“Anti-corruption law” leaves room for dangerous concepts

Law 12,846/13, known as the anti-corruption law, should impact the functioning, dynamics and culture of business in Brazil. It strengthens business ethics and the logic of administrative probity. However, it must be noted that even before this Law came into force, it was already possible to bring legal entities within the scope of acts of corruption or improbity under Law 8,429/92, legislation that remains applicable to the matter, as an authentic General Code of Conduct for individuals and legal entities. And the new legislation may raise additional concerns regarding legal certainty and the reasonableness of the conduct of oversight authorities.

The interpretation of this new normative instrument embodied in Law 12,846/13 cannot escape the incidence of other no less important norms, such as those set out in Laws No. 9,613/1998 (money laundering law), 8,666/1993 (public procurement law), LC 101/2000 (fiscal responsibility law), LC 105/2001 (financial transactions secrecy law), 4,717/1965 (popular action law), 7,347/1985 (public civil action law), 9,784/1999 (federal administrative procedure law) and 6,385/1976 (securities market law). It is important to note the likelihood that various regulatory norms will converge in defining the offenses, such as Bacen and Susep Circulars; CVM Instructions; Coaf Resolutions; RF Instructions, among so many others. Sub-statutory norms form part of the factual basis of administrative and criminal offenses, so understanding them is imperative.

In fact, a very heavy administrative fine, provided directly in Law 12,846/13, was added to the list of sanctions in Brazilian Law, associated with the liability of legal entities for committing acts against the public administration, domestic or foreign, to be imposed through a vehicle designated as an administrative proceeding. In reality, there is provision for an administrative sanction whose range of variation (between the minimum and maximum degrees) grants an apparently free and gigantic space to the competent authority.

In reality, exhaustive reasoning must be demanded of the administrative authority in individualizing and imposing the applicable penalty, with no room for discretionary judgments. The act of setting a penalty must be reasoned and transparent. It cannot conceal reasons or open room for misuse of power.

Indeed, starting from the aforementioned Law 12,846/13 – which enters into force in February 2014 – some say that companies become obliged to prevent and uncover the deviations and transgressions defined as corruption, becoming collaborators of the State, on pain of suffering serious economic consequences and damage to their image. However, the duties of companies must be set out in laws. No one is obliged to do or refrain from doing anything except by virtue of law. Sub-legal regulations complement laws. The principle of the legality of infractions and penalties is what dominates Administrative Sanctioning Law.

The consequence provided for acts deemed unlawful, under Law 12,846/13, is a fine in the amount of 0.1% (one tenth of one percent) to 20% (twenty percent) of the gross revenue of the fiscal year prior to the opening of the administrative proceeding, excluding taxes, which will never be less than the advantage obtained, when it can be estimated, without prejudice to applicable criminal sanctions and the sanctions of Law 8,429/92, which applies to individuals and legal entities (suspension of political rights, civil fine, compensation for damage, prohibition on contracting with the Public Administration or receiving benefits of any kind from it). In other words, beyond the fine created here, the civil fine provided for in the Improbity Law may also apply.

Law 12,846/13 is punitive in nature and must be subject to the legal regime of Administrative Sanctioning Law. In that sense, it is not appropriate to speak of strict liability of legal entities for the purpose of imposing administrative penalties. The burden of proof lies with the accuser and cannot be reversed. It is necessary to work on the company’s culpability, which requires prudential levels of conduct in decision-making, to meet standards of probity (good management), and it is precisely in this field that new room may arise for the responsibility of legal opinion writers and greater consistency in business decision-making processes [1] .

The acts of corruption listed by the legislator are described as acts harmful to the public administration, national or foreign, that violate the national or foreign public patrimony, the principles of public administration or the international commitments assumed by Brazil, which broadened the reach of Law 8,429/92, justifying it as a set of blank sanctioning rules.

The legislator considers corruption the act of promising, offering or giving, directly or indirectly, an undue advantage to a public agent, or to a third person related to him. The main problem here may be the indeterminate legal concept “undue advantage”. Many may understand that the payment of a trip by a company to a public servant, to study a project implemented in a given place, constitutes an undue advantage, when in reality it would be merely part of an agreement between public and private sectors. Conceptualizing and delimiting undue advantage is a challenge that requires a solid case-law view of the rules and principles applicable to the Public Administration. What is due or undue, what is reasonable or not, depends on case-law parameters, on well-grounded constructions, or on consistent scholarly foundations, which will come to be incorporated into decision-making, evidencing paradigms of liability of other actors (those who issue legal opinions).

