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13 August 2018
After years of extensive anti-corruption investigations launched by Operation Car Wash (in Portuguese, Operação Lava Jato), the national and international legal community have recognised that Brazil's enforcement of regulatory and criminal matters has become stronger than ever.
Considering the political and economic nuances associated with federal enforcement agencies and the judicial system, it is important to note two key elements:
At present, Operation Car Wash's reach goes far beyond the promiscuous relationships between construction companies and Brazilian politicians. Its main prosecution strategy is largely based on plea bargain agreements from 2014, which took advantage of the 2013 legal reform that had established a mechanism for investigating organised crime (Law 12,850/13).
Plea deals were offered to individuals – including several businesspeople and financial agents – subject to criminal investigations, as criminal liability in Brazil is almost exclusively placed on individuals (the sole exception in which corporate criminal liability is accepted relates to environmental crimes).
As of 2015, federal prosecutors started using another legal tool which, while recently established, specifically focused on legal entities in relation to civil and administrative liabilities – namely, the leniency agreement procedure set out in the Anti-Corruption Law (also known as the Clean Company Act (Law 12,846/13)).
This new policy has had notable success. As a result, in November 2017 a new bill (Law 13,506/17) was introduced to enable companies and individuals to settle before financial regulators such as the Brazilian Central Bank and the National Securities Commission.
While the changes were not immediately welcomed by practitioners (who come from a legal culture with little knowledge of common law systems), regulators, companies and individuals have increasingly seen the advantages of avoiding costly and endless court battles. Nevertheless, the current practice of offering settlements and plea deals fails to offer stable precedents or clear application criteria.
This legal uncertainty is aggravated by the disparities between prosecutorial practices at the federal and state level and by the number of enforcement agencies that oversee connected cases, which have been unable to coordinate their acts and enforcement policies in full. These bodies include:
On the one hand, this multi-agency institutional framework has undoubtedly played an important role in preventing economic and political power from dominating crime control. On the other hand, it has created a significant challenge for individuals and companies that have to deal with such a complex legal scenario.
However, there is good news on the horizon. In September 2017 the Federal Prosecutor's Office issued a 131-page document containing its views on anti-corruption leniency agreements, which may help to unify prosecutorial practices in this field. In February 2018 the Solicitor General reported that it was about to reach a common basis with U-System members regarding settlements involving them and the Public Prosecutor's Office.
Further, in April 2018 the Federal Audit Court approved the basis of a settlement primarily negotiated between other federal authorities and a multinational company. More recently, in May 2018 the Public Prosecutor's Office set out internal guidelines for signing plea deals. In July 2018 the biggest construction company involved in Operation Car Wash reached a settlement with the Solicitor General and the Comptroller General – a year-and-a-half after it had settled with the Public Prosecutor's Office (in December 2016).
In addition, given their historic willingness to defer to public policy, it is likely that the Administrative Council for Economic Defence and financial regulators will reach an understanding with the other agencies in order to finally provide domestic and international corporations and society at large the stability and predictability that any healthy market and democracy presupposes.
Indeed, in light of the size, reach and complexity of the settlements and plea deals already signed with some of the most powerful companies and influential businesspeople in Brazil, a scenario in which these tools cannot offer enough stability to the parties involved would certainly bring harm to the enforcement policies as a whole and generate longstanding and unpredictable battles before the country's overcrowded judicial system.
While work is still needed, it is clear that the use of settlements and plea deals in Brazil is here to stay and that these methods have radically changed the local enforcement landscape.
For further information of this topic please contact Rogério Fernando Taffarello at Mattos Filho, Veiga Filho, Marrey Jr e Quiroga Advogados by telephone (+55 11 3147 7600) or email (firstname.lastname@example.org). The Mattos Filho, Veiga Filho, Marrey Jr e Quiroga Advogados website can be accessed at www.mattosfilho.com.br.
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Rogério Fernando Taffarello