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The consequences of the adoption of the Law Sapin II for US companies operating in France

  • France
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Following the adoption of the “Sapin Law II” which entered into force on June 1st 2017, companies operating in France, as well as their directors, have to implement strict compliance obligations.

Companies with more than 500 employees or which are members of a French group[1] having more than 500 employees and recording a turnover superior to €100,000,000, their directors, their subsidiaries, and the companies they control have to implement:

  • a specific French Code of Conduct, including an anti-corruption policy which has to be included in the company’s “Règlement intérieur;
  • an internal whistleblowing procedure, which aims at collecting and reporting any breach of the Code of Conduct or any domestic and international regulation in force;
  • a risk mapping, in the form of a detailed document, which is regularly updated, identifying, analysing and hierarchizing the risks of corruption, notably on the basis of the geographical scope where the company is doing business and the business sector in which it operates;
  • due diligence processes for major clients, suppliers and intermediaries;
  • internal or external accounting control procedures;
  • training sessions for the most exposed employees and those who are at executive level (“cadre”);
  • a disciplinary system to sanction violations of the Code of Conduct;
  • an internal control and audit process of the anti-corruption compliance procedures that have been implemented.

Breach of the obligation to prevent corruption is sanctioned by the “Agence Française Anticorruption”, which is granted with real investigation powers. Should internal procedures be considered inadequate, the director of the entity can be fined up to €200,000, whereas the company itself can incur a fine of up to €1,000,000. These sanctions can be cumulative.

This law also reinforces the protection of whistleblowers and obliges companies with more than 50 employees to implement specific whistleblowing procedures to ensure confidentiality (but not the anonymity) of the alerts by January 1st, 2018.

Since this regulation differs from other similar anti-corruption regulations such as the FCPA, companies subject to this law may have to adapt their existing compliance program and anti-bribery policies to make sure that they comply with the requirements of the “Sapin Law II”, especially to ensure that :

  • The company has implemented a specific French Code of Conduct, including an anti-corruption policy. French Criminal Law has a broader scope than the FCPA since in addition to corruption in the public sector (of foreign officials), it provides for sanctions for corruption in the private sector, including influence and favouritism. Therefore, these criminal offenses should be defined in the French Code of Conduct, which should also provide specific examples of situations that could be interpreted as constituting these offenses (i.e., scenarios based on the specificities of the business of the company).

Furthermore, since the Code of Conduct has to be attached to the company’s “Règlement intérieur”, the company will have to comply with specific French Labour Law procedures including the approval of the different work councils and health and safety committees of the Group and the transmission of the Code in French to the Labour Law inspector.

  • The company has implemented an internal whistleblowing procedure which is compliant with the “Sapin Law II”, , as well as the “Délibération n° 2017-191” dated 22 June 2017 issued by the CNIL (the French data protection authority). These new regulations have significantly extended the scope of the whistle and strengthened the obligation to observe strict confidentiality (failing to comply with this obligation of confidentiality is criminally sanctioned). They have also amended former rules relating to data protection.
  • The company has prepared a French risk mapping document which is regularly updated, identifying, analysing and hierarchizing the risks of corruption, notably on the basis of the geographical scope where the French company and its subsidiaries are doing business. Most companies may already have conducted risk assessments on a global scale. However, they will have to establish a French based map of risks (i.e., focusing on the risks raised by the business partners of the French entity, the geographical implantations of the French entity and its subsidiaries, the public contracts etc).

Since the “Sapin Law II” does not only apply to French companies but also to their subsidiaries even if they are incorporated abroad, the French regulatory body (“AFA”) as well as the judicial authority could request to be provided with all the existing risk mapping documents within the group. It should be underlined that discrepancies or differences between these documents could be interpreted as a failure to conduct a proper risk mapping analysis.  

  • All of the company’s executive level “cadre” employees and the most exposed employees have to receive an anti-corruption training program in French, which complies with French Law.
  • The company has implemented a disciplinary system to sanction violations of the Code of Conduct, which complies with French Labour Law. Not only should the Code of Conduct be amended, but also the internal procedures and culture to ensure that the disciplinary system is effectively implemented in day-to-day business and complies with French Labour Law.

It should be highlighted that even though a company is not subject to the “Sapin Law II”, it may have to comply with this regulation because some of their business partners will provide contractual provisions requesting them to do so.Indeed, many companies (notably banks and insurance companies) have added new anti-bribery provisions in the general conditions of their contracts. These provisions oblige their co-contractors to comply with the obligations imposed by the article 17 of the “Sapin II Law” and provide that failure to comply with these contractual obligations may constitute a ground of termination of the contract. Therefore, their co-contractors may have to implement the 8 measures set forth above to avoid any contractual breach.

[1] whose parent company is incorporated in France