This country-specific Q&A provides an overview to bribery & corruption law in Brazil.
It will cover the definition of bribery, regulation, compliance, liability and enforcement as well as insight and opinion and any upcoming legal changes planned for their respective country.
This Q&A is part of the global guide. For a full list of jurisdictional Q&As visit http://www.inhouselawyer.co.uk/practice-areas/bribery-corruption/
What is the legal framework (legislation/regulations) governing bribery and corruption in your jurisdiction?
The legal framework governing bribery and corruption in Brazil may be divided in two main areas: the framework regarding individuals, which is mostly criminal, and the framework regarding legal entities, which comprises administrative and civil liability.
Individuals: The practice of corrupt acts by individuals is subject to punishment in accordance with the Brazilian Criminal Code (Decree Law No. 2.848, of December 7, 1940). The Brazilian Criminal Code establishes the crimes of “active corruption”, which punishes the acting party (the individual who offers bribes to public officials) and “passive corruption”, which punishes the public official who receives bribes.
Legal Entities: The practice of acts against the public administration may lead to the civil and administrative liability of the legal entities, in accordance with the Brazilian Anticorruption Law (Law No. 12.846, of August 1st, 2013). The Brazilian Anticorruption Law was regulated by Federal Decree No. 8.420, of March 18, 2015 (the “Federal Decree”). In addition to the Brazilian Anticorruption Law, which is a federal law, certain Brazilian states have also enacted local laws regarding the liability of legal entities as a result of wrongdoings. Where enacted, such local laws follow the principles of the federal law and focus on establishing the local authority that will be responsible for the investigation and prosecution at the local level.
The Brazilian Anticorruption Law was considered innovative to the extent that it was the first law to provide for the liability of the legal entities as a result of corruption acts. Before the enactment of such law, only individuals would be prosecuted, from a criminal standpoint, and there were no specific provisions for the payment of pecuniary penalties and reimbursement of damages caused that would apply to legal entities.
On a subsidiary manner, the following laws and regulations would also apply to the bribery and corruption investigations in Brazil:
- Federal Law No. 8.429, of June 2, 1992 (“Brazilian Public Property Law”), which provides for sanctions applicable to public agents in cases of illicit acts against public administration, such as corruption. May also be subsidiary applicable to particular individuals or entities which participated in the illicit act. Relevant articles: 1-3; 9-11; 12-18;
- Federal Law No. 8.666, of June 21, 1993 (“Brazilian Public Bidding Law”), which provides for the rules regarding public biddings and agreements with the public administration in federal, state and local levels. Establishes sanctions in case of breach of agreements, provisions and/or wrongdoings. Relevant articles: 81-99; and
- Federal Law No. 13.303, of June 30, 2016 (“Brazilian Public Companies Law”), which provides for the legal rules applicable to the public companies, including public controlled companies, semi-public companies and their respective subsidiaries that explore economic activity of production or commercialization of goods or provision of services, even in cases where the economic activity are protected by a government monopoly, in the Federal, State, District and Municipal levels. Relevant articles: 5-13.
The focus of this chapter will be on the rules applicable to legal entities, rather than individuals. It should be noted that, according to the Brazilian Anticorruption Law, the imposition of responsibility on legal entities does not depend on the charging and/or condemnation of the individuals, and vice-versa, meaning that each proceeding initiated by the competent authority is autonomous and will depend on the evidence presented in each case.
Which authorities have jurisdiction to investigate and prosecute bribery in your jurisdiction?
The Brazilian Anticorruption law provides for two different proceedings that may be initiated against a legal entity in the event of a violation/wrongdoing: an administrative proceeding and a judicial proceeding.
Administrative proceeding: The administrative proceeding for the investigation and application of penalties are incumbent on the maximum authority of each agency or entity of the Executive, Legislative or Judiciary Branches, as applicable. The commencement of the administrative proceeding could result from an “ex officio” act of the competent authority (the authority itself would initiate the investigation) or from a report from third parties (thus considered as any party that is not the competent authority). In any of the cases, the administrative proceeding shall guarantee to the investigated party(ies) the right of defence (which is a fundamental right under the Brazilian Federal Constitution).
The Brazilian Anticorruption Law also provides that the jurisdiction to initiate an administrative proceeding against a legal entity could be delegated (being the sub-delegation expressly forbidden).
