After a lengthy legislative process between the National Assembly and the Senate, Sapin II, the French anti-corruption law focused on transparency and modernization of economic activity, was passed, in its final form, by the National Assembly on November 8, with a majority vote of 308 to 171.
As to anti-corruption relating to companies, the new law applies to companies or a group of companies with 500 employees or more and revenues or consolidated revenues of more than €100 million (about $100 million).
Those companies are now required to implement measures to prevent and detect corruption in France of foreign countries or influence peddling.
When it comes to subsidiaries of groups that may not meet the thresholds, the obligation applies only to these companies for which the parent company is headquartered in France.
Various articles will take effect through the issuance decrees issued by the Conseil d’Etat. In regard to Article 17, concerning the implementation of procedures and controls surrounding anti-corruption risks, entities have six months from the publication of the law to comply. So at some point in the first six months of 2017 -- probably the May or June timeframe -- the law will be effective. -
(In a post for the FCPA Blog in July, Jonny Frank and I talked about some specific ways to prepare for Sapin II.)
Title I of the new law creates a national body to oversee the detection and prevention of corruption, the Agence Française Anticorruption (AFA).
It also creates a French Deferred Prosecution Agreement.
Finally, it includes measures on whistleblower protections, which remained in the new law after much debate.
In this post, I'll focus on the whistleblower provisions.
A whistleblower is defined in Sapin II as “a physical person who reveals or signals, without personal interest and in good faith, a crime or misdemeanor regarding, or a grave and flagrant violation of which he or she became aware, of an international commitment ratified or approved by France, […], the law or regulation, or the threat of a grave prejudice to the public.” (Note: This is our translation of the text).
The intent of the expanded definition is to protect certain whistleblowers who report violations that did not necessarily directly violate French law, but international laws or issues of public interest, and could have otherwise exposed them to sanctions by employers or even the government.
The law provides that whistleblowers must advise their immediate supervisor or designee.
Employers must implement procedures to gather and follow-up on incidents reported anonymously and have an opportunity to investigate within a reasonable period of time, otherwise, the whistleblower can then report the events to the regulators. If no steps are taken by the regulators, the issue can be made public. There are additional provisions specific to the reporting of professional and regulatory violations to the Autorité des Marchés Financiers (the French SEC).
If the whistleblower is retaliated against, and is involved in a lawsuit, the Defender of Rights (an independent state body -- or ombudsman -- whose mission is to protect citizens’ rights) may provide financial assistance to the whistleblower upon request or if, as a consequence of the reporting of the violation, they suffer financial hardships. The Defender of Rights may refuse such financial support if it concludes that the whistleblower acted in bad faith. Provisions require companies and others to protect the anonymity of whistleblowers or suffer sanctions. Obstruction to the reporting of potential violations may result in a one year prison sentence and a €15,000 penalty.
Sapin II makes it clear that there are no financial incentives for whistleblowers to report wrongdoing. In fact, the whistleblower should act without any self-interest.
One can wonder whether self-interest can ever be entirely eliminated when reporting a potential violation.
In the United States, on the contrary, the Securities and Exchange Commission whistleblower program can reward them financially. The SEC has already paid out more than $130 million to whistlebowers.
The protections for whistleblowers provided by the new French law may seem insufficient to some, but the fact that the Defender of Rights can assist a well-meaning person provides a counterbalance. Only time will tell whether the lawmakers struck the right balance.
Xavier Oustalniol, a partner in the San Francisco office of StoneTurn, began his accounting career in his native France. Now, with more than 25 years of experience as an auditor, forensic accountant and litigation consultant, he focuses on complex forensic accounting issues, fraud investigations, and fraud prevention and anti-corruption compliance assessments. His clients include many French companies and U.S. entities with operations in France.