Brazil Enacts New Anti-Bribery, Corruption Law

Brazil is cracking down on corruption.

In four months, companies that conduct business in the South American country will be held liable for the corrupt activities or behavior of their employees or agents. Bill of Law 6,826/2010, which has become known as the Anti-Bribery Law, was enacted on Aug. 2 and takes effect Jan. 28, 2014.

Before the bill was passed, 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. Such exemption no longer will apply to businesses.

Former President Luiz Inácio Lula da Silva introduced the law in 2010, but the legislation stalled for nearly three years before being “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 partly was 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 the planet’s inhabitants.

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 the country to accelerate its efforts to make companies directly liable for bribing foreign officials.

To prosecute companies for violations of the statute, authorities need only 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 percent 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.

The new regulation, however, provides companies with incentives to compliance. Effective internal ethics compliance programs and self-disclosure of violations will be taken into consideration by the court when determining punishment. Compliance, though, is not a complete defense.