José Alexandre Buaiz Neto

Pinheiro Neto, Brasília

jabuaizneto@pn.com.br

Daniel Costa Rebello

Pinheiro Neto, Brasília

drebello@pn.com.br

Amanda Athayde Linhares Martins Rivera

Pinheiro Neto, Brasília

aathayde@pn.com.br

Camila Gomes Martins Sobrinho

Pinheiro Neto, Brasília

csobrinho@pn.com.br

Luana Graziela Alves Fernandes

Pinheiro Neto, Brasília

lgfernandes@pn.com.br

The publication of Law No 12,846 of 1 August 2013 (Anti-Corruption Law) came about in response to international commitments undertaken by Brazil, particularly with respect to the international anti-corruption system and practices, such as the Organisation of American States (OAS) Convention against Corruption (1996), the Organisation for Economic Co-operation and Development Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (1997), and both United Nations (UN) Conventions in Palermo (2000) and in Merida (2003).^[1]

The Anti-Corruption Law was first regulated, at the federal level, almost two years later by Decree No 8,420 of 18 March 2015. On 12 July 2022, more than seven years later, Federal Decree No 11,129 of 11 July 2022, which regulates Anti-Corruption Law and repeals Decree No. 8,420/2015, was published by the Brazilian government.

The new Decree includes substantial changes to the criteria previously set out in the repealed decree and incorporates provisions already contained in ordinances, normative rulings and internal opinions of the Office of the Comptroller General (Controladoria-Geral da União –  ‘CGU’) and of the Federal Attorney General’s Office (Advocacia-Geral da União – ‘AGU’), in addition to new provisions.

Its scope is specifically defined so as to apply to tortious acts committed: (1) by a Brazilian legal entity against the foreign public administration, even if committed abroad; (2) totally or partially within the Brazilian territory or that produce or may produce effects on it; or (3) abroad, when committed against the domestic public administration. These legal entities must have headquarters, a branch or representative office within Brazilian territory, whether organised de facto or de jure (Art 1).

The provisions in the Decree apply to ongoing cases from 18 July 2022, with due regard to acts committed before their effectiveness.

This article contains some considerations on the changes introduced by new Federal Decree No 11,129/2022 based on five main pillars: (1) liability in the administrative sphere; (2) administrative sanctions and prosecution in the judicial sphere; (3) leniency agreements; (4) compliance programme; and (5) other relevant matters.

Liability in the administrative sphere in new Federal Decree No 11,129/2022

As regards the liability in the administrative sphere, Federal Decree No 11,129/2022 makes a groundbreaking division into preliminary investigations and administrative liability proceedings (Processo Administrativo de Responsabilização).

With respect to the preliminary investigations (Art 3), the following changes are highlighted:

1. The head of the oversight board (corregedoria) of the competent entity will decide among three possible ways: (a) to open a preliminary investigation; (b) to recommend the instatement of an Administrative Liability Proceedings; or (c) to recommend the shelving of the case (Art 3, para 1).
2. The sphere of authority and scope of the preliminary investigation was extended, with the possibility of adoption of relevant measures, such as to ask for the assistance of experts with technical or operational knowledge; to request bank information about transactions with public funds, even if confidential; to request to the competent authority the sharing of tax information of the legal entity under investigation; to ask the judicial representation body or its equivalent in the aggrieved bodies or entities to call for the judicial measures necessary for investigation into and prosecution of tortious acts (including search and seisure measures), in Brazil or abroad; and, to request documents or information to national or foreign individuals or state-owned or private legal entities, or public international organisations (Art 3, para 3). Therefore, a legal basis for anti-corruption search and seisure seems to be included at a civil level, through the granting of a judicial measure, still under a preliminary investigation, as the already consolidated practice in the antitrust area (Art 13, VI(d) of Law No 12,529/2011), in theory, without the mandatory involvement of the Public Prosecutor’s Offices in this proceeding.
3. The investigation period was extended to 180 days, and may be extended indefinitely, as distinct from the previous rule that set out a period of only 60 days, which could be extended only once for completion of the preliminary investigation (Art 3, para 4).

