Member Article

The passion Brazilians have for football is nothing new. As children, we learn the game and argue over the rules, which are often anything but black and white and, on occasion, are difficult to apply. That’s true even for referees, who, well into the 21st century, are still barred from employing the full array of technologies available to make their work easier. In contrast to other sports, the rules governing football evolve very slowly.

 

To a certain extent, the same observation could be applied to anti-corruption legislation around the world, at least until about 15 years ago.

 

Until recently, countries attached little priority to introducing or amending rules and regulations to prevent and combat corruption. The United Nations Convention against Corruption, for example, was signed as recently as 2003, while an Organization for Economic Co-operation and Development (OECD) convention on combating transnational bribery went into effect only a little earlier, in 1999.

 

In addition, for many countries, formal adherence to these international agreements represents but a first step, given the subsequent need to adapt pertinent domestic laws to the new legal framework.

 

Nonetheless, in recent years several significant changes have taken place, some more quickly than others. Brazil is no exception. For the country’s business sector, this trend gives rise to a key question: How will business be affected by emerging domestic and international anticorruption laws?

 

The various laws introduced or amended around the world to date share a common thread: they expressly assign liability to business firms for acts of foreign bribery.

 

Of the 40 signatory countries to the OECD convention, only Argentina and Brazil have yet to approve legislation in this area. Brazil is nonetheless expected to secure passage of a bill regulating the issue soon. The new legislation is about to be signed by President DilmaRousseff and will come into force at the beginning of 2014.

 

Once the new legislation is enacted, Brazilian firms with operations abroad that engage in acts against the public administration of other countries will be held to account in Brazil. Sanctions will range from fines and prohibitions on public financing to asset seizures and even liquidation, in addition to reimbursement of the public treasury for any and all misappropriations. This is a wholly unfamiliar scenario to a substantial number of Brazilian executives.

 

At a recent seminar, even legal scholars were unaware that the crime of transnational bribery had already been codified in Brazilian criminal law. Indeed, Articles 337-B and 337-C of the Brazilian Penal Code – which define the offenses of active corruption and traffic of influence, respectively, in international business transactions – were incorporated in 2002.

 

Although neither article has ever been applied nor any criminal proceeding entered on the basis of these provisions, the lack of legal awareness alone serves to reinforce the view that a brave new world is on the way for many companies.

 

Many Brazilian executives who do business abroad or have foreign partners with operations in the country are accustomed to complying with the applicable international laws. Attorneys at Brazil’s leading firms deal on a daily basis with issues relating to the Foreign Corrupt Practices Act (FCPA) and the UK Bribery Act. A number of sectors, however, including those exporting to countries that have yet to enact legislation on this front, will face a far-reaching process of adaptation to the new statute.

 

Further, a distinguishing feature of the Brazilian law is that it applies to acts of domestic corruption as well. As such, even companies not engaged in transnational business transactions will be affected.

 

In this light, enactment of the law is likely, as an initial consequence, to bolster the development of compliance units within businesses operating in Brazil, at least in some cases. Firms that are able to get out ahead of the issue will have a comparative advantage over their competitors, which will surely encounter difficulties in recruiting qualified professionals given the sudden need for talent in this area.

 

There is thus a real possibility ahead of living in different times. Clearly, it is not yet possible to determine whether the new law will be sufficient to reduce corruption in Brazil. Yet there is no question that what we are witnessing constitutes far more than minor tweaks to existing rules. It is a fundamental change in the game itself.