French National Financial Prosecutor's Office Publishes New Guidelines on Judicial Conventions of Public Interest
The new guidelines update those published jointly by the National Financial Prosecutor's Office (Parquet National Financier or "PNF") and the French Anticorruption Agency (Agence Française Anticorruption or "AFA") on June 26, 2019. They provide more predictability and legal certainty in the implementation of judicial conventions of public interest (conventions judiciaires d'intérêt public, or "CJIPs").
On January 16, 2023, the PNF published new guidelines relating to the implementation of a CJIP, the French equivalent of a deferred prosecution agreement, instituted by the law known as "Sapin II" (no. 2016-1691, December 9, 2016). A CJIP allows the National Financial Prosecutor to enter into an out-of-court settlement with a corporate entity accused of corruption, influence peddling, or tax evasion in particular, as well as money laundering and related offenses. By means of a CJIP, the company involved also avoids other possible penalties, including prohibition from carrying out certain activities, exclusion from public markets, and the inability to have securities admitted to a regulated market.
To encourage companies to cooperate, the PNF employs two tools: the authority to offer a CJIP to a company, as the only agency empowered to do so pursuant to articles 41-1-2 and 180-2 of the Code of Criminal Procedure; and the ability to determine the amount of the fine in the public interest.
In order to qualify for a CJIP, a company must demonstrate to the PNF its good-faith cooperation, which is determined based on the following criteria:
- The voluntary disclosure of the facts to the prosecution, within a reasonable time;
- The establishment of an internal investigation into the facts and the individuals involved, and the transmission of the investigation report to the public prosecutor's office;
- The unprompted implementation of an anticorruption compliance program if the company is too small to fall within the scope of application of article 17 of the Sapin II law;
- The rapid adoption of corrective measures to reinforce the effectiveness of the compliance program;
- The possible modification of the management team; and
- Prior compensation to victims. In the case of acts of tax evasion, prerequisites for a CJIP include the recovery by the tax authorities of the evaded duties, interest on late payment, and penalties. This is why CJIPs do not, in principle, cover compensation for damage caused to the Public Treasury.
The PNF specifies that companies subject to the provisions of Article 17 of Sapin II are unlikely to qualify for a CJIP if, following an inspection by the AFA, they are found to lack proper corrective measures.
The PNF also provides objective criteria for assessing the fine in the public interest, which must be proportionate to the benefits derived from the identified breaches (article 41-1-2 of the Code of Criminal Procedure).
This fine is made up of two parts. The first, called "restitutive," is equal to the amount of the benefits derived from the identified breaches. The second, called "afflictive," is punitive in nature and is calculated on the basis of the amount of the benefits derived from the breaches. Aggravating and mitigating factors are applied in order to assess the afflictive part of the fine.
The new aggravating factors identified by the PNF are:
- Obstruction of the judicial inquiry;
- Creation of tools to conceal the facts;
- Existence of a serious disturbance to public order;
- Company size, i.e., large enough to fall within the scope of application of article 17 of Sapin II; and
- Shortcomings in the company's anticorruption compliance program.
The new mitigating factors are:
- The unique occurrence of the offenses;
- The unequivocal recognition of the offenses by the company;
- The prior compensation of victims; and
- The relevance of internal investigations.
The methods of calculating the afflictive part ("AP") of the fine are thus intended to be more transparent. The goal is to ensure that the AP remains proportionate to the amount of benefits derived from the breaches. In addition, the multiplier coefficients (ranging from 10% to 50% and applied according to the mitigating and aggravating factors above) should be more predictable and more clearly encourage companies to cooperate.
The calculation of the AP, in relation to the restitutive part ("RP") of the fine, can now be summarized as follows:
AP = RP * (1 + increasing factors – reducing factors)
Through its new guidelines, the PNF hopes to encourage corporate interest in concluding a CJIP. It also intends to convince companies to cooperate fully in the event of a judicial inquiry into facts falling within the scope of the CJIP and to comply with the provisions of article 17 of Sapin II.
Companies should bear in mind that the quality of their anticorruption program, the effectiveness of their internal alert system, and their ability to carry out relevant internal investigations are all criteria likely to help convince the PNF to offer them a CJIP.
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