Brazil leniency program

Upon ruling on the fraudulent bidding process for construction of thermoelectric power station Angra 3 on 3. It granted them additional 60 days to amend the existing leniency agreements in a way that settles the Angra 3 claim and provides for their collaboration with the TCU as well. This coordination may prove ineffective eventually and still needs to be battle-tested.

In addition, the TCU could in principle reject any amendment to the MPF settlement after all and as result still prohibit any of Odebrecht, CC and AG from participating in the federal procurement process for five years regardless of the negotiation efforts with the other authorities.

Thanks to a very defective and illogical constitutional and legal structure, there is a hodgepodge of overlapping jurisdictions to take action in corruption probes and at the same time there is no rule to coordinate those actions. All authorities purport to defend and safeguard the public interest, but their conflicting actions may end up having the opposite result and cause large construction conglomerates — which employ thousands of workers and pay hundreds of millions of reais in taxes every year — to go bankrupt.

The risk is real: all this uncertainty surrounding the Brazilian anticorruption leniency program already hurts their credit ratings and in practice prevents them from getting financings, and may soon also block their access to the federal procurement process, which is a vital source of revenue for them.

The underlying problem extends well beyond, though. It may discourage any entities investigated in any other probes from settling — be it with the MPF or the other relevant authorities. This will serve no one, and certainly not the public interest in the first place.

To name a few: articles 71 to 74, and of the Constitution; Law No. The legal framework for leniency agreements related to cartels and other competition-related wrongdoings is different, leaner and clearer under Law No.

Parties accorded that the agreement would only be enforceable upon validation by the MPF. The MPF has not validated it on the grounds that more investigation must be carried out. MPF settlements must be homologated in court, so the Judiciary may theoretically also interfere with the content and scope of the bargains.

PDF File. Find a professional. See all. Home Publications. Introduction In March the Brazilian federal government auctioned off concessions to operate four airports. Law enforcement agents in corruption probes and their powers and duties An intricate set of rules applies to the internal and external oversight, control, review and enforcement as regards management and execution of the federal budgets, federal procurement, and lawfulness of contracts between the federal government and the private sector 1.

Leniency agreements and their legal and political background The landmark statute on corrupt acts and corporate compliance is Law No. Conclusion Thanks to a very defective and illogical constitutional and legal structure, there is a hodgepodge of overlapping jurisdictions to take action in corruption probes and at the same time there is no rule to coordinate those actions. What are you searching for? From To Other issues Nov Tax reform: recent developments involving dividend taxation and the telecom sector.

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But such admissions can also entail additional collateral consequences: For one thing, a factual confession that the company engaged in specific unlawful conduct such as paying bribes exposes the company to the risk of shareholder class action suits. Such suits are still relatively rare in Brazil, but may increase soon, following the U.

Furthermore, if the company entered into any private contracts that include anticorruption representations and warranties, these agreements would all be subject to review, penalties, and even termination if the company admits, as a required part of a leniency agreement, that it engaged in specified corrupt conduct.

Many companies simply decide not to do business with a company that has admitted involvement in corrupt activity, as doing business with such companies inherently raises red flags, notwithstanding the fact that the company in question has supposedly resolved its liability. Like this: Like Loading What are the implications for employees when an undertaking has been granted immunity or leniency?

Circumstances As soon as CADE's Tribunal declares the fulfilment of the leniency agreement, liability for penalties for the following is immediately extinguished:. Cartel conduct provided in Law No. Other crimes related to cartels set out in various laws such as Law No. However, only in rare cases does CADE object to the signing of addenda to the leniency agreement by other employees. This means that directors, managers and employees of involved companies that do not sign leniency agreements can be prosecuted both by CADE and criminally.

A criminal conviction can result in a prison sentence of between two and five years, and a fine ranging from BRL,67 to BRL5, Employees' interests See Question 6.

Application proceedings 8. When should an application for leniency be made? Under the Brazilian competition authority's leniency programme, the first leniency proponent will be the only recipient of the benefits for that specific violation reported or under investigation.

This creates an incentive for companies to apply for leniency as soon as possible. What are the procedural rules for leniency applications? CADE's Tribunal is only responsible for declaring the fulfilment of the conditions established in the signed agreement. Other companies in the same group as the leniency applicant will only be able to benefit from the terms of the agreement if they have signed it together with the applicant company. Companies and their directors, managers and employees can be represented by the same or by different legal representatives or attorneys.

However, since CADE is a public body, it is always possible to schedule a meeting, in person or by telephone, to discuss the issues. However, companies are advised to communicate with the GS of CADE as soon as possible their intention to propose a leniency arrangement and request a marker declaration. Form of application Leniency applications and notices of intention to apply can be requested only to the GS's Chief of Staff or, in their absence, to the Substitute General Superintendent , either orally by telephone or in person or in writing.

