooperation in the fight against corruption. In fact, it is already one of the main points of contact of the ACAs12. It is therefore highly likely that the AFA will carry some influence in the upcoming harmonization of ACAs best practices.
- May 2020, Global Mapping of Anti-Corruption Authorities Analysis Report, https://www.agence-francaise-anticorruption.gouv.fr/files/files/NCPA_Analysis_Report_Global_Mapping_ACAs.pdf.
- May 2020, Global Mapping of Anti-Corruption Authorities Analysis Report, (“For example, in 2010, the World Bank, in collaboration with the UNODC, the US State Department and the European Commission, have launched an initiative aimed at collecting systematic data and information about ACAs. A diagnostic survey was developed, and its results published on an online platform (www.acauthorities.org). The ACAs’ profiles available on this platform constitute a very valuable resource. However, they have not been updated in recent years”).
- Anti-Corruption Authorities (ACAs) Portal, Profiles: Botwana, https://www.acauthorities.org/country/bw.
- For more information on the Network for Integrity: http://www.networkforintegrity.org/the-network/.
- National Anti-Corruption Authorities listed on the Council of Europe Portal, https://www.coe.int/fr/web/greco/national-anti-corruption-authorities.
- For more information on Network of Corruption Prevention Authorities: https://www.coe.int/en/web/corruption/ncpa-network.
- “Towards a global mapping of anti-corruption authorities: the results of our survey”, French Anti-corruption Agency, May 14, 2020.
- Global Mapping of Anti-Corruption Authorities Analysis Report, May 2020, Foreword.
- Global Mapping of Anti-Corruption Authorities, Preliminary findings, December 2019.
- Global Mapping of Anti-Corruption Authorities, Preliminary findings, December 2019.
- https://www.agence-francaise-anticorruption.gouv.fr/fr/linternational: Reinforced cooperation between AFA and its Brazilian partners on March 24, 2020; Signature of a Memorandum of Cooperation with the Egyptian Anti-Corruption Authority on November 22, 2019 etc.
- December 2019, Global Mapping of Anti-Corruption Authorities, Preliminary findings, (“For further information about this initiative, please contact the French Anti-Corruption Agency (AFA) at firstname.lastname@example.org”).
The French Data Protection Authority releases guidelines on whistleblower reports
In France, the setting up of an internal reporting system is mandatory since the Sapin II law for companies over fifty employees3. It has been expanded with the duty of vigilance law4, and many large companies go beyond their legal obligations to meet international expectations in terms of compliance by providing compliance reporting systems for violations of the code of conduct and internal rules.
After the entry into force of the GDPR, the reporting system through the authorization AU-004 was no longer adequate5. On July 18, 2019, the CNIL thereby decided to adopt guidelines for private or public organizations to implement a system for collecting and managing professional alerts requiring the processing of personal data6.
These Guidelines, based on a public consultation, update and strengthen the CNIL’s expectation on professional alerts, by integrating the changes linked to the implementation of the GDPR in France and the modification of the law on Data Processing and Individual Liberties adopted in 19787.
Compliance with these Guidelines enables organizations to ensure that data processing implemented in the context of alert systems complies with data protection principles.
I. A pragmatic reminder of the GDPR principles with respect to the alert data processing
The Guidelines stress the fundamentals principles that should apply governing the collection of personal data following a professional alert, by outlining the steps in processing an alert.
The purpose of the GDPR is to guarantee a high-level protection for the persons subject to the processing of their personal data and to increase the accountability of those involved in such processing.
First, the data processing must thus fulfil a specific purpose and be justified regarding the entity’s missions and activities8.
It is also up to the data controller to identify the legal grounds of the processing prior to any processing operation9. Regarding internal alert system, it involves complying with a legal obligation imposing the implementation of such a system (i.e. Articles 8 and 17 of the Sapin II law10 and Article 1 of Duty of vigilance law11). The controller is also required to select the relevant and necessary information regarding the purpose of the processing operation12.The conditions for the receipt of personal data are also specified. The Guidelines provide that only the authorized persons shall have access to the personal data13.
The time-frame for which data storage can be kept, warrants clarification. The CNIL, recalling the GDPR provisions, merely indicates that when no follow-up is given to the alert, the data must be destroyed. Anonymous data on the other hand, may be kept for an unlimited period14. In the other cases, the situation would need to be appreciated on a case-by-case basis.
II. The guarantee of individual rights and its limitations
The Guidelines also contain recommendations relating to information, the rights of individuals, as well as a list of security measures applicable to an information system. The controller shall then give information about the processing to the person concerned. More specifically, the Guidelines provide that the person subject to the alert must be informed within a month following the alert15.The right to be informed might be difficult to implement. There is an exception however and the information can be postponed when it is likely to compromise the objective of the alert (i.e. the destruction of evidence) 16.
While the European Directive on whistleblowers leaves the choice to Member States to accept anonymous reports17, the CNIL recommends that companies do not encourage reporters to remain anonymous18. In any event, information that is likely to reveal the identity of the reporter cannot be disclosed without the consent of the person concerned, except to the judicial authority19.
The processing of report data however involves some restrictions on the rights of individuals. For instance, the right to object may be overruled by the company, either by invoking legal obligations or by invoking the exceptions of legitimate and compelling reasons for the processing, which override the interests and the rights and freedoms of the subject of the data, or for the establishment, exercise or defense of legal claims. Companies will therefore have to ensure that any objection request is carefully examined to assess its receivability.
- Regulation (EU) 2016/679 of the European Parliament and of the Council of April 27, 2016 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data. The regulation entered into force on 24 May 2016 and applies since 25 May 2018.
- CNIL guidelines relating to the processing of personal data for the implementation of alert system, July 18, 2019, https://www.cnil.fr/sites/default/files/atoms/files/referentiel-alertes-professionnelles_dec_2019.pdf.
- Article 8 of the Sapin II law (“Appropriate procedures for collecting alerts issued by members of their staff or by external and occasional partners shall be established by public or private law legal entities with at least fifty employees, State administrations, municipalities with more than 10,000 inhabitants as well as public inter-municipal cooperation establishments with their own tax system of which they are members, departments and regions”); Article 17, II, 2° requires French companies to set up “an internal alert system intended to allow the collection of signals from employees and relating to the existence of conduct or situations contravenes the company’s code of conduct”.
- French Corporate Duty Of Vigilance Law of March 27, 2017 establishes a legally binding obligation for parent companies to identify and prevent adverse human rights and environmental impacts resulting from their own activities, from activities of companies they control, and from activities of their subcontractors and suppliers, with whom they have an established commercial relationship, http://www.assemblee-nationale.fr/14/ta/ta0924.asp.
- The purpose of single authorization AU-004 was to provide a framework for professional warning systems in accordance with the provisions of the Sapin II law. It no longer has legal value since the entry into force of the GDPR.
- Law n° 78-17 of January 6, 1978 on Data Processing, Data Files and Individual Liberties, https://fra.europa.eu/en/law-reference/act-ndeg78-17-6-january-1978-data-processing-data-files-and-individual-liberties.
- CNIL guidelines relating to the processing of personal data for the implementation of alert system, July 18, 2019, p.3.
- Article 6(1) of the GDPR sets out the conditions the must be met for the processing of personal data to be lawful. (“(a) the data subject has given consent to the processing of their personal data for one or more specific purposes;(b) processing is necessary for the performance of a contract to which the data subject is party or in order to take steps at the request of the data subject prior to entering into a contract; (c) processing is necessary for compliance with a legal obligation to which the controller is subject; (d) processing is necessary in order to protect the vital interests of the data subject; (e) processing is necessary for the performance of a task carried out in the public interest or in the exercise of official authority vested in the controller; (f) processing is necessary for the purposes of the legitimate interests pursued by a controller, except where such interests are overridden by the interests or fundamental rights and freedoms of the data subject which require protection of personal data, in particular where the data subject is a child. This shall not apply to processing carried out by public authorities in the performance of their tasks. These conditions are all equally valid and organizations should assess which of these grounds are most appropriate for different processing activities and then fulfil any further requirements the GDPR sets out for these conditions (GDPR Article 5)”).
- Article 8 III. and article 17 II. 2° of the Sapin II law.
