France: Business Crime Defence Review 2016
A Review of Business Crime Defence in 2016, by Emmanuel Marsigny of Marsigny Avocats
Business crime defence in France currently faces substantial changes with regards to both criminal procedure and substantive law. It is especially worthy to present some of the most significant on-going trends, such as: the new limitations to the double jeopardy in major white-collar crime fields; the attempts to develop transactional procedures; the expansion of money laundering prosecution; and the predicted significant evolution of anti-corruption regulations.
New restrictions to double jeopardy
Even though the French system recognises res juridicata, which prohibits cumulative decisions sanctioning the same conduct, it has in the past limited its effects to decisions held by similar jurisdictions.
This has always been an important topic for business crime defence, because some administrative bodies (such as, for example, the tax administration and the Financial Markets Authority) also have the power to sanction illicit behaviours.
On 18 March 2015, the French Constitutional Council put an end to the cumulative prosecution before both the French Financial Markets Authority and the Criminal Court, in insider trading cases.
Formerly, the French Constitutional Council held that cumulative administrative and criminal prosecutions for identical facts were consistent with the Constitution, provided that the total penalties did not exceed the maximum possible amount for one of these offences. Moreover, the State Council and the Court of Cassation also held that cumulative sanctions for identical facts did not contravene article 4 of Protocol no.7 to the European Convention on Human Rights, which prohibits double jeopardy (non bis in idem) when facing penalties of a different nature. This former case law relied on France’s reservation to this protocol, which limits the applicability of the non bis in idem principle to the sole offences rendered by French criminal courts.
The recent Constitutional Council case law reversal is the direct consequence of the Grande Stevens v Italy case rendered by the European Court of Human Rights, which:
- sets aside the Italian reservation to the Protocol no. 7, which was similar to the French one; and
- condemns the double jeopardy system, as the administrative and criminal penalties incurred do not differ in nature, regardless of their legal qualification under Italian law.
The French Constitutional Council took the European Court of Justice’s decision into consideration, even if a minima, and set out four criteria to condemn double jeopardy from a constitutional perspective:
- decisions are intended to punish the same conduct;
- relevant provisions shall protect the same social order;
- penalties incurred in both decisions may not differ in nature; and
- cases shall come within the jurisdiction of ordinary courts.
With the last criterion, the effect of this new jurisprudence and its repercussion on other areas of law, especially tax offences, turn out to be contained. Indeed, as the vast majority of tax litigation is subject to administrative jurisdiction, rather than the ordinary courts, cumulative administrative and criminal penalties in such cases should not infringe the Constitution. However, inheritance tax and solidarity, and wealth taxation, remain within the jurisdiction of the ordinary courts. In the run-up to 2016, both of these taxes were at the heart of two high-profile tax fraud cases, involving the head of a wealthy art-dealing dynasty and a former budget minister.
Applying the criteria put forward by the French Constitutional Council, defendants raised preliminary questions on constitutionality that challenge conformity of these cumulative administrative and criminal penalties.
It is likely that that, in the near future, defendants may challenge the conformity of the last criterion to the European Convention, since the European Court of Human Rights case law never restricted the prohibition of double prosecution to ordinary courts (ECHR, Lucky Dev v Sweden).
The non bis in idem principle has also recently affected recognition of foreign decisions. Last year it justified the dismissal of charges against prosecuted persons who had concluded a deferred prosecution agreement abroad.
Case law on the matter is still being developed: the public prosecutor is challenging those first-degree decisions, and the Court of Cassation has not yet ruled on the matter.
Attempts to Develop Transactional Procedures
Transactional procedure is in the spotlight due especially to recent major transactional agreement concluded aborad involving French multinational groups.
However, to date, there is no deferred prosecution agreement in France. The only negotiated penalty provided for by the French penal code is a plea-bargaining process, which was purposely extended to every business crime case since the abolition, on 13 December 2011, of all restrictions to its scope. However, at present its implementation has been unsuccessful in white-collar crimes – which, on 19 January 2015, led Paris High Court’s president to call for a “cultural revolution” by normalising recourse to this procedure in these kind of cases.
The first attempts failed. For example, in a recent case involving a major foreign bank and accusations of tax evasion and money laundering, the bank is said to have refused the prosecuting authorities’ proposal.
