EU Anti-Corruption Framework: What companies should expect from the EU Commission in 2024
While the EU’s Corporate Sustainability Due Diligence Directive (CS3D) has received much-deserved attention from businesses, corporates should not overlook the important developments in anti-corruption regulation the Commission made during 2023 which will be pursued further this year.
On May 3rd, 2023, the EU Commission presented a new proposal to combat corruption. This followed on from the September 2022 speech on the State of the Union by EU Commission President Ursula von Der Leyen during which she set out the need for action against corruption emphasising its corrosive effects.
2023 also saw the Qatar corruption scandal explode, and with the EU Parliament elections taking place in June 2024, it is likely that the Commission will focus its efforts on moving the framework forwards. With combating corruption high on the agenda, companies should make sure they are aware of what is being proposed and the implications for their operations.
The key elements in the EU Framework cover three main areas.
Defining corruption and applicable sanctions: one definition to rule them all
Given that corruption is a transnational phenomenon, the Commission suggests in a Proposal for a Directive a harmonised definition for active and passive bribery in the private and public sectors as well as related offences such as “misappropriation”, “trading in influence”, “abuse of functions”, “obstruction of justice”, and “enrichment from corruption offences” (Articles 7 to 12). The Proposed Directive also pushes Member States to criminalise these offences in cases of incitement, as well as aiding and abetting (Article 14).
Bribery in the public sector would adopt a broad definition of public officials (EU officials, national officials appointed or elective, permanent or temporary, international organisation and court officials).
The EU is also urging Member States’ to introduce the concept of bribery in the private sector into domestic law to encompass the concept of undue advantage of any kind to or by a person who directs or works for a private-sector entity, in any capacity (Article 8).
Criminal liability for companies: the noose could be tightening
This harmonisation would also cover the criminal liability regime of legal persons (such as companies) in corruption cases and the potential applicable sanctions (Article 17). Companies would be held liable for corruption committed “for the benefit of those legal persons by any natural person, acting either individually or as part of an organ of the legal person, and having a leading position within the legal person” (Article 16).
This would close major gaps in some Member States’ legislation. For instance, companies cannot currently be prosecuted and held criminally liable for any criminal offence under German law, which is in breach of international standards such as the OECD Convention. They may, nonetheless, be subject to corporate fines for criminal or administrative offences committed by their ‘representatives’. The proposed directive would change that.
Effective compliance programmes as a mitigating circumstance: Do the right thing
A breakthrough provision in the Proposed Directive is the potential introduction of anticorruption compliance programmes as a legal concept in Member States’ legislation. Indeed, the Proposed Directive states that effective “internal controls, ethics awareness, and compliance programmes” aimed at preventing corruption would be deemed a mitigating factor where an offence has been committed by a corporate, (but not a defence) under its Article 18.2. This would be likely to push companies to review some of their existing operational procedures such as employee training, anti-bribery practices and procedures and third party due diligence, to ensure robust systems are in place to help mitigate corruption risks.
This would represent a significant change in many jurisdictions. An effective compliance programme is not currently a mitigating factor when determining the amount of a fine, either under the French Loi Sapin 2, nor under the common guidelines by the French National Financial Prosecutor’s Office (PNF). Such a programme is only considered as an asset if entering negotiations with the PNF for a French deferred prosecution agreement (convention judiciaire d’intérêt public, see PNF guidelines, para. 2.1.4).
If the proposed Directive is adopted, companies would therefore be more incentivised than ever to design, build and embed effective ethics and compliance programmes to prevent corruption.
Corruption and international sanctions: It takes two to tango
On May 3rd, 2023, the High Representative of the Union for Foreign Affairs and Security Policy (in effect the EU Foreign Office) also proposed to include corruption as a legitimate ground to enact international sanctions targeting individuals. This would complement the toolbox of restrictive measures and clarify when and where acts of corruption are deemed to seriously affect or risk affecting the fundamental interests of the Union.
In other words, the EU wants to add a new thematic framework where international sanctions and corruption legislation become more aligned, following Executive Order 13818 by the White House and previous calls from both the EU Parliament and Ursula Von Der Leyen. As a result, companies would be obliged to exercise heightened due diligence in their operations, particularly in countries with high corruption risks.
The proposed Directive could significantly increase the risk of prosecution for bribery and raise the level of scrutiny on a company’s compliance programme.
Given that an effective anticorruption compliance programme is increasingly likely to be considered as a mitigating circumstance in future, companies would be advised to evaluate the strengths of their programme in their EU operations.
GoodCorporation can assist you in assessing, designing and embedding an effective and efficient anticorruption compliance programme. Contact us for more information.