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Artigo26.09.2019

Implementing the United Nations Convention Against Corruption: why commercial bribery should be a crime in Brazil

Por:

André Luiz Marcassa Filho

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André Luiz Marcassa Filho
Pinheiro Neto Advogados, São Paulo
amarcassa@pn.com.br (mailto:amarcassa@pn.com.br)


Introduction
Despite worldwide anti-corruption efforts, corruption remains a persistent problem in many countries. This is particularly true in Brazil which still falls below the global average on corruption indices.[1] Although corruption remains one of the main challenges for Brazil,[2] the Brazilian enforcement regime has undergone remarkable change in the past decade, with unparalleled results. Brazilian society seems less tolerant corruption-related culture and practices. The fight against systemic corruption in contracts of the public sector has definitely entered Brazil's public policy agenda and will influence political debates for years to come.[3]

The Brazilian Criminal Code already sets forth crimes of both active and passive corruption (Articles 333 and 317 respectively) within the chapter dedicated to crimes against the government, and which states that, as a rule, those crimes must affect public interest and involve someone vested with public authority. Moreover, the Brazilian Criminal Code also incriminates the practice of influence-peddling (Article 332) by whoever solicits, charges or obtains an advantage, or promises an advantage for influencing an act to be carried out by a government official in the exercise of his/her duties.[4]

In the context of international business transactions, to implement the provisions of the Organisation for Economic Cooperation and Development (OECD) Convention on Combating Bribery of Foreign Public Officials in International Business Transactions,[5] the Brazilian Criminal Code was amended in 2002 to set forth the crimes of active corruption of a foreign public official (Article 337-B) and influence-peddling to whoever solicits, charges or obtains an advantage, or promises an advantage for influencing an act to be carried out by a foreign government official in the exercise of his/her duties (Article 377-C).

Despite the fact that the Brazilian legal system already establishes legal provisions relating to bribery and corruption in the public sector, commercial bribery or corruption in the private sector is not yet defined as a crime and punished under Brazilian law.[6]

United Nations Convention against Corruption: a landmark for international cooperation to implement anti-corruption measures in the private sector

Brazil is a signatory to the United Nations Convention against Corruption (UNCAC), signed in 2003 and which entered into force in 2005. The UNCAC is a multilateral treaty negotiated by members of the United Nations (UN) which requires state parties to the treaty to implement several anti-corruption measures that focus on six main areas: prevention, law enforcement, international cooperation, asset recovery, technical assistance and information exchange.[7]

UNCAC's goal is to reduce various types of corruption that can occur across country borders, such as trading in influence and abuse of power, as well as corruption in the private sector, including embezzlement and money laundering. Article 21 of the UNCAC provides that states parties should adopt measures to combat private corruption in their legal systems, especially in cases related to economic, financial or commercial activities.[8]

To implement the UNCAC's provisions against corruption in the private sector in its domestic law, the Brazilian Congress has been intermittently discussing different bill proposals that will change the enforcement landscape towards commercial bribery.

Bills proposed to criminalise commercial bribery in Brazil

The first relevant bill to criminalise commercial bribery in Brazil is the New Brazilian Criminal Code (Bill No 236 of 2012), which in its Article 167 incriminates the acts of 'demand, request, accept or receive an undue advantage, as a representative of a company or private institution, in order to favour itself or third parties, directly or indirectly, or accept a promise of undue advantage, in order to act or refrain from acting'. The bill named this crime as 'corruption among private individuals' ('corrupção entre particulares'). According to this bill, commercial bribery will carry a maximum sentence of four years of imprisonment.[9]

Following the first proposed bill, in 2016, two other bills were proposed to incriminate commercial bribery in Brazil in the wake of and under direct influence of the corruption scandal involving the International Federation of Association Football (FIFA), in which three of the defendants (arrested by Swiss authorities in cooperation with United States authorities) were Brazilian (José Maria Marin, former President of Brazilian Football Confederation (CBF), José Hawilla and José Margulies).[10]

Criticism from the Brazilian legal community and media about the lack of domestic legal tools to prosecute commercial bribery offences relating to the FIFA scandal contributed remarkably to the proposal of the Bill No 5,895 of 2016.[11] This bill seeks to incriminate private corruption as acts of unfair competition in the intellectual property landscape (including sections XV and XVI to Article 195 of Law No 9,279 of 1996), punishable by a maximum sentence of three months to one year of imprisonment, or a fine.[12]

