Corruption within private companies

09/11/2018 - Anne-Catherine Brunschwig and Christina de Aguiar Barbosa

 

The Brazilian law provides that corruption is only constituted in case of an act committed against public administration, thus involving, consequently, administrative officers. However, the corruption within the private sector is one of the most concerning current issues for the business community. Indeed, this particular type of corruption is as serious and existent for the companies as the corruption involving public administration.

 

Brazil has still not legislated in this area. However, we would like to highlight that few countries have incorporated into their national legislation provisions allowing the creation of a corruption crime in the private sector. 

 

The decision to legislate against corruption within the private sector was impacted, among others, by the United Nations Convention Against Corruption (“Convention”) of which each State party foresees to “take measures to prevent corruption involving the private sector, and enhance accounting and auditing standards in the private sector” (articles 12 and 21). The ratification of this Convention has occurred following many corruption’s cases in sports competitions. 

 

The crime of corruption has already been created by the anti-corruption law of several countries such as United-Kingdom, Spain, France, Germany, Portugal, Italy and also China. 

 

The French notion of corruption within the private sector provides that corruption as a crime will be constituted when an individual who suggests “without right, at any time, directly or indirectly, to a person, who does not hold a public office, is discharged from a public service mission, or is invested of a public electoral mandate, exerting, within its professional or social activity, a management function or a mission for a natural or a legal person or for any agency, offers, promises, gifts, presents or advantages of any kind, for himself or for third party, to carry out or to abstain from carrying out or because it has carried out or has abstained himself to carry out an act of his function and activity or has facilitated by his activity or his function, breaching his legal, contractual or professional obligations”. 

 

While Brazil has committed to incorporate in its legislation all provisions of the Convention, the Brazilian criminal code still doesn’t regulate any corruption crime in the private sector as mentioned in the previous paragraph. 

 

However, the law reform commission of the Brazilian criminal code approved the drafted law providing for the creation of the corruption within in the private sector (PL 455/2016), in order to curb the practice of unfair competition[1]. The objectives of the legislator in this project are to protect competition and the assets of companies and to guarantee fairness in professional relations.

 

Both company owners and employees of the said companies, who, in exchange for any advantage, would violate the obligations inherent to their position are committed under these provisions. Therefore, the crime of corruption within the private sector would be constituted when any natural person as a partner, officer, director, employee or collaborator, requires, requests, receives, offers, promises or delivers undue advantages.

 

When private entities enter into an unlawful contract, involving bribes, in order to obtain advantages for themselves, then these entities are committing a crime of corruption within the private sector. These unfair and illegal trade relations have impeded free competition and the ability for new companies to enter into this market, and, with a more general understanding, delaying and damaging the economic development of the country. 

 

However, this does not mean that business owners, during the period of approval of the draft law, will not be able to face an action for liability before any Brazilian courts. Even if no specific legislation has not yet been adopted, some of the conduct described in the preliminary draft could already be interpreted as others crimes, such as larceny by fraud, illegal reproduction, violation of professional secrecy, crime against the tax system, tax fraud, money laundering and even criminal organisation. 

 

It is also important to note that companies located in Brazil, having business relationships with foreign companies under a legislation in accordance to the United Nations Convention and, consequently, for which a corruption crime within the private sector already exists, may also be liable due to the anti-corruption law’s extraterritoriality.

 

In accordance with national and international anti-corruption laws, companies must invest in the ethics and compliance department, in order to apply a zero tolerance for the commission of any unlawful act, as well as to raise awareness and establish a better control of their employees. A well-structured and incorporated department will be able to assist companies in setting up a protection program against the individual acts of their employees, allowing them to have attenuating circumstances in case of civil, administrative and, depending on the origin of the applicable anti-corruption law, criminal proceedings. 

 

As a consequence, the incorporation of a solid ethics and compliance department will enable to control and prevent any risk situation and to avoid any case of corruption involving public officers as well as agents of the private sector, thus constituting an essential tool enabling the company to remain competitive on the market. 

 

 

[1]Art 1 – Law-decree n°2.848 of November the 7th, 1940, Criminal code enters into force with the following redaction: “Private corruptionArt. 196-A – The fact for the director, the administrator, the board member or technical body, the auditor, the manager, the officer, the representative, the employee of the company or private institution to require, to request, to accept or to receive some undue advantage in order to carry out or to abstain himself to carry out an act relative to its function. Sentence: reclusion, from one to four years. Single paragraph: the same sentences will be incurred by the natural person offering, promising, delivering or paying, directly or indirectly, the undue advantages.”

Art.2 this law enters into force at the date of its publication. PL n°455/2016 at the initiative of the football investigating parliamentary committee 2015.

delivering or paying, directly or indirectly, the undue advantages.” Art.2 this law enters into force at the date of its publication. PL n°455/2016 at the initiative of the football investigating parliamentary committee 2015.

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