Non-prosecution agreement under French law: self reporting and internal investigation are expected

Emmanuel Moyne
Bougartchev Moyne Associés AARPI, Paris
emoyne@bougartchev-moyne.com

Nathan Morin
Bougartchev Moyne Associés AARPI, Paris
nmorin@bougartchev-moyne.com

The adoption of Law 2016-1691 of 9 December 2016 on transparency, the fight against corruption and the modernisation of economic life, known as ‘Sapin II’, was a milestone in the field of negotiated justice since it introduced a true settlement procedure, inspired by the United States’ Defense Production Act (DPA), with no acknowledgment of guilt, the ‘public interest judicial convention’ (convention judiciaire d’intérêt public (CJIP)).

Many have seen this alternative to prosecution as a way to avoid criminal prosecution at a lower cost, although the 15 or so CJIPs concluded to date demonstrate that the public interest fines can be particularly high.

While this alternative to prosecution has several advantages for companies, it does require compliance with a number of conditions, which have been specified by the French authorities without any legal basis.

What does the law provide?

The CJIP is only available for legal entities suspected of acts of bribery, influence peddling, the laundering of tax-fraud proceeds, related offences and (since the Anti-Fraud Law of 23 October 2018) tax fraud offences.

Since Act No 2020–1672 of 24 December 2020, the CJIP has been extended to offences provided for by the Environmental Code, excluding crimes and offences against persons (Article 41–1–3 of the CCP).

This settlement procedure is an option made available for the Public Prosecutor before the opening of criminal proceedings as well as to the Investigating Magistrate before the closing of their investigation, at the request of, or in agreement with, the Public Prosecutor. Should this procedure be initiated, the accused legal entity may be required to:

• pay a public interest fine in proportion to the advantages gained from the offences within the limit of 30 per cent of the annual average turnover calculated on the basis of the last three turnovers available, with the possibility to spread the fine over a maximum of one year; and/or
• set up, under the French Anticorruption Agency’s (AFA) supervision, a compliance programme for three years in line with the measures described above; and
• if necessary, compensate the victims for their loss.

The victim would retain the ability to claim compensation for their loss before the civil courts and the legal entity’s executives, as well as any individual involved, would remain criminally liable before the criminal jurisdictions.

Therefore, negotiating and concluding a CJIP does not close the whole criminal case by itself. In practice, attorneys tend to negotiate in parallel that the charges against the individuals be dismissed when a CJIP is concluded. Public Prosecutors and Investigating Magistrates are very cautious about this and most of the time are eager to prosecute or refer the individuals to the criminal court.

The main benefit associated with this procedure is the absence of any acknowledgement of guilt, compared to the ‘appearance pursuant to a prior admission of guilt’ procedure (comparution sur reconnaissance préalable de culpabilité (CRPC)), where such acknowledgement could lead to an exclusion from public procurement (article 45 of Order No 2015-899 of 23 July 2015).

Although the conditions for benefiting from a CJIP have not been expressly provided for by the French legislator (apart from the need for an indictment in the context of a judicial investigation and the acceptance of the charges), the French authorities have had the opportunity, on several occasions, to specify the conditions for benefiting from a CJIP as well as the criteria to be taken into account in order to assess the amount of the public interest fine.

What is expected by the French authorities to grant the benefit of a CJIP?

In a Circular dated 31 January 2018, relating to the presentation and implementation of the criminal provisions provided for by the Sapin II law, the Ministry of Justice had provided some guidelines as to the conditions under which a company could expect to benefit from a CJIP.

It was specified that the appropriateness of implementing a CJIP should be assessed according to several criteria:

• the (criminal) background of the legal entity;
• the fact that the disclosure of the facts was voluntary;
• the degree of cooperation of the legal entity with the judicial authority.

It was also specified that the fact that the legal entity had already benefited from a CJIP in the past was likely to deny it the benefit of a ‘second chance’.

Then, on 26 June 2019, the AFA and the National Financial Prosecutor's Office (Parquet National Financier (PNF)) published joint guidelines for the implementation of CJIP where it was clearly stated that it is subject to the full cooperation of the company, which would be deduced from ‘the spontaneous disclosure of the facts’ and ‘the implementation of an internal investigation’ by the company. The AFA and the PNF indicated that they expected companies to forward the internal investigation report to the public prosecutor's office.

Those conditions are obviously not provided by law.

More recently, these authorities have published a draft practical guide on internal anti-corruption investigations which they have submitted for consultation. The purpose of this guide is to provide guidance to companies on the best practices to be observed during the various stages of an internal investigation. However, far from being a simple pedagogical tool intended to help companies, this draft guide also reflects the desire of the PNF and the AFA to commit companies without any legal basis.

From the point of view of these authorities, the company should denounce any potentially criminal act that it becomes aware of, both before and after a possible internal investigation.