In addition, Bill No 455 of 2016 derived from the parliamentary inquiry committee of Brazil's National Congress that investigated facts related to the FIFA scandal and the contracts of CBF.[13] This bill proposed to include Article 196-A in the Brazilian Criminal Code to incriminate the acts of 'require, request, accept or gain advantage, from directors, officers, board and technical body members, auditors, managers, agents, representatives or employees of a company or private institution, in order to favour himself or herself or third parties, directly or indirectly, or accept a promise of advantage in order to act or refrain from acting in accordance to his or her duties'. The bill named this crime as 'private corruption' ('corrupção privada') and provides that this crime will also carry a maximum sentence of four years' imprisonment.[14]

Although Brazilian pre-legislators are using different terminology to define this crime in the mentioned bills, to be coherent with the US law terminology, this article will refer to this practice as commercial bribery. All these bills that incriminate commercial bribery in Brazil are in discussion in the upper and lower houses of Brazil's National Congress and are about to be voted on by Brazilian Congress.[15]

Reasons for criminalising commercial bribery in Brazil

There are several reasons for Brazil's National Congress to pass any of these bills giving Brazilian authorities proper legal tools to investigate, prosecute and punish commercial bribery cases involving Brazilian individuals.

First, criminalisation of commercial bribery is coherent with criminal legislation currently in force in Brazil. It is legally defensible under current Brazilian legislation that certain acts defined as commercial bribery by Article 167 of Bill No 236/2012, under certain circumstances, can be criminally prosecuted if characterised as other offences, such as embezzlement ('estelionato', Article 171 of Brazilian Criminal Code), breaching of professional secrecy ('violação de segredo professional', Article 154 of Brazilian Criminal Code), unfair competition ('concorrência desleal', Article 195 of Law No 9;279/96 specific for intellectual property landscape), conspiracy ('associação criminosa', Article 288 of Brazilian Criminal Code), or the act of taking part in a criminal organisation ('organização criminosa', Article 2 of Law No 12,850/13, the so-called Law on Organised Crime).[16]

Secondly, observing the experience of other countries, it is well-established that commercial bribery is against public policy, unfair to competitors and against the interest of consumers. US courts argued that this practice is 'morally reprehensible',[17] 'morally and economically offensive',[18] 'a competitive wrong in and of itself',[19] and 'an indefensible practice needing no further condemnation'.[20] According to the former chairman of the Federal Trade Commission of the US, commercial bribery 'eliminates competition based on quality and service', and 'provides only competition for the goodwill of the agent or employee who is bribed, which leads to increase in price or deterioration in quality causing harm to consumers.'[21] Legislation in the UK also criminalises private-to-private bribery and provides that this crime will carry a maximum sentence of ten years' imprisonment and/or a fine (Bribery Act 2010).[22]

Thirdly, without proper legislation incriminating commercial bribery, it would be impossible for Brazilian authorities to cooperate with other countries investigating Brazilian individuals and companies for commercial bribery, just as in the FIFA case.[23] This means that, without the criminalisation of commercial bribery in Brazil, the individuals investigated for and charged with commercial bribery, who are in Brazilian territory, could not be extradited and there is no means for the countries involved in the investigations to cooperate criminally, which frustrates the purposes of UNCAC provisions signed by Brazil.[24]

Concluding remarks

It is clear that Brazil needs to be aligned with the global anti-corruption efforts and adapt its legislation to UNCAC provisions. Commercial bribery is a serious crime and causes huge losses to companies. When bribery attracts trade by the fraud it perpetrates, the trade is diverted from upright competitors so that to meet this unlawful competition the honest merchant must either suffer loss in price, reduce the quality of his goods or service, or become dishonest.[25]

Unfortunately, the scale of commercial bribery in Brazil is immense but largely under-reported in the media and, historically, is not investigated, prosecuted or punished. When the marketplace is not clean and transparent and payment of bribes is the rule among the market participants, responsible investors will not have the confidence to invest their money into that market.[26] Therefore, there is a latent need for a specific legislation that defines commercial bribery as a crime to punish the perpetrators of this activity in Brazil.

Although it is possible for Brazilian individuals to recover damages related to commercial bribery in the civil sphere,[27] it is imperative for Brazil's National Congress to criminalise commercial bribery, so that: (i) Brazilian individuals who obtain undue advantages at the expense of private entities will be punished, creating accountability culture among the market participants; (ii) Brazil will ensure cohesion with the most modern anti-corruption legislation in the world and, more specifically, adapts its legislation to UNCAC provisions; and (iii) Brazil will show its commitment to an efficiently functioning global economy characterised by free and fair competition.

