On July 4th, the Brazilian Senate approved Bill of Law 6,826/2010, which has now become known as the Anti-Bribery Law. The law was enacted on August 2nd and takes effect in February of 2014. It imposes strict civil and administrative liability on legal entities for the corrupt activities of their employees or agents.
Before the passage of the Anti-Bribery Law, only individuals could be charged with and imprisoned for bribery in Brazil. Companies faced no criminal or civil liability for the corrupt activities of their employees.
The law was introduced by former President Luiz Inácio Lula da Silva in 2010, but passage has been stalled for nearly three years. It has been reported that the Anti-Bribery Law was “dusted off” and rushed through as a response to the widespread protests against corruption and government spending that began this past June.
The Anti-Bribery Law is part of an ongoing effort by Brazil to bring its culture of business ethics up to international standards. The law was partly motivated by Brazil’s association with the Organization for Economic Cooperation and Development (OECD), an international organization that promotes policies that improve the economic and social well-being of people around the world.
While Brazil is not a member of the OECD, it is a party to the OECD’s Anti-Bribery Convention on Combating Bribery of Foreign Public Officials, which has asked Brazil to accelerate its efforts to make companies directly liable for bribing foreign officials.
The Major Provision of Brazil’s Anti-Bribery Law
The Anti-Bribery Law applies specifically to the bribery of foreign officials as well as Brazilian officials. That means that foreign corporations operating in Brazil are also subject to penalties for the bribery of Brazilian government officials.
Penalties for Violation of the Anti-Bribery Law
To prosecute companies for violations of the Anti-Bribery Law, authorities only need to show that the illegal acts were committed in the benefit or interest of the legal entity. The new penalties that companies face include:
- Civil liability of corporations for the acts of their directors, officers, employees, and agents.
- Successor liability
- Fines of up to 20% of gross revenue and never lower than the advantage obtained
- Loss of assets
- Suspension of business activities
- Compulsory dissolution
- Banning from receiving government subsidies and loans
- Withholding of government contracts for up to 5 years.
Compliance Incentives
One of the constructive provisions provides companies with incentives to comply with the law. Effective internal ethics compliance programs and self-disclosure of violations will be taken into consideration by the court when determining what sanctions to impose. However, compliance is not a complete defense.
While foreign companies that do business in Brazil may already have anti-bribery policies and procedures in place, it is crucial that they take a closer look at the practices of their employees in Brazil as the corporate culture adapts to the new law.
