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July 2018 | Newsletter 11

 

RECENT CASE LAW


 

The order dismissing an application to erase the registration in the Interior Ministry Automated Fingerprint File of a person accused of slanderous denunciation constitutes an excess of power for the President of the competent Instruction Chamber, as long as this decision is based on grounds not provided for in the applicable law, namely Article 7-1 III of Decree n° 87-249 enacted on April 8, 1987. The Criminal Chamber of the French Cour de cassation indicates in a judgment of April 10, 2018 (n° 17-84674-PB) that it belongs to the competent Judges :

 

  • to check whether the registration of fingerprints complies with the regulatory conditions in force;

 

  • and to assess the need for their retention according to the purpose of the file, which depends in particular on the circumstances of the offense and the personality of the person concerned.

 

In this case, the President of the Instruction Chamber’s refusal to erase the applicant’s fingerprints was based on non-regulatory grounds of inadmissibility. The former opposed to the latter the fact that his request for deletion was not based on one of the grounds provided for in Article 7-1 III of the abovementioned decree and that the precise conduct of the initial registration procedure had not been reported to the Court.

 

In view of these elements, the Judges of the Criminal Chamber decided to quash the rejection order submitted to them.

 


 

The fact that a maintenance agent did not use a delegation of authority to secure the work facilities and not to have committed in person (directly) the manslaughter of an agent « fatally wounded » by the explosion of a machine rendered insecure by abnormal conditions of use is not sufficient to exclude the criminal liability of the legal person concerned from the moment when the offense actually (even indirectly) takes place by an organ or a representative having acted on behalf of it. In this case, a maintenance operator died as a result of an accident during the repair of an oil extraction pump. An investigation revealed that the equipment had exploded due to a lack of normal maintenance. The operators responsible for maintaining it did not have the information necessary for the normal performance of their task.

 

The Appeal Judges dismissed the criminal liability of the company concerned on the grounds that its manager, who was the only body or representative likely to act on its behalf in the absence of a delegation of his powers in security matters, was absent from the scene of the tragedy at the time of its realization and could not have contributed to it by direct and personal acts.

 

The Court of Cassation invalidated this argument considering the deficiencies found in the training of the personnel to the normal maintenance of the work equipment and to the means of protection constituted a violation by the manager of his security obligations pursuant to Articles R4322-1 and R4323-1 of the French Code du travail.

 

Since the explosion in question was the result of the fault of an organ or a representative acting on behalf of the enterprise concerned, the criminal liability of this last should have been incurred under Article 121-2 of the French Code penal – judgement of October 31, 2017 (n° 16-83683).

 

 

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June 2018 | Newsletter 10

 

PUBLIC INTEREST JUDICIAL CONVENTION


 

Having in mind the anticorruption mechanisms of the Anglo-Saxons regime, especially those of the American Foreign Corrupt Practices Act of 1977, the French legislator introduced by Law No. 2016-1691 of December 9, 2016 (known as SAPIN II) a range of innovative legal mechanisms with the aim of improving the prevention and the repression of certain offenses involving dishonesty and moral turpitude of the economic agents.

 

This legislation “relating to transparency, the fight against corruption and the modernization of economic life” puts at the disposal of the public authorities a series of new and promising elements. Among them is the Public Interest Judicial Convention (PIJC), a transactional measure inspired by the Deferred Prosecution Agreement, which the US Department of Justice does not fail to use when it comes to impose formidable fines on corrupted operators.

 

The adaptation in French Law of this emblematic instrument is determined by the new article 41-1-2 of the French Code of Criminal Procedure. It is of a paramount importance for the concerned parties to ensure, through their legal advisers, that they are sufficiently aware about the new legal regime as long as the government is slow to lay down implementing decrees, circulars and general guidelines that would define it in a better way.

 

LEGAL PROVISIONS IN A NUTSHELL

 

Initiative – It belongs to the prosecutor to decide whether to propose or not the conclusion of a PIJC to a legal person. In principle, its choice intervenes before the introduction of a public action. Although it can still be initiated during the investigation, this implies for the referred legal person to acknowledge the facts alleged against it and to accept their criminal characterization.

 

Purpose – The settlement of a PIJC gives rise to negotiations between the prosecution and the affected company. Three types of legal obligations can result of it :

 

  • payment to the Treasury of a public interest fine, whose amount has to be proportionate “to the benefits derived from the breaches found, within a limit of 30% of the average annual turnover calculated over the last three known annual turnovers on the date of the founding of these breaches”; and whose payment may be staggered over a maximum period of one year at the will of the prosecutor;

 

  • subjugation for a maximum of three years to a compliance program designed and controlled by the Agence Française Anticorruption (AFA); knowing that the costs incurred in the application of its control missions must be borne by the legal person concerned within the limits of a conventional ceiling;

 

  • and/or compensation within one year for the harm suffered by a victim who has been identified at the prosecutor’s office and invited to submit evidence of the actual damage resulting from the breaches found.