- CNIL guidelines relating to the processing of personal data for the implementation of alert system, July 18, 2019, p.2.
- CNIL guidelines relating to the processing of personal data for the implementation of alert system, July 18, 2019, p.5 (“Which is often the case in the following category: identity, functions and contact details of the issuer of the alert; identity, functions and contact details of the persons who are the subject of the alert; identity, functions and contact details of the persons involved in the collection or processing of the alert; reported facts; evidence gathered; audit activity reports; follow-up to the alert”).
- CNIL guidelines relating to the processing of personal data for the implementation of alert system, July 18, 2019, p.7.
- CNIL guidelines relating to the processing of personal data for the implementation of alert system, July 18, 2019, p.8 (“In accordance with Article 5(1)(e) of the DPMR, personal data should be kept in a form which permits identification of individuals only for as long as is strictly necessary for the purposes of the aims pursued. It is therefore in the light of the purpose that the retention period will be determined”).
- CNIL guidelines relating to the processing of personal data for the implementation of alert system, July 18, 2019, p.7, referring to Article 12.3 of the GDPR (“The controller shall provide information on action taken on a request under Articles 15 to 22 to the data subject without undue delay and in any event within one month of receipt of the request”).
- Article 14.5 b of the GDPR (“Paragraphs 1 to 4 shall not apply where and insofar as: […] in so far as the obligation referred to in paragraph 1 of this Article is likely to render impossible or seriously impair the achievement of the objectives of that processing. In such cases the controller shall take appropriate measures to protect the data subject’s rights and freedoms and legitimate interests, including making the information publicly available”).
- Directive (EU) 2019/1937, §34 (“Without prejudice to existing obligations to provide for anonymous reporting by virtue of Union law, it should be possible for Member States to decide whether legal entities in the private and public sector and competent authorities are required to accept and follow up on anonymous reports of breaches which fall within the scope of this Directive. However, persons who anonymously reported or who made anonymous public disclosures falling within the scope of this Directive and meet its conditions should enjoy protection under this Directive if they are subsequently identified and suffer retaliation”).
- CNIL guidelines relating to the processing of personal data for the implementation of alert system, July 18, 2019, p.6.
- CNIL guidelines relating to the processing of personal data for the implementation of alert system, July 18, 2019, p.7.
Ne bis in idem: France stays on the sidelines of the European stance on the cumulation of criminal and fiscal sanctions after last decisions rendered by the French Supreme Court
Pursuant to the principle ne bis in idem, set out in Article 4 of Additional Protocol n° 7 of the European Convention on Human Rights, no one can be criminally judged, prosecuted, or charged twice for the same facts. European Court of Human Rights1 and Court of Justice of the European Union2 applied this principle to exclude the cumulation of tax and criminal penalties.
In recent years, this cumulation of criminal and fiscal sanctions has been a subject of significant litigation before the French courts.
Since 2016, the French Constitutional Council (Conseil constitutionnel) has approved the principle of cumulation of criminal and fiscal sanctions for the most serious cases of tax fraud. It sets out however some reservations regarding the cumulation. For the first time, the French Supreme Court (Cour de Cassation), in six rulings dated on September 11, 20193 and October 23, 2019 4, has had the occasion to clarify these reservations.
The Court has, nonetheless, reasserted that the principle ne bis in idem does not apply systematically to the cumulation of criminal and fiscal sanctions and decided that these reservations were not applicable to the cases in hand. France stays thus on the sidelines of the European stance.
I. The French Supreme Court states that the criminal judge can order a stay of proceedings only when the proceedings pending before the tax judge constitutes a serious risk of conflict between tax and criminal decisions
One of the reservations expressed by the French Constitutional Council is that the principle of necessity of offences prohibits a taxpayer who has been relieved from taxation by a final court decision on substantive grounds from being convicted of tax fraud 5. This reservation led to the question of the obligation from the criminal judge to stay the proceedings until a final decision of the tax judge.
In one of the September 11th’s decisions 6, the company and its director were found liable by the administrative Court of tax evasion (related to declaratory deductions for VAT and abusive refunds of research tax credits), and were sentenced to pay the said eluded taxes and the penalties resulting from this breach. The defendant appealed the decision and requested the criminal judge to order a stay of the criminal proceedings based on this ground.
The Criminal Chamber of the Supreme Court ruled that the criminal judge should only order a stay of proceedings in the event of proceedings pending before the tax judge if there is a “serious risk” of conflict between the decision of the tax judge and the decision of the criminal judge. In other words, a criminal sentence can be imposed even though the accused could ultimately be discharged from the disputed taxes. In the present case, there was, however, no indication of possible contradiction between the rulings of criminal and tax judges, as the lower tax court decision (subject of appeal) did not discharge the defendant from taxation on substantive grounds in the first place.
II. The French Supreme Court limits the application of the principle of proportionality to sanctions of the same nature and specifies the nature of the solidarity penalty
According to the French Constitutional Council, when two proceedings lead to a cumulation of penalties, the total amount of penalties imposed should not exceed the higher amount of one of the penalties incurred 7.
This rule, known as the principle of proportionality, only applies to sanctions “of the same nature”. Hence, a question arises with respect to the application of the principle in case of cumulation of penalties of different nature, such as fines, tax increases, confiscation measures, ineligibility or imprisonment. Since only monetary sanctions can be compared, the judge making the last decision must carry out a comparison of the criminal and fiscal monetary penalties incurred in order to determine the ceiling’s highest amount. 8
Regarding the monetary sanctions, the Court had to clarify the legal nature of solidarity in the October 23rd 2019 decision 9. In this case, the company’s director was jointly and severally sentenced with the company for the payment of the fraudulent taxes, increases and related penalties. The Court considered that “the fiscal solidarity stated in Article 1745 of the General Tax Code, which constitutes a guarantee for the recovery of the debt of the Public Treasury, does not constitute a penalty in the meaning of Article 8 of the Declaration of 1789”, so that the principle of proportionality is not applicable” 10. This position confirms that solidarity is not punitive in nature as “anyone who has paid the amount of evaded taxes and related penalties in place of the debtor, has a recourse action against the principal debtor, and, where applicable, against co-debtors jointly and severally liable” 11.
III. The French Supreme Court clarifies what are the “most serious cases of fraudulent concealment of sums subject to tax” 12 where cumulation of penalties can apply
The seriousness of the fraud may result from the amount of duties defrauded or the conduct of the person prosecuted 13. The various rulings of the French Supreme Court have shown that elements such as the use of intermediaries established abroad, the existence of concealment maneuvers or the amount of duties can be taken into account in assessing the seriousness 14. For instance, the Court held in one of the September 11th’s decisions 15, that the seriousness of the fraud arose from the use by the defendant of accounts opened in Switzerland for fictional companies registered in tax heavens, and the amount of duties evaded which amounted to 235,580 euros.
IV. The French Supreme Court confirms the application of the reservation issued by France to the Article 4 of the Additional Protocol n° 7 of the European Convention on Human Rights to reject the application of ne bis in idem principle
France accompanied the ratification of the Article 4 of Additional Protocol n°7 of the European Convention on Human Rights with a reservation which restricts the application of ne bis in idem to criminal courts’ decisions and criminal offences 16.
The French Supreme Court affirms in these decisions that the criminal judges have to apply this reservation confirming the specificity of France in the application of ne bis in idem principle. The ECtHR has invalidated the reservations made by several other EU countries, but France reservation is indeed still valid 17. Until otherwise decided, French courts shall thus apply the reservation made to ne bis in idem principle and give it full effect 18.
It is however interesting to note that the commentators expect the ECtHR to decide on the validity of the reservation issued by France in the foreseeable future 19 and to potentially undermine the current position of the French Supreme Court.
- CEDH November 15, 2016, A. et B. c/ Norway.
- CJUE March 20, 2018, Di Puma
- Cass. Crim., September 11, 2019, n° 18-81.980; n° 18-81.067; n° 18-82.430; n° 18-81.040; n° 18-83.484; n° 18-84.144.
- Cass. Crim. October 23, 2019, n° 18-85.088.
- Cons. Const. June 24, 2016, n° 2016-545 QPC, §13.
