Euro Vision on Corruption: All Singing from the Same Song-Sheet? Proposals for a New Anti-Corruption Legal Framework in the EU: Five Key Takeaways

The Proposed Directive

The Proposed Directive aims to update and harmonise EU anti-corruption frameworks, definitions and penalties for breaches, which currently vary across Member States. It covers several aspects, including:

(i) comprehensive and up-to-date preventive anti-corruption measures for the public and private sectors, “adapted to the specific risks of an area of activity” (Art. 3)⁴;

(ii) specialised bodies dedicated to the prevention⁵ and repression of corruption, which are functionally independent from the government and adequately resourced (Art. 4);

(iii) definitions of public, private, passive and active bribery. These offences must be “punishable as a criminal offence when committed intentionally” (Arts. 7 and 8);

(iv) definitions of related offences, such as misappropriation, trading in influence, abuse of functions, obstruction of justice and illicit enrichment from corruption (Art. 9 to 13);

(v) harmonised minimum penalties and specific measures for natural persons, with terms to range from at least four to a maximum of six years imprisonment depending on the offence (Art. 15);⁶

(vi) liability and penalties for legal entities under specific conditions, with maximum fines imposed being not less than 5% of the total worldwide turnover of the entity and related entities in the previous financial year (Arts. 16 and 17); and

(vii) harmonised minimum limitation periods for corruption offences (Art. 21).

The Proposed Directive contains a dual focus on preventing corruption before it occurs (for example, through education and research programmes) and repressing corrupt acts (for example, through criminal investigation and enforcement).

In the context of recent EU legislative development regarding the protection of whistleblowers, the Proposed Directive reiterates the importance of protecting those who report corruption offences and assist relevant investigations. It is also in line with broader efforts by the EU to harmonise the enforcement of serious crime across Member States. For example, in November 2022, the Council of the EU adopted⁷ a decision to add the violation of EU sanctions to the list of “EU crimes”, which include corruption, amongst others. This decision was soon followed by the proposal of a directive⁸ setting out the criminal offences and penalties applicable to breaches of EU sanctions laws.

While the Proposed Directive may be subject to change as it goes through the EU’s legislative process, the latest draft (as at the time of writing) states that Member States will have 18 months to transpose the final Directive into their domestic law.

A potential dedicated EU sanctions regime focusing on corruption

On 3 May 2023, the Commission and the High Representative stated⁹ that a coherent approach “between internal and external [EU] anti-corruption policies” is essential for the credibility of the EU’s anti-corruption framework.

To add “more flexibility to the Union’s sanctions toolbox,” a Council decision and a Council regulation are being considered to establish a thematic framework (i.e., not limited to a specific geographic context) targeting corruption under the EU’s sanctions regime. This proposal, which is still in its infancy, would enable the EU to impose sanctions on persons or entities involved in “serious acts of corruption” which “seriously affect or risk affecting the fundamental interests of the Union and the objectives of the CFSP”.¹⁰ This would not be the first thematic framework available to the EU when imposing sanctions; the EU currently has powers to impose restrictive measures in response to matters such as serious human rights violations, terrorism, the proliferation and use of chemical weapons, and cyberattacks.

Commentary

France

France has made significant progress in the fight against corruption by introducing ground-breaking preventive legislation. The law of 9 December 2016, known as the “Sapin II Law”, imposes an obligation to establish and maintain a global anti-corruption compliance programme on (i) companies incorporated in France and (ii) foreign companies not headquartered in France, falling within specific criteria.¹¹ A failure to enact such a programme may lead to companies facing administrative sanctions and criminal penalties even where no corrupt activity is identified on the part of that company.

The Sapin II Law also created the French Anti-Corruption Agency (“AFA”). The AFA oversees public and private entities and, with its sanctions commission, engages in enforcement action in France and abroad against entities that do not meet their preventive obligations.¹² The AFA has already investigated more than 150 entities, with an average duration of 18 months for each investigation.¹³

In addition to the creation of the AFA, which focuses on preventive requirements, the National Financial Prosecutor’s Office (“PNF”) prosecutes offences such as corruption, trading in influence, favoritism and misappropriation of public funds (thus focusing on “repressing” corruption). Since 2016 and the implementation of the French Judicial Public Interest Agreement (Convention judiciaire d’intérêt public, or CJIP) – a form of deferred prosecution agreement – enforcement relating to these offences has increased significantly.

