By Stella Dawson
WASHINGTON (Thomson Reuters Foundation) – Brazil’s Clean Companies Act plugs a major gap in its corporate anti-bribery arsenal but how regulators apply the complex legislation will prove an important test of its effectiveness, a top global anti-corruption official said on Friday.
Nicola Bonucci, director of legal affairs at the Organisation of Economic Cooperation and Development (OECD), said Brazil’s new law passed in August to hold companies liable for bribery and corruption of public officials, is an important step toward bringing Latin America’s largest economy into line with international standards.
Until now, only individuals could be prosecuted for corporate bribery in Brazil. President Dilma Rousseff successfully championed the new legislation, which had been stalled for years in Congress and vigorously opposed by businesses, after citizens rioted in July over rising prices, poor public services and public corruption.
Brazil is a signatory of the OECD’s Anti-Bribery Convention, and its Working Group on Bribery next June is scheduled to deliver a progress report on how well Brazil meets its guidelines. Bonucci predicted the group will vigorously debate many aspects of the law, which he said rivals the U.K. Bribery Act for complexity, before it can give Brazil its seal of approval.
One issue will be criminal liability. Under Brazil’s new law, corporate corruption is treated as a civil and administrative offense, not a criminal one, which the government has said will make it easier to bring cases since the standard of proof is not as high.
The OECD prefers criminal liability, Bonucci said, though in practice some of the countries that are the most aggressive in cracking down on corporate corruption, such as Germany, only have civil liability provisions – hence the litmus test is how the law is applied.
“This still has to be tested in Brazil,” he said.
A second issue is how much leniency a corporation will be granted if it voluntarily reports corruption. Under Brazil’s law, the size of any fine -- which will range from 0.1 percent to 20 percent of gross revenues or up to $30 million -- could be reduced if a company self reports. Bonucci said such leniency has caused controversy over laws in Russia and Eastern Europe, raising concerns in the Working Group about the degree of flexibility.
“It will generate a lot of discussion, because at the end of the day we all know that this is one of the hot topics,” said Bonucci, who participated in a panel discussion on the new law, hosted by the law firm Baker & Mackenzie.
A third issue will be debarment. The law does not require that companies found to violate the anti-corruption laws are barred from bidding for public contracts for a set period. In contrast, multi-lateral development banks debar companies and their subsidiaries or affiliates for contract fraud or bribery.
Brazil’s Office of the Comptroller General is due to issue regulations in January, when the new law takes effect, which will provide some guidance over how it will be applied.
Carlos Ayres, co-chair of the anti-corruption and compliance committee of the Brazilian Institute of Business Law which worked hard on its passage, praised the law as “another indication that Brazil is closing ranks against corruption.”
Not only has this law passed but in the past year, Brazil’s Supreme Court transfixed the country by publicly trying and convicted officials linked to former President Luiz Inacio Lula da Silva in a vote-buying scheme in Congress. Twelve people last week were sent to prison, even though their cases are on appeal – a highly unusual step in Brazil.
Ayres said the number of arrests for public corruption has increased 133 percent since 2008, and over 2,700 people are behind bars for corruption. In addition, a leading Brazilian company Embraer, the aircraft manufacturer, is under investigation by Brazilian and U.S. officials for foreign bribery and corruption.