- Cass. Crim., September 11, 2019, n° 18-81.980.
- Cons. Const. June 24, 2016, n° 2016-545 QPC, § 24.
- Cass. Crim., September 11, 2019, n° 18-82.430 et 18-81.067.
- Article 1745 of the French General Tax Code (“All those who have been subject of a final conviction, pronounced in application of Articles 1741, 1742 or 1743 may be jointly and severally liable, together with the person legally liable for the tax defrauded, for the payment of this tax as well as for the payment of the related tax penalties”).
- Cass. Crim. October 23, 2019, n° 18-85.088, (“The fiscal solidarity stipulated in Article 1745 of the General Tax Code, which constitutes a guarantee for the recovery of the Treasury’s claim, does not constitute a penalty in the meaning of Article 8 of the Declaration of 1789, so that the above-mentioned principle is not applicable”).
- Cass. Crim. June 25, 2014, n° 13-87.692, (“A person who has paid the evaded taxes and related penalties has a recourse action against the principal debtor and, where appropriate, against the joint and several co-debtors”); “Non bis in idem et droit pénal fiscal : rappels salutaires”, C. Litaudon, in AJ Pénal 2020, p.25.
- Cons. Const. June 24, 2016, n° 2016-545 QPC, §21.
- Cass. Crim., September 11, 2019, n° 18-81.040.
- “Principe ne bis in idem : la Cour de cassation applique les réserves d’interprétation du Conseil Constitutionnel”, M. Lassalle, in AJ Pénal 2019, p.564.
- Cass. Crim., September 11, 2019, n° 18-81.040.
- Cass. Crim. September 11, 2019, n° 18-81.067 et 18-82.430, (“The [French] Supreme Court has consistently held that the prohibition of double jeopardy for the same acts, stipulated in Article 4 of Protocol No. 7, according to the reservation entered by France, applies only to offences falling under French law within the jurisdiction of the criminal judge, and does not prohibit the imposition of fiscal penalties in addition to the penalties imposed by the criminal courts”).
- “Fraude fiscale – Cumul des répressions pénale et fiscale : la Cour de cassation précise la portée des jurisprudences constitutionnelle et européenne en la matière Regards croisés”, S. Detraz, E. Dezeuze, in La Semaine Juridique Edition Générale n° 43, October 21, 2019, 1086, (“<em<It should be noted that the reservations made by Austria and Italy have been held to be invalid as they failed to provide a brief statement of the law concerned, as required by Article 57 § 2 of the Convention (see respectively Gradinger v. Austria, 23 October 1995, § 51, Series A no. 328-C; and Grande Stevens, cited above, §§ 204-211), unlike the reservation made by France (see Göktan v. France, no. 33402/96, § 51, ECHR 2002-V)”).
- Cass. Crim. September 11, 2019, n° 18-81.067 et 18-82.430, (“the criminal court shall apply article 4 […] by giving full effect to the reservation made by France”).
- “Fraude fiscale – Cumul des répressions pénale et fiscale : la Cour de cassation précise la portée des jurisprudences constitutionnelle et européenne en la matière Regards croisés”, S. Detraz, E. Dezeuze, in La Semaine Juridique Edition Générale n° 43, October 21, 2019.
Key takeaways from the past year’s CJIPs
Since the entry into force of the Sapin II law, ten Conventions Judiciaires d’Intérêt Public
I. The Airbus CJIP paves the way for increasinly collaborative transactional justice
On January 31, 2020, the Tribunal of Paris approved the CJIP between the European company Airbus and the PNF, for corruption of public officials. Airbus agreed to pay a fine of 2,083,137,455 euros. This amount is part of a total fine of 3.6 billion euros shared with the US Department of Justice (“DOJ”) and the British Serious Fraud Office (“SFO”) 1. This CJIP is coupled with a three years compliance monitoring carried out by the French Anti-Corruption Agency (“AFA”). It was clarified by the AFA however, that the Airbus compliance program had been completed and its deployment was being monitored.
The multi-jurisdictional investigation relating to Airbus led to investigative measures in over twenty countries2 and was carried out in large part by a joint PNF/SFO team. The investigation revealed that repeated illegal and non-compliant practices were implemented by commercial intermediaries hired by Airbus to negotiate with governmental and private customers and obtain new contracts. Financial and in-kind incentives were offered or provided to foreign airline executives and public officials, through the entity which oversaw the group business development activities called Airbus Strategy and Marketing Organization (“SMO”).
The National Financial Prosecutor, Jean-François Bohnert, described this CJIP as “an exceptional moment […], because it is the result of exceptional proceedings”. Indeed, the extraordinary nature of these proceedings can be explained by several factors:
First, the novelty and exemplary nature of Airbus’ cooperation. Airbus decided to fully cooperate with the authorities and disclosed many documents and elements from its internal investigation. Deputy Financial Prosecutor, Eric Russo, referred to a relationship of trust between the investigators and Airbus’ lawyers, while specifying that “trust does not mean complacency”. While this does not mean that the PNF acted as the company’s lawyer nor that the company lawyers undertook the role of the prosecutors, all parties acted willingly to work constructively and compromise. Airbus’ efforts have been rewarded by its foreseen penalty being cut in half. This will be likely to encourage greater cooperation from future companies.
Secondly, the content of the investigation. Three and a half years of investigating, with 30 million documents to be analyzed, some 40 former executives and employees interviewed by the OCLCIFF, many raids including at former Airbus executives’ residences and requests for mutual assistance in Switzerland, Lebanon, and Latvia, was an extremely costly procedure.
Thirdly, the role of the PNF and the AFA along with the DOJ and the SFO. The appointment of monitors raised a question of sovereignty and protection of the France’s economic interest, on account of the risk of transmitting sensitive information. The DOJ and SFO agreed to waive the designation of their own monitor in favor of the AFA, that is to monitor the deployment of the compliance program. It confirms that “France has both the knowledge and the ability” to do so.
This first experience of full cooperation was significant also because of the tripartite collaboration between the company, investigators and magistrates as the internal investigation was led in cooperation with the authorities, as well as the coordinated action of three prosecuting authorities.
This CJIP which took place on the sixth anniversary of the PNF, is a major step forward for collaborative justice. It enables the French justice system to recover its full powers. This is illustrated by the preponderant place of the PNF in the investigation and the allocation of more than two thirds of the fine to the French state. It also marks the international recognition of French jurisdiction in matters of economic and financial delinquency and paves the way for multi-jurisdictional resolutions.
II. The Google CJIP is a sign of the fight against tax fraud
On September 3, 2019, Google’s French and Irish subsidiaries concluded a CJIP with the PNF on charges of tax fraud and complicity of tax fraud3. This is the second CJIP in relation to tax fraud since the law of 23 October 2018 extended this mechanism to this offense4. Google, which was already sued in several countries and had to conclude several hundred million euro agreements with the tax authorities of the United Kingdom and Italy, agreed to pay a public interest fine of 500 million euros in return for the termination of criminal proceedings5.
The dispute started after allegations from the French tax authorities stated that Google France, a subsidiary of the US company Google LLC, was a French permanent establishment of the European headquarters Google Ireland Ltd, based in Ireland. Google France considered a contrario that all its activities were carried out from Ireland, where income tax is much lower than in France.
Google won the case before the Paris Administrative Court in July 2017 and before the Paris Administrative Court of Appeal in April 20196. These decisions did not recognize the existence of a permanent establishment in France and reversed the corporate tax reassessment for the period 2005-2010. The Ministry of Action and Public Finance then brought the case before the French Administrative Supreme Court (Conseil d’État).
As a matter of caution, Google chose a negotiated approach and concluded a CJIP.
This CJIP was jointly negotiated by Google, the PNF and the tax authorities, which extinguished both the legal proceedings and the tax disputes from 2005 to 2018, opened in France against Google. In addition to the 500 million euros fine, 465 million euros were thereby paid to the tax authorities and closed the procedure for the company’s tax reassessment.
This amount has been determined in compliance with the proportionality principle set by the French Constitutional Council () with respect to the combination of criminal fines with tax sanctions7. Indeed, the CJIP recalls the rule according to which “the combination of criminal and tax penalties is permitted where the total amount of any penalties applied does not exceed the highest amount of one of the penalties incurred8.”
