Marcelo dos Santos Barradas *

On August 1st, 2013 Brazilian Law nº 12.846 ("Anticorruption Law") was sanctioned in order to regulate the civil and administrative liability of corporations for acts taken against the public administration. The timing to raise the debate about fighting corruption is convenient given the recent popular initiates of protesting against the Brazilian public administration level of corruption.

The new act fulfills a gap in our legislation because until now there was no specific rule in charge of imposing to corporations any penalty for corruption acts. The law seeks to meet Brazil's compromise before the OECD – Organization for Economic Co-operation and Development upon the ratification of the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions. The matter of corruption involving foreign official has recently been regulated by countries such as the United Kingdom, Mexico and Chile, following the United Sates' steps which deals with this subject since the 70's trough the FCPA – Foreign Corrupt Practices Act.

The Brazilian act, however, is not limited to deal with corruption involving foreign officials and it provides for strict liability to the corporations engaging in harmful acts to any public administration, whether national or foreign. The acts defined as harmful include not only the actual payment or donation of any undue advantage to any public agent or third parties related to them but also the offering or support of such practices. The Anticorruption Law further reaches those who make use of intermediates to somehow benefit public agents and it forbids a number of practices aiming to jeopardize the competitive character of public bids or to affect the originate balance of public contracts.

In the administrative sphere, the applicable penalties include the extraordinary publicity of the condemnation and the payment of a fine of up to 20% of company's gross revenues from financial year ended before the filing of the administrative proceedings. The amount set for the fine shall never be lower than the advantage obtained by the company. Parent and affiliated companies, subsidiaries, and those that are members of the same consortium in a given public contract are jointly liable for the payment of these fines. Whenever the application of the annual gross revenues criteria turns out to be impossible, the amount of the fine shall range between R$ 6,000.00 (six thousand Reais) to R$ 60,000,000.00 (sixty million Reais).

Within the civil sphere, the public administration may file lawsuits requesting eviction of assets, rights of amounts seeking to recover the losses suffered by the public treasury at the same proportion of the advantages obtained by the relevant companies. Such lawsuits may also lead to sanctions that go from the suspension or partial interruption of the companies’ activities up to their complete debarment.

Following the example of the Brazilian Antitrust Act (Law nº 12.529/2011) as well as some foreign anticorruption pieces of legislation, the Anticorruption Law authorizes the execution of leniency agreements by companies that have been accused of engaging in harmful practices and that cooperate with the relevant investigations and administrative proceedings. Such agreements may reduce in up to 2/3 the amount of the fine applied in those cases.

Instead of appointing the filing and management of the administrative proceedings to a single body that would develop the technical expertise necessary for that purpose, the legal text appoints the maximum authority of each public organism or entity under the Executive, Legislative and Judiciary to which the potential harmful act may be associated as the competent authority to do so. Proceedings relating to foreign officials are an exception to this rule as they responsibility of the Federal Government General Controller (CGU – Controladoria Geral da União). The plurality of bodies that are competent to convict companies for the violation of the Anticorruption Law may be a cause of apprehension on the side of the business community with respect to the level of cohesion among the administrative proceedings throughout Brazil.

Finally, a point that calls the attention in the Anticorruption Law is the value given to the initiatives adopted by the companies aiming to prevent fraud and corruption practices within the corporate field. The Anticorruption Law expressly assures that the existence of corporate integrity mechanisms such as internal controls, hotlines and the effective application of conduct codes shall be taken into account for the definition of the penalties provided for in that legislation.

It is up to the companies that have not yet internally taken measures seeking to fight or prevent fraud and corruption practices to take such measures in accordance with the new law. To those companies that have already mechanism in place it is advisable to make sure that its codes and controls are in full compliance with the Anticorruption Law provisions. Law nº 12.846/2013 will come into effect by the beginning of 2014.

* Marcelo Barradas is partner in Araújo e Policastro Advogados.