Legislative Updates Worldwide
Legislative Updates by Country
In 2022, several countries seen globally as weak on democratic ideals and human rights offered new legislation and guidance that could have significant, positive impacts on these countries’ transparency and anti-corruption efforts. Hungary passed several legislative changes in response to European Union (EU) scrutiny and to overcome EU-imposed restrictions on Hungary’s access to EU funds. China issued revised anti-bribery guidelines that expand the government’s ability to investigate bribery and the organizations that pay bribes. China’s new guidelines also permit the imposition of more significant penalties on offending entities, including blocking them from doing business in the country. The new Honduran president, after running on an anti-corruption platform, revised the country’s laws to limit the situations in which government documents can be withheld from the public, a tactic that government officials have used to stall government corruption probes in the past. Brazil created a new framework to implement its 2013 Clean Company Act that provides prosecutors with updated guidance on releasing preliminary investigative findings and imposing revenue-based fines and penalties on companies engaged in wrongdoing. French authorities also published draft guidelines for internal investigations related to bribery and corruption.
1. Hungary
Hungarian President Viktor Orban’s attitude towards democracy and his administration’s erosion of rights within the country has strained Hungary’s relationship with the European Commission and fueled widespread criticism. In recent years, the EU has imposed financial sanctions on Hungary, limiting the country’s access to EU funds and pressuring Hungary to reduce corruption.
To appease the EU and gain access to billions in EU funding, Hungary approved anti-corruption legislation in September 2022 and sent the proposal to the EU for approval.[1] The proposal included 17 measures that Hungary represented it would implement by November 2022, including the creation of an anti-corruption task force comprised of government delegates and non-governmental organization (NGO) representatives that would advise on governance issues and aim to make public procurement more transparent moving forward. Hungary’s proposal also provides that an independent anti-corruption authority could step in and oversee the management and disbursement of EU funds if the Hungarian government does not “prevent, investigate and fix cases of fraud, conflict of interest, corruption or other crimes and abuses.”
On November 30, 2022, however, the European Commission recommended that a majority of allocated EU funds continue to be withheld from Hungary because the country has “failed to adequately implement central aspects of the necessary 17 remedial measures.”[2] According to the commission, “there is still a continued risk to the EU budget” from the lack of safeguards Hungary has in place to appropriately manage EU funds.[3] While the European Commission did endorse Hungary’s post-COVID Recovery Plan (a different and independent proposal), allowing for the release of a portion of recovery funds to the country, it conditioned the release of funds on Hungary’s future implementation of various reforms, including the 17 anti-corruption policies previously charted by Hungary. In December 2022, EU member states voted to approve Hungary’s national plan and announced their intention to adopt a formal written procedure in the near future.[4] Hungarian government officials have stated that they expect to satisfy Hungary’s anti-corruption commitments and expect the EU to release all suspended recovery funds in 2023.[5]
2. China
Late last year, China released an anti-corruption guideline: “Opinions on Further Promoting the Investigation of Bribery and Acceptance of Bribes.” This guideline provides for the blacklisting of companies that have paid bribes in China, barring these companies from doing further business in the country. The guideline is aimed at penalizing companies, regardless of industry, that pay substantial bribes to Chinese government officials and others, not the person who accepts the bribe. The backlisting process would publicly “name and shame” entities that pay bribes, regardless of whether the recipient was affiliated with the government. The guideline is silent on the impact of blacklisting on a company’s assets held in China at the time of blacklisting. The guideline has the potential to give the Chinese government leeway in its handling of significant assets of American and other foreign companies.
China’s new guideline also allows prosecutors to initiate “carbon copy prosecutions,” which are prosecutions based on allegations that surface during international investigations of the same or related conduct. Given that international companies are increasingly agreeing to settlements that include an admission of wrongdoing, stakeholders should be aware that Chinese prosecutors may use admissions or evidence uncovered during other investigations in their own prosecutions, creating the risk of being penalized in China and other venues for the same conduct. The new guideline also imposes a stricter regime on authorities when crediting a company’s mitigation or active cooperation in the context of a prosecution. Prosecutors will now focus on the controls the company implemented ex ante, rather than just the company’s cooperation after the fact.
3. Honduras
During her recent presidential campaign, then-candidate, Xiomara Castro, vowed to repeal an “open secrets” law that has allowed governmental officials to avoid investigations and hinder prosecutions. The "official secrets" law[6] was passed in 2014 with the support of former leaders, including one who was arrested amid an extradition request from the US. Supporters of the 2014 law have defended it on the grounds that it protected the investigative process from the criminal organizations being investigated. The law gave over 20 state secretaries and public institutions the authority to categorize various budget and management documents as reserved, confidential, secret, and top-secret for anywhere from five to 25 years. The previous government used the law, however, to inappropriately classify documents that could have shed light on government abuses.
Since her election, President Castro has kept transparency a priority by repealing the “official secrets” law. Now, government officials may only classify documents under a narrow set of circumstances, including to protect a legitimate national security interest or privacy right. The repeal of the 2014 law may result in the declassification of information that has been inappropriately withheld from the public to date and help invigorate the Institute for Access to Public Information, the independent government entity tasked with government transparency.