This agreement between Google and the PNF owes much to the political context of taxation of multinationals and the French willingness to respond to the imperative of tax fairness. For that matter, even though Google’s permanent establishment in France has yet to be recognized, the digital giant will be subject from now on to a new tax on its digital services, the GAFA tax9.
- Airbus, Convention judiciaire d’intérêt public, January, 29, 2020, https://www.agence-francaise-anticorruption.gouv.fr/files/files/CJIP%20AIRBUS_English%20version.pdf.
- The United Arab Emirates, Saudi Arabia, China, South Korea, Nepal, India, Taiwan, Vietnam, Japan, Turkey, Mexico, Russia, Brazil, Kuwait, Thailand, Colombia, Malaysia, Indonesia, Ghana, and Sri Lanka.
- Google France & Google Ireland Ltd, Convention judiciaire d’intérêt public, September 3, 2019 https://www.agence-francaise-anticorruption.gouv.fr/fr/document/english-version-convention-judiciaire-dinteret-public-cjip-between-national-financial-prosecutor.
- Law No. 2018-898 of October 23, 2018 on the fight against fraud.
- “Justice négociée et lutte contre la fraude fiscale : quels enseignements tirer de la dernière CJIP Google ?”, P. Dufourq, in Dalloz Actualité, October 17, 2019.
- CAA Paris, April 25, 2019, N° 17PA03065, N° 17PA03066, N° 17PA03067, N° 17PA03068, N° 17PA03069.
- Cons. Const. June 24, 2016, n° 2016-546 QPC.
- Google France & Google Ireland Ltd, Convention judiciaire d’intérêt public, September 3, 2019, §21.
- Law No 2019-759 of July 24, 2019 creating a tax on digital services and amending the trajectory for the reduction of corporate income tax.
French Supreme court ruled that the non-compliance with anticorruption provisions could enable co-contractor to terminate established business relations
On November 20, 2019, the French Supreme Court (Cour de cassation) ruled that failing to comply with anticorruption provisions included in a contract is a valid ground for terminating a long-established business relationship. The dismissed contractor in breach of compliance requirements is not entitled to claim damages based on the abrupt termination of an established business relationship.
This is the first decision rendered on the topic. This verdict emphasized that the French Supreme Court considered that “compliance law” have become unavoidable.
I. The French Supreme Court ruled that a breach of anticorruption compliance and a failure to declare its interests is sufficient to characterize a misconduct enabling to terminate a contractual relationship
A French company specialized in the marketing of medical devices (“EIC”) signed a business agency contract in 2007 with the French subsidiary of the U.S company Biomet, Zimmer Biomet France (“Biomet”).
Under the terms of this contract, EIC “undertook to carry out its activities in compliance with the applicable rules, and in particular acknowledged that it had been informed of the provisions of the former Article L. 4113-6 of the Public Health Code and acknowledged that he had to comply with them”. The company also undertook to subscribe to the Biomet Group’s global anti-corruption policy providing that “all Biomet collaborators will be required to sign a certification of their adherence to the Policy on a regular basis, as well as to satisfactorily participate in training on applicable anti-corruption legislation”1.
After EIC refusal to renew his adherence and certification to Biomet anti-corruption policy and the failure to declare its links of interests, Biomet terminated the contract without prior notice due to a serious breach of EIC’s contractual compliance obligations. EIC then sued Biomet in front of the French courts for abrupt termination of an established commercial relationship pursuant to article L 442-6 I 5° of the French Commercial Code2.
For the first time, the French Supreme Court ruled that a breach of anticorruption compliance rules is a valid ground for to terminating a commercial contract for misconduct.
More specifically, the French Supreme Court endorsed the judges of appeal considering that “taking into account the rules set out in the compliance program and the agreement concluded, the failure of [EIC] to comply with its contractual obligations, in that it was likely to result in Biomet’s own liability, was sufficiently serious to justify the termination of the commercial relationship without notice”3.
II. French Supreme Court stance for compliance law
The decision emphasized that the French Supreme Court considered that a company may engage its liability for its business partners failure to comply with anticorruption compliance requirements.
In the case at hand, it is relevant to note that the defendant company signed a Deferred Prosecution Agreement (“DPA”) with the US Department of Justice and the Securities and Exchange Commission in 2012 for corruption of public officials. Under this DPA, Biomet agreed to pay a 17 million dollars fine and to strengthen its anticorruption compliance program under a monitorship. The enhancement of the anticorruption compliance program included relationships with third parties, namely business partners. In this context, the non-compliance of its contractor with its anticorruption requirements exposed Biomet to a sanction and a criminal risk.
In addition, IEC failure to declare its interests took place in the context of increased transparency requirements with French anti-gift rules and public health scandals.
In line with the Sapin II law requirements4 and the French Anti-corruption Agency (“AFA”) guidelines5 in terms of control over third parties before entering into/during a business relationship, this ruling sends thus a strong message to French businesses : they must maintain a high level of requirements in terms of internal control and third-party controls with respect to the compliance policies. Moreover, and in accordance with the recent publishing of the political procedure circular on the fight against international corruption6 by French Minister of Justice Nicole Belloubet, the companies must be involved in the fight against corruption and its implementing mechanisms7.
- Cass, crim., November 20, 2019, n°18-12817 https://www.legifrance.gouv.fr/affichJuriJudi.do?idTexte=JURITEXT000039437948.
- Now article L 442-1 of the French Commercial Code.
- Cass, crim., November 20, 2019, n°18-12817 https://www.legifrance.gouv.fr/affichJuriJudi.do?idTexte=JURITEXT000039437948.
- Law n° 2016-1691 of December 9, 2016 on transparency, anti-corruption and economic modernization.
- December, 2017, AFA Guidelines to help private and public sector entities prevent and detect corruption, influence peddling, extortion by public officials, unlawful taking of interest, misappropriation of public funds and favoritism page 24/41 (“requiring the third party to provide a written commitment to fight corruption. For this purpose, contracts deemed to be risky might include anti-corruption clauses. Such clauses make it possible to terminate the contract in the event of a lapse of integrity”) https://www.agence-francaise-anticorruption.gouv.fr/files/2018-10/French_Anticorruption_Agency_Guidelines.pdf..
- 20200602 French Ministry of Justice, political procedure circular on the fight against corruption https://globalinvestigationsreview.com/digital_assets/1539b2b6-f7ff-40c4-b790-42069c76f297/Circulaire.pdf.
- “France’s Justice Ministry spurs on self-reporting”, James Thomas, June 11, 2020 in Global Investigations Review.
Lesson drawn from the two first decisions of the Enforcement Committee of the French Anti-corruption Agency
The Enforcement Committee of the French Anti-Corruption Agency (“AFA”)1 issued its first decisions on July 4, 20192 and on February 7, 20203. In both cases, the decision followed a control carried out by the AFA regarding the existence of breaches of the compliance mechanisms provided for in Article 17 of the law Sapin II4. Although no financial sanctions were pronounced, both decisions clarify the AFA Enforcement Committee’s expectations of companies’ compliance program.
I. Decisions reflecting the rigorous stance of the French regulator
With respect to Sonepar – a company specialized in electrical equipment distribution –, the AFA’s Director considered that the company risk mapping was too standardized, the code of conduct was irrelevant regarding the risks that should have been identified, third-party evaluation procedures did not comply with legal requirements and were missing internal control and evaluation processes and an efficient accounting control procedure ensuring that accounts were not used for corruption or influence-peddling purposes. With respect to Imerys – a company specialized in the extraction and processing of minerals – the AFA’s Director considered that its risk assessment methodology did not guarantee satisfactory risk identification, that its risk mapping was incomplete and were missing the absence of an appropriate code of conduct and accounting control procedures.
In both decisions, taking up point by point the grievances formulated by the AFA’s Director, the Enforcement Committee assessed the compliance obligations in the light of the legislative provisions.
