- New Colombian draft law proposes to impose severe administrative
sanctions on companies that engage in transnational bribery.
- The new legal framework applies both to Colombian subsidiaries and
branches of multinational companies.
- Administrative fines can be imposed up to USD 50 Million.
- Companies may be liable to have imposed on them the “inability for
performing commercial activities” sanction.
- Effective compliance programs and active cooperation in investigations can substantially reduce the sanction‘s severity or prevent it entirely.
- Multinational companies that use Colombia as a hub country for other
national markets should take efforts to minimize compliance risks.
Multinational companies that have subsidiaries in Colombia are likely to face a new compliance challenge with the draft law on transnational bribery (proyecto de ley 159 de 2014) that has recently been approved in the first debate by the Colombian Congress.
This pertinent legislative development should be seen against the background of Colombia‘s plans to become a part of the OECD (Organization of Economic Co-operation and Development). Colombian President Juan Manuel Santos has reiterated his commitment to secure Colombia‘s membership to this “club of wealthy countries”. A pre-condition for the OECD membership is becoming a signatory to the OECD-Anti-Bribery Convention (OECD Convention on Combating Bribery of Foreign Public Officials in International Business
Transactions), which Colombia did by signing and becoming the 40th party of the OECD convention on 19 January 2013.
However, signing the OECD-Anti-Bribery Convention was only the first step, since the OECD subjects convention signatories to a strict standard, including annual review. In this regard, the OECD was of the opinion that Colombia’s legislation lacks in terms of prevention of transnational bribery. Therefore the Colombian government introduced the abovementioned draft law in late 2014 to comply with its commitments to the OECD Anti-Bribery Convention.
The draft law has had its first debate in Colombian Congress, and would have to go through three more debates as required by Colombian constitutional law. While the law is required to be adopted by 20th June 2016, it is probable that this process may be expedited by the Colombian Congress in light of Colombia’s imminent membership to the OECD and the efforts of the Minister of Justice.
The draft law proposes to introduce some major changes within the Colombian legal system of corporate liability. Article 1 of the draft law establishes administrative sanctions on a legal person who, through one of its employees or managers, bribes foreign public officials in an international business transaction. Such administrative sanctions would mark a unique development to Colombian law.
As per the current law, sanctions against legal persons can only be imposed if the company’s legal representatives or administrators are directly involved or permitted acts of transnational bribery. The company however could face civil law liabilities by virtue of criminal proceedings having been initiated against its officers in connection to transnational bribery offences. For example, in criminal proceedings against a company‘s CEO for bribery in public procurement, the company itself could be included as a civilly liable third party in the proceedings. However, this civil liability mechanism has not been applied in judicial practice. As a result, there is no effective sanction regime in place against companies in cases where employees committed corruption-related offences, even when the company has obtained financial benefits from such offences.
The proposed administrative sanctions as envisaged in the draft law would apply to both Colombia-based subsidiaries of foreign companies and to branches of such foreign companies as well, notwithstanding the fact that the latter (branches) have no legal personality per se under Colombian commercial law.
A hypothetical example highlighting the impact of the draft law would be if an employee of a multinational company‘s Colombian branch bribes a foreign (i.e. not Colombian) public official, the Colombian branch itself might face administrative sanctions, as well as criminal proceedings against the natural person that committed the offence.
The enforcement of the draft law is likely to rest with the Colombian Superintendence of Companies (Superintendencia de Sociedades) which would also be in charge of imposing administrative sanctions for transnational bribery on companies. However, companies that are supervised by the Financial Superintendence (Superintendencia Financiera de Colombia), such as banks and other financial institutions, would be sanctioned by the Financial Superintendence.
The draft law provides for a broad range of administrative sanctions. Firstly, the Superintendences may impose fines of up to 128 billion Colombian Pesos (approximately USD 50 million). Secondly, the company may be excluded from Colombian public procurement for a period of up to 20 years. Thirdly, the company may be declared unable to perform commercial activities. Lastly, the imposed sanction may be published in newspapers and required to be published on the sanctioned company‘s website.
If a company that has engaged in transnational bribery is acquired by another company, the concerned Superintendence can impose the administrative sanctions on the buyer company. This provision is likely to make future company acquisitions in Colombia more cumbersome, as now an exhaustive criminal law compliance will be necessary to avoid administrative sanctions.
The draft law includes a list of mitigating factors regarding the administrative sanction‘s severity. One of those factors is a preventive anti-corruption program, codes of conducts or other effective compliance measures that were in place at the time the corruption-related offence has been committed. Furthermore, the Superintendences can grant benefits to companies that actively cooperate in ongoing investigations. The company may even have its charges dropped if it actively and comprehensively discloses at an early stage such acts of transnational bribery that have been committed by its employees.
The draft law poses serious legal, financial and reputational risks for subsidiaries or branches of multinational companies that are domiciled in Colombia, especially if they are doing business in foreign countries with a
Colombian presence. As Colombia is becoming more and more attractive as a hub for multinational companies that serve markets in other Andean countries (like Ecuador or Peru), Central America or the Caribbean, such risks must be considered significant. Companies are advised to ensure compliance with the Colombian legal framework. An earnest compliance effort can prevent or substantially reduce administrative sanctions.
Parra Rodríguez Abogados
Carrera 9 No 74-08 Of.504