From the standpoint of the Federal Executive Branch, the General Controller Office (“Controladoria Geral da União - CGU”) has a concurrent jurisdiction to initiate administrative proceedings under the Brazilian Anticorruption Law or to review the administrative proceedings initiated by other agencies of the Federal Executive Branch. In addition to that, the CGU has jurisdiction to initiate and decide on the proceedings for investigation of violations against foreign public agencies or authorities.
Once an administrative proceeding under the Brazilian Anticorruption Law is initiated, a commission shall be designated, and such commission shall be composed by two or more stable public servers.
Judicial Proceeding: The judicial proceeding for the investigation and application of penalties shall be initiated by the Attorney’s Office (“Advocacia Pública”) of the respective entity or agency and/or by the Public Prosecutor’s Office (“Ministério Público”), both State and Federal, depending on the agencies and/or officials affected/involved in the wrongdoing.
How is bribery defined?
According to Article 5 of the Brazilian Anticorruption Law, “wrongful acts” against national or foreign public administration bodies those carried out be legal entities to the detriment of national or foreign public assets, of public administration principles, or to Brazil’s international commitments, and are defined as follows:
- to promise, offer or give, directly or indirectly, an undue advantage to a public official or to a third party related to him/her;
- to, on an evidenced manner, finance, defray, sponsor or in any way subsidize the performance of wrongful acts;
- to, on an evidenced manner, make use of a third party, either an individual or a legal entity, in order to conceal or dissimulate the legal entity’s actual interests or the identity of those who benefited from the wrongful acts;
- with respect to public bidding and government procurement:
(iv.a) to thwart or defraud, through an adjustment, arrangement or any other means, the competitive nature of public bidding processes;
(iv.b) to prevent, disturb or defraud the execution of any act related to a public bidding process;
(iv.c) to remove or try to remove a bidder by means of fraud or by the offering of any type of advantage;
(iv.d) to defraud public bidding processes or bidding-related contracts;
(iv.e) to create, in a fraudulent or irregular manner, a legal entity with the purpose of participating in a public bidding process or of entering into a contract with the public administration;
(iv.f) to gain undue advantage or benefit, in a fraudulent manner, from amendments or extensions of contracts executed with the public administration without authorization in the Law, in the notice of the public bidding or in the respective contractual instruments; or
(iv.g) to manipulate or defraud the economic and financial balance of the contracts executed with the public administration;
- to hinder investigations or inspections carried out by public agencies, entities or officials, or to interfere with their work, including the activities performed by regulatory agencies and by inspection bodies of the national financial system.
Does the law distinguish between bribery of a public official and bribery of private persons? If so, how is ‘public official’ defined? Are there different definitions for bribery of a public official and bribery of a private person?
According to the provisions of the Brazilian Anticorruption Law, the wrongful acts would only include acts carried out against the public administration (whether national or foreign). Therefore, the bribery of private persons would not be considered a violation under Brazilian laws and regulations.
Under the Brazilian Public Property Law (which reproduces a concept of public official that is provided by the Brazilian Criminal Code), a public official is any individual who, whether by a permanent or transitory bound, and regardless of the payment of compensation, exercises a public position, job or function.
For the specific purposes of the Brazilian Anticorruption Law:
- public agencies and entities, or diplomatic representations of a foreign country, at any government level or scope, as well as legal entities directly or indirectly controlled by the government of a foreign country are all considered foreign public administration;
- international public organizations will be considered equivalent to foreign public administration bodies; and
- those who, even transitorily or without compensation, hold a public position, job or office in government agencies and entities, or in diplomatic representations of a foreign country, as well as in legal entities directly or indirectly controlled by the government of a foreign country, or in international public organizations, will be considered foreign public agents.
What are the civil consequences of bribery in your jurisdiction?
The administrative and judicial proceedings, detailed in Question 2 above, are independent from one another and may lead to different penalties being applicable to the legal entities investigated.
While the administrative proceeding may result in the application of a pecuniary penalty that may range from 0.1% to 20% of the turnover of the legal entity in the year immediately preceding the commencement of the administrative proceeding and the mandatory and extraordinary publication in the press of the condemnation decision, the judicial proceeding may result in the application of the following penalties: loss of assets, rights and values that may represent an advantage or profit, directly or indirectly, of the violation; suspension or partial interdiction of its activities; compulsory dissolution; and prohibition to receive incentives, subsidies, subventions, donations or loans from public bodies, agencies and/or financial institutions, for a period of one to five years.