By the hearing, Sonepar had demonstrated that its risk mapping was being improved, that it had adapted its code of conduct, incorporated new control procedures into its internal control charter and had developed managing tools for relations with third parties and intermediaries. Since the violations were no longer established at the day of the hearing, the Enforcement Committee rejected all grievances raised by the AFA’s Director, and chose not to sanction Sonepar in the absence of serious breaches of the legislative provisions5. As for Imerys, the Enforcement Committee requested it to adjust its code of conduct and accounting procedures within a specific time-frame. Neither of the companies was sanctioned financially.
II. Specifications regarding the non-binding nature of AFA recommendations and the burden of proof in proceedings opposing the AFA and companies
Both decisions raised interesting points, notably regarding the nature of AFA recommendations, that could be used as potential guidance for companies and AFA controls in the future.
In the Sonepar decision, the Enforcement Committee stated that Sonepar, which was not required to follow the methodology recommended in the AFA recommendations, must be considered as justifying the relevance, quality and effectiveness at the level of the risk mapping that it is responsible for setting up.
In the Imerys decision, the Enforcement Committee did not approve the AFA’s reasoning regarding risk mapping, which requires companies to include a roadmap in their risk mapping, as well as detain a specific and standardized methodology. The Enforcement Committee rejected this argument, on account of the fact that the AFA’s recommendations are only a frame of reference and are thus not binding for companies.
This demonstrates that only breaches provided for by law might be sanctioned and that companies are free to choose their own risk mapping methodology as long as it meets the legislative requirements6.
Furthermore, the Enforcement Committee distinguished two situations regarding the burden of proof. If a company states to have strictly complied with the AFA’s recommendations, it is presumed to satisfy anticorruption law requirements and the burden of proof lies with the AFA’s Director, who will have “to demonstrate that the company did not, in fact, followed such recommendations”. If a company alleges to have partially satisfied the AFA’s recommendations, it must “demonstrate the relevance, the quality and the effectiveness” of its anticorruption system7.
These decisions thereby establish that the standard of assessment is that which is set by law and not by AFA recommendations. This being said, AFA recommendations remain an advantageous framework for companies who choose to comply with them.
- The AFA, which monitors the effectiveness of companies’ compliance procedures in order to prevent and detect corruption, may seize the Enforcement Committee to sanction identified breaches.
- Decision No 19-01 Société S SAS et Mme C, AFA Enforcement Committee, July 4, 2019.
- Decision No 19-02 Société I. et M. C. K., AFA Enforcement Committee, February 7, 2020.
- Law No 2016-1691 of December 9, 2016 on transparency, the fight against corruption and the modernization of economic life.
- Y. Paclot “Première décision de la commission des sanctions de l’Agence française anticorruption (AFA)”, La Semaine Juridique Edition Générale n°42, October 14, 2019.
- “AFA’s Enforcement Committee Grants a Measure of Freedom to Companies”, K. Haeri, V. Munoz-Pons, in Revue Internationale de la Compliance et de l’Ethique des Affaires No 2, April 2, 2020.
- Decision No 19-02 Société I. et M. C. K., AFA Enforcement Committee, February 7, 2020, §17.
The French Supreme Court confirms its position on the presumption of money laundering
In a decision of 18 December 2019, the French Supreme Court (“Cour de cassation”) clarified the contours of the presumption of money laundering, which was established by the law of December 6, 20131 to fight money laundering more effectively.
During a custom check, a man driving a car registered in Slovenia and travelling in the direction Spain-France was questioned about the contents of his vehicle. While he claimed not to be carrying more than 10,000 euros in cash, almost 30,000 euros hidden in the car were found.
He was sued and convicted for transferring money without a customs declaration and money-laundering. The lower Court and the Court of Appeal applied the presumption of unlawful origin of the funds stated in Article 324-1-1 of the Criminal Code, according to which “the property or income is presumed to be the direct or indirect proceeds of a crime or offence if the material, legal or financial conditions of the investment, concealment or conversion operation have no other justification than to conceal the origin or beneficial owner of such property or income”. The judges considered in particular that the defendant, whose statements have changed several times, did not provide a credible justification of the origin of the funds to rebut this presumption. The Court therefore considered that the material conditions of the transaction have no other explanation than to conceal the origin or the beneficial owner of the sums discovered.
In a decision of December 18, 2019, the criminal division of the Cour de cassation validated this analysis2. The judges emphasized that maneuvers used by the defendant could be interpreted as an intention to conceal the origin or beneficiary of the cash discovered. The Court, making an extensive interpretation of the presumption of Article 324-1-1 of the Criminal Code, also recalled that it is unnecessary to identify or to characterize the initial crime or offense that gave rise to the money laundering operation.
I. The unnecessary characterization of an original crime or offence
The defendant reproached the Courts not to have identified and characterized the original offence. It is however well known that the subsequent offence of money laundering is independent of the original offence. Indeed, the presumption set up by Article 324-1-1 only requires establishing a specific operation such as investment, concealment or conversion.
Hence, according to the Cour de cassation, a mere characterization of the components of money-laundering is sufficient to establish the offence, regardless of the absence of constituting facts required for the prosecution of the original offence3. The provision of Article 324-1-1 thus allows to limit the investigations and focus on combating money laundering rather than on the sanction of the original offence4.
In another recent decision, the criminal division held the same reasoning, specifying that it is not important that “the perpetrators of [original] offences are not known and that the circumstances of the commission of the offences have not been fully determined” in order to establish an offence of money laundering and tax fraud5. The commented decision thus confirms the position of the criminal division of the French Supreme Court, which already had the occasion to apply a presumption on similar cases implicating hidden cash transfer from a country to another6.
II. The necessity of a credible justification of origins of the funds to reverse the burden of proof
In the present case, the Court recalls that the defendant must prove otherwise to reverse the presumption of the illicit origin of the funds. The burden of such proof therefore lies on the defense and not on the prosecution. In this matter, the defendant who claimed that the funds had a lawful origin, produced various outdated documents, related to a real estate sale. The Court noting inconsistencies in the defendant’s statement, concluded that “the material conditions of the transaction have no justification other than to conceal the origin or the beneficial owner of the sums discovered”.
According to the French public prosecutor J. Goldszlagier, the presumption is more than a mean of evidence. Indeed, in this decision the criminal division of the Court applies the presumption of Article 324-1-1 to support the generic illegality of the proceeds of the offence7.
III. An extensive interpretation of the presumption that could be tempered
The Courts justify the application of this presumption in view of the difficulty of proving money laundering operations in the context of very complex and obscure schemes.
The solution is however viewed as severe by some commentators8, especially, as in the present case, with regard to an operation of concealment. The concealment of large sums could in fact be explained by the intention to avoid making a customs declaration concerning these funds. Thus, a failure to comply with the various reporting obligations in customs or tax matters may at the same time be considered as a concealment within the meaning of Article 324-1-1. The presumption of Article 324-1-1 could thus potentially transform any concealment into money laundering if the person questioned of the origin of the funds is unable to demonstrate otherwise.
- Law No. 2013-1117 of December 6, 2013 on the fight against tax fraud and serious economic and financial crime.
- Cass., crim. December 18, 2019, n° 19-82.496.
- Cass., crim., February 20, 2008, n° 07-82.977.
- “It’s the economy, Stupid ! De l’interprétation judiciaire de la présomption d’illicéité en matière de blanchiment”, J. Goldszlagier, in AJ Pénal 2019 p.323.
- Cass., crim. December 4, 2019, n° 19-82.469.
- Cass., crim. March 6, 2019, n° 18-81.059; Cass., crim. March 20, 2019, n°17-85.664.
- “Présomption d’illicéité de l’origine des fonds en matière de blanchiment : précoce maturité de la jurisprudence”, J. Goldszlagier, in AJ Pénal 2020 p.132.
- “Blanchiment – Présomption de l’origine illicite des biens”, Ph. Conte, in Droit pénal n° 3, March 2020, comm. 46.
French Court approves dismissal of an employee for breach of company anticorruption policy
A company operating as spare-part supplier for the aircraft industry, dismissed its sales assistant after an internal investigation revealed that she had accepted and ordered two iPads from one of the company suppliers, violating the company’s internal anticorruption policy.
While the lower court ruled against the dismissal, Anger’s Court of Appeal followed the employer’s reasoning, considering that “by personally accepting gifts of a significant amount from a supplier, twice and with an absolute discretion”, the employee had committed gross misconduct that justified her dismissal1.