In accordance with the Proposed Directive, the French criminal code already distinguishes between bribery in the public sector and the private sector, as well as active and passive bribery. The French criminal code also contains several related offences, as listed in the Proposed Directive, such as trading in influence.

Overall, the French anti-corruption legal framework, both in its preventive and repressive components, aligns with the objectives of the European Commission. The Proposed Directive’s requirement on Member States to enact “up-to-date measures to prevent corruption”¹⁴ may even cause other Member States to follow France’s lead by penalising corporates for not having an adequate compliance programme.

Italy

In recent years, Italy has expanded the set of rules targeting corruption, with significant results. Among the most impactful reforms, Law No. 190/2012 established the Italian Anti-Corruption Authority (“ANAC”), a financially and politically independent authority for the prevention of corruption, with regulatory and supervisory powers over public procurement and administration, monitoring powers in relation to the anti-corruption system generally, and sanctioning powers. More recently, Law No. 3/2019 (the so-called “Sweep-the-Corrupt” law) further amended the Criminal Code, with the aim of strengthening the prevention, detection and repression of corruption.  On 30 March 2023, the Legislative Decree No. 24/2023 implementing the Directive (EU) 2019/1937 on whistleblowing, finally entered into force with effect from 15 July 2023 and strengthened the existing legislation relating to the protection of whistleblowers.

In the last 12 years, Italy has consistently improved its scoring in Transparency International’s Corruption Perception Index and, in 2022, scored 56 out of 100 (where 0 is “highly corrupt” and 100 is “very clean”). This is an important improvement considering that Italy scored 42 out of 100 in 2012; however, the latest rank is still below the EU-Western European average score of 66 out of 100).

Thus, the fight against corruption is still essential, especially in connection with the major investments and projects expected to be realised with the funds made available by the EU to Member States, in the context of the Next Generation EU Plan. Italy is planning to use such funds (approximately €191 billion) and a further €30.6 billion of national funds to realise the National Recovery and Resilience Plan, including, amongst other initiatives, (i) investments to complete the digital transformation, (ii) the transition to sustainable energy sources and (iii) the creation of new infrastructures to support the economic growth. Corruption risk may occur in the selection of suppliers and contractors, and criminal organizations may be tempted to influence the selection process in favour of companies linked to them. Therefore, the President of the ANAC welcomed the Proposed Directive emphasising the importance of the measures aimed at preventing corruption and the role given to independent authorities.

The set of rules targeting corruption currently in place are already along the lines of the Proposed Directive, even if some differences in the definition of offences may exist and further adjustments may be made to the Proposed Directive before it is enacted. The outcome of the mapping of the high-risk areas by the Commission (expected for 2024) remains to be seen, as well as the possible subsequent implementation of the preventive measures set by Article 3 of the Proposed Directive (e.g., awareness-raising actions, plans to address the risk in the identified sectors).

United Kingdom

The Proposed Directive does not go so far as to mandate that Member States enact a “strict liability” corporate offence of failure to prevent bribery by persons associated with the company, which exists under Section 7 of the UK Bribery Act 2010 (although it is open to Member States to take such a step). However, it does require Member States to impose corporate liability where there has been a lack of supervision or control by senior management (as defined under Article 16(1) of the Proposed Directive), which “has made possible the commission of any of the criminal offences” listed in the Proposed Directive.¹⁵

It is noteworthy that the Proposed Directive refers to corruption in both the public and private sectors and includes provisions for corporate criminal liability where there have been compliance failings, which tracks the approach taken in the UK. Additionally, certain steps that Member States may be required to take under Article 3 of the Proposed Directive (such as rules “for the disclosure and verification of assets of public officials”) may go further than those currently provided for in the UK’s anti-corruption laws, depending on how they are implemented.