As to the Administrative Liability Proceedings, the following changes are highlighted:

1. Standardisation of the procedures to be complied with, including minimum requirements for notice and statement of charges (Art 6, paras 1, 2, and 3), actions to be taken after the production of new evidence (Art 8, para 1), extension of the measures to be adopted by the Committee to clarify the facts (Art 10, main section), granting of a maximum term of ten days for the legal entity to answer regarding the terms of the final report issued by the Committee (Art 12, main section), and submission of the Administrative Liability Proceedings to the oversight board of the competent entity or unit to review the good standing and merits of the proceeding (Art 12, sole paragraph).
2. Possibility of the Administrative Liability Proceedings being admitted for trial if the legal entity fails to submit its defence, regardless of notification or notice, without an specific provision on the failure to appeal or answer or acknowledgment of the matter of fact (Art 6, para 4).
3. Possibility of notifying or serving notice on a foreign legal entity in the person of the manager, representative or officer of its branch, agency, main branch, establishment or office set up in Brazil, regardless of power of attorney or contractual or statutory provision (Art 7, para 3).
4. Possibility of submitting the final report to several authorities for specific investigations, including to the competent authority for filing of supporting documents of the specific administrative proceeding for redress of damage, when there are signs that the tortious act has resulted in damage to the public coffers (Art 11, II).
5. The direct and indirect federal public administration bodies and entities’ obligation to inform CGU about signs of occurrence of tortious acts against a foreign public administration, identified in the discharge of their duties, attaching to the communication the documents already identified (Art 18, sole para).

Administrative sanctions and prosecution in the judicial sphere in new Federal Decree No 11,129/2022

Concerning the administrative sanctions and prosecution in the judicial sphere, the Decree significantly changes the fine calculation criteria set out by the Anti-Corruption Law, with new calculation percentages and innovations in some mitigating or aggravating factors to define the level of the fine. In several items, the repealed decree set out a range, with minimum and maximum percentages, whereas Federal Decree No 11,129/2022 indicates only a maximum percentage, giving, in theory, more discretion to the authorities, but less predictability to market players.

The Decree also further describes the concept and calculation of the advantage gained or sought, and also sets new criteria for definition of the calculation base of the fine.

Among the main changes, we highlight:

1. Definition of alternative methods of identifying the legal entity’s revenues to be the calculation base of the fine: (a) sharing of tax information; (b) review of the accounting records made or published by the legal entity; (c) an estimate, in reliance on any information about its economic status or business of the legal entity; and (d) identification of overall sums received by the non-profit legal entity in the year before the fiscal year of instatement of the PAR (Art 20, para 1).
2. Consolidation of gross revenues of all legal entities that make up the same economic group, whether de facto or de jure, that have committed the wrongful acts set out in the Anti-Corruption Law or contributed to their commitment, to be considered in the calculation of the fine (Art 20, para 2).
3. If the legal entity has not manifestly had gross revenues in the latest fiscal year before the fiscal year of instatement of the PAR, the fine should be calculated based on the last gross revenues ascertained by the legal entity, instead of in the year in which the tortious act has occurred, as provided in the repealed decree, excluding the taxes levied on sales, with their amount monetarily adjusted up to the last day of the fiscal year before the fiscal year of instatement of the Administrative Liability Proceedings. In this case, the amount of the fine will be stipulated within a range from BRL6,000 to BRL60m (approx US$1,122 to US$11.22m) and the upper limit of the advantage gained (Art 21, main section and para 1).
4. Changes in the aggravating factors for calculating the fine: (a) removal of the provision on continuation of tortious acts over time as an aggravating factor – instead, an aggravating factor of up to four per cent in case of joinder of tortious acts was included (Art 22, I); (b) increase in the percentage range, in case of neglect or awareness of the tortious conduct by persons in the legal entity’s management or executive board by up to three per cent (Art 22, II) – the repealed decree set out a range from one to 2.5 per cent; (c) interruption of supply of public services, performance of contract works may result in an aggravating factor of up to four per cent (Art 22, III) – the repealed decree set out a range from one to four per cent; (d) inclusion of an aggravating factor of up to four per cent in the events of interruption of delivery of assets or services essential to the provision of public services and failure to comply with regulatory requirements (Art 22, III) – the repealed decree did not contain this provision; (e) change in the criterion for the analysis of general solvency and general liquidity and net profit ratios in the latest fiscal year before the fiscal year of the instatement of the PAR (Art 22, IV) – the repealed decree adopted the last fiscal year before the fiscal year of the occurrence of the tortious act as a criterion; (f) reduction in the percentage in case of recidivism to three per cent (Art 22, V) – the repealed decree set out the application of five per cent; and (g) expansion of the range of amounts of the contracts, conventions, agreements, arrangements and other similar instruments held or intended to be executed with the aggrieved body or entities, in the years of commitment of the tortious act (Art 22, VI).
5. Changes in the mitigating factors for calculation of the fine: (a) reduction in the percentage range of non-consummation to up to 0.5 per cent (Art 23, I) – the repealed decree established a one per cent reduction; (b) reduction of up to one per cent for cases of evidence that the legal entity voluntarily returned the advantage gained and redressed the damage resulting from the tortious act, or non-existence or lack of evidence of the advantage gained and of damage resulting from the tortious act (Art 23, II) – the repealed decree set out a 1.5 per cent discount. The maximum discount may be only given on the return of amounts in full (Art 23, sole para I); (c) change in the percentage range to up to 1.5 per cent concerning the level of cooperation given by the legal entity (Art 23, III) – the repealed decree set a range from one to 1.5 per cent; (d) removal of the provision on reduction as a result of voluntary report. Instead, a mitigating factor of up to two per cent in case of voluntary acknowledgement of strict liability for the tortious act by the legal entity (Art 23, IV) was included. The maximum discount may be only given if the acknowledgement occurs before the Administrative Proceeding is instated (Art 23, sole para, II); and (e) increase in the percentage range on evidence that the legal entity has adopted and enforces a compliance programme to up to five per cent (Art 23, V) – the repealed decree set out a range from one to four per cent. The maximum discount may be only given if the compliance programme becomes effective before the commitment of the tortious act (Art 23, sole para III).
6. Inclusion of clearer assumptions about the upper and lower limits of the final amount of the fine (Art 25).
7. Definition of advantage gained or sought as the monetary value equivalent to the proceeds of the wrongful act, which means the gains or benefits obtained or sought by the legal entity as a direct or indirect result of the commitment of the tortious act, as well as the inclusion of methods to estimate the value of the advantage (Art 26).

