Thought leadership from our experts

Filling the gaps of French white collar crime regulation

In a context where France is regularly criticized for the lack of efficiency of its white collar crime regulation and where, on the contrary, the US FCPA – one could also mention the UK Bribery Act – is used to regulate conducts that have but a tangential link with the United States, France appears to be on the verge of filling two main gaps: (i) the absence of an efficient criminal settlement procedure and (ii) the indifference of French regulation towards companies' compliance programs.

i. The development of the French "comparution sur reconnaissance préalable de culpabilité" or plea of guilty (hereinafter "CRPC") in economic and financial matters

France has recently implemented a specialized prosecution department and its corresponding court to handle all major economic and financial cases.

Indeed, on December 6, 2013, the scandal caused by the Minister of Budget who secretly detained an account in Switzerland ("Affaire Cahuzac") was one of the factors that led to the adoption of the Law, initiated by President François Hollande, on the fight against tax evasion and large economic and financial crime. Notably, this regulation created the "parquet national financier" ("Financial national prosecutor") or PNF, which has national jurisdiction especially for the following offenses: stock market offenses, corruption, bribery, foreign official corruption, complex tax evasion and tax fraud committed by an organized gang, and laundering of these offenses.

In parallel, the 32nd Chamber of the Paris Criminal Court has been created on February 2, 2015 to handle in priority cases coming from the PNF.

After one year of activity, PNF's slowness and lack of results can be criticized, although one must allow time for this institution to assert itself. Beyond that, the main causes for this relative slowness come from the high complexity of the cases at stake, the difficulty to recruit magistrates that are highly qualified in financial matters, and the lack of funds made available to them.

Beginning of a solution to such problems lies in the development of the CRPC in economic and financial matters. The CRPC, which can be translated into "appearance before court after prior recognition of guilt", is often described as the French equivalent of plea of guilt. Under the CRPC regime, imprisonment proposed by the prosecutor may not exceed half of the sentence incurred or, in any event, exceed one year with or without suspended sentence. The person so sentenced does not have to appear before a court judgment to the merits of the case, the procedure giving rise only to a homologation hearing before a single judge, in charge of approving or refusing the proposed sentence.

Created in 2004, the CRPC was only applicable to the least serious offenses, i.e. less than 5 years of imprisonment. But the Law of December 13, 2011 extended the applicability of the CRPC to all misdemeanors, including tax fraud, serious economic and financial matters and corruption and offering the possibility for the investigative judge – in charge of investigating on most complex cases – to initiate such procedure. Moreover, the Law of December 6, 2013 made the CRPC procedure more flexible, allowing the resuming of investigations instead of a mandatory referral to the criminal Court ("Tribunal correctionnel"), in case of a refusal by the homologating judge to ratify the proposed sentence, or a new contestation of the facts by the defendant. However, though the system existed, it had not been used during several years.

As a consequence, during the solemn hearing marking the beginning of the Court's judicial year 2015 the Chairman of the High Court of Paris, Mr Jean Michel Hayat, urged for the application of the CRPC in economic and financial matters. The Chairman explained that, after meeting with the investigative judges from the financial department of the High Court of Paris, all expressed their "perplexity to a criminal response intervening after five years, seven years, or ten years after the supposed date of the facts, given the procedural battles, complexity of investigations and sophistication of fraud circuits."

This new perspective has been favorably welcomed. Yet, current French regulation of the CRPC does not offer the same opportunities as UK or US legislation.

Especially, the sanctions proposed by the Prosecutor necessarily involve acceptance of guilt. Indeed, there are no equivalents to deferred prosecution agreement (DPA) or non-prosecution agreement (NPA) in the French system. There is also no such thing as an "Alford Plea", when a defendant maintains his or her innocence with respect to the charge to which he or she offers to plead guilty.

The recognition of guilt by the defendant is thus mandatory, which can be problematic in several instances, for example when a conviction has professional or business consequences such as a suspension of professional licence. It has recently been the case in the procedure initiated against UBS AG and UBS France for cross-border illegal solicitation and tax fraud. Once considered, this option was rejected by the banks since the recognition of their guilt would involve a licence withdrawal on the U.S. market.

As a consequence, no CRPC procedure in economic and financial matters has been achieved so far. However, reliable information leads to believe that the first CRPC settlement is about to be reached. Likewise, announcement of further measures in favor of this procedure are expected during the solemn hearing of the Court's judicial year 2016.

ii. The development of French regulation on companies compliance program

Compliance programs are not mandatory under French law. Similarly, no provision compels the judge to take a company's compliance program into consideration in the rendering of a decision.

Recently, a bill debated in Parliament was proposing to introduce a duty of vigilance ("devoir de vigilance") for large French companies, notably regarding corruption matters. This bill, which would have been a first step of French regulation on compliance, was however rejected by the French Senate and is unlikely to be passed.

Yet, a governmental bill on the transparency of the economy will imminently be introduced in Parliament, especially creating a National Anti-Corruption Agency, thus replacing the former Service central de repression de la corruption, with enlarged supervising powers.

The bill also creates a "duty (for companies) to prevent risks of corruption", which will apply to companies employing at least 500 employees and to subsidiary companies whose group employs at least 500 employees and has a turnover exceeding EUR 100 million. The anti-corruption and anti-bribery program of these companies shall include (i) a code of conduct, (ii) a whistleblowing mechanism, (iii) a constantly updated risk assessment, (iv) an integrity review of clients, suppliers and third parties, (v) internal or external accounting controls, (iv) trainings for employees and managers and (vii) a disciplinary sanctions policy.

The newly created Agency shall define the application guidelines of the newly created duty to prevent risks of corruption and will ensure its enforcement as it will be competent to assess the efficiency of the companies' anti-corruption and anti-bribery compliance programs and issue order to comply should the company's program not be sufficient.

The bill also establishes an additional penalty for corruption or bribery offenses, consisting in the obligation for the sanctioned company to implement an anti-corruption and anti-bribery compliance program under the monitoring and supervision of the Agency. Conversely, the existence of a compliance program shall be taken into consideration when considering sanctions for corruption or bribery offenses.

Should it be enacted into law, this bill could be the first and major step for mandatory compliance programs for French based-companies and companies operating in France.

* * *

Even if they are yet to be fully implemented, the combination of these two upcoming developments in French regulation, inspired from common law, would allow France to reinforce the influence and attractiveness of its legislation as well as ensure the predictability and flexibility of white collar crime sanctions.