The administrative procedure for punishing companies for engaging in corruption.
Corruption is a social problem that can have significant consequences for society and is one of the biggest challenges affecting the credibility of public and private institutions in Brazil and worldwide. To address this problem in Brazil, various legal measures, such as the creation of laws and the strengthening of public oversight bodies, have been adopted over the years as a way to combat these illicit practices.
Among the main measures, Law No. 12.846/2013 (Anti-Corruption Law) stands out, which, among its main provisions, seeks to hold companies involved in illegal acts against public administration accountable.
In this sense, the Anti-Corruption Law stipulates that the accountability of legal entities for offenses foreseen in that law will be carried out through the Administrative Liability Process (PAR). The PAR may lead to the application of fines and extraordinary publication of the decision, in addition to the sanctions provided for in Law No. 14.133/2021 (Public Procurement and Contracts Law), such as the declaration of ineligibility and the prohibition from bidding.
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In this article, we will explore the main aspects of the Administrative Liability Process (PAR), covering everything from the legal basis to the applicable sanctions, leniency agreements, and the future impact of this legislation on the Brazilian corporate environment.
Brazilian Anti-Corruption Law
The Anti-Corruption Law was enacted in 2013 and is a landmark in the fight against corporate corruption in Brazil. Unlike other laws that focused on punishing individuals, this law aims to punish legal entities involved in harmful acts against public administration, whether national or foreign.
The illicit acts defined in the rule are provided for in its article 5 and include: (i) promising, offering or giving undue advantage to a public agent, defrauding public bids and contracts and hindering inspection activities.
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One of the main points of the Anti-Corruption Law, which has been the subject of extensive doctrinal and jurisprudential debate, is the fact that it introduced the objective liability of companies, meaning that it is not necessary to prove intent or negligence on the part of administrators or employees for the company to be punished, only the causal link between the conduct and the illicit act committed.
Sanctions can include hefty fines, ranging from 0,1% to 20% of the company's gross revenue, up to and including a declaration of ineligibility if the offenses committed are also covered by the Bidding and Contracts Law, which places companies in a position of greater caution and internal scrutiny.
The Administrative Accountability Process (PAR)
The Administrative Liability Process (PAR) is the mechanism provided for in the Anti-Corruption Law through which public administration bodies, including the Comptroller General of the Union (CGU), investigate and punish companies involved in acts of corruption.
According to the Anti-Corruption Law, the authority to initiate the PAR (Administrative Sanctioning Process), which is an administrative sanctioning process, lies with the highest authority of the public entity that has been harmed by the alleged acts of corruption, or, concurrently, with the CGU (Office of the Comptroller General), which has become the reference body in the fight against corruption in the country.
The PAR (Administrative Liability Proceeding), which must have a duration of 180 days, extendable, begins with the formal initiation of the administrative procedure, which can be done through a complaint, audit report, or any other indication of irregularity. After the initiation, a Commission composed of two or more tenured civil servants from that public body is appointed, who will be responsible for analyzing the facts and the defense arguments and, subsequently, issuing a final report with their conclusions.
It is important to highlight that during the Administrative Liability Process, the constitutional rights to full defense and due process must be guaranteed, allowing the company to defend itself against the accusations and present counter-evidence.
After the presentation of the defense and the factual evidence, and the issuance of the final report by the PAR Commission, a decision will be made by the highest authority of the body handling the procedure, deciding whether or not to hold the legal entity liable.
Sanctions Applicable to Companies
The Anti-Corruption Law establishes severe sanctions for companies convicted in an Administrative Liability Process. These sanctions serve both to punish and to deter future corrupt practices, within an educational aspect, promoting greater compliance in companies.
The outcome of the PAR (Administrative Liability Proceeding) may result in the application of fines and extraordinary publication of the conviction decision, which are the penalties provided for in the Anti-Corruption Law, in addition to the sanctions provided for in the Bidding and Contracts Law, as explained previously.
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It also cannot be ignored that the application of these penalties can generate serious reputational damage for companies, which, in itself, can have a considerable impact on the continuity of their activities.
However, Decree No. 11.129/2022 (Anti-Corruption Decree) provides for factors capable of mitigating, or even aggravating, the fine imposed on companies. Among the mitigating factors foreseen are cooperation with the authorities and the implementation and maintenance of an efficient integrity program; that is, even if the company is punished under the law, it may receive benefits if it invests in an effective compliance program.