Notes

[1] Brazil is below the average score on the last year's corruption perception index that ranks 180 countries by levels of public sector corruption: Transparency Int'l, Corruption Perception Index 2018, available at: www.transparency.org/cpi2018, accessed 10 May 2019.

[2] The country ranked 105 out of 180 on the last year's corruption perception index, see: https://knowledgehub.transparency.org/assets/uploads/helpdesk/Brazil-Country-Profile-2019_PR.pdf, accessed on 10 May 2019.

[3] For an overview of the singularities of public corruption in Brazil, see Sérgio Fernando Moro, Preventing Systemic Corruption in Brazilwww.amacad.org/publication/preventing-systemic-corruption-brazil, accessed 10 May 2019.

[4] Rogerio Tafarello, Bribery & Corruption 2019 – Brazil,GLI Global Legal Insights, www.globallegalinsights.com/practice-areas/bribery-and-corruption-laws-and-regulations/brazil, accessed on 10 May 2019.

[5] www.oecd.org/daf/anti-bribery/ConvCombatBribery_ENG.pdf, accessed 10 May 2019.

[6] According to the report, coordinated by Rita de Cássia Biason, on Brazil's implementation and enforcement of UNCAC provisions, Brazilian Criminal Code does not contain the offences of bribery in the private sector: UN Convention Against Corruption Civil Society Review: Brazil 2012, page 6,  Available at: www.transparency.org/files/content/publication/206-brazil-full-report.pdf, accessed 10 May 2019.

[7] The United Nations Convention against Corruption, available at: www.unodc.org/unodc/en/corruption/uncac.html, accessed 10 May 2019.

[8] Article 21: Bribery in the private sector, available at: www.unodc.org/documents/brussels/UN_Convention_Against_Corruption.pdf, accessed 10 May 2019:

'Each State Party shall consider adopting such legislative and other measures as may be necessary to establish as criminal offences, when committed intentionally in the course of economic, financial or commercial activities:

(a) The promise, offering or giving, directly or indirectly, of an undue advantage to any person who directs or works, in any capacity, for a private sector entity, for the person himself or herself or for another person, in order that he or she, in breach of his or her duties, act or refrain from acting;

(b) The solicitation or acceptance, directly or indirectly, of an undue advantage by any person who directs or works, in any capacity, for a private sector entity, for the person himself or herself or for another person, in order that he or she, in breach of his or her duties, act or refrain from acting.'

[9] Article 167, available at: https://legis.senado.leg.br/sdleg-getter/documento?dm=3515262&ts=1557773026440&disposition=inline, accessed 10 May 2019.

'To demand, request, accept or receive an undue advantage, as a representative of a company or private institution, in order to favour itself or third parties, directly or indirectly, or accept a promise of undue advantage, in order to in order to act or refrain from acting:

Sentence – One to four years of imprisonment.

Sole paragraph. The same sentence is applicable to anyone who offers, promises, delivers or pays, directly or indirectly, to the representative of the company or private institution, improper advantage.'

[10] The FIFA case investigated agreements between FIFA executives and owners of sports marketing companies: in short, those who intend to contract with FIFA should, supposedly, make payments of bribes to the directors of FIFA, who would launder illicit payments by means of intricate financial transactions. Available at: www.justice.gov/opa/pr/nine-fifa-officials-and-five-corporate-executives-indicted-racketeering-conspiracy-and, accessed 10 May 2019.

[11] Conrado Almeida Corrêa Gontijo, Caso Fifamostra a fragilidade da ordem jurídica do país no assunto. Available at: www.conjur.com.br/2015-jun-01/conrado-gontijo-fragilidade-ordem-juridica-brasileira-escandalo-fifa#_ftnref1, accessed on 10 May 2019. See also the explanatory memorandum of the bill: www.camara.leg.br/proposicoesWeb/prop_mostrarintegra;jsessionid=2D5FBE85CBBD16CCE807F5E081BA49C3.proposicoesWebExterno2?codteor=1479584&filename=PL+5895/2016, accessed 10 May 2019.

[12] Article 195. (…), available at: www.camara.leg.br/proposicoesWeb/prop_mostrarintegra;jsessionid=2D5FBE85CBBD16CCE807F5E081BA49C3.proposicoesWebExterno2?codteor=1479584&filename=PL+5895/2016, accessed 10 May 2019.