Leniency agreements in new Federal Decree No 11,129/2022

With regard to leniency agreements, the new Decree incorporates provisions already contained in normative rulings of CGU and AGU and consolidates the authorities’ internal opinions, while also amending a series of provisions and including several others.

The new Decree defines the concept of leniency agreement as a negotiated administrative instrument in which the state exercises its sanctioning power, designed to impose liability on legal entities for the commitment of tortious acts against the domestic or foreign public administration (Art 32).

In addition, the purposes of a leniency agreement are defined, which were not so far contemplated in the former decree: to improve the public administration’s investigative capacity, to enhance the state’s asset recovery capacity, and to foster the compliance culture in the private sector (Art 32). The legal writings offer other possible justifications for leniency programmes,^[2] which should be read together with this new provision in the Decree.

The Decree also specifically provides for the interinstitutional cooperation between CGU and AGU (Art 35). This is, therefore, a formalisation of an already existing practice through joint ordinances and cooperation agreements of the authorities,^[3] and also acknowledged by the Supreme Court.^[4]

The main changes brough by the new Decree include:

1. CGU may accept the delegation to negotiate, enter into and monitor the compliance with leniency agreements related to tortious acts against other branches and political entities (Art 36). It seems, however, an increase in the sphere of authority of CGU, which may use its expertise to assist other state and municipal entities that are still unable to process proposed leniency agreements.
2. Change in the wording from ‘acknowledge participation in the administrative offences’ to ‘acknowledge its strict liability for the tortious acts’ (Art 37, III).
3. Inclusion, as a requirement for the execution of the leniency agreement, full redress of the undisputed portion of the damage caused (defined as amounts admitted by the legal entity or resulting from definitive decision in administrative or judicial proceeding) and forfeiture of the amounts corresponding to improper economic gains or unjust enrichment directly or indirectly arising from the offence (Art 37, VI and VII, coupled with para 2), a requirement not established in the Anti-Corruption Law.
4. If the tortious act results simultaneously in damage to the relevant entity and improper economic gains to the legal entity that committed the act and there is identify between both, the corresponding amounts will be: (a) calculated only once for the purpose of quantifying the amount to be paid based on the leniency agreement; and (b) classified as payment of damages for accounting and budget purposes as well as their allocation to the injured entity (Art 37, para 2), a provision that is also not included in the Anti-Corruption Law.
5. Specific inclusion of a provision establishing that leniency agreements shall be submitted for review of the admissibility for acceptance of their execution (Art 39, main section), as well as the possibility that negotiations may terminate at any time, on request of the proponent or at the discretion of the federal public administration (Art 39, para 2).
6. Interruption of the limitation period during the negotiations (limited to 360 days) due to the signature of the memorandum of understanding (Art 39, para 3), as well as the possibility of staying PAR without affecting the continuity of the investigations necessary to clarify the facts and adoption of indispensable preventive and precautionary measures (Art 40).
7. Specific inclusion of clauses of payment of fines and damages given the inclusion of the guarantee of possibility of using the amounts paid as damages under the leniency agreement for offsetting with other amounts that may be ascertained in other sanctioning or accountability proceedings, when related to the same facts (Art 45, VI and VI, coupled with Art 37, VI).
