1. The President of the Republic published Provisional Measure No. 703, on December 21, 2015 (MP 703), amending some provisions of the Clean Companies Law, also known as Anticorruption Law (Law No. 12,846 of 2013).
2. The changes introduced by MP 703 have focused on the rules for negotiation of leniency agreements, the respective eligibility requirements and conditions, and resulting benefits. Those changes aim to make leniency agreements safer, faster and more advantageous for companies.
NEW RULES FOR NEGOTIATION
3. The existing legislation established that the ‘head authority’ of each government body or entity would be competent to enter into a leniency agreement. MP 703 extended such authority to the internal control bodies of the Federal Government, states, Federal District and municipalities. Such change helps overcome the drawbacks of negotiating leniency agreements with city mayors or state governments (the ‘senior authorities’), as suggested in the erstwhile provisions.1
4. Further, MP 703 expressly authorized the Public Prosecution Office and or the Public Attorney’s Office to jointly execute leniency agreements.2 This change regulates the already existing practice in some cases, and seeks to avoid court disputes over this specific issue for the fact that the leniency agreement could prevent the filing of administrative improbity suits or other civil liability actions, as well as on the imposition of penalties set out in the Brazilian Public Procurement and Government Agreements Law (Law No. 8,666 of 1993).
NEW REQUIREMENTS FOR EXECUTION OF LENIENCY AGREEMENTS
5. Under the new wording, the certainty about an offense is no longer required; a company may plea for leniency while the facts are still under probe and it is unaware of all elements and circumstances involved. Further, the need for ‘admission of guilt’ is no longer a prerequisite for execution of leniency agreements. Under MP 703, the applicant’s ‘cooperation with investigations, in light of its strict liability’ would suffice.
6. Likewise, MP 703 dispensed from the need for prompt disclosure of information and documents ‘evidencing the offense under probe’, having instead called for disclosure of information and documents ‘evidencing the reported offense or that under probe.’
7. Such change has brought the Clean Companies Law closer to similar anticorruption practices in other countries, where companies are permitted (and sometimes required) to report on mere signs of offenses so that the authorities and those companies may jointly devise the strategies and next steps for investigative actions.
8. Also drawing on international experience, MP 703 established that leniency agreements must provide for the duty ‘to implement or improve the internal mechanisms with regard to compliance, auditing, reporting incentives, as well as those measures intended to encourage the enforcement of the company’s code of ethical and business conduct.’ Such requirement is yet another incentive of the Clean Companies Law to implementation of compliance programs.
NEW BENEFITS FROM LENIENCY AGREEMENTS
9. MP 703 drew a clear distinction between the benefits offered to the first signatory and those available to the other parties to a leniency agreement. The first signatory may enjoy a full reduction in the fines, whereas the fine imposed on the other signatories may be reduced by up to two thirds (2/3). Until then, the maximum 2/3 reduction in the fine was valid for all signatories, including the first one to qualify for the leniency agreement. This change aims to encourage companies to rush into an agreement with the government authorities.
10. Leniency agreements under the former system did not shield signatories against the prohibition from bidding in public procurement procedures (a penalty prescribed in other rules, such as the Administrative Misconduct Law). This ended up serving as a deterrent to execution of leniency agreements in that it increased the exposure of companies to such a severe penalty (on account of their acknowledgment of guilt). To iron out this conflict, MP 703 expanded the benefits underlying a leniency agreement by exonerating the party from a penalty restricting rights (i.e., the penalty consisting in a prohibition from bidding in public procurement procedures, which is also set out in other prevailing laws).
11. Besides, a leniency agreement executed with the participation of Public Attorney’s Offices and the Public Prosecution Office also prevents them from filing or prosecuting the liability suits set out in the Clean Companies Law3, civil lawsuits, and administrative misconduct actions.
12. Under MP 703, a leniency agreement may also stipulate methods and conditions for payment of damages, depending on the company’s economic status. This operates as yet another incentive for execution of leniency agreements even by companies in financial straits.
13. Although a leniency agreement may establish the value of damages and respective method of payment, MP 703 allowed for review of these aspects by the competent administrative accounts tribunal upon evidence that the respective sum is not enough to redress the actual damage, which lends a certain tinge of uncertainty to the actual effects of leniency agreements.
FINAL COMMENTS
14. Besides the aspects outlined above, MP 703 has brought several other changes to the Clean Companies Law, such as rules on the applicability of limitation periods and on compulsory return of the materials handed in to the government authorities if a leniency agreement is not reached.
15. MP 703 will be discussed in Congress for up to 120 days, where it can be accepted or rejected, fully or in part.
16. The Congress is unlikely to change MP 703 substantially as its wording is similar to the bill already passed by the Senate and currently under discussion at the House of Representatives (Bill 3,636 of 2015).
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References
1 If an entity has no internal control body, the leniency agreement may be executed by the head of the respective government authority, jointly with the Public Attorney’s Office.
2 As one same fact may characterize an offense under both the Clean Companies Law and the anticompetitive legislation (Law 12,529 of 2011), MP 703 established a cooperation between the Brazilian competition authority (CADE), and the body in charge of executing the leniency agreement under the Clean Companies Law.
3 The Clean Companies Law envisages penalties in the administrative and judicial spheres. Judicial penalties are meted out via court proceedings, and may result (among others) in forfeiture of assets, suspension or partial interdiction of activities, compulsory winding-up of the company, or disqualification for tax incentives.
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*Ricardo Pagliari Levy is litigation partner at Pinheiro Neto Advogados.
*Alessandro Pezzolo Giacaglia is associate at Pinheiro Neto Advogados.
*Este artigo foi redigido meramente para fins de informação e debate, não devendo ser considerado uma opinião legal para qualquer operação ou negócio específico.
© 2015. Direitos Autorais reservados a PINHEIRO NETO ADVOGADOS