EU steps forward in fight against corruption
Part of the European Parliament building complex in Brussels, Belgium. olrat - stock.adobe.com
In June, the EU Anti-Corruption Directive came into force, creating a harmonised framework for preventing corruption. According to the European Parliament, corruption costs the EU up to €990bn a year.
The directive includes standard definitions of corruption offences and sets the minimum level of penalties for wrongdoing. The new rules also instruct Member States to ensure that judges consider factors such as enhanced cooperation or adequate compliance procedures as mitigating circumstances in sentencing.
Anti-corruption lawyers who spoke to Global Insight say that the directive is a welcome development in strengthening the rule of law and anti-corruption standards in the EU. They suggest it will encourage companies operating in Europe to invest more in compliance programmes because of the clarity of the rules. Transparency International has also welcomed the new rules, while criticising the Commission for not introducing mandatory corporate criminal liability or including binding standards on political party funding, electoral campaigns and lobbying.
Nicola Bonucci, a Member of the IBA Anti-Corruption Committee Advisory Board, describes the directive as a ‘step forward’ for corporate accountability in the EU because it recognises that inadequate controls to prevent corruption could trigger liability. This goes beyond the requirements of jurisdictions with developed anti-corruption laws such as the UK Bribery Act and France’s Sapin II Law, which require the offence to be tied to the actions of a senior individual within the company.
The introduction of nine set categories of corruption offences will broaden the legal definition of corruption in many Member States, particularly where trading in influence and unlawful exercise of public functions is not included. The categories also include public and private bribery, misappropriation, and corruption-related obstruction of justice and enrichment. ‘If you look at the various harmonised offences some of them are game changers if not in all countries, then in some,’ Bonucci says.
If you look at the various harmonised offences some of them are game changers
Nicola Bonucci
Member, IBA Anti-Corruption Committee Advisory Board
Bonucci says the European Commission needs to publish guidelines for its implementation and monitor how effectively its provisions are adopted by Member States. ‘The EU Commission needs to ensure that its transposition doesn’t create further imbalances,’ says Bonucci, a former Director of Legal Affairs at the OECD. The EU Commission has said that its Anti-Corruption Network, established in 2023, will help to ensure effective adoption of the rules by facilitating cooperation between Member States and developing non-binding guidance and best practices. The directive also includes a requirement for countries to collect accurate and consistent data on corruption offences.
Jitka Logesova is a partner at Wolf Theiss in Prague and member of the IBA Anti-Corruption Advisory Board. She says one of the most significant implications of the directive for the Czech Republic will be the requirement for judges to consider lesser penalties for companies that cooperate during investigations and self-report to the authorities. ‘It’s quite difficult to explain to clients why they potentially should cooperate with the prosecuting authorities because so far there has been no reward or incentives for the companies to cooperate,’ she says.
In July, the Czech Republic is set to introduce a new legal mechanism allowing companies to avoid prosecution if they admit misconduct and take remedial actions, including improving compliance systems and appointing a monitor. The opportunity for companies to settle cases with prosecutors, combined with incentives for cooperation, will bring the Czech Republic under a framework similar to many other European jurisdictions where these tools for resolving corporate corruption are commonplace.
The other game changer, Logesova says, is the minimum standard for penalties, which will dramatically increase the level of fines authorities can issue against companies. These have been relatively low in the Czech Republic compared to other jurisdictions. According to the directive, fines must be at least five per cent of total worldwide turnover for bribery and corruption, and at least three per cent of total worldwide turnover for other offences, including trading in influence and obstruction of justice. ‘This we hope will change behaviour by certain companies who are still considering whether to spend much money on compliance efforts,’ she says.
Eric Mayer, an officer of the IBA Anti-Corruption Committee, is a lawyer at GSK Stockmann in Munich. He says that the EU Anti-Corruption Directive appears already to have shaped proceedings in Germany that have led to robust penalties for corruption offences. For example, the landmark conviction of former German Member of Parliament by a Munich court in January for accepting bribes from Azerbaijani officials, which led to a judge handing him a one-year and two-month suspended prison sentence. In addition, the judge barred him from holding public office for two years, ordered a confiscation of €20,000 and required him to pay €12,000 to a victim support fund. The verdict marked the first conviction of a former MP for accepting bribes while holding public office. ‘That case gives me hope that the fight against corruption is making progress and there is an awareness of what the Anti-Corruption Directive will bring and a desire to implement that,’ says Mayer.
Mayer adds that the German government’s huge recent increase in defence spending to respond to security threats in Europe has brought into sharp relief the importance of strong anti-corruption measures with the risk of large-scale public corruption scandals increasing. ‘This is why it is really important that we get our act together across borders,’ he says. ‘And have European harmonisation on that fight’.