What are the criminal consequences of bribery in your jurisdiction?
Under Brazilian laws and regulations, criminal consequences would apply exclusively to individuals, meaning that no criminal consequences would apply to corporate entities.
Does the law place any restrictions on hospitality, travel and entertainment expenses? Are there specific regulations restricting such expenses for foreign public officials?
No. Brazilian laws and regulations do not provide any restrictions on hospitality, travel and entertainment expenses, nor there are any specific regulations restricting such expenses for foreign public officials.
Are political contributions regulated?
The Elections Law (Federal Law No. 9.504, of September 30, 1997) provided in its Article 81 the possibility of political contributions by legal entities, limited to 2% of their respective gross turnover in the fiscal year immediately preceding the elections.
Such provision, however, was amended by Federal Law No. 13.165, of September 29, 2015 (the “Electoral Reform Law”) which expressly removed the provisions for any type of political contributions by legal entities. As a result thereof, since the elections held in 2016, only individuals may make political contributions (in addition to the self-contribution by the candidate and the donations made by political parties themselves, provided that such funds do not result from contributions made by legal entities, even when such contributions were allowed).
Are facilitation payments regulated? If not, what is the general approach to such payments?
No. Brazilian laws and regulations do not provide for facilitation payments. The making of any facilitation payment, to the extent not provided for expressly in the laws and regulations, would be considered a violation.
Are there any defences available?
No. The Brazilian Anticorruption Law provides for the strict liability of legal entities. It means that the Brazilian Anticorruption Law does not require any element of a “corrupt” or “improper” intent in relation to the practice of a wrongful act. Also, the Brazilian Anticorruption Law does not require that the potential (or intended) results are achieved to determine the liability of the legal entity. Therefore, once the occurrence of the wrongful act is verified, the liability would apply.
Although no defences would be available, the existence of certain elements, such as a compliance program, or collaboration with the authorities, could be considered mitigating factors in the determination of the applicable penalties.
Are compliance programs a mitigating factor to reduce/eliminate liability for bribery offences in your jurisdiction?
According to the Federal Decree, the existence of an effective compliance program is a mitigating factor in the determination of the penalties applicable to legal entities for the practice of wrongful acts. In case the compliance program is considered effective (please refer to Question 13 below), the reduction in the pecuniary penalty may range from 1% to 4% (the pecuniary penalty, as detailed in Question 5 above, may range from 0.1% to 5% of the turnover in the year immediately preceding the commencement of the administrative proceeding for investigation of the wrongful act).
Who may be held liable for bribery? Only individuals, or also corporate entities?
Please refer to Question 1. Both individuals and corporate entities may be held liable for bribery.
Has the government published any guidance advising how to comply with anti-corruption and bribery laws in your jurisdiction? If so, what are the elements of an effective corporate compliance program?
According to the Federal Decree, the compliance program will be analysed with respect to its existence and enforcement in accordance with the following parameters:
- tone at the top, including the Board of Directors, and the importance of gaining the commitment of upper management, which shall be evidenced by the full and undoubtful support to the program;
- standards and codes of ethics and conduct for all employees (regardless of their positions) and managers;
- standards and codes of ethics and conduct for all third parties, as applicable, including suppliers, service providers, intermediary agents and associates;
- periodic training on the program;
- periodic risk assessment to enable the required amendments to the compliance program;
- accounting records that reflect in a complete and precise manner the transactions carried out by the legal entity;
- internal controls that assure the prompt drafting and the reliability of the reports and financial statements of the legal entity;
- specific proceedings to prevent fraud and illicit acts in the context of public biddings, in the execution of contracts with the public administration or in any interaction with the public sector, even in case the legal entity is represented by an intermediary, such as the payment of taxes, the carry out of tax audits, or the obtaining of authorizations, licenses, permissions and certificates;
- independence, structure and authority of the internal body responsible for the enforcement of the compliance program;
- reporting channels open and widely disclosed to employees, managers and third parties, and mechanisms to protect bona fide whistle-blowers;
- disciplinary measures in the event of a violation of the compliance program;
- proceedings that assure the immediate interruption of the irregularities or violations identified and the timely remediation of the damages caused;
- appropriate diligence for the hiring of third parties and, as the case may be, their supervision, including suppliers, service providers, intermediary agents and associates;
- adequate diligence in mergers, acquisitions and corporate restructurings, in order to identify the occurrence of wrongful acts or the existence of vulnerabilities of the legal entities involved;
- continuous monitoring of the compliance program, towards its enhancement in the prevention, detection and fight against the occurrence of wrongful acts;
- transparency of the legal entities with respect to contributions made to candidates and political parties (applicable to the extent that such contributions were allowed under Brazilian laws).
