Argentina took a significant step this month in its efforts to combat corruption, one of President Mauricio Macri’s strongest campaign promises, by passing, on Nov. 8, 2017, the Law on Corporate Criminal Liability and Compliance Programs for Certain Corruption Cases (“the CCL”). This law creates corporate criminal liability in Argentina for corruption cases involving certain specific interactions with public officials, such as bribery, for the first time, and regulates compliance programs for legal entities in such cases.
This effort began shortly after President Macri assumed power in December 2015, when he sent a set of bills to Congress to update Argentina’s anti-corruption regulations. Now, nearly two years later, the stage is set for the CCL to dramatically change Argentina’s anti-corruption enforcement regime in many respects.
On the one hand, the CCL complies with the Organization for Economic Cooperation and Development requirements established for Argentina, aligning the country’s regulations with international anti-corruption standards and thus strengthening Argentina’s position in its efforts to become an OECD member. In turn, this demonstrates Argentina’s effort to reinsert itself in the international arena, both as a player on the world stage and a good receptor of much-sought-after international investment.
On the other hand, the CCL will have a material impact on a number of companies that now must comply with its requirements or face significant potential penalties or debarment. The extent of this impact, of course, depends on the enforcement resources, priorities and implementation by the Argentine authorities.
The most significant aspects of the CCL are described below.
Liability of Legal Entities
Prior to the CCL, corporate criminal liability in Argentina was limited to a narrow list of conduct such as tax evasion and smuggling. The CCL expands the corporate liability to apply where the following crimes are committed, directly or indirectly, with the intervention of legal entities, on their behalf, interest or benefit:
(a) local or international bribery (“cohecho”) and influence peddling (“tráfico de influencias”);
(b) negotiations that are incompatible with public office;
(c) illegal payments made under the appearance of taxes or fees owed to a government agency upon undue request from one or more public officials (“concusión”);
(d) illegal enrichment of public officers and employees; and
(e) producing aggravated false balance sheets and reports to hide local or international bribery or influence peddling.
Moreover, similar to other constructs of successor liability, if an entity liable for misconduct under the CCL merges or splits with another entity, liability flows to the successor entity.
Penalties and Debarment
The CCL sets fines between from two to five times the “undue” benefit that was obtained or that could have been obtained through activity in violation of this regulation. Additionally, the authorities may require companies to forfeit assets obtained through illegal activity.
Legal entities may also lose or suffer suspension of previously earned government benefits, and be forbidden from participating in government bids and contracts or in “any other activity related to the government.” In certain cases, courts may order full or partial suspension of the company’s activities for up to 10 years, or even shut down the entity when its main purpose or activity was to carry out criminal activities.
The level of penalties imposed on the company will depend on a series of elements, including whether it had an effective compliance program in place prior to the criminal activity, and whether the matter was voluntarily self-reported by the company to the authorities.
Effective Collaboration Agreements
Legal entities under investigation for breaching the CCL may enter into effective collaboration agreements with the authorities. To such end, the entity shall disclose precise and verifiable information that is useful for investigating the facts, authors and participants in the crime, as well as for recovering assets. The agreement shall be subject to the following conditions: (1) the legal entity shall pay 50 percent of the minimum fine; (2) the entity shall restitute the assets and profits obtained through the crime; and (3) the entity shall abandon in favor of the state those goods that presumably would be forfeited in case of conviction.
Legal entities are not required by the CCL to implement compliance programs. However, having an effective compliance program may mitigate the penalties ultimately imposed. Further, the CCL specifically contemplates that additional regulations will be passed regarding compliance programs and that any compliance program shall (1) be appropriate to the risks, size and economic capacity of the entity, and (2) include a code of ethics, internal policies to prevent crimes in interactions with the public sector, and training.
Finally, and importantly, having a compliance program will be a requisite for certain contracts with the federal government.
The CCL will become enforceable 90 days after being enacted by President Macri and published in the Official Gazette, steps that, in this case, are viewed as formalities now that it has passed through Congress. Companies operating in Argentina should carefully consider the impact the CCL may have on their activities, particularly direct and indirect interactions with the government, and consider any appropriate enhancements to their compliance programs.
Kim Nemirow is a partner in the Chicago office of Kirkland & Ellis LLP. Lucila Hemmingsen is a partner in the firm's New York office.
Gustavo Morales Oliver is an associate at Marval O'Farrell & Mairal in Buenos Aires.
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