Brazil's New Anti-Corruption Legislation

For many years, the United States drove global anti-corruption efforts through vigorous enforcement of the Foreign Corrupt Practices Act (“FCPA”). More recently, other jurisdictions, such as the United Kingdom and China, have begun to assert themselves by enacting new anti-corruption measures or by enforcing laws that were already on the books. Following that trend, Brazil has enacted Law 12,846 of August 1, 2013 (the “Brazilian Anti-Corruption Law” or the “Law”), which imposes tough new sanctions on foreign and domestic corporations that are involved in bribery or other acts of public corruption.

The Brazilian Anti-Corruption Law

The Brazilian Anti-Corruption Law is similar to the FCPA and the UK Bribery Act. It imposes strict liability on foreign and domestic corporations that bribe public officials or related parties, and it prohibits corporations from promising or offering any undue advantage to domestic and foreign public officials, including officials in international organizations. It also prohibits bid-rigging in connection with public procurement projects and provides for penalties against companies that obstruct investigations.

However, the Brazilian Anti-Corruption Law takes a unique approach to penalties. The Law provides for civil and administrative sanctions, which complement the existing criminal laws applicable to individuals who engage in bribery. The Law provides for administrative fines ranging from 1 to 20 percent of an entity’s gross revenues during the preceding year, or up to roughly $30 million if revenues are difficult to calculate. In addition, in civil enforcement actions, the courts may impose additional sanctions, including dissolution, suspension, disgorgement, debarment, the loss of public contracts and prohibitions against obtaining incentives, subsidies, grants, donations or loans from public authorities.

Under the Law, the Brazilian authorities will consider both the cooperation of the company subject to an investigation and the company’s implementation of compliance, audit and whistleblower procedures and mechanisms. In addition, the Brazilian Anti-Corruption Law includes leniency provisions that create incentives for companies to cooperate by dramatically reducing the sanctions applicable to the first company that discloses misconduct involving others to Brazilian authorities. These leniency provisions, which have been widely used in antitrust enforcement, will presumably be of special import in the bid-rigging context.

The Brazilian Anti-Corruption Law also creates additional incentives for companies to adopt and enforce effective compliance programs. The Law directs that sanctions must take into consideration whether a company maintains an effective compliance program. While the full impact of this provision remains to be seen, similar provisions in US and UK law have led many companies to commit substantial time, energy and money in developing effective compliance programs.

Compliance Programs and Global Enforcement

There can be no doubt that the Brazilian Anti-Corruption Law creates powerful new incentives for all companies—domestic and foreign—to examine (or reexamine) their corporate compliance programs. As in other jurisdictions, Brazil’s interest appears to be in incentivizing corporations to establish comprehensive compliance programs that effectively deter wrongdoing. To that end, the Brazilian Anti-Corruption Law encourages corporations to devise formalized compliance programs, to publish codes of ethics, to encourage employees to report misconduct and to audit the effectiveness of its programs. Moreover, effective compliance programs cannot exist only on paper; effective compliance requirements to commitment of management at all levels—including the top.

The Brazilian Anti-Corruption Law may also herald a new enforcement era. By providing its domestic law enforcement with the power to sanction corporations, Brazil has asserted itself in the global enforcement scene. Multinational corporations that violate Brazil’s new anti-corruption laws could well find themselves facing hostile regulators in multiple jurisdictions with different disclosure expectations. Navigating internal investigations, making self-disclosures to multiple agencies and resolving matters in multiple jurisdictions may become the new normal in the anticorruption arena.

For further information about this topic, please contact Kelly Kramer at +1 202 263 3007, Alistair Graham at +44 20 3130 3800 or Salim Saud at +55 21 2127 4297 or Caio Campello at +55 11 2504 4267 of Tauil & Chequer Advogados in association with Mayer Brown LLP.

Observations in this update about Brazilian law are by Tauil & Chequer Advogados. They are not intended to provide legal advice to any entity; any entity considering the possibility of a transaction must seek advice tailored to its particular circumstances.