When reviewing and analysing the compliance program, with the purposes of determining its existence and enforcement, the authorities shall consider the size and specificities of the legal entity, including:
- total number of employees and associates;
- complexity of the internal hierarchy and number of departments and sectors;
- use (or lack of use) of intermediary agents, such as consultants and commercial representatives;
- the market in which the legal entity operates;
- the countries where the legal entity operates, both directly and indirectly;
- the interaction grade with the public sector and the relevance of governmental authorizations, licenses and permits in its operations;
- the quantity and location of the legal entities that are part of the economic group; and
- the qualification of the legal entity as a “microempresa” or entity of “pequeno porte” (companies with limited turnover).
In November 2015, the CGU has published both in English and Spanish the guide named “Compliance Programs: Directives to Private Companies”, with the purpose to assist private entities in their fight against corruption. The guide explains the Compliance Program provided for in the Brazilian Anticorruption Law and contains rules on the implementation or enhancement of the instruments for prevention, detection and remediation of wrongful acts against the public administration. The English version is available at http://www.cgu.gov.br/Publicacoes/etica-e-integridade/arquivos/integrity-program.pdf and the Spanish version is available at http://www.cgu.gov.br/Publicacoes/etica-e-integridade/arquivos/programa-de-integridad.pdf.
In addition to presenting practical examples of conducts to fight corruption, the guide also details the five pillars of a compliance program: (1) commitment and support from the top management (“top down policy); (2) definition of body responsible for the program; (3) profile and risk analysis that should be specific to the corporate entity; (4) structuring of rules and procedures; and (5) strategies for continuous monitoring.
It should be noted that the guide should be used for orientation purposes and is not binding upon the corporate entities. Therefore, the confirmation (or not) that the Compliance Program follows the rules provided for the in Brazilian Anticorruption Law and in the Federal Decree shall be obtained on a case by case basis, upon specific review from the authorities.
Does the law provide protection to whistle-blowers?
Federal Law No. 13.608, of January 10, 2018, which provides for the telephone services to receive complaints and establish the procedures for the payment of rewards to whistleblowers who assist in police investigations, authorizes the member States of the Federative Republic to create telephone hotlines, to be preferably accessed for free. The law also authorizes that the hotlines are operated by non-profit private entities, through an agreement.
The same law also provides that the Union, the States, Federal District and Municipalities may establish ways to reward whistle-blowers who offer useful information to prevent, repress or determine crimes and administrative offences; which rewards may include the payment of amounts in cash.
In cases where the whistle-blower identifies him/herself shall have his/her identity and personal information preserved and kept confidential.
Although the enactment of such Federal Law has been the first step to establish a whistle-blower program, until the date on which this chapter was prepared no additional regulations have been enacted.
How common are government authority investigations into allegations of bribery?
The Brazilian Anticorruption Law was only enacted in 2013 and came into force in January 2014. Since then, certain judicial and police investigations which were disclosed in 2014 and uncovered corruption schemes have dominated the agenda of authorities. As a result of those judicial and police investigations, leniency agreements have been signed by corporate entities, collaboration agreements have been signed by individuals, revealing facts that are still to be investigated by the authorities.
As a result thereof, the current scenario is that current investigations into allegations of bribery are more related to and resulting from those leniency and collaboration agreements.
There is an expectation that once those major investigations are conclude, which may still take and while, authorities will have the required resources to initiate further investigations on their own.
What are the recent trends in investigations and enforcement in your jurisdiction?
Please refer to Question 15.
Is there a process of judicial review for challenging government authority action and decisions?
According to the provisions of the Brazilian Federal Constitution, no law can exclude the jurisdiction of the Judiciary Branch for the analysis if any violation of threat of violation of a right. To that extent, and following Brazilian scholars, in case a legal entity is held liable under an administrative proceeding, in accordance with the Brazilian Anticorruption Law, the legal entity may challenge such decision in Brazilian courts (State or Federal, depending on the public agency responsible for the administrative proceeding to be challenged).
