This article was first published on Lexis®PSL Corporate Crime on 24 July 2019.
Corporate Crime analysis: Kathryn Hughes takes a closer look at the first guidelines on the convention judiciaire d'intérêt public and says it is evident that the French authorities have embraced the idea of working with prosecutorial agencies in other jurisdictions to reach global settlements.
What is the background to the publication of this guidance on French deferred prosecution agreements (DPAs)?
Sapin II was passed by the French Parliament on 8 November 2016 to address anti-corruption, transparency and modernisation of economic life. It came into force in December 2016. Perhaps one of the most significant aspects of Sapin II, was the creation of a ‘convention judiciaire d’interêt public’ (CJIP), the French equivalent of a DPA. At the time of writing, six CJIPs have been successfully concluded.
The French Ministry of Justice issued a circular on 31 January 2018, to provide some guidance on how to conclude a CJIP. The circular, however, was too high-level to provide sufficient legal certainty, which resulted in inevitable inconsistencies in the approach taken in these first CJIPs.
On 27 June 2019, the Parquet National Financier (PNF) and the Agence Française Anticorruption (AFA) published the first joint guidelines on the use of CJIPs in cases of corruption committed in both a national and international context. The purpose of the guidelines is to encourage corporations to cooperate with prosecuting agencies and to provide a higher degree of certainty to both companies and authorities in other jurisdictions. To what extent they achieve this object is open to debate.
Although the guidelines focus on corruption cases, the general principles are likely to apply equally to other forms of misconduct capable of resolution through a CJIP. The guidance on the calculation of the financial penalty however, would appear to be specific to corruption cases.
What are the key points of interest contained in the guidance?
Although the guidelines leave many questions unanswered, they do take a first step towards clarifying the approach to be taken. Three areas of particular interest are self-reporting, internal investigations and co-operation.
Self-reporting
The guidelines state that while self-reporting within a reasonable time is an important factor, it is not a pre-requisite to a CJIP. This mirrors the practice adopted in the UK, as evidenced by the DPA with Roll-Royce, despite the company not self-reporting.
Internal investigations
The guidelines place particular emphasis on internal investigations. Companies are expected to undertake an internal investigation either prior to any investigation by the prosecutor, or in conjunction with it. An internal investigation must ensure the preservation of evidence, must not jeopardise the prosecution investigation and must ensure that the integrity of witness testimony is preserved. The prosecutor will expect a detailed report to be shared with it at the conclusion of the internal investigation. Interestingly, any internal investigation should help establish the responsibility of individuals. This is discussed further below.
Co-operation
The guidelines describe cooperation with prosecution authorities as a necessary pre-condition to the conclusion of a CJIP. It would appear, however, that even minimal cooperation will suffice. Instead, the extent of a company’s cooperation will have an impact on the financial penalty. For example, in the first CJIP concluded with HSBC Private Bank Suisse (SA) in 2017, the company did not self-report and thereafter offered very limited co-operation. This resulted in a higher financial penalty but was no bar to concluding the CJIP.
How does the guidance compare to the approach outlined in the Serious Fraud Office (SFO)/Crown Prosecution Service guidance on DPAs in the UK?
It is evident that, on the whole, the guidelines have a similar tone and approach and are influenced considerably by the practices adopted in the UK and the US. However, there are some notable distinctions, as set out below.
Legal professional privilege (LPP)
The most significant difference is the position vis a vis privileged material. The guidelines adopt an ambiguous yet somewhat troubling position in relation to ‘le secret professionnel de l’avocat’ (the French equivalent of LPP). They note that although the duty of lawyer-client confidentiality is binding on counsel in their relationship with their client, the client itself is not bound by such a duty. It would seem that companies will be expected to disclose documents otherwise covered by lawyer-client confidentiality. A refusal to do so may affect the weight given to co-operation in calculating the financial penalty.
In the UK, companies are not required to waive LPP. Indeed, XYZ and Standard Bank entered into DPAs notwithstanding that privilege was not waived. However, following the obiter comments from Sir Brian Leveson P in Director of the Serious Fraud Office v Eurasian Natural Resources Corporation Ltd (Law Society Intervening) [2018] EWCA Civ 2006, [2019] 1 All ER 1026 at paras [116] and [117], it may be that in the future, companies will be expected to offer at least a limited waiver over privileged documents that are central to the SFO’s investigation. In April 2019, the director of the SFO said that waiving privilege over initial investigative material will be a ‘strong indicator of cooperation’ and an important factor that the SFO will take into account when considering whether to invite a company to enter into DPA negotiations. It is therefore arguably unsurprising to discover that in Serious Fraud Office v Serco Geografix Ltd [2019] Lexis Citation 67 agreed on 4 July 2019, the company had agreed to a limited waiver.
Sufficiency of evidence
Another, albeit more subtle, difference with the UK position is that the guidelines specify that a CJIP can only be concluded in circumstances where the investigation has uncovered sufficient evidence on which to bring a prosecution. By contrast, the SFO may conclude a DPA either where there is sufficient evidence, or where they are satisfied such evidence would be uncovered within a reasonable period of time if the investigation continued.
Individuals
The guidelines state that prosecutors will exercise their discretion in deciding whether or not individuals involved in the underlying offending should be prosecuted. It does, however, require that any internal investigation should help establish the responsibility of individuals.
One of the biggest criticisms of DPAs in the UK is the vulnerability of individuals to prosecution in circumstances where companies are seeking a DPA, yet individuals do not have a voice in the negotiation process. That being said, the SFO has not yet been successful in its endeavours to prosecute these individuals. Most recently, on 16 July 2019, a jury acquitted the three individuals allegedly involved in the misconduct underlying the XYZ (Sarclad) DPA.
With charging decisions expected to be made by the end of 2019 in SFO v Serco, we may soon have a better idea of what approach the SFO will be taking in the future to individuals identified in a DPA.
What practical points should practitioners take from this guidance?
The guidelines provide much needed clarity for practitioners advising companies on CJIPs, most notably in respect of internal investigations and in calculating any financial penalty for corruption offences.
However, many questions remain unanswered. For example, to what extent will companies in fact be required to hand over privileged documents, and what impact will any such refusal actually have on the financial penalty?
What is evident is that the French authorities have embraced the idea of working with prosecutorial agencies in other jurisdictions to reach global settlements. French prosecutors have already demonstrated a willingness to work alongside other agencies, as can be seen from the CJIP with Société Générale. The guidelines now make this explicit. For example, on the subject of privilege, the guidelines specifically state that where appropriate, the assessment of a company’s stance on privileged material will take into account the legal consequences of waiver in other jurisdictions.
In international cases, practitioners should be prepared to advise companies at the outset of an investigation on how and when to engage the various agencies with a view to negotiating the best possible global settlement. This is likely to have substantial benefits for the company in terms of time and cost, and would provide a greater degree of certainty to shareholders.
Interviewed by Kate Beaumont of Lexis Nexis.
Kathryn Hughes