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France

France has asserted itself as a hub for white collar crime enforcement in recent years. Spearheaded by the National Financial Prosecutor’s Office (PNF), the white collar criminal enforcement landscape continued to evolve in 2020 towards greater collaboration with overseas enforcement authorities, record-breaking corporate settlements, and some unprecedented large fines.

The PNF came under heavy fire in 2020 after numerous scandals concerning alleged political pressure and aggressive methods. Eric Dupond-Moretti, a former lawyer, and outspoken critic of the PNF’s methods, was chosen to be the new Minister of Justice in July 2020. This criticism may curb the expansion of the French white collar crime enforcement arsenal and push the legislator towards a more balanced rapport between companies and enforcement authorities.

 

Investigations trends/developments

2020 saw a continued shift in French judicial and prosecution culture to a more collaborative and transactional approach. French-style deferred prosecution agreements (known as CJIP – Convention Judiciaire d’Intérêt Public) have become more common in matters ranging from corruption to tax evasion, and have resulted in the payment of significant fines, particularly by banks.

The success of CJIPs encouraged the legislator to expand the scheme to include tax fraud. In late 2019 a global technology company was one of the first companies to settle a tax fraud dispute with a CJIP. It agreed to pay EUR500 million over the alleged existence of a permanent establishment of its Irish entity on French soil.

The CJIP is likely to be extended and amended further to include environmental offences and laundering the proceeds of corruption or of influence peddling. In addition, companies seeking to settle a CJIP may no longer be required to recognise the disputed facts and accept their criminal nature, making it increasingly interesting from a reputational standpoint.

This collaborative and transactional approach must not be confused with clemency, as prosecutors have sought, and judges have handed down, unprecedented fines. In 2019 French judges ordered a large Swiss bank to pay a record EUR3.7 billion fine for illicit banking solicitation and aggravated money laundering of the proceeds of tax evasion (the ruling is currently under appeal). In January 2020, the National Financial Prosecutor’s Office (the PNF), along with its UK and U.S. counterparts, entered into a record-breaking CJIP with a large aerospace company (over EUR3.6 billion) for alleged acts of bribery and corruption.

Significant law reforms impacting corporate criminal liability

A recent ruling by the French Supreme Court (Cour de Cassation)[1] found that, in the event of a merger of certain public limited liability companies, the acquiring company may be convicted of criminal wrongdoing committed by the acquired company prior to the merger. This stark departure from previous French case law has serious implications for mergers. Companies are likely to want to undertake an even greater level of pre-acquisition due diligence, plus negotiations of disclosure and warranty clauses are likely to take longer. The new ruling applies to mergers that take place after 25 November 2020.

There is a further move towards encouraging companies to voluntarily disclose wrongdoing. New guidelines for prosecutors on international bribery were issued in June 2020 (known as “Circulaire Belloubet”) and state that:

  • to benefit from “some form of leniency as to the methods of prosecution likely to be undertaken by the PNF”, corporates are encouraged to voluntarily disclose any wrongdoing within their business; and
  • as provided for in the Sapin II statute, any corporate “residing usually, or exercising all or part of [their] economic activity, in French territory” may be prosecuted by the PNF.

For tax evasion and tax fraud offences, the French legislator had already moved towards a voluntary self–disclosure regime. In 2019, it launched the SMEC programme, a “corporate tax compliance service”, which allows companies to self-report irregularities in their tax situation in return for reduced penalties and no criminal conviction, provided that no tax, administrative or legal proceedings are underway. The programme is still in its early days, and has yet to yield any concrete results (17 cases are currently being examined), but it sets the tone for what is expected from corporates concerning cooperation with tax authorities.

Internal investigations – key developments

The Circulaire Belloubet encourages internal reporting and investigating of corrupt practices, however there are still some difficult issues to contend with at the internal investigation stage. The scope of privilege is still much debated in France. The PNF’s 2019 CJIP guidelines provide that “not all documents of an internal investigation are covered by professional secrecy laws”. In June 2020 the French National Bar Association (CNB) set out guidelines concerning internal investigations, which state that internal investigations conducted by lawyers should be covered by professional secrecy laws, as they are an integral part of the rights of the defence. Case law has not yet clarified the issue, although it tends to favour a more restrictive view of client/attorney privilege, in considering only documents drafted in preparing a client’s criminal defence to be covered.

The issue of confidentiality of internal investigation documents is particularly important given that, in the event of failed negotiations for a CJIP, the PNF provides no guarantee that the documents exchanged during the investigation and negotiation will not be used in further proceedings.

Administrative case law is more protective of attorney/client privilege. It bars administrative regulators such as the French equivalent to the Financial Conduct Authority (“Autorité des Marchés Financiers”, known as the AMF), from seizing the work product of internal investigations conducted by lawyers or any correspondence exchanged between a lawyer and client, in particular any legal advice drawn up by the lawyer for the client.