With this decision, the Court took a stance in favor of companies that adopt a strict interpretation of anticorruption policy and sent a strong message to employees who put their employer at risk. The Court operates a sort of balance of interests by supporting companies’ internal anticorruption policies, although the company was not subject to anticorruption law standards.
I. A willful breach of internal anticorruption rules constitutes gross misconduct justifying dismissal
Pursuant to French labor law, employees cannot be dismissed without reason2 and a minima, must be found guilty of substantiated misconduct. In the present case, the Court recalled that “gross misconduct results from a fact or set of facts committed by the employee involving a violation of the obligations deriving from [the employee’s] employment contract and of such importance as to make it impossible for [the employee] to remain in the company”.
Here, the identified misconduct is the result of cumulated circumstances. The employee was guilty of having breaching company internal anticorruption and ethical policy, by personally ordering two Ipads without consulting management and asking for them to be delivered at her personal residence.
Moreover, the Court highlighted that she willingly denied and withheld the order, all the while being aware of the company’s internal policy, as she had participated in several company trainings on ethics and anticorruption and had been provided with documents that expressly specified anticorruption provisions regarding gifts. According to these rules, accepting gifts was prohibited, except for gifts of a “reasonable value”, capped at twenty euros – while the iPads amounted to 798 euros. The internal investigation carried out by the company revealed, that the employee had issued a similar order with the same supplier two years earlier, for an electronic pad.
Although no act of corruption was identified – as not the role of the labor judge – this decision is an indication of the willingness to support company efforts to prevent litigious behavior on the part of their employees.
II. A decision in line with French anticorruption provisions
Pursuant to Article 17 of the Sapin II law, only companies with over five hundred employees are required to implement an anti-corruption policy3, including a code of conduct, an internal reporting procedure, an internal control procedure, risk mapping and trainings.
Here, while the company is under the threshold imposed by law4, it voluntary chose to implement an internal anticorruption and ethics policy. This shows that anticorruption is increasingly considered as important by small economic actors, namely on account of the serious consequences uncovered corruptive schemes may have (e.g. financial, reputational, and potential prosecution).
Although the risks of corruption are the mere backdrop of this case, the gross misconduct is characterized by the risks for the company. By dismissing its employee, the company chose to avoid such risks.
- Appeal Court of Angers, May 29, 2020, No 18/00395.
- Article L. 1232-1 of the French Labor Code (“Any dismissal for personal reasons must be justified by a real and serious cause”).
- Article 17 of the Sapin II law (“The chairmen, chief executive officers and managers of a company employing at least five hundred employees, or belonging to a group of companies whose parent company has its registered office in France and whose workforce includes at least five hundred employees, and whose turnover or consolidated turnover is higher than 100 million euros, are required to take measures to prevent and detect the commission, in France or abroad, of acts of corruption or influence peddling as provided for in paragraph II”).
- The company’s certificate of incorporation mentions a workforce between 250 and 499 employees.
The French administrative Supreme Court recalls the limits of the employer‘s internal investigation powers vis-à-vis employees
Although internal investigations have become common practice in France, there is no dedicated and special legal framework of the employees’ rights during such investigations. The employee’s rights during internal investigation are thus regularly stems from case-law.
The decision issued by the French Council of State (Conseil d’Etat) on 2 March 2020 illustrates the necessity to balance the company’s interest and the employee’s right to privacy during an internal investigation1.
According to the Conseil d’Etat, investigative measures carried out by an employer against its employee must be necessary and proportionate for the gathering of the evidence related to the allegation and should not unduly infringe the employee’s right to privacy.
I. Summary of facts
In the present case, a Bank launched an internal investigation against one of its employees after a customer reported being threatened by this employee due to alleged suspicious transactions in the customer’s bank accounts.
In order to shed light on the allegations, the employer carried out investigative measures focused on whether the employee had consulted the bank accounts of the customer. However, during the investigation, the Bank accessed its employee’s private bank accounts as well as those of the union of which he was treasurer. The investigation revealed that the employee had embezzled funds to the detriment of the union.
Considering that the embezzlement caused an undeniable disturbance in the business operations of the company, the Bank decided to dismiss its employee. As the employee was a member of a trade union, the employer needed the authorization of the labor inspector to dismiss him. This authorization has not been granted however and the employer has thus seized the French Labor Ministry who conversely considered that the embezzlement of funds justified the dismissal.
After several years of proceedings before French courts, the Conseil d’Etat ruled that the dismissal was not valid and recalls that the investigation measures carried out against an employee must be justified and proportionate to the facts that gave rise to the investigation and shall not affect the employee’s right to privacy.
II. The acts of investigation must be proportionated to the aim of the investigation: the balance between the right to evidence and employee’s rights to privacy
In the case at hand, the Conseil d’Etat reaffirms that the employer has no right to use investigative measures that would violate its employees’ fundamentals rights2, such as the employee’s right to privacy under Article 9 of the French Civil Code3 and Article 8 of the European Convention of the Human Rights4.
This decision is in line with well-established case law. Thus, in a decision of 20 November 1991, the Civil and Criminal Supreme Court (Cour de cassation) held that “while the employer has the right to control and monitor the activities of his employees during working hours, any recording, for whatever reason, of images or words without their knowledge constitutes an unlawful means of evidence”5. Similarly, French administrative courts have had previous occasions to sanction the use of unlawful means of evidence by an employer6.
It should be stressed that the Conseil d’Etat condemns this infringement only because the investigative measure taken – access to the employee’s bank account – was not necessary and proportionate to establish the materiality of the allegations for which the investigation was launched. The employee was thus dismissed for reasons unrelated to the customer’s complaint.
Hence, it remains questionable whether the employer would have had the right to access the employee’s bank account if the complaint was specifically related to the embezzlement. Indeed, the right to privacy remains an essential right protected by the French courts French courts asserted that “while the employer may always have access to files that have not been identified as personal by the employee, it cannot use them to sanction him if they are part of his private life”7 and specified that “the right to evidence can only justify the disclosure of material that violates privacy if it is essential to the exercise of that right and if the violation is proportionate to the aim pursued”8. In each case, it is essential to balance the employee’s right to privacy and the employer’s right to evidence.
This question must also be considered in the light of the European General Data Protection Regulation9 and the recent French Data Protection Authority (“CNIL”) guidelines on professional alert10 recall that a data collection of personal data within an internal investigation requires the consent of the person subject to the data collection11.
It remains therefore unanswered whether an analysis of personal data which is necessary to establish the materiality of the allegations but is collected without the employee’s consent could be considered as a proportionate investigate measure and not a breach of the right to privacy.
In this context, the importance of a well-established internal investigation framework with good practices, including a clear definition of the investigations’ scope must be reaffirmed.
- Conseil d’Etat, March 2, 2020, n° 418640, https://www.legifrance.gouv.fr/affichJuriAdmin.do;jsessionid=CFA10FB86D0C6F3B50D40ACBBA456B81.tplgfr35s_2?oldAction=rechExpJuriAdmin&idTexte=CETATEXT000041757059&fastReqId=144400569&fastPos=767.
- “Respect de la vie privée du salarié : la preuve illicite d’un détournement de fonds”, J. Jardonnet, in Dalloz actualité, May 4, 2020.
- Article 9 of the French civil Code, (“Everyone has the right to respect for his private life”).
- Article 8 of the ECHR, (“Everyone has the right to respect for his private and family life, his home and his correspondence”).
- Cass. soc., November 20, 1991, No. 88-43120.
- CAA Bordeaux, May 9, 2017, n° 15BX02686, (“Every employer has an obligation of loyalty towards his employees. He may not, therefore, base an authorization application for dismissal against one of his employees on documents or records obtained in breach of that obligation. […] The use of a concealed surveillance procedure is unlawful”).
- Cass. soc., July 5, 2011, No.10-17.284.
- Cass. civ. 1, February 25, 2016, n°15-12.403.
- General Data Protection Regulation (EU) 2016/679 of April 27, 2016 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data, and repealing Directive 95/46/EC, https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32016R0679&from=FR.