It is also of interest that, at Article 16, the Proposed Directive provides that a corporate entity can be liable for any of the offences listed, when committed for its benefit by natural persons having a “leading position” within the entity. A leading position within the entity is based on “(a) the power of representation of the legal person; (b) the authority to take decisions on behalf of the legal person; or (c) the authority to exercise control within the legal person.” This differs in some respects from the position in English law, where a person’s seniority in the company does not necessarily mean they are acting as the “directing mind and will” of the company (thus making the entity liable for their misconduct).

Naturally, while the Proposed Directive would not have any direct application to the UK, as it is no longer part of the EU, it does suggest the potential for greater cooperation between the UK, its European counterparts and other third-country jurisdictions. In particular, the authorities in the UK will no doubt be carefully monitoring how any new “specialised bodies” put in place by Member States will be resourced and how they approach requests for mutual legal assistance made by their international counterparts.

Separate from the Proposed Directive, the potential new EU anti-corruption sanctions regime is yet another indicator of increasingly harmonised standards internationally. The UK enacted a dedicated global anti-corruption sanctions regime in 2021.¹⁶ Under this regime, the UK government can sanction those who are involved in “serious corruption”. At the time of writing, 35 individuals have been designated under this regime.

Five key takeaways

The following are key takeaways from the publication of the Proposed Directive:

(i) the Proposed Directive has been published at a time when there have been a number of significant developments in the white-collar space globally, including in particular (i) the  recent development of new corporate “failure to prevent” offences in the UK (covering inter alia fraud, false accounting and money laundering), (ii) the memorandum released in September 2022 by US Deputy Attorney General Lisa Monaco on Corporate Crime and Enforcement¹⁷ and (iii) the March 2023 updates to the US Department of Justice guidance on the Evaluation of Corporate Compliance Programs.¹⁸  The Proposed Directive is part of the efforts of the European Commission to maintain focus on the fight against corruption and participate further in the increasing international alignment on these issues;

(ii) while the Proposed Directive indicates increasing harmonisation of anti-corruption requirements across the EU, it only prescribes minimum standards. Member States will, therefore, be able to implement or maintain stricter obligations. Additionally, as the proposal takes the form of a directive, Member States will be afforded a degree of freedom as to how they choose to implement its provisions. It will therefore be important for companies with operations across several Member States to consider any differences or nuances that apply under local law. To the extent that such differences exist, companies may need to adopt a “highest common denominator” approach of designing policies and procedures that meet the requirements of those jurisdictions with the strictest obligations;

(iii) in terms of enforcement, harmonisation across the EU, which seems broadly to align with the UK and the United States, will make it easier for law enforcement agencies around the world to cooperate in the investigation and prosecution of multinational companies that engage in corrupt activities in or from the EU; it also sends a clear message to jurisdictions with high levels of corruption that the EU will not tolerate misconduct that is damaging to EU interests;

(iv) the Proposed Directive also reflects the recent initiatives of Member States that focus on the prevention of corruption as opposed to focusing solely on prosecuting corrupt acts (i.e., “repressing” them). The harmonised concept of prevention is stated to be “the detection and elimination of the causes of and conditions for corruption, through development and implementation of a system of appropriate measures, as well as deterrence against corruption-related acts”. In that regard, special reference is made to the creation of bodies “specialised in the prevention of corruption,” in addition to those “specialised in the repression of corruption”; and

(v) companies within the scope of the Proposed Directive and relevant national laws may benefit from adopting the harmonised definitions of public, private, active and passive bribery, and related offences within the Proposed Directive.¹⁹ This may become even more important if the Proposed Directive is enacted and companies find themselves subject to the supervision of newly established bodies (or under increased scrutiny from existing agencies with a renewed focus on anti-corruption).²⁰

In short, it appears that similar approaches to anti-corruption prevention and enforcement are being adopted in a number of advanced jurisdictions around the world. This is not considered to be mere coincidence. There is also evidence of increased co-operation between law enforcement agencies around the world, plus increased sharing of data, intelligence and investigation techniques. Multinational companies should therefore seek to harmonise their own approach to compliance and prevention in the various countries in which they operate, whilst at the same time taking account of key differences where they exist. This requires a fairly constant cycle of risk assessment, monitoring and review, but is one that need not be overly burdensome once the basic processes are in place.