A complicated question concerns an allegedly undue advantage to a third party related to the public agent. The punitive rule becomes elastic and, on the procedural level, it may entail highly relevant developments. Which ties make a person connected to a public agent for the purposes of the sanctioning rule? This question must run through, as stated elsewhere, an analysis of case law on the ties that give rise to conflicts of interest or nepotism. It is obvious that there may be situations of extreme artificiality in which the relationship between the persons exists for economic purposes, and this finding will depend on an evidentiary phase (bank transfers, wiretaps, etc.).

An act of corruption is considered to be that of, demonstrably, financing, funding, sponsoring or in any way subsidizing the practice of the unlawful acts provided for in the Law. Can illegal acts that constitute corruption, such as diversion of public funds, overpricing, tax evasion, abuse of public prerogatives for private ends, be funded by private enterprise? It seems to us that it is one or the other: either the private party is directly involved in the practice of those acts, or benefits from them, in either case triggering Law 8,429/92. This modality of financing, funding or sponsoring the practice of illegal acts must make clear the link of connected interests. One imagines a criminal organization in this context. The legislator once again works with elastic and dangerous concepts. What does it mean to fund or sponsor the practice of offenses prohibited by the Law? The financial officers of companies must adopt the utmost caution as to how and where they allocate resources. They must be guided by all possible prudence, on the basis of opinions and legal opinions .

Also provided for as corruption is the behavior of one who, demonstrably, uses an intermediary individual or legal entity to conceal or disguise his true interests or the identity of the beneficiaries of the acts performed. Again, the legislator attacks ambiguous behaviors. A broad discretionary power is allowed to the investigating authorities. Concealing or disguising one’s true interests or the identity of the beneficiaries of the acts performed involves an endless web of possible conduct.

It is worth noting that the reference to the need for evidence to convict in certain sanctioning offenses and not in others sounds strange. This is an unavoidable procedural requirement for any and every conviction, in keeping with the principle of the presumption of innocence.

Preventing, disrupting, or defrauding the conduct of any act of a public bidding procedure is considered an offense of corruption. If a company, by filing reckless lawsuits, prevents or disrupts acts of bidding procedures, will it potentially be ensnared by the Law? We understand that a restrictive view must prevail. It will be necessary to prove intentional, willful acts aimed at the realization of fraud. The regular exercise of a right cannot constitute an offense of corruption.

Finally, the classification of the act of hindering the investigative or oversight activity of public bodies, entities or agents, or interfering in their work, including within regulatory agencies and the oversight bodies of the national financial system, stands out. It is the duty of companies to facilitate investigative and oversight acts, and in this context there is talk of reinforcing compliance structures. To what extent, however, in light of the presumption of innocence and the guarantee against self-incrimination, is the company really obliged to cooperate with an investigation? This is an important limit: the private sector does not have the same obligations as state public agents. It can and should cooperate within the limits of the law and safeguarding the confidentiality of the commitments undertaken, as well as the rights of third parties.

[1] Cf. MEDINA OSÓRIO, Fábio. Direito Administrativo Sancionador . 4. ed. São Paulo: RT, 2011; MEDINA OSÓRIO, Fábio. Direitos imanentes ao devido processo legal sancionador na constituição de 1988. In: MARTINS, Ives Gandra; REZEK, Francisco (Org.). Constituição Federal : avanços, contribuições e modificações no processo democrático brasileiro. São Paulo: Revista dos Tribunais, 2008, p. 149-166; MEDINA OSÓRIO, Fábio. Conceito e tipologia dos atos de improbidade administrativa. In: Revista de Doutrina da 4ª Região , Porto Alegre, n. 50, out. 2012. Available at: http://www.revistadoutrina.trf4.jus.br/artigos/edicao050/Fabio_Osorio.html . Accessed on: Sept. 12, 2013.

Fábio Medina Osório is a lawyer, holds a doctorate in Administrative Law from the Complutense University of Madrid, and is president of the International Institute of State Law Studies (IIEDE).