Since the Brazilian Anticorruption Law is still new (it was enacted in August 2013 and came into force in January 2014, being regulated only in March 2015), all those discussions are still in their early stages, and there is still no precedent that could guide in the application of the law or establishing minimum standards for the challenge of any such decision.
Are there any planned developments or reforms of bribery and anti-corruption laws in your jurisdiction?
There are currently several bills under review and analysis of the Brazilian Congress for the purposes of amending the current Brazilian Anticorruption Law and/or related laws and regulations (more than one hundred could be identified on the date this Chapter was prepared), being the following the most relevant:
- Bill of Law No. 522/2015, which proposes that the execution and enforceability of a leniency agreement (and the benefits resulting therefrom) should depend on the legal entity refraining from perpetrating any wrongful act for a term of ten years;
- Bill of Law No. 941/2015, which proposes the amendment of the Brazilian Anticorruption Law to exclude all the provisions related to the leniency agreement (on the basis that the Public Authorities should not be allowed to enter into agreements with legal entities that have practiced wrongful acts);
- Bill of Law No. 2.267/2015, which proposes that the execution of leniency agreement shall be followed by a review by the Legislative Branch;
- Bill of Law No. 3.500/2015, which proposes the inclusion in the Brazilian Anticorruption Law of the criteria for determining the pecuniary penalties that may apply to the legal entities as a result of any wrongful acts (there are certain parameters provided for in the Federal Decree, but not in the Anticorruption Law);
- Bill of Law No. 3.636/2015, which proposes the amendment of the Brazilian Anticorruption Law to expressly provide that both the Prosecutor’s Office (“Ministério Público”) and the Attorney’s Office (“Advocacia Pública”) may enter into leniency agreements for the purposes of the Brazilian Anticorruption Law;
- Bill of Law No. 5.208/2016, which proposes the establishment of certain requirements for the execution of leniency agreement by the legal entities, such as the need to be the first entity to report the wrongdoing and the presentation of new documents, which may not have been provided to the authorities under any other agreement, including collaboration agreements entered into individuals and the authorities;
- Bill of Law No. 5.216/2016, which proposes certain amendments to the enrolment of the legal entities in the public database of entities that were penalized under the Brazilian Anticorruption Law;
- Bill of Law No. 7.149/2017, which proposes the amendment of the Brazilian Anticorruption Law to determine the specific provisions regarding compliance programs to be followed by legal entities hired by the public administration;
- Bill of Law No. 7.222/2017, which proposes the use of the proceeds to be collected by the public administration upon application of penalties resulting from violations of the Brazilian Anticorruption Law;
- Bill of Law No. 8.333/2017, which proposes rules to be followed for the disclosure of the administrative and judicial sanctions that imply in restrictions to participate in public bidding or execution of contracts with the public administration; and
- Bill of Law No. 9.795/2018, which proposes that any rural real estate that is collected by the authorities as a result of the application of the penalties provided for in the Brazilian Anticorruption Law are used for the purposes of implementing a rural reform.
To which international anti-corruption conventions is your country party?
- OAS Inter-American Convention Against Corruption, of 1996, internalized in Brazil by Federal Decree No. 4.410/2002;
- OECD Convention on Combating Bribery of Foreign Public Officials, of 1997, Internalized in Brazil by Federal Decree No. 3.678/2000; and
- UN Convention Against Corruption, of 2003, Internalized in Brazil by Federal Decree No. 5.678/2006.
Do you have a concept of legal privilege in your jurisdiction which applies to lawyer-led investigations? If so, please provide details on the extent of that protection.
Under the Brazilian Federal Constitution, the confidentiality of legal communications prepared for professional use; the attorney-client privilege; and the inviolability of lawyers’ offices and related work files are considered fundamental rights.
In addition to the provisions of the Brazilian Federal Constitution, the Code of Ethics issued by the Brazilian Bar Association and the Federal Law No. 8.906, of July 4, 1994, which regulates the legal profession in Brazil and the Brazilian Bar Association, also establish the confidentiality of the communications between a client and its lawyer.
In this context, a lawyer-led investigation would be covered by the privilege and confidentiality protections. It is for that reason that the most common structure for an investigation in Brazil is to have the law firm involved in the case hiring all other professionals that may be required, such as auditing and forensic companies, also assuring that all communications are made only between those professionals and the law firm, and the law firm being the only one to communicate with the client – in a sense that the product of work from the other professionals is a work instrument for the development of the attorney’s work. In addition to this protection, it should also be said that under Brazilian laws and regulations the advise on legal matters is exclusive on lawyers, and the provision of such advise by non-legal professionals may be considered an irregular exercise of the legal profession.