Unsurprisingly, and in line with the guidelines for the implementation of the CJIP, the AFA and the PNF expect companies to ‘transmit the investigation report to the judicial authorities’.

Much more surprisingly, the AFA and PNF consider that: ‘if internal control or audit activities reveal facts of a criminal nature, even before an internal investigation is initiated, the management body is advised to bring them to the attention of the judicial authorities without delay’. According to them, ‘the company should give priority to informing the judicial authority beforehand’.

However, it will be recalled that the right not to incriminate oneself is a fundamental right and that there is no legal obligation under French law for companies to denounce any reprehensible acts that they may observe.

One may also question the interest of systematically informing the judicial authority before any internal investigation. In fact, the purpose of such an investigation is precisely to establish or corroborate facts which, at the time it is launched, are only suspicions.

Informing the judicial authority of what has not yet been uncovered means taking the risk of wasting its time. Above all, it deprives the company of a free and informed decision, taken in the light of sufficiently established elements.

In order to compel the company outside of any legal obligation, the benefit of a CJIP is subordinated to ‘the early and sincere denunciation by the company to the judicial authority of the criminal acts of which it has knowledge and the communication of the internal investigation’. Conversely, ‘any delay in the transmission of information resulting from the internal investigation or any partial communication of the elements gathered by the company may be considered as an aggravating factor when calculating a possible CJIP fine’. To do otherwise could lead the company to ‘be held liable for the dissipation of evidence or fraudulent consultation’ or ‘for the dissipation of criminal assets that may be apprehended’.

All in all, it is rather unfortunate that the AFA and the PNF assume that the company is necessarily at fault and that it should systematically blame itself.

In the vast majority of cases, the company is, in fact, unrelated to the actions of its dishonest employees, when it is not itself the victim. In either case, it is not liable to incur criminal liability for such conduct.

Furthermore, not immediately reporting suspected offences to the judicial authorities does not make the person an accomplice and does not constitute the offence of destruction of evidence or money laundering as suggested in this draft guide. This does not mean either that the company is reluctant to cooperate but that it intends, in full legitimacy, to be able to make its decisions in full knowledge of the facts, in particular to cooperate if necessary.

Finally, even if the company is likely to be held criminally liable for the actions of one of its employees, it has the absolute right to choose how to defend itself in an informed manner, for instance in light of the results of a thorough internal investigation.

How is the public interest fine calculated?

The criteria taken into account to calculate the quantum of the public interest fine were specified by the 2018 circular, the AFA/PNF guidelines and the practice of previously concluded CJIPs. The Sapin II law does not offer any details other than (1) taking into account the benefits derived from the breaches identified; and (2) setting a ceiling of 30 per cent of the average of the last three turnovers.

First, this public interest fine consists of:

• the restitution of the unlawful profit; and
• an additional penalty.

Second, the circular defined aggravating and mitigating criteria, specified by the guidelines. In these guidelines, the following are considered as aggravating factors:

• the exceptional seriousness of the facts;^[1]
• in case of bribery, the fact that the bribed person is a public official;^[2]
• the fact that the legal entity was supposed to implement an anti-corruption programme in compliance with Article 17 of the Sapin II law;
• the fact that the legal entity has already been convicted/sanctioned in France or abroad for acts of corruption;
• the use of resources of the legal entity to conceal acts of corruption;
• the repeated or systematic nature of the criminal acts.^[3]

The following are considered as mitigating factors:

• the spontaneous disclosure of the facts to the public prosecutor's office before any criminal investigation was opened within a reasonable time;
• excellent cooperation and complete and effective internal investigations;
• an effective compliance programme, the implementation of corrective measures and the adaptation of the internal organisation;
• the spontaneous implementation of a compliance programme by a legal entity that is not legally obliged to do so.

In practice, the criterion most often used is that of the ‘exceptional seriousness of the facts’, a concept whose boundaries are intrinsically vague and, in any case, not arithmetically translated.

In this respect, it would seem appropriate to draw inspiration from the American Sentencing Guidelines, which are based on a system of ‘points’ leading to a ‘score’ that can be multiplied by a coefficient of between 0.05 and 2 depending on the situation.

The CJIP is still a recent mechanism and is bound to evolve, both in terms of how the public interest fine is calculated and the offences concerned. It is also hoped that it will one day be accessible to individuals.

Notes

[1]     Applied in the HSBC Private Bank (Suisse) SA CJIP, the Société Générale SA CJIP, the Carmignac Gestion CJIP and the Google France and Google Ireland CJIP.

[2]    Applied in the CJIP SAS Set Environnement, the CJIP SAS Kaeffer Wanner, the CJIP SAS Poujaud and the CJIP Société Générale SA.

[3]     Applied in the HSBC Private Bank (Suisse) SA CJIP, the Set Environnement SAS CJIP, the Kaeffer Wanner SAS CJIP, the Poujaud SAS CJIP, the Carmignac Gestion CJIP and the Google France and Google Ireland CJIP.