- CNIL guidelines relating to the processing of personal data for the implementation of alert system, July 18, 2019, https://www.cnil.fr/sites/default/files/atoms/files/referentiel-alertes-professionnelles_dec_2019.pdf.
- Article 6(1) of the GDPR sets out the conditions the must be met for the processing of personal data to be lawful, (“(a) the data subject has given consent to the processing of their personal data for one or more specific purposes[…]”).
French Prosecutors continue to conclude French Deferred Prosecution Agreements
(i) CJIP Google France SARL and Google Ireland Ltd, September 3, 2019. On September 3, 2019, the Financial Prosecution Office (“PNF”) concluded a CJIP with Google France SARL and Google Ireland Limited, which agreed to pay a €500 million fine for tax fraud and complicity of tax fraud1. The fine was then lessened, taking into account the tax penalties set by the tax authorities for 2011-2018 that the company had agreed to pay.
(ii) CJIP Société SAS Egis Avia, December 10, 20192. On December 10, 2019, the PNF concluded a CJIP with the French company SAS Egis Avia, which agreed to pay a €2.6 million fine for the bribery of a foreign public official. SAS Egis Avia had been under investigation since October 2013 for the payment of consultancy fees to companies domiciled in Non-Cooperative Countries and Territories – British Virgin Islands – the investigation highlighting financial flows to Algerian public officials to influence the award of a contract for the construction of an airport terminal in Oran.
(iii) CJIP Bank of China, January 15, 20203. On January 15, 2020, the Paris Public Prosecutor’s Office concluded a CJIP with the Bank of China, which agreed to pay a €3 million fine for profits derived from tax fraud laundering on account that they failed to demonstrate that they had complied with anti-money laundering standards relating to customer identification and transaction due diligence. Accounts opened in a Bank of China branch located in the province of Zhejiang, were used to receive funds under false invoices and process cash inflows from the sale of smuggled goods. The modus operandi enabled Chinese account holders residing in France to circumvent corporate tax and VAT for a significant part of their turnover.
(iv) CJIP Airbus SE, January 31, 20204. On January 29, 2020, the PNF concluded a CJIP with Airbus SE, which agreed to pay a €2.083 billion fine for the bribery of public officials. The investigations demonstrated that Airbus hired and paid numerous commercial intermediaries up until 2015. Part of their fees was paid by several occult means, including fictitious loans, without establishing the exact nature of their contribution. This CJIP was signed in coordination with the UK Serious Fraud Office and the US Department of Justice, with which Airbus SE has concluded separate Deferred Prosecution Agreements. Airbus SE also commits to complying with the French Anti-Corruption Agency (“AFA”) controls for a period of three years, to ensure that the compliance program upon which they have agreed has been fully deployed in the company’s entities and subsidiaries.
(v) CJIP Swiru Holding May 4, 20205. On May 4, 2020, the Public Prosecutor’s Office of Nice concluded a CJIP with the Swiss company Swiru Holding AG. The latter agreed to pay a €1.4 million fine, in addition to a separate payment of €10.4 million to the tax administration for tax evasion. The company was indicted in November 2019 for complicity of tax fraud after the investigation revealed concealment of part of the sale price of a villa located in South of France to avoid paying tax on the differential price. The Public Prosecutor’s Office of Nice is the fourth authority that has signed a CJIP, following the PNF, and the Public Prosecutor’s Office of Paris and Nanterre, therefore contributing to a wider use of this transactional tool in France.
- “SARL Google France & Google Ireland Ltd case, Convention judiciaire d’intérêt public”, September 3, 2019, https://www.agence-francaise-anticorruption.gouv.fr/fr/document/english-version-convention-judiciaire-dinteret-public-cjip-between-national-financial-prosecutor.
- Press release ; PNF, December 10, 2019.
- “Blanchiment : Bank of China accepte de payer 3,9 millions d’euros à la France”, Les Echos, January 28, 2020.
- “Airbus SE case, Convention judiciaire d’intérêt public”, January, 29, 2020, https://www.agence-francaise-anticorruption.gouv.fr/files/files/CJIP%20AIRBUS_English%20version.pdf.
- Press release, Nice Public Prosecutor, May 3 2020.
The French Anti-Corruption Authority releases its 2019 activity report
On July 9, 2020, the French Anti-Corruption Authority (“AFA”) published its activity report for year 2019. This report provides the key figures of the initiatives that the AFA has carried out, namely trainings and outreach missions to increase anticorruption awareness among public and private actors. With respect to AFA controls, 36 new controls were carried out in 2019 – including 20 on economic actors and 16 on public actors – and an additional 4 pursuant to CJIPs.
The 2019 activity report also covers the notable developments at the AFA over the past year. It highlights the AFA’s contribution to the international assessments of France and the fight against corruption carried out by the United Nations and GRECO respectively, and to the preparation of the OECD assessment due to take place in 2021. The AFA also attended several roundtables, alongside the UK Serious Fraud Office, the World Bank and the OECD, and was present during the G20 summit.
The AFA elaborates on the phenomenon of corruption and provides indications on the anticorruption mechanisms to be adopted by different-sized companies. It states that while companies are progressing towards implementing effective anticorruption measures – providing the example of a sanctioned company that enhanced its compliance program before the date of the hearing before the AFA Enforcement Committee, thereby voiding the purpose of sanction – there remain issues to overcome, requiring enhanced administrative and judicial cooperation.
New article 314-1-1 of the Criminal Code introduces the offence of breach of trust for violations of the EU’s financial interests
The decree dated September 18, 20191 added article 314-1-1 to the French Criminal Code, strengthening the breach of trust offence.
The sentence is extended from three to five years of imprisonment2 in cases where the breach “affects [the] revenue received, [the] expenditure incurred or [the] assets belonging to the budget of the European Union, to the budgets of the institutions, bodies, offices and agencies of the European Union or to budgets managed and controlled directly by the latter3”.
Similarly, the sentence increases from a €375,000 to a €750,000 fine and seven years’ imprisonment when the crime is committed in an organized band.
While the attempt and the aggravating circumstance of organized crime are not sanctioned under the common law breach of trust offence, this new article makes explicit that the attempt to commit this specific breach of trust will be sanctioned in the same way as the commission of the offence itself.
These provisions, which reinforce the legislative protection of EU’s financial interest, are in line with the European Directive of July 5, 2017 “on the fight against fraud affecting the financial interests of the European Union by means of criminal law4”.
Although the case law on the breach of trust offence is well established, the first decisions regarding the breach of trust relating to EU financial interests are yet to come. Is awaited with anticipation case law clarifying attempted breach of trust, and the confirmation that the constituent elements are the same as those of the primary offence.
- Decree No. 2019-963 of September 18, 2019, based on the PACTE law of May 22, 2019.
- Article 314-1 of the French Criminal code.
- Article 314-1-1 of the French Criminal code.
- Directive (EU) 2017/1371 of the European Parliament and of the Council of 5 July 2017 on the fight against fraud to the Union’s financial interests by means of criminal law.
The French Supreme Court confirms the importance of the French Financial Prosecutor’s Office in the fight against complex and international financial delinquency
On April 1, 2020, the Criminal division of the French Supreme Court (Cour de cassation) ruled that the French Financial Prosecutor’s Office (“PNF”) is competent to prosecute money laundering and misappropriation of public property offenses, even in cases where it does not have jurisdiction to prosecute the initial offense1.
In the present case, an investigation was conducted by the PNF into the use by a former Russian minister and his wife of funds allegedly derived from the misappropriation of Russia’s public funds.
The investigation involved the seizure of a hotel located in France against which an appeal was lodged. The defendant challenged the PNF’s ratione materiae jurisdiction, before the criminal division of the Cour de Cassation, stating that the PNF was only created to ensure “”.
The Court recalled however, that the PNF was established to provide the French judicial organization with a highly specialized public prosecutor, whose jurisdiction would include the most complex cases of economic and financial delinquency. The PNF thereby has jurisdiction to prosecute complex facts, including, inter alia, cross-border cases, with multiple shell companies in countries deemed “tax havens”.
Transparency International sounds the alarm about the risks of corruption in the face of Covid-19
The Covid-19 pandemic led to a multitude of rushed contracts signed to provide protective and medical equipment, sometimes without carrying out proper due diligence.