An additional issue in internal investigations is movement of data. Those undertaking an internal investigation must consider whether information may need to be disclosed to a foreign enforcement authority:

  • in its 2020 guidelines, to avoid violating GDPR rules, the CNB recommends carrying out a data protection impact assessment prior to an internal investigation, and notifying relevant individuals that their data could be used for litigation purposes; and
  • the CNB guidelines encourage lawyers to advise foreign authorities of the requirements set out in the French Blocking Statute, and to negotiate the scope of disclosure requests. To avoid any unnecessary transfer of data outside of French territory, the guidelines also recommend appointing forensic services that can host the data in France while still allowing foreign authorities access to review it.

Sectors targeted by law reforms or enforcement action

The Circulaire Belloubet is a new and emphatic assertion of French criminal jurisdiction over foreign companies with a presence in France, generating a criminal exposure for all activities with a French nexus. The Sapin II statute provides that French law is applicable to any instance of corruption or bribery committed abroad by persons or corporate entities “residing usually, or exercising all or part of [their] economic activity, in French territory”. However, the Circulaire Belloubet specifies that the legislator intended this to be understood broadly, thus encompassing corporations “with a subsidiary, branches, commercial offices or other office operating in France, even if these would not have their own legal personality”.

The PNF is therefore encouraged to investigate bribery offences committed anywhere around the world as long as the corporate having committed the wrongdoing conducts some of its business in France or has a representative office there. The Circulaire Belloubet seems to push the PNF towards a more proactive approach particularly against foreign corporates. It is seen by some as a response to the U.S. legal and regulatory authorities having subjected scores of large French corporates and financial institutions to U.S. extraterritorial action (BNP Paribas, Technip, Société Générale, Alstom etc.).

Seven economic sectors considered to be at high risk of corrupt practices by the OECD are listed in the Circulaire Belloubet. The PNF is thus encouraged to monitor closely these sectors, specifically: construction, mining, transportation, telecommunications, pharmaceuticals, energy and military equipment. The PNF recently opened an investigation against a large French energy company concerning alleged acts of corruption in the sale of uranium in Nigeria.

Cross-border coordinated enforcement activity

French enforcement authorities are keen to collaborate for cross-border investigations.

The French Anti-Corruption Agency (AFA) stated in its 2020 guidelines that cross-border cooperation is a priority.

A 2020 CJIP was a milestone in terms of international collaboration of white collar enforcement activity. In the aerospace CJIP (referred to above), the PNF collaborated with the UK Serious Fraud Office (SFO), and the U.S. Department of Justice (DOJ) and State Department to reach a coordinated settlement in which the company agreed to pay EUR3.6 billion for alleged corrupt practices. The PNF and the SFO had signed a cooperation agreement and worked together as part of a joint investigation team to conduct the investigation.

The French/U.S./UK collaboration in this matter revitalised the French Blocking Statute. This prohibits the transfer of information abroad in the context of, or with a view to, foreign judicial or administrative proceedings, outside the relevant international cooperation channels (ie the Hague Convention, MLATs, MOUs between agencies). The PNF relied on the Statute to control the flow of information to the UK and U.S. authorities. This assisted the PNF in taking the lead on the investigation.

The report drawn up by an MP in June 2019, at the request of the French Prime Minister, recommending increased penalties for violations of the Blocking Statute has not yet led to any action.

A coordinated settlement is beneficial for a company facing investigations in more than one jurisdiction, in order to avoid the risk of double jeopardy. In May 2020 the Paris Court of Appeal fined a telecom company for actively bribing foreign officials. Although a settlement agreement had been signed with a foreign enforcement authority, the Court of Appeal refused to apply the non bis in idem principle (which protects criminal defendants against double jeopardy) as some of the fraudulent behaviour had occurred in France and was not therefore covered by the settlement.

Financial crime issue predictions for 2021

The European Public prosecutor is set to become operational in 2021, an authority empowered to prosecute criminal offences “affecting the financial interests” of the EU, such as fraudulent or corrupt behaviour affecting its budget through, for example, the misappropriation or misuse of European subsidies. This independent prosecuting corps promises to investigate cases that Member States did not have the means to prosecute, or did not prioritise, in particular due to difficulties intrinsic to cross-border collaborations which are often resource-intensive.

Reports[2] indicate that huge amounts of subsidies are misappropriated or misused each year, and that nearly EUR60 billion is lost yearly to cross-border VAT fraud alone.

The European public prosecutor has indicated that it had received up to 3,000 cases from Member States that may fall under its jurisdiction. European white collar litigation promises to be one of the important features of 2021, as Member States increase collaboration in prosecuting such cases.

The increasing level of fines and penalties incurred by financial institutions, particularly in respect to tax evasion and tax fraud, serves as a reminder that the French financial and banking industry are also still being particularly targeted by enforcement authorities.

This article is part of the Allen & Overy Cross-border White collar Crime and Investigations Review. Please visit the review homepage for our overviews and insights in other jurisdictions. 

[1]Cass. Crim., 25 November 2020 n°8-86.955

[2] European Court of Auditors special report – Fighting fraud in EU spending : action needed, 2019

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