 

Validation or invalidation – Once the defendant company has agreed to finish the negotiations and to proceed to the conclusion of a PIJC on the basis of its latest version, the prosecutor shall address to the president of the French Tribunal de Grande Instance (TGI) which is competent a request to validate the negotiated terms of the conventional proposal. This introductory act includes the details of the facts and their legal qualification. After having publicly heard the parties involved in the proceedings, namely the legal person concerned and its eventual victims, the president of the court shall decide once and for all on the validation or rejection of the proposed PIJC on the basis of its well founded and regularity.

 

In case of validation, the company involved has a period of then days from the notification of the enacted judicial order to exercise its right of withdrawal.

 

The validation order does not amount to a conviction and does not carry the effects of it, such as the exclusion form public procurements in accordance with European Law. Also, the PIJC is not mentioned on the criminal record. Its content is nevertheless disclosed through a press release by the prosecutor and through a dedicated publication on the AFA website.

 

In case of invalidation, retraction or non-execution of the PIJC, the prosecutor’s office has the responsibility to implement the public action unless new elements arise in opposition to it. Partial execution of the agreement may be considered in the event of a subsequent prosecution.

 

When the request for validation is rejected or when the validation of the request is followed by an effective retraction, the prosecutor is no longer authorized to rely on the documents that the legal person has communicated to him during the conventional proceedings, both before the investigative and trial judges.

 

PRECISIONS AND OUTSTANDING ISSUES

 

The liability of natural persons – The new law provides that the legal representatives of the accused company remain liable as natural persons. Accordingly, they should not be able to take advantage of the PIJC to negotiate any exemption of criminal liability.

 

However, the actual effectiveness of this statement should be relativized, since it is very likely that in reality the French Parquet National Financier (PNF) will have to redefine on a case-by-case basis the extent of the criminal proceedings brought against the leaders participating in a PIJC, depending on the degree of good faith or goodwill and their level of cooperation.

 

Asked to comment on this point, the PNF deputy prosecutor said that negotiating a PIJC with a company would affect in no way the prosecution of individuals involved in criminal proceedings. Their participation to the conventional process should never amount to a complete exemption from liability.

 

This precision matters in the sense that it recognizes a contrario the possibility of exonerating the natural person from part of its individual liability in proportion to the service rendered to the courts during the pursuit of the legal person; provided that, of course, that it is not directly responsible for the offenses committed. The direct criminal liability of the individual cannot be mitigated in return for a PIJC. There is no question of allowing the author (natural person) of the offense to hide behind the indirect liability of its sponsor (legal person).

 

Assessment of the public interest fine – Following a transnational logic, the negotiated fine must be proportionate to the benefits (monetary, reputational, etc.) caused by the company’s failures. According to a penal logic, the homologated fine must be punitive, that is to say of a value superior to the compensation of the profits consecutive to the alleged facts.

 

The amount of of the penalty that is added to the base of the refund of the financial gains related to the offenses noted is calculated according to a proportional formula that the law refuses to detail. In these circumstances, it is up to the PNF to establish relevant evaluation factors, such as the level of cooperation, the quality of the exchanges, the temporality of the revelations and the care taken to bring them into compliance. As long as elements of this type have not become predictable, it will affect the entire conventional system with a legal uncertainty limiting its effectiveness.

 

The undetermined impact of the compliance program and the compensation for a damage – The legislator does not rule on the possibility for the prosecution to modulate – downward or upward – the criminal liability of the persons concerned based on the examination of compliance with their compliance obligations.

 

The silence of the law does not preclude the PNF from considering the good conduct of the company and its managers or the adoption and implementation of mechanisms consistent with the law when assessing the amount of the conventional fine. In doing so, the modalities of such modulation should be clarified.

 

If need be, the law provides for the inclusion in the PIJC of the obligation to repair within a period of one year the damages suffered by a victim identified with de prosecutor’s office. In the absence of legislative provisions to the contrary, the amount of this compensation seems likely to affect that of the fine, but to what extent? Here as elsewhere, the authorities will be asked to detail their positions very soon.

 

FIRST APPROVAL

 

On November 14, 2017, the French TGI of Paris decided to homologate a PIJC negotiated and concluded between the PNF and HSBC PRIVATE BANK. This is the first of its kind since the entry into force of the conventional scheme. The British bank has agreed to pay the French Treasury a fine of 300 million euros to escape from a criminal conviction for laundering of tax fraud.

 

The Swiss subsidiary of the private bank had been indicted for aggravated money laundering, as well as illegal banking and financial solicitation at the end of an instruction based on data and computer files seized in the home of a former employee.

 

The bank was criticized for having carried out in France, through several account managers, various operations that allowed French taxpayers to mislead the tax administration by concealing a certain amount of their assets behind the opacity of the bank secrecy accorded to bank accounts seated in Switzerland.

 

At the end of a 6-month negotiation, the bank acknowledged the facts and agreed to pay 300 million euros to the French authorities. This sum should be related to the total amount of assets subtracted from the French Impôt Sur la Fortune, which amounted to 1.6 billion euros. Despite the fact that it represents less than 20% of the amount concealed, the fine negotiated remains to this date the largest ever the French courts imposed to anyone in this context.

 

 

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