According to the provisions of the Code of Ethics issued by the Brazilian Bar Association, all communications of any nature between a client and its lawyer shall be considered confidential and privileged, and therefore should not be subject to disclosure to any third parties (with a few exceptions allowed when the lawyer is under investigation, and which shall be analyzed on a case by case basis). As a result thereof, one may conclude that the elements required for the legal privilege to apply are: (a) that the lawyer is qualified under Brazilian law (and duly enrolled with the applicable Brazilian Bar Section) to practice Brazilian law or that he/she is registered with the applicable Brazilian Bar Section to advise on foreign law, and (b) that the communications exchanged relate to the lawyer’s professional activity with the client.
There are some discussions on whether communications with in-house counsel would also be protected by the confidentiality and privilege provided for in the law. The majority of the doctrine and case law admit that such protection shall apply as long as the in-house counsel is effectively exercising the legal profession (and is not an executive of the company acting on other matters), to the extent that the Brazilian laws and regulations do not establish any distinction between the rights and obligations of in-house and external counsel.
One relevant issued to be noted is that although the client may waive its right to the confidentiality of the communications exchanged with its lawyer, under Brazilian laws and regulations the professional secrecy is an obligation incumbent on the lawyer, who has the right to decide on whether or not disclosing communications when authorized by the client. In other words, even if the client waives the right to the confidential treatment of its communications, it is the lawyer who will decide on the actual disclosure, or not, of such communications.
Although the legal requirements (elements) for the protection of the communications by the privilege and confidentiality are limited to those referred to above, certain recommendations are usually made to assure that privilege and confidentiality will apply, such as: (a) marking as confidential all written communications that may be sensitive, indicating further that privilege shall apply to them, and that they are exchanged in the context of an attorney-client relationship; (b) limiting the content of the communications to legal matters and advice, avoiding the inclusion of other matters such as commercial or business; and (c) avoiding that the communications are forwarded to or disclosed to third parties (which in some cases may be considered as a tacit waiver of the privilege).
How much importance does your government place on tackling bribery and corruption? How do you think your jurisdiction’s approach to anti-bribery and corruption compares on an international scale?
Within the past years, Brazil has lowered its position in the Transparency International ranking of “corruption perception”. Although it may lead to the conclusion that corruption has increased in these past years, the more realistic approach would be that the fight against corruption is now a matter that is being followed by most of the population. More than that, the effects of corruption (such as the lack of investments in schools and education, hospitals and health care and infrastructure) seem to be understood.
When compared to more mature jurisdictions (as it regards to anti-bribery and corruption fight), such as the United States, one can say that Brazil has still to develop its practice. However, the efforts of the country have been considered as a model by other jurisdictions, especially in Latin America, where similar social problems seem to be found.
The steps already taken by Brazil, such as the enactment of a law to provide for the liability of corporate entities; the independence of the judiciary branch, which has been able to grant decisions involving businessmen and politicians; the imprisonment of a former president, are enough to demonstrate that a change in culture is already taking place.
Generally how serious are organisations in your country about preventing bribery and corruption?
In the Brazilian corporate scenario it is possible to find organizations in different stages with respect to the adoption of measures to prevent bribery and corruption.
Brazilian subsidiaries of multinational companies, especially North-American and European, tend to have developed and mature compliance programs, already fully implemented, and which are in the process of reviewing those programs to assure that they comply with Brazilian laws and regulations. Although the main principles of the Brazilian Anticorruption Law are consistent with the principles of the FCPA and UK Bribery Act, certain adjustments may be required, including with respect to labour issues that may arise from the application of the rules of a compliance program. As an example, while US regulations may allow that an employee is demoted in case of a violation of compliance rules, Brazilian laws and regulations would not allow such demotion (a termination for cause may apply, depending on the case, but not demotion).
When analysing Brazilian companies, the compliance function is still a recent matter to be developed. Certain company have adopted “shelf” compliance programs in the past, which proved to be not sufficient to prevent the occurrence of wrongdoings and leading to the conclusion that an effective compliance program takes time and effort to be built.