'XV – Promise or offer advantage to others in order to divert clients or obtain the conclusion of an agreement or contract;

XVI – Receiving or accepting the advantage of others divert clients or obtain the conclusion of an agreement or contract.'

[13] Available at: www12.senado.leg.br/noticias/materias/2017/02/06/projeto-tipifica-o-crime-de-corrupcao-privada, accessed 10 May 2019.

[14] Private corruption, Article 196-A, available at: https://legis.senado.leg.br/sdleg-getter/documento?dm=3769412&ts=1557773197847&disposition=inline, accessed on 10 May 2019.

'Require, request, accept or gain advantage, from the directors, officers, board and technical body members, auditors, managers, agents, representatives or employees of the company or private institution, in order to favour himself or herself or the third parties, directly or indirectly, or accept a promise of advantage in order to act or refrain from acting in accordance to his or her duties:

Sentence - One to four years of imprisonment, or fine.

Sole paragraph. The same sentence is applicable to anyone who offers, promises, delivers or pays, directly or indirectly, the improper advantage.'

[15] Rogerio Tafarello, Bribery & Corruption 2019 – Brazil, GLI Global Legal Insights, available at: www.globallegalinsights.com/practice-areas/bribery-and-corruption-laws-and-regulations/brazil. Also, Fernanda Barroso, Managing Director and Head of the São Paulo, Brazil office with Kroll's Business Intelligence and Investigations practice in Brazil, states that Bill no 236/2012 is about to be voted on by the Brazilian House of Representatives in plenary session and, if approved, forwarded to the Federal Senate. Fernanda Barroso, Quando vamos regular a corrupção privada?, available at: www.valor.com.br/legislacao/6192715/quando-vamos-regular-corrupcao-privada, accessed on 10 May 2019.

[16] See Leandro Falavigna e Paulo Tiago Sulino Muliterno, A corrupção privada no Brasil,available at: https://m.migalhas.com.br/depeso/251890/a-corrupcao-privada-no-brasil, accessed on 10 May 2019.

[17] United States v Brecht, 540 F2d 45, 49 (2d Cir 1976).

[18] United States v Tonry, 837 F2d 1281, 1287 (5th Cir 1988).

[19] Seaboard Supply Co v Congoleum Corp, 770 F2d 367, 372 (3d Cir 1985).

[20] Ibid; see also In re Luppino, 221 B.R. 693, 702 (SDNY 1998) ('There can be no argument that commercial bribery is a wrongful act, a dishonest scheme, a deceit and a chicane – it is... immoral conduct ...').

[21] Garland S Ferguson, Jr, Chairman of the Federal Trade Commission, in a speech at the Conference on Commercial Bribery on 17 October 1930, available at: www.ftc.gov/system/files/documents/public_statements/685041/19301017_ferguson_commercial_bribery.pdf, accessed on 10 May 2019.

[22] Available at: www.legislation.gov.uk/ukpga/2010/23/contents, accessed on 10 May 2019.

[23] Conrado Almeida Corrêa Gontijo, Caso Fifa mostra a fragilidade da ordem jurídica do país no assunto, available at: www.conjur.com.br/2015-jun-01/conrado-gontijo-fragilidade-ordem-juridica-brasileira-escandalo-fifa#_ftnref1, accessed on 10 May 2019.

[24] Fernanda Barroso, Quando vamos regular a corrupção privada?, available at: www.valor.com.br/legislacao/6192715/quando-vamos-regular-corrupcao-privada, accessed on 10 May 2019.

[25] See note 21 above.

[26] Sérgio Fernando Moro, Preventing Systemic Corruption in Brazil, available at: www.amacad.org/publication/preventing-systemic-corruption-brazil, accessed 10 May 2019.

[27] Among other provisions, the Brazilian legal system establishes that the company's senior manager shall act, in the exercise of his duties, 'with due care and diligence that every active and upright man employs in the management of his own business', (Article 1.011 of Brazilian Civil Code), being prohibited from acting against the interests of the entity (eg, embezzling funds or taking bribes). Whoever, by a voluntary act or omission, negligence, or recklessness, violates the right of and causes damages to another, shall have committed an unlawful act in the civil sphere (Article 186 of Brazilian Civil Code). In addition, whoever, by an unlawful act, causes damages to another shall compensate the aggrieved party (Article 927 of Brazilian Civil Code).

Published by: International Bar Association

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