Bill on Corporate Criminal Liability for Cases of Corruption and Guidelines for Compliance Programs

Although it has a narrower scope, this Bill follows the trend established by foreign regulations such as the Clean Companies Act of Brazil (Law 12,846), the UK Bribery Act, and the US Foreign Corrupt Practices Act (FCPA).

If enacted into law, this Bill would mean a material change in the anti-corruption regulation in Argentina by penalizing legal entities in addition to individuals.

Crimes against  public administration and transnational bribery

Legal entities are liable for crimes against the public administration and transnational bribery when:

1. the crime resulted from lack of appropriate supervision and control;
2. the crimes have been committed, directly or indirectly, in their names, in their interest, on their behalf, and when the legal entity might benefit from the crimes; and
3. the crimes were committed by any of (i) their owners or controlling parties, (ii) their representatives, directors, managers, employees under their supervision or direction, or (iii) representatives in partnership, agency, distribution, concession or trust agreements.

With the exception of small and medium-sized companies, legal entities are be responsible for the actions of their suppliers, contractors, agents, distributors or individuals or other legal entities with whom they have a contractual relationship when no due diligence procedures in order to check their integrity and reputation were carried out.

Further, legal entities may be sanctioned even in those cases where no individuals are convicted.

Joint and Several Liability of Controlling Companies - Successor Liability

The Bill also sets forth joint and several liability of controlling companies for the economic penalties imposed on their controlled companies, as well as successor liability in cases of transformation, merger, splits or any other corporate modification. However, it will be possible to avoid successor liability if appropriate due diligence processes aiming to verify irregularities or illegal actions are carried out and corrective measures are adopted in order to prevent the repetition of similar situations once the relevant corporate modification is over.

Compliance Programs - Exclusion of Liability

Considering that one of the elements of the definition of the crime is that such crime derives from inadequate control and supervision, it is of the utmost importance to determine when such control and supervision may be considered adequate. According to the Bill, it will be deemed adequate if the legal entity, before the commission of the crime, implemented a compliance program appropriate to the risks of the activities that the entity carries out, and the entity’s size and financial capacity.

Compliance programs may include, among others, the following elements:

1. a Code of Ethics/Conduct or anti-corruption policies;
2. rules and procedures to prevent illegal acts in bids and tenders or in any interaction with the public sector;
3. applying the Code of Ethics/Conduct or the anti-corruption policies to third parties;
4. regular trainings on the compliance program;
5. regular risks assessments and consequential amendments to the compliance program;
6. support to the compliance program from the senior management (tone at the top);
7. report channels;
8. non-retaliation policies;
9. internal investigation systems;
10. third-party due diligence;
11. due diligence in cases of corporate transformation and acquisitions;
12. continues monitoring and evaluation of the compliance program; and
13. a person in charge of the implementation of the compliance program (i.e. compliance officer).

Effective Collaboration Agreements

It is innovative that, up and until the case goes to trial, the authorities and the legal entity may enter into “Effective Collaboration Agreements”. Through this agreement, the company undertakes to cooperate in exchange for a deferred prosecution by disclosing information or accurate, useful and verifiable data for the clarification of the facts of the case, the identification of the authors or participants and/or the recovery of the assets or profits proceeding from the crime.

Penalties

Penalties involve:

1. fines from 1% to 20% of the gross income for the previous year;
2. suspension of activities up to 10 years;
3. suspension of trademarks and patents up to 10 years;
4. publication of the ruling;
5. suspension or termination of government benefits and subsidies, suspension from participating in public bids/tenders or in any other activity related to the State for up to 10 years,
6. termination of the legal entity and forfeiture of assets derived from illegal activities.

Some of the elements to graduate penalties are the existence and scope of an internal system of control and supervision, turning state’s evidence on the case to the authorities and collaborating with the authorities during the investigation (e.g. provide information on individuals involved and how to recover assets related to the illegal activities).

Transnational Bribery

The Bill adds a new section to article 1 of the Criminal Code by which the scope of the Code is extended to all Argentine citizens or legal entities domiciled in the Argentine Republic, either when such domicile is the one specified in their by-laws or the domicile corresponding to its establishments or branches located in the Argentine territory, in transnational bribery cases.

New article 1 should be read jointly with article 258 bis that defines transnational bribery by penalizing those who, directly or indirectly, offer or give to a foreign public official or to an official from an international public organization, either for their own benefit or for the benefit of a third-party, money or anything of value or other kinds of compensations, such as “dádivas”, gifts, favors, promises or benefits, in exchange for such official doing or refraining from doing something related to his/her office.

Although previous bills made similar proposals, the Bill is strongly promoted by the current administration and is presented a few days after Congress approved a law granting benefits to those who, after engaging in bribery, turn state’s evidence and collaborate with the authorities.