Leniency Agreement and Commitment Term
Other relevant mechanisms that can bring an end to the Administrative Liability Process through agreements between the public entity and the liable legal entity are the Leniency Agreement and the Commitment Agreement (formerly known as summary judgment).
Inspired by agreements reached in cartel cases, the leniency agreement, which is provided for in the Anti-Corruption Law, allows a company to cooperate with investigations by providing relevant information and confessing to its illegal activities. In return, the company may obtain reduced penalties or even the waiver of certain sanctions.
The leniency agreement is seen as an essential tool for dismantling complex corruption schemes, as it facilitates investigative work by offering a clear incentive to companies, while still holding them accountable. For this reason, for the agreement to be valid, the company must completely cease the illicit practice and adopt effective compliance measures.
The commitment agreement, formerly known as early judgment, is provided for in CGU Normative Ordinance No. 155/2024, and is another way to conclude the Administrative Liability Process through the signing of an agreement between the authorities and the investigated legal entity.
In the settlement agreement, the company must also admit its responsibility for the investigated acts and cease the illegal practices, and may receive a discount on the fine and be exempt from the sanction of extraordinary publication of the decision, depending on the procedural stage at which it is presented.
However, unlike a leniency agreement, a commitment agreement is limited to the allegations of the Administrative Liability Process and can only be entered into by the CGU (Brazilian Comptroller General's Office), whereas a leniency agreement can be signed by other injured public entities and may include the presentation of new relevant facts.
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Conclusion
The Administrative Liability Process is a fundamental pillar in the fight against corruption in Brazil, and the Anti-Corruption Law has brought significant advances in confronting corporate wrongdoing against public administration. Sanctions, combined with instruments such as leniency agreements and companies' fear of potential reputational damage, aim to promote a more transparent and ethical corporate environment in the country.
Companies, in turn, must continually adapt to legal requirements, investing in compliance programs that ensure conformity with legislation. A future trend is the strengthening of transparency and internal oversight mechanisms within companies, which can be accelerated by technologies such as artificial intelligence and big data, which assist in the early identification of illicit behavior.
Now that you know the main aspects of the Administrative Liability Process, how about deepening your knowledge of Administrative Law with our Postgraduate Program?
References:
BRAZIL. Comptroller General of the Union. How to make an agreement . Leniency Agreement . Available at: https://www.gov.br/cgu/pt-br/assuntos/integridade-privada/acordo-leniencia/como-fazer-um-acordo . Accessed on: September 23, 2024.
BRAZIL. Comptroller General of the Union. Anti-Corruption Law – General Aspects . Frequently Asked Questions . Available at: https://www.gov.br/corregedorias/pt-br/assuntos/perguntas-frequentes/lei-anticorrupcao-aspectos-gerais . Accessed on: September 23, 2024.
BRAZIL. General Comptroller of the Union. Administrative Liability Process (PAR) . Frequently Asked Questions . Available at: https://www.gov.br/corregedorias/pt-br/assuntos/perguntas-frequentes/processo-administrativo-de-responsabilizacao-par . Accessed on: September 23, 2024.
BRAZIL. Law No. 912.846, of August 1, 2013. Available at: https://www.planalto.gov.br/ccivil_03/_ato2011-2014/2013/lei/l12846.htm . Accessed on: September 23, 2024.
BRAZIL. General Comptroller of the Union. Normative Ordinance No. 155, of August 21, 2024. Available at: https://www.in.gov.br/web/dou/-/portaria-normativa-n-155-de-21-de-agosto-de-2024-581125693 . Accessed on: September 23, 2024.
BRAZIL. General Comptroller of the Union. Commitment Agreement . Accountability of Private Entities . Available at: https://www.gov.br/corregedorias/pt-br/assuntos/painel-de-responsabilizacao/responsabilizacao-entes-privados/termo-de-compromisso . Accessed on: September 23, 2024.
BRAZIL. Federal Public Prosecutor's Office. Leniency Agreements . Combating Corruption . Available at: https://www.mpf.mp.br/atuacao-tematica/ccr5/publicacoes/guia-pratico-acordo-leniencia/ . Accessed on: September 23, 2024.