4. Brazil
In 2013, Brazil passed the Clean Company Act[7] that, among other things, established a program to give companies credit, and in some cases immunity, for proactive self-disclosure of corrupt practices. Since then, Brazil has issued several decrees that have provided updated guidance and a framework to implement the Clean Company Act and guide officials during investigations and prosecutions.
In July 2022, the current administration issued a decree[8] that provides guidance to the Controladoria Geral da União (CGU), the Brazilian regulator tasked with enforcing the Clean Company Act. The new decree identifies factors the CGU should consider when issuing decisions about preliminary investigative and liability findings and requires companies to provide the CGU with information related to revenue so government authorities can calculate meaningful monetary fines.
Over the decade since enactment of the Clean Company Act, the act has been revised to provide prosecutors with greater ability to offer incentives to offending companies through leniency agreements. For example, the act originally provided that only the first cooperating company could enter into such an agreement and only before a lawsuit was filed. Subsequent decrees have eliminated those requirements.[9] Under the 2022 decree, the CGU has even broader authority to negotiate leniency agreements concerning wrongdoing affecting state and local entities and can renegotiate an agreement if the offending company meets certain ex ante requirements.
Moreover, the new decree amends the framework that CGU officials use when evaluating a company’s compliance or integrity program to levy punishments, such as an independent monitor. When assessing punishments, officials will now take into consideration: (1) how the program fosters a culture of integrity, (2) the resources the company dedicates to its integrity and compliance efforts, (3) what, if any, compliance and due diligence training the company offers, and (4) whether the company submits to third-party due diligence.
5. France
On March 7, 2022, the French Anti-Corruption Agency (Agence Française Anticorruption, AFA) and the French National Financial Prosecutor’s Office (Parquet National Financier, PNF) jointly published a draft of guidelines on internal investigations related to bribery and corruption.[10] The guidelines are geared towards larger companies with more than 500 employees and with annual revenue exceeding €100 million, but most of the recommendations and best practices can be followed by businesses of any size operating in France.[11] The guidelines reiterate an ever-growing theme among anti-corruption enforcement authorities – the importance of communicating and cooperating with enforcement authorities as early in the investigative process as possible. Although the French guidance does not explicitly state how companies can receive cooperation credit, it does imply that cooperation could increase the likelihood of a more favorable corporate settlement.
The publication of the guidelines comes after the 2017 enactment of comprehensive anti-corruption legislation commonly referred to as Sapin II. With Sapin II, France replaced its rather passive approach to anti-corruption efforts with a thorough and proactive enforcement regime. The newly released, practice-oriented guidelines will help businesses operating in France comply with the multi-layered provisions of the Sapin II framework.[12] Notably, the guidelines identify key principles to which companies should adhere when carrying out investigations, which, in addition to evaluating the potential issue or wrongdoing, should respect employees’ privacy rights and comply with the EU General Data Protection Regulation (GDPR).
Footnotes
[1] Hungary Submits Proposals Aimed At Avoiding Loss Of EU Funds, RadioFreeEuropeRadioLiberty (September 19, 2022) https://www.rferl.org/a/hungary-legislation-eu-funds/32041651.html.
[2] Alice Tidey, Brussels recommends freezing €7.5 billion in EU funds to Hungary over rule of law concerns, euronews (November 30, 2022) https://www.euronews.com/my-europe/2022/11/30/brussels-to-announce-decision-to-cut-75-billion-of-eu-funds-to-hungary-over-rule-of-law-co.
[3] Samuel Petrequin, EU Commission proposes blocking billions in funds to Hungary, ABC News (November 30, 2022) https://abcnews.go.com/International/wireStory/eu-commission-proposes-blocking-billions-funds-hungary-94200604.
[4] Council of the EU Press Release, NextGenerationEU: Member states approve national plan of Hungary (December 12, 2022), https://www.consilium.europa.eu/en/press/press-releases/2022/12/12/nextgenerationeu-member-states-approve-national-plan-of-hungary/.
[5] Krisztina Than, Hungary expects EU to approve its recovery plan next month -minister, Reuters (November 29, 2022) https://www.reuters.com/world/europe/hungary-expects-eu-approve-its-recovery-plan-next-month-minister-2022-11-29/.
[6] Decree 418/2013.
[7] Law No. 12,846/2013.
[8] Decree No. 11,129/2022.
[9] See, e.g., Provisional Measure 703/2015.
[10] Guide pratique sur l’enquête interne anticorruption, https://www.actualitesdudroit.fr/browse/affaires/penal-des-affaires/36660/guide-pratique-sur-l-enquete-interne-anticorruption-a-vos-stylos.
[11] Ropes & Gray, French Enforcement Authorities Publish First-Ever Guidance on Internal Anti-Bribery and Corruption Investigations, June 17, 2022, https://www.ropesgray.com/en/newsroom/alerts/2022/06/French-Enforcement-Authorities-Publish-First-Ever-Guidance-on-Internal-Anti-Bribery.
[12] Id.