• French Financial National Prosecutor and Anticorruption Agency published their first guidelines on the use of the French-style deferred prosecution agreement.
• The purpose of the guidelines is to encourage self reporting and cooperation of corporate wrongdoers.

On June 27, 2019, the French Financial National Prosecutor (commonly referred to as the “PNF”) and the French Anticorruption Agency (the “AFA”) published their first joint guidelines on the use of the French-style deferred prosecution agreement (known as the “CJIP”) in cases of domestic and transnational corruption or influence peddling. The stated purpose of these guidelines is to encourage cooperation of corporate wrongdoers by providing clearer and more reliable procedures to develop the facts and circumstances relevant to the PNF in considering whether to enter into a CJIP and on which terms.

Background. The Sapin II Law of December 9, 2016 created the CJIP procedure, which provides prosecutors (such as the PNF but not the AFA) with the power to offer a company suspected of having committed corruption, influence peddling, tax fraud or laundering of the proceeds of tax fraud to settle the case without formal prosecution. The company must agree to pay a fine proportionate to the benefit derived from the misconduct up to 30 percent of the company’s average annual turnover during the previous three years. The company may also be required to compensate the victims and/or agree to implement an enhanced compliance program under the supervision of the AFA for a period up to three years. A CJIP may only be finalized with approval of a judge following a public hearing. The judge’s role is to verify that the statutory requirements for a CJIP have been met. The company does not have to acknowledge any guilt, and the judge’s approval order does not have the effect of a conviction.

On January 31, 2018, the French Ministry of Justice issued a circular to French prosecutors providing guidance on how to implement a CJIP. This circular, however, did not provide much by way of guidance to companies that discover misconduct and might wonder whether they could be eligible for a CJIP. The June 27, 2019 guidelines provide welcome clarifications as to the PNF’s and AFA’s approach to this question. The key features of these guidelines can be summarized as follows.

Conditions to enter into a CJIP. The PNF and other prosecutors offices have discretion to propose resolution of a case through a CJIP. The guidelines list factors that will be weighed by the PNF before deciding to do so:

The guidelines make clear that any internal investigation made before the involvement of authorities must ensure the preservation of evidence and the integrity of witness testimony. Internal investigations conducted in parallel with a prosecutor’s own investigation should be conducted in coordination with the prosecutor. Importantly, the CJIP procedure is not available for individuals, and guidelines make it clear that any internal investigation should help establish the responsibility of individuals.

Calculating the fine. The statute provides that the fine agreed to in a CJIP must be proportionate to the benefit derived through the misconduct, up to a limit of 30 percent of the entity’s average annual turnover during the previous three years. The PNF now indicates it will first calculate the direct and indirect improper benefit secured by the entity and then apply a multiplier based on relevant aggravating and mitigating factors.

The guidelines make no mention of how the fine under a CJIP should relate to the fine that could be imposed if the case went to court, and the company was found guilty. However, the guidelines do point out that for a company, the benefit of being offered a CJIP includes the absence of a number of ancillary penalties that are available postconviction including confiscation of the proceeds of the offense, the prohibition to conduct certain activities, the closure of one or more business sites or the prohibition to offer securities on regulated markets.

For transnational investigations, the guidelines note that the amount of the fine under a CJIP may be discussed with foreign prosecution authorities investigating the same conduct in order to take a holistic view of the fines and other sanctions imposed on the company.

Post-CJIP compliance program. As part of a CJIP, the company may have to agree to implement an enhanced compliance program under the supervision of the AFA for a period of up to three years. According to the guidelines, the PNF may decide not to impose such an obligation if the AFA already recently performed an audit of that company’s compliance program or if a foreign authority has already imposed robust anticorruption compliance obligations on that entity.

If foreign authorities are also involved, a single monitoring body shall be appointed, which the guidelines suggest should be the AFA if the entity has its registered office or effective headquarters in France or conducts most of its business in France.

The guidelines also indicate that AFA’s supervision will last at least two years (and maximum three as per the statute) so as to ensure the effectiveness and robustness of the implemented measures. The AFA will report to the PNF at least every year.

Key Takeaways. As indicated above, the guidelines apply to domestic and transnational cases of corruption and influence peddling. A literal reading would suggest that these guidelines do not apply to matters concerning tax fraud and laundering of the proceeds of tax fraud; however, we believe that the PNF will probably apply similar principles in such matters. While the PNF is not the sole French prosecutorial office to use the CJIP procedure (in fact, three of the six CJIPs entered into to date were entered into by prosecutors in Nanterre), its guidelines will no doubt set the tone among prosecutors.

The guidelines in essence amount to an invitation to French (and other) corporations and their attorneys to engage in discussions that would lead to a negotiated outcome in France, such has been the norm in the United States for years, and more recently in the United Kingdom. While these first guidelines represent a welcome clarification, it remains to be seen whether French corporations and their attorneys will find the CJIP procedure to be sufficiently attractive to effect a real change in corporate defensive strategy.

Among other things, making a true “self-report” to a prosecutor not already aware of corporate wrongdoing is not a tradition in criminal justice in France. The absence of specific sentencing guidelines for cases going to courts means that it is still quite challenging to estimate how much a prospective defendant may gain in a CJIP compared to a potential court-imposed penalty; the monetary benefit of self-reporting therefore remains less evident in France than it may be in the United States or the United Kingdom. Insofar as the PNF has publicly expressed its desire to use CJIP as frequently as possible, future clarifications may come from CJIPs themselves.

Another variable is whether a French CJIP will be considered sufficiently “adequate” by prosecutors in other countries, notably the United States, so as to forestall parallel or successive prosecutions. At a minimum, the guidelines should be seen as a clear attempt by prosecutors in France to obtain flexibility of action and powers more comparable with those of their U.S. and U.K. counterparts.