A major impediment to this procedure is that the French legal system only allows settlement in conjunction with a guilty plea, which may impact potential civil proceedings or access to public procurement.
For the first time, the creation of a new volountary alternative to adjudication for corruption and influence peddling offences – clearly inspired by the US Deferred Prosecution Agreement – has been contemplated by the Government. This proposed transactional procedure would have consisted in an agreement between the prosecutor and legal entities, which would have contained several obligations, such as the payment of a penalty or compliance commitments. However, this attempt has so far been quashed by the State Council in its opinion on the draft law, which considers that the proposed procedure was not consistent with criminal procedure principles.
Nevertheless, the draft law is under debate before the French Parliament. More generally, discussions on the relevance of such procedures to address offences like international corruption are not over and foreign examples are considered to be successful.
Expansion of money laundering prosecution
In the current climate, where public spending is a hot topic, there has been a strong focus placed on tax offences. In this respect, money laundering tends to be increasingly prosecuted with the aim of sanctioning tax fraud-related facts.
Recent high-profile cases highlight this trend, and the financial effects on people prosecuted for such an offence. Two major banks have been prosecuted for money laundering via tax fraud committed by their wealthy clients. For the very first time, they have been ordered by the investigation judge in charge of the case to provide, respectively a €1.1 billion and a €100 million bail to cover potential penalties incurred.
This trend is largely explained by recent laws, by which in money laundering cases some or all of the offender’s assets may be seized and/or confiscated, whether or not these assets are connected with the money laundering offence in question.
The strength of prosecution for money laundering has also been increased by the reversal of the burden of proof permitted when the factual, legal or financial conditions of an investment, a dissimulation or a conversion seem to have no other justification than to hide the origin or the actual beneficiary of these properties or incomes.
Money laundering as an offence is also increasingly used by the prosecution because it allows circumvention of some procedural particularities in French law that pertain to tax offences, such as the prerequisite of a complaint filed by the tax authorities.
A new anti-corruption act
Penalties were significantly raised by the Anti-tax Fraud and Large Economic and Financial Criminality Act (No. 2003-1117, dated December 2013): under these changes, offenders face fines of up to twice the profits drawn from the offence. Despite this, the French anti-corruption framework is still considered too weak, especially compared to the United States Foreign Corrupt Practices Act and the United Kingdom Bribery Act. The French system does not currently provide for legally binding rules obliging businesses to adopt internal measures against corruption.
In March 2015, the French Central Service of Corruption Prevention (CSCP) provided guidelines for French companies operating abroad. These guidelines, which apply on a voluntary basis, set out key principles such as top-level commitment, risk assessment, anti-corruption compliance programmes (with training and follow-up), control mechanisms, communication and establishment of a sanction policy.
Many major French companies already apply these internal controls, mindful of the extraterritorial reach of some foreign legislations and the need to limit the risk of a potential conviction for corruption. They operate in this mannter with the help of external auditors and certification bodies.
But the forthcoming law on transparency in the economic sector and the fight against corruption is a real breakthrough for the French legal system. For the first time, the draft law provides for a binding obligation for companies employing over 500 people, and with a turnover of over €100 million, to implement anti-corruption programmes. According to the draft, they will have to instigate the following:
- a code of conduct defining anti-corruption rules and practice;
- an internal reporting process;
- a common risk-mapping system that analyses and prioritises the risk of corruption for the company, in terms of its geographical location and the sectors in which it operates;
- a process for contracting parties;
- internal or external accounting audits;
- training programmes for employees and managers; and
- disciplinary sanctions.
The draft law also provides for specific extraterritorial applicability of the offence, so as to expand the reaches of the French system, and creates statutory protection for whistle-blowers – until now unknown in the French legal system.
In addition, it introduces a new criminal penalty for a legal entity convicted of corruption: by this measure, the implementation of effective anti-corruption measures is imposed on perpetrators for a period of up to five years. Under the draft law provisions, if the convicted legal entity breaches the obligations imposed by this new penalty, it may face a fine of up to €150,000 (two years’ imprisonment plus a fine of up to €30,000 for a natural person).
These evolutions are part of global current trend towards the enhancement of tools to prosecute corruption and probity offences.