Markers A potential applicant can request a "marker" declaration from GS which attests that it has formally sought out CADE with the intention of reporting that specific anti-trust violation, and that it meets the requirements for negotiating a Leniency Agreement Article , CADE's Internal Rules. The marker will also indicate, if applicable, whether the referred violations are already under investigation.

In any case, the definitive consequences of the leniency will only be implemented when the Tribunal of CADE approves the leniency. Details of all known perpetrators including of itself , and each one's participation in the anti-competitive conduct. Information on the violation, including its estimated duration, and on the market affected, with indication of clients and competitors, and of the effects in the Brazilian territory, as well as the products, services and the geographic area affected by the conduct s complained of.

Evidentiary documents submitted on the execution of the agreement, such as:. Information on leniency proposals made in other jurisdictions concerning the same practice. The leniency proponent must also report other criminal and administrative violations other than the anti-competitive conduct under investigation, if such additional information is needed for CADE to understand the anti-trust violation.

However, leniency benefits will only apply to the anti-competitive conduct. Oral statements Oral statements are accepted throughout almost the whole procedure, from the initial contact with and marker request to the regulator. During the latter phase, indeed, communication with the applicant is primarily made orally. Apart from any eventual leniency applicant interview conducted by the GS, most of the evidentiary documents will be provided in hard copies and flash drives.

Short-form applications Not applicable. What are the applicable procedures and timetable? The leniency programme can be divided into three main phases:. Marker request. Initial contacts can be made at any time, especially since the marker application can be made orally, by telephone or in person. Then, "in a race with its co-conspirators", the leniency applicant secures a marker to be the first to negotiate a collaboration agreement.

GS has five working days to either issue a marker declaration to the referred company or inform the proponent that the marker is unavailable in this scenario, the company will be put it in the waiting line. The marker will not be available when another agent involved in the wrongdoing had already reported, before CADE, the collective anti-competitive conduct.

Instruction phase. The declaration will indicate a deadline of up to 30 days for the applicant to submit the Leniency Agreement Proposal, which consists of the submission of evidentiary information and documents about the conduct reported. That second phase is complemented by the negotiation period. The negotiation period can be extended by CADE until all the requested information and documents have been submitted.

The proposal is then forwarded by the GS's Chief of Staff to the Substitute General Superintendent, who, after deciding on the completion of that document, will send the proposal for final analysis by the GS. Execution phase. This includes the submission of additional information and documents relating to the conduct, such as sworn translations of foreign documents, and may involve the participation of the Federal or State Public Prosecution Service as a third party to the agreement which can request changes or additions to the leniency agreement.

Subsequently, the parties involved must validate the terms of the agreement and sign it at CADE's headquarters in Brasilia or in some other place set by the parties. At this point, the evidentiary documents of the reported violation must be definitively delivered.

The leniency recipients, after signing the referred agreement, must fully and permanently co-operate with the investigations and the administrative proceeding until their conclusion Article 86, Competition Law The Public Prosecution Service may or may not participate in the leniency proceeding, as its participation is not expressly required by Articles 86 and 87 of Law No.

However, in the light of the criminal repercussions of a cartel, the Public Prosecution Service is normally invited to co-sign and participate in the celebration of the agreements as a consenting party, which gives greater legal security for the leniency recipients and facilitates the criminal investigation of the cartel. Withdrawal of leniency In what circumstances and at what stage of the proceedings can leniency be withdrawn?

What implications does the withdrawal of leniency from one company have for other applicants? The leniency proponent can withdraw its application at any time before the agreement is signed. Withdrawal does not amount to any illegality or confession of wrongdoing. If there is a waiting list of applicants, the next leniency applicant in line will then be invited to negotiate a new leniency agreement.

CADE cannot, however, open an investigation based on the documents and information provided in the context of the leniency negotiation withdrawn or rejected. All above documents will be returned to the respective leniency applicant. Scope of protection What is the scope of leniency protection after it has been granted?

The benefits granted by leniency cover all the conduct under investigation. Such conduct will be listed in the leniency agreement signed by both parties. If the authority manages to collect further evidence on the conducts denounced in the leniency application, it will still analyse the effectiveness of the co-operation to decide on the partial or total fulfilment of the agreement, and consequently, on the amount granted of the expected benefits.

Does the competition authority offer any further reduction in fines for an undertaking's activities in one market if it is the first to disclose restrictive agreements and practices in another market leniency plus?

The applicant can provide information on a second cartel conduct about which CADE's General Superintendence was not previously aware, to obtain all the benefits of the Leniency Agreement, as well as further penalty waivers on the leniency procedure it first applied to "leniency plus".