8. Specific inclusion of clauses for monitoring compliance programmes (Art 45, main section, IV), which may be made directly or indirectly by CGU or may be dispensed (Art 51, main section), in line with recent experiences of CGU.^[5] Brazilian inspiration seems to lie in the North-American Independent Compliance Monitoring implemented as a method adopted by the United States Department of Justice (DoJ) and the Securities Exchange Commission (SEC) as a leniency agreement monitoring method whose general lines are set out in the document known as ‘Memorandum Morford’.^[6] That is an instrument which has been attracting the attention of legal scholars due to its recent application in Brazil.^[7]
9. Emphasis is given to the new Decree provision establishing parameters for calculating the percentage of the reduction in the applicable fine in leniency agreements (Art 47), that is: timeliness of the voluntary disclosure and unprecedented nature of the tortious acts; effective cooperation of the legal entity; commitment to undertake material conditions for fulfillment of the agreement. In our view, this is an important initiative because it gives greater legal certainty to the parties on negotiating leniency agreements since the anti-corruption legislation does not provide for full exemption, different from what happens in leniency agreements under the scope of Brazil’s antitrust authority (CADE), the National Financial System, the Central Bank, and the Brazilian Securities Commission (CVM). It must be remembered that article 16, paragraph 2, of the Anti-Corruption Law provides that the execution of a leniency agreement shall exempt the legal entity from the sanctions set out in article 6, II and in article 19, IV, and shall reduce the applicable fine by up to two thirds.
10. The leniency agreement may provide for the resolution of lawsuits dealing with the facts comprised in the scope of the agreement (Art 50, para 1).
11. New provisions on declaration of fulfillment, termination and possibility of changing or replacing obligations agreed (Arts 52 and 54).

The new Decree does not make any reference to the forms of cooperation with TCU, whose acts are governed by Normative Ruling TCU No 83/2018. Therefore, there are no new developments in the regulation compared to what has been presented and is in phase of testing, pursuant to Technical Cooperation Agreement STF/CGU/AGU/MJ/TCU 2020.

Compliance programme in new Federal Decree No 11,129/2022

The new Decree changes the wording of certain requirements for assessment of compliance programmes, therefore supplementing the previous decree by introducing the best market practices. The main changes brought by the new Decree include:

1. A new purpose for compliance programmes, consisting in developing and keeping in place a compliance culture in the organisational environment (Art 56, II).
2. Adjustments in the parameters for assessment of compliance programmes, including assessing the existence and application of proper risk-based measures for hiring and overseeing politically exposed persons as well as their family members, close associates, and legal entities in which they hold equity interests; and carrying out and overseeing sponsorships and donations (Art 57). It seems that these changes result from CGU’s experience from past investigations.
3. Certain provisions on the assessment of small companies’ compliance programmes were revoked, but the possibility of assessment based on the legal entity’s revenues was maintained.

Other relevant matters in new Federal Decree No 11,129/2022

The Decree has brought changes in the procedures for inclusion or exclusion of data into/from the national register of noncompliant and suspended companies (CEIS) and the national register of punished companies (CNEP) (Arts 58 to 63).

Finally, the new Decree also provides for joint actions among the Ministry of Justice and Public Security, AGU and CGU for the establishment of institutional communication channels for: the reporting of information on commitment of tortious acts against the domestic or foreign public administration or derived from plea bargains and leniency agreements; and international legal cooperation and recovery of assets (Art 67).

Given the comments above, concerning the five main pillars chosen for this article, one can see that further discussions will take place in the mission to strengthen the fight against corruption in the public and private sectors.