On Jan. 29, 2014, Brazil’s new Clean Companies Act came into effect, bringing with it a new wave of anti-corruption implications for companies operating in one of the largest economies in the world. Although the law shares many features with the U.S. Foreign Corrupt Practices Act (FCPA) and the UK Bribery Act (UKBA), it once again brings to light the necessity for multinational companies to keep up with the changes in the anti-corruption world. 

As previously reported on this blog, Brazil’s new law imposes civil and administrative liability on companies for wide-ranging corrupt activities, including bribery of Brazilian or foreign public officials. Fines can range up to 20 percent of a company’s gross revenue for the fiscal year ending prior to the initiation of the investigation. If, for whatever reason, a fine cannot be calculated based on revenue, a company may face a fine up to BRL 60 million (or approximately $25 million). Other administrative penalties may include forcing a company to relinquish any benefits received from the illegal conduct, limiting a company from participating in public bidding processes or even forcing dissolution.

Like the FCPA and UKBA, the Clean Companies Act has an international impact, allowing Brazilian enforcement agencies to enforce the law against acts occurring inside and outside Brazil, and against Brazilian companies and foreign companies with a registered office, affiliate or branch in Brazil. Although the Clean Companies Act brings strict liability and does not provide for an UKBA-style “adequate procedures” defense that could eliminate fines altogether, companies are able to mitigate potential fines based on cooperation and the existence of an effective compliance program. Unlike the FCPA and UKBA, the new law does not impose criminal liability on companies — but its civil and administrative penalties are potentially severe enough to result in similar effects. Also, it does not provide for a facilitating payments exception, such as the one found under the FCPA.

Even with a comprehensive compliance program and well-trained employees, companies falling under the Clean Companies Act’s jurisdiction face potentially challenging situations based on two key aspects of the law. First, the Clean Companies Act is enforced by multiple levels of government in Brazil, which raises the question of whether such multilevel enforcement will actually create more possibilities for illegal conduct in light of competing enforcement interests and Brazil’s culture. In fact, one European company has publicly commented about its concerns that some Brazilian government bodies may extort money or other things of value in exchange for looking the other way when it comes time to apply the law. Practically speaking, multiple enforcement fronts may also impose significant investigative costs on companies.

Second, the Clean Companies Act also provides for leniency agreements to be executed with companies that self-report violations or that otherwise qualify under the law. In effect, these agreements can potentially reduce a company’s fines by up to two-thirds, while also protecting the company from other administrative penalties. Unlike the FCPA, the Clean Companies Act contemplates full transparency about exactly how self-reporting may impact the bottom-line for a company. The decision to self-disclose with Brazilian authorities may backfire, however, because it is entirely possible that companies that admit wrongdoing under the Clean Companies Act will face greater scrutiny under other Brazilian laws. Also, just as with a decision to self-disclose with U.S. authorities under the FCPA and especially because so many more countries are expanding the scope of their anti-corruption laws, a company must be mindful that more corruption-related investigations may be on the horizon as other countries take notice.