Used as a political instrument by the Brazilian Federal Government in response to the popular protests that happened in mid-2013, the Act nº 12.846, of 1st August 2013, entitled as “Anti-Corruption Act”, entry into force on January 29th, 2014, in the midst of polemics, but promising to have an impact in the way that business is made in Brazil.
Regarding its immediate nature, the Act intends to attend international agreements assumed by the Brazilian Government, especially the “Convention on Combating Bribery of Foreign Public Officials in International Business Transactions” of the Organization for Economic Co-operation and Development (OECD), finished in Paris in the year 1997.
Despite the granted popular name – “Anti-Corruption Act” – the new statute is not restricted to actions concerning corruption, but covers all actions “that threaten the national or international public patrimony, against the principals of the government or against the international agreements assumed by the Brazilian Government.”
It is therefore noteworthy that the 5th article of the Act has a wide reach, given that the typical actions in the regulation have a purely illustrative nature, in a way that any actions considered as harmful to the government will be punishable, both administratively and in court.
The Act’s only aim is to hold the legal entity liable – both in a civil and administrative scope – instead of its management and employers or the public servants involved in the corrupt actions. To these individuals remains the possibility of being punished by other Acts concerning such violations, as the Act of Misconduct in public office, the Act of Bidding Process and Public Agreements and the Penal Code.
Nevertheless, there is also the possibility of the members and managers of the companies be held liable by the sanctions of the law, administratively and in court, in case the disregard of the legal entity is determined. In that case the assets of the members and managers may be affected if the company is used to facilitate, cover up or conceal illegal practices.
Unlikely the individuals, that are subjectively held accountable by their actions, the new law sets forth that the legal entity will be, from now on, strictly liable by any harmful action that it practices “in their behalf or interest”. Therefore, the companies and general partnerships, incorporated or not, the associations, the foundations, the foreign companies that have its head office, branch or representation in Brazil, as well as the Brazilian companies that operate abroad, can be held liable by the Anti-Corruption Act.
The Act, nevertheless, stipulates that the liability of the legal entity is restricted. Thus, the occurrence of the damage is all that matters, on behalf or in interest of the legal entity, for it to be liable administratively and in court, regardless of intent or fault.
In these terms, the mere occurrence of a prohibited action, linked to a legal entity and, hence, leads to damage to the Government, will result in the liability of the company.
Therefore, hypothetically, if an employee, by its free will, offers a bribe to a public servant to obtain an environmental permit to the company, without the previous authorization or consent of his superiors, this company might suffer the sanctions as provided by the Anti-Corruption Act.
In accordance to Marçal Justen Filho1, “there is an absolute presumption that, if the employee involved the company in corruption, this was a result of the lack of organizational and managing programs”.
This is, in fact, the most controversial issue of the Anti-Corruption Act. Many corporate entities, for example, understand that i) if the company adopted all measures to prevent and counter corruption, and ii) if after the proper investigation, it is proved that the harmful action to the Government was a result of an detached action of an employee; the company should be exempted of any responsibility.
However, the Act only considered the case above as a mitigating circumstance (article 7) to define the sanction to be applied to the company. So, in the process to evaluate the penalties, a less serious sanction will be applied as a result of the implement of corporate governance policies within the company, the so called compliance policies.
In this given context, the authority itself may institute the punitive administrative process when an illegal action is verified, in which the right of defense of the company is guaranteed. By the end of the investigative process, and having been understood by the judging authority that an infraction of the Act was committed, the company may suffer the following penalties:
The Anti-Corruption Act is also criticized by the fact that it did not create a specific competent authority to investigate and judge the infractions. By the way that it was written, the Act allows the adoption of a diffuse jurisdiction to intend and make the judgment of the administrative process, what can result in administrative decisions without the proper legal reasoning, in addition to disproportional sanctions and even political decisions.
This reckless situation has worried the business community. Nevertheless the administratively sanctioned company can seek a review of the applied penalties in court.
The Act stipulates that the administrative liability does not preclude the judicial liability, in which companies may suffer even harder sanctions, such as:
The severity of the sanctions in addition to the strict liability of the legal entity will bring inevitable changes to the companies that operate in Brazil and abroad, forcing them to adopt most efficient compliance policies.
Moreover, many of them have already done substantial investments to: create or review their codes of ethic and business conduction; creation or review of their internal reporting channels; conducting periodic investigations to search for infractions; conducting training as well as internal and external audits; implementation of computerized systems and efficient procedures to manage and control the government contracts.
It is noticeable that the companies will be one of the main players in the combat against corruption in the country, since they will certainly adopt effective measures to prevent and investigate illegal conducts set forth by the law.
The framer of the Act also predicted the possibility of celebrating a “leniency agreement” between the company and the government.
Through the “Leniency Agreement”, the company that engaged in illegal practices starts to co-operate with the investigations in the administrative process and, as a result, allows the identification of others involved in the infraction in order to facilitate the acquisition of important information and documents to examine the facts.
As a result of the agreement, the company will be exempted from the sanctions of “general publication of the condemnatory decision through a wide news media” and the “prohibition to receive incentives, subsidies, grants or donations from public entities or government agencies for a period of 1-5 years”, and may also have the fine reduced up to 2/3 (two thirds). There is also the possibility of mitigating or even the exempt the sanctions set forth in the Act of Bidding Process and Administrative Contracts (Act nº 8,666/93).
Lastly, the lawmaker foresees the creation of the “CNEP” (National Register of the Punished Companies), giving publicity to the sanctions applied to the companies by the federal, state and municipal authorities.
The Act nº 12.846/13 was already regulated by the states of São Paulo (Executive Order nº 60.106/14), of Parana (Executive Order n° 10.271/14) and of Tocantins (Executive Order nº 4.954/2013) and, very soon, it will also be regulated by the Federal Executive Branch.
The new Anti-Corruption Act will, thus, fill a gap in the Brazilian legislation related to the liability of the legal entities for harmful actions practiced against the Government, and will coexist with other correlated rules.
1 JUSTEN FILHO, Marçal. The “New” Brazilian Anti-corruption Law (Federal Act 12.846). Newsletter Justen, Pereira, Oliveira e Talamini, Curitiba, nº 82, December 2013, available in http://www.justen.com.br/informativo, visited on 02/26/2014.