Approval passed on Brazil anti-bribery law

June 3, 2014

A review on the content of the law suggests that it is aimed at controlling the participation and grant of tender generally. Besides prohibiting bribery paid by businesses to local and foreign officials, the law also covers “other illegal conducts committed against the local and foreign public administration”. This includes creating a legal entity in a fraudulent manner for the purposes of participating in a public tender.

It should be highlighted that the law would cover foreign entities with business or representation in Brazil, not just local companies. And, unlike the Foreign Corrupt Practices Act, the Brazil anti-bribery law covers bribery to both domestic and foreign officials. What’s more, instead of offering deferred prosecution agreements (as per the United Kingdom and United States), the law offers what are known as “leniency agreements”, exempting a company from sanctions and reducing their fine (based on certain conditions), rather than deferring prosecution based on certain conditions. While the United Kingdom Bribery Act offers companies the complete defence of having “adequate procedures” in place, no similar defences are featured in the Brazilian law.

As with the United Kingdom and United States anti-bribery legislation, self-disclosure and the existence of an effective compliance programme will be considered when determining the appropriate sanction. However, these factors may be more favourable to foreign companies (such as those in the United States) rather than local companies, as local companies are likely to have less awareness about the importance of building a compliance programme for their business.

Compliance and legal counsels of companies with presence in Brazil should watch closely on the development of the law and any future prosecutions made under it, especially since the bill showed a wide coverage of the types of corrupt behaviour which could be caught. Foreign companies do not have to have an established presence in Brazil to be caught under the law; representative offices are also covered.

Brazilian citizens themselves are criticising the high level of corruption that exists within the country. In June, around 250,000 people in over 100 cities in Brazil protested against their dissatisfaction regarding areas such as vote-buying and the preparation and costs required for the 2014 FIFA World Cup.

Before the passing of the bill it was hinted by Patrick Moulette, head of OECD’s anti-corruption division, that failure to do so would be a “missed opportunity” for Brazil. Brazil is now due for its 2014 OECD review, and Mr Moulette’s comments imply that the results may improve now the anti-bribery law has been enacted. Brazil is only a signatory to the OECD Anti-Bribery Convention, not a member, although it is still subject to OECD review.

What is the penalty?

A fine of 0.1 percent to 20 percent of the company’s gross revenue for the year, with the additional possibility of disgorgement of assets/profits gained from the violation.

If it is not possible to use this criterion, then the fine can be between US$3,000 and $30 million.

Other penalties include mandatory dissolution of the business.

 

Is there criminal liability on companies, just like the Bribery Act and Foreign Corrupt Practices Act?

No, as with other laws in Brazil, the anti-bribery law imposes criminal liability only on individuals, not on companies.

 

What about successor liability?

The anti-bribery law has a provision on successor liability whereby the succeeding entity will be liable for fines and restitution post-merger or acquisition. The limit of the fine/restitution depends on the value of assets transferred.

As the law encompasses both local and foreign companies, successor liability would catch foreign companies acquiring business in Brazil.

 

When will the law come into force?

The law has now received presidential approval and will come into force 180 days after it has been published in the Brazilian government’s official gazette. This is expected to be in January 2014.

 

 

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