As corruption often thrives in times of crisis, a risk of fraudulent schemes and bribery exists. The NGO thus recommends identifying these compliance risks prior to their occurrence, namely considering that the procurement of medicine and supplies in health systems is one of the most vulnerable areas for corruption1.
French financial authorities warning on fraud increase in time of Covid-19
The French Securities and Markets Authority (“Autorité des Marchés Financiers”)1 and the French Prudential Control and Resolution Authority (“Autorité de Contrôle Prudentiel et de Résolution”)2 urge the population to be vigilant regarding the risk of fraud amidst the Covid-19 epidemic, namely with respect to fraudulent e-mails and online advertising banners3.
The two regulatory authorities point out that fraudulent solicitations, often exploiting topical events, can escalate rapidly
- The “Autorité des Marchés Financiers” is an independent public authority responsible for ensuring that savings invested in financial products are protected and that investors are provided with adequate information. The AMF also supervises the orderly operations of markets.
- The “Autorité de contrôle prudentiel et de resolution” is the administrative authority operationally attached to the Banque de France that supervises the banking and insurance sectors and ensures financial stability. The ACPR is also responsible for protecting the customers of the supervised institutions and ensuring the fight against money laundering and the financing of terrorism.
- “L’AMF et l’ACPR mettent en garde le public contre les risques d’arnaques dans le contexte de l’épidémie de coronavirus”, AMF, March, 26, 2020, https://www.amf-france.org/fr/actualites-publications/communiques/communiques-de-lamf/lamf-et-lacpr-mettent-en-garde-le-public-contre-les-risques-darnaques-dans-le-contexte-de-lepidemie.
French Prosecutor opened an investigation into potential mismanagement during the Covid-19 crisis
In response to many criminal complaints, the Paris Public Prosecutor’s Office launched a criminal investigation regarding the alleged mismanagement of the Covid-19 crisis1.
The investigation will examine the following charges: endangering the lives of others, involuntary homicide, failure to assist those in danger, and willingly abstaining from fighting a threat2.
A number of these complaints have been filed against X. Therefore, it remains up to the prosecutors to assess whether public decision-makers or administrative structures should be prosecuted.
Concurrently, complaints have been lodged against ministers before the Court of Justice of the Republic (“Cour de Justice de la République”), which has sole jurisdiction over ministers’ actions as part of their government duties3. The French President, on account of his presidential immunity, will not be included in the investigation carried out by the court4.
- “Covid-19 : le parquet de Paris ouvre une vaste enquête sur la gestion critiquée de la crise”, L’Obs, June 9, 2020, https://www.nouvelobs.com/coronavirus-de-wuhan/20200609.OBS29876/covid-19-le-parquet-de-paris-ouvre-une-vaste-enquete-sur-la-gestion-critiquee-de-la-crise.html
- “Parlement, justice, exécutif… Qui enquête sur qui après la crise du coronavirus ?”, Franceinfo, June 10, 2020, https://www.francetvinfo.fr/sante/maladie/coronavirus/parlement-justice-executif-qui-enquete-sur-qui-apres-la-crise-du-coronavirus_4003223.html
- “Coronavirus : le parquet de Paris ouvre une enquête préliminaire sur la gestion critiquée de la crise sanitaire”, Le Monde, June 9, 2020, https://www.lemonde.fr/police-justice/article/2020/06/09/cornavirus-le-parquet-de-paris-ouvre-une-enquete-preliminaire-sur-la-gestion-critiquee-de-la-crise-sanitaire_6042265_1653578.html.
- “Coronavirus : les plaintes déposées contre les membres du gouvernement s’accumulent”, Franceinfo, May 22, 2020, https://www.francetvinfo.fr/sante/maladie/coronavirus/coronavirus-les-plaintes-deposees-contre-les-membres-du-gouvernement-s-accumulent_3976657.html.
The challenges brought to the independence of the French Public Prosecutor’s Office
Recent statements by the former French Financial Prosecutor, Eliane Houlette, before the Parliamentary Board of Inquiry1, has revived the debate on the independence of the French Prosecutor vis-à-vis the executive power.
Indeed, she stated that the independence of French prosecutors, in particular of the French Financial Prosecutor Office (“PNF”), is hampered by a number of obstacles2. Among these, the power of the General Prosecutor’s Office, directly linked to the Minister for Justice, to provide general instructions and to request reports on pending cases from the PNF:
“So, in practical and concrete terms, the feeling of dependency [from the executive power] is something I have experienced within the performance of my duties. […] the problem is that through general instructions and special reports, the General Prosecutor’s Office grants himself a right of oversight over the conduct and policy choices of public prosecutors. […] And this right to oversee is omnipresent. […] The question that we can actually ask ourselves is why does the General Prosecutor’s Office have this right to oversee the public prosecution, through specific cases? How should we understand it? Is he acting for himself or for someone else? ”3.
These statements caused quite a stir, namely considering that Eliane Houlette conducted the investigation of the former French prime Minister François Fillon and his wife, who were accused of misappropriation of public assets and that she reported pressure from the General Prosecutor’s Office to provide and communicate information pertaining to this case.
Another former investigative magistrate, Renaud Van Ruymbeke, condemned the lack of independence of the Public Prosecutor’s Office, stating that politicians have never lobbied for it4.
In addition, a few days before his appointment as French Minister of Justice, Eric Dupond Moretti, a French criminal lawyer, filed a complaint against X before the Paris Prosecutor office after having been secretly wiretapped by the PNF during an investigation held in 2014 regarding corruption facts involving the former French President Nicolas Sarkozy5. He finally withdrew his complaint after his appointment and stated that he will campaign for the reform regarding the independence of the justice:
“I want to progress on a subject that is close to my heart: the independence of the justice system. I wish to be the Minister of Justice who will finally bring the long-awaited reform of the Public Prosecutor’s Office to a congress”6.
- Interview of Madame Eliane Houlette before the ‘Parliamentary Board of Inquiry into the obstacles to the independence of the justice’, June 10, 2020, http://videos.assemblee-nationale.fr/video.9167957_5ee0d0648a176.commission-d-enquete-sur-les-obstacles-a-l-independance-du-pouvoir-judiciaire–mme-eliane-houlette-10-juin-2020.
- “Affaire Houlette ou l’hypocrite débat sur l’indépendance du parquet relancé”, M. Barbonneau, Dalloz actualités, June 22, 2020, (« All this seems to me as many obstacles to the independence of the authoritative, at least to that of the prosecutors, of the financial public prosecutor that I have been”),
- “Affaire Houlette ou l’hypocrite débat sur l’indépendance du parquet relancé”, M. Barbonneau, Dalloz actualités, June 22, 2020,https://www.dalloz-actualite.fr/flash/affaire-houlette-ou-l-hypocrite-debat-sur-l-independance-de-justice-relance#.XwSgfygzaUl.
- “Jamais il ne me serait venu à l’idée de me faire communiquer des fadettes d’avocats”, Dalloz Actualités, July 2, 2020, (“Ms. Houlette’s statements clearly illustrate the ambiguity of her position. She has the honesty to say what happened. It is clear that the PNF is accountable to the General Prosecutor’s Office as regards the conduct of investigations. This control therefore goes well beyond the framework of criminal policy circulars since it intervenes in specific cases”), https://www.dalloz-actualite.fr/interview/jamais-il-ne-me-serait-venu-l-idee-de-me-faire-communiquer-des-fadettes-d-avocats#.XwdAgSgzZ-M.
- “Les dérives des écoutes : Affaire Sarkozy : l’avocat Eric Dupond-Moretti porte plainte”, Le Parisien, June 30, 2020,https://www.leparisien.fr/faits-divers/affaire-sarkozy-l-avocat-eric-dupond-moretti-porte-plainte-30-06-2020-8345091.php.
- “Eric Dupond-Moretti veut l’indépendance du parquet et restaurer la présomption d’innocence”, the Huffpost, July 7, 2020, https://www.huffingtonpost.fr/entry/eric-dupond-moretti-veut-lindependance-du-parquet-et-restaurer-la-presomption-dinnocence_fr_5f045858c5b6e97b568a05f1.