On the 9th of December 2016, the Sapin II law, which counters corruption and tax fraud, was enacted. This legislation was established in response to an international imperative to prevent fraud and to provide a legal framework for French companies for the implementation of their anti-corruption policies. It is aligned with the provisions of the Anglo-Saxon anticorruption legislations, namely the Foreign Corrupt Practices Act (FCPA) and the UK Bribery Act. But what does actually distinguish the Sapin II law from the UK Bribery Act and the FCPA?
The Sapin II law: a unified approach
This legislation, which aims at fighting corruption, led to the establishment of the French Anti-Corruption Agency (AFA). By 2017, the AFA had introduced 8 preventive measures regulating companies with at least 500 employees and a turnover exceeding €100 million. Following a public consultation in 2020, the AFA updated its initial recommendations. The 8 measures have been reformed to give way to 3 main pillars: the commitment of the governing body, the knowledge of corruption risks and its management within the organisation.
An act derived from Anglo-Saxon legislations
To address concerns raised by the OECD regarding its anti-bribery regulations, the French government introduced the Sapin II law. The legislation was indeed modelled on the FCPA and the UK Bribery Act in order to meet the international compliance standards. Its aim is to reduce corruption not only in France but also in foreign countries through preventive and repressive actions. Transparency being key to proper corporate governance, the Sapin II law was built around three pillars: ethics, compliance and risk prevention.
The differences between Sapin II, the UK Bribery Act and the FCPA
In 2010, the UK Bribery Act was passed in the UK to tackle corruption in private companies as well as in public institutions. The Foreign Corrupt Practices Act, which includes an auditing and anti-corruption component, was implemented in the United States in 1977. While the intent of the three acts is similar, the measures that they call for differ.
Companies registered or listed on a US stock exchange, regardless of their nationality, any individual or corporation and persons carrying on business in the US must comply with the Foreign Corrupt Practices Act. The UK Bribery Act applies to organisations registered in England, any person of British origin and any individual operating in England. While the Sapin II law concerns all companies, headquartered in France, with at least 500 employees and a turnover of more than €100 million. Subsidiaries of foreign companies, whose head office is based in France, are also subject to the act if they meet these two criteria. We can notice the limitative nature of the French law here. In 2017, the director of the AFA even pointed out that a significant number of subsidiaries of foreign companies are not audited due to insufficient resources for investigation. Another challenge faced by the AFA is the international reach of its authority, as it is not recognised as the legitimate institution to repress fraudulent acts. This responsibility is vested in the public prosecutor’s office.
On the other hand, foreign authorities, such as the US Department of Justice or the UK Serious Fraud Office, can take action against companies for occurrences of corruption already monitored by the AFA.
However, the internal accounting control procedures required by the AFA under the Sapin II law are more rigid. The company’s accounting department or an auditor generally intervenes to ensure that the accounts are not used to commit fraud. The FCPA has a similar approach, and requires the issuance of accounting reports that provide accurate information about the company’s operations. The UK Bribery Act is more flexible and calls for transparency and the establishment of an audit committee for the elaboration of reports.
The Sapin II law also requires companies to adopt a code of conduct to inform all stakeholders about behaviour that could be considered as corruption or influence peddling. This can be seen as an innovation as it encourages companies to actively engage in the fight against corruption, namely through workshops designed for managers and staff exposed to the risks of corruption and influence peddling. In comparison, the FCPA and the UK Bribery Act recommend the introduction of a code of conduct and urge companies to raise awareness about the risks of bribery among employees through workshops. Since those are not mandatory in both instances, companies should undertake these initiatives themselves.
While all three laws have a common purpose, they each intervene at different levels to counter corruption and regulate the financial machinery of powerful corporations. However, the Sapin II law has its limits in terms of extraterritoriality, unlike the FCPA and the UK Bribery Act. The AFA is indeed empowered to sanction French citizens or companies established in France for instances of corruption, but cannot defend them against foreign authorities for these same offences. However, by identifying and guiding companies that are particularly exposed to the risk of fraud, its role in the prevention against corruption is significant.