Regardless of the stages of each company in Brazil, compliance is currently one of the most relevant topics for corporate entities. A so-called “compliance wave”, initiated by the investigations and disclosure of corruption schemes, has moved forward to the need of adaptation to a new way of doing business, and has further evolved to a stage where bigger corporate entities are requesting from their suppliers the adoption of effective compliance programs, so that they can continue to engage in business relationships.
In the same direction and for similar purposes, certain public entities and government have enacted rules that require that a compliance program is adopted by corporate entities willing to engage in businesses with those entities and government.
What are the biggest challenges enforcement agencies/regulators face when investigating and prosecuting cases of bribery and corruption in your jurisdiction?
One of the biggest challenges faced by enforcement agencies and regulators when investigating and prosecuting cases of bribery and corruption in Brazil is the lack of resources (especially human and budget resources).
In addition to that, the legal uncertainties related to the execution of leniency agreements (please refer to Question 25) may result in less cooperation from corporate entities with respect to the voluntary disclosure of wrongdoings, which are usually a faster and less money-consuming way of investigating and prosecuting cases of bribery and corruption.
However, it is expected that as time passes by and more decisions are granted by the judiciary branch and competent administrative authorities, the whole investigating and prosecuting system becomes more mature, and such challenges can be overcome.
What do you consider will be the most significant corruption-related challenges posed to businesses in your jurisdiction over the next 18 months?
The most significant corruption-related challenges posed to businesses in Brazil over the next 18 months are related to the development of a greater compliance culture, where prevention should have an important role.
In the current scenario, most Brazilian companies are reactive on compliance matters, and therefore only adopt any compliance measures once a breach has occurred and demands from the various stakeholders to adopt an effective compliance program are presented.
How would you improve the legal framework and process for preventing, investigating and prosecuting cases of bribery and corruption?
One of the most challenging issues regarding the current framework for preventing, investigating and prosecuting cases of bribery and corruption is the legal uncertainty that arises from the execution of leniency agreements.
Although the Federal Prosecutor’s Office (MPF) has been successfully negotiating leniency agreements with corporate entities, simultaneously with the execution of cooperation agreements with individuals in the criminal sphere, the Brazilian Anticorruption Law provides that the Federal Controller’s Office (CGU) has the jurisdiction to execute such agreements at the federal level. As a result of such discussions, all agreements that were entered with the MPF remain subject to a confirmation by the CGU and other public agencies that may have jurisdiction over the matter, such as the General Attorney’s Office (“Advocacia Geral da União” - AGU) and the Federal Audit Court (“Tribunal de Contas da União” – TCU).
In certain cases, there are judicial decisions (which were not final when this chapter was prepared, to the extent that they were still subject to appeals) that indicate that leniency agreements executed by the MPF are subject to the confirmation by the CGU, for their full validity and enforceability, although preserving the validity and enforceability with respect to the parties who actually executed the agreements. Such discussions bring uncertainty to the parties involved, especially with respect to the amounts of fines to be paid and damages to be reimbursed, since the CGU may challenge the amounts established in the agreements.
In addition to the discussions concerning the agencies with jurisdiction at the federal level in relation to corruption and bribery matters, as described above, there are also discussions with respect to (a) the jurisdiction in respect of wrongful acts that are also violations under other laws, such as, for example, a cartel in the context of a public bid, that would also be a violation under the Brazilian Antitrust Law (Federal Law No. 12.529, of November 30, 2011), and therefore involve the jurisdiction of Administrative Council for Economic Defence (“Conselho Administrativo de Defesa Econômica” - CADE); and (b) the jurisdiction in respect of wrongful acts that affect state, district and/or municipal public agents, in which cases those states, district and municipalities would also have jurisdiction to investigate the wrongdoings.
From the perspective of the corporate entities who are willing to cooperate with the authorities and negotiate and execute a leniency agreement, it is reasonable to expect that once an agreement is entered into with a competent authority, it should be binding to and enforceable against all other authorities that may have a jurisdiction over the investigated matter. At the same time, it is important to acknowledge that under the Federative model adopted by Brazil, the jurisdiction of states, district and municipalities cannot be overruled.
In this context, having the various authorities at the federal level to establish a cooperation agreement among themselves and also developing a model where state, district and municipal authorities could adhere to agreements executed at the federal level (or even by other states, district or municipalities) would be two important steps to provide corporate entities with more certainty when entering into leniency agreements. There is a reasonable expectation that once such steps are taken, more corporate entities would be willing to cooperate with the authorities.