the Anti-Bribery and Anti-Corruption Review - BSP · 2018. 12. 6. · THE ASSET MANAGEMENT REVIEW...

Anti-Bribery and Anti-Corruption ReviewSixth Edition

EditorMark F Mendelsohn

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© 2017 Law Business Research Ltd

Anti-Bribery and Anti-Corruption ReviewSixth Edition

EditorMark F Mendelsohn

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Reproduced with permission from Law Business Research LtdThis article was first published in November 2017 For further information please contact [email protected]


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i

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The publisher acknowledges and thanks the following law firms for their learned assistance throughout the preparation of this book:


iii

PREFACE ......................................................................................................................................................... viiMark F Mendelsohn

Chapter 1 ARGENTINA ........................................................................................................................1

Maximiliano D’Auro, Manuel Beccar Varela, Dorothea Garff, Francisco Zavalía and Tadeo Leandro Fernández

Chapter 2 AUSTRALIA ........................................................................................................................11

Robert R Wyld and Jasmine Forde

Chapter 3 BRAZIL ................................................................................................................................41

Ricardo Pagliari Levy and Heloisa Figueiredo Ferraz de Andrade Vianna

Chapter 4 CANADA .............................................................................................................................53

Christopher J Ramsay

Chapter 5 CHINA.................................................................................................................................68

Kareena Teh and Philip Kwok

Chapter 6 ECUADOR ..........................................................................................................................80

Javier Robalino Orellana, Jesús Beltrán and Ernesto Velasco

Chapter 7 ENGLAND AND WALES .................................................................................................94

Shaul Brazil and John Binns

Chapter 8 FRANCE ............................................................................................................................106

Antonin Lévy

Chapter 9 GERMANY ........................................................................................................................118

Sabine Stetter

CONTENTS


iv

Contents

Chapter 10 GREECE ............................................................................................................................128

Ilias G Anagnostopoulos and Jerina (Gerasimoula) Zapanti

Chapter 11 HONG KONG .................................................................................................................137

Kareena Teh

Chapter 12 INDIA ................................................................................................................................149

Aditya Vikram Bhat and Shwetank Ginodia

Chapter 13 ITALY .................................................................................................................................162

Roberto Pisano

Chapter 14 JAPAN ................................................................................................................................175

Kana Manabe, Hideaki Roy Umetsu and Shiho Ono

Chapter 15 JERSEY ...............................................................................................................................185

Simon Thomas and Lynne Gregory

Chapter 16 LUXEMBOURG ...............................................................................................................195

Anne Morel

Chapter 17 MALAYSIA ........................................................................................................................204

Rosli Dahlan and Muhammad Faizal Faiz Mohd Hasani

Chapter 18 MEXICO ...........................................................................................................................220

Oliver J Armas, Luis Enrique Graham and Thomas N Pieper

Chapter 19 NETHERLANDS .............................................................................................................231

Aldo Verbruggen

Chapter 20 POLAND ...........................................................................................................................244

Tomasz Konopka

Chapter 21 PORTUGAL ......................................................................................................................256

Sofia Ribeiro Branco and Joana Bernardo

Chapter 22 RUSSIA ..............................................................................................................................266

Alexei Panich and Sergei Eremin


Contents

v

Chapter 23 SWEDEN...........................................................................................................................277

David Ackebo, Elisabeth Vestin and Emelie Jansson

Chapter 24 SWITZERLAND ..............................................................................................................289

Yves Klein and Claire A Daams

Chapter 25 TURKEY ............................................................................................................................301

Okan Demirkan, Begüm Biçer İlikay and Başak İslim

Chapter 26 UNITED STATES ............................................................................................................312

Mark F Mendelsohn

Appendix 1 ABOUT THE AUTHORS ...............................................................................................337

Appendix 2 CONTRIBUTING LAW FIRMS’ CONTACT DETAILS...........................................357


vii

PREFACE

This sixth edition of The Anti-Bribery and Anti-Corruption Review presents the views and observations of leading anti-corruption practitioners in jurisdictions spanning every region of the globe, including new chapters covering Argentina, Canada, Jersey and Sweden. The worldwide scope of this volume reflects the reality that anti-corruption enforcement has become an increasingly global endeavour.

Over the past year, the ripple effects from several ongoing high-profile global corruption scandals have continued to dominate the foreign and domestic bribery landscape. Most notably, in Brazil, Operation Car Wash, the wide-ranging investigation that uncovered a colossal bribery and embezzlement ring at state-owned oil company Petróleo Brasileiro SA (Petrobras), has implicated many domestic and multinational firms across a range of industries, and touched a growing number of foreign countries, leading to cross-border cooperation by enforcement agencies and one of the largest foreign bribery settlements in history. In December 2016, Odebrecht SA, the largest construction company in Latin America, and its subsidiary Braskem SA, a Brazilian petrochemical company, entered coordinated settlement agreements to pay approximately US$3.5 billion in fines and penalties to authorities in Brazil, the United States and Switzerland for making improper payments to government officials, including officials at Petrobras, Brazilian politicians and officials, and political parties through Odebrecht’s off-book accounts in exchange for improper business advantages, including contracts with Petrobras. Additionally, J&F Investimentos SA, the parent company of the world’s largest meatpacker JBS SA, entered a leniency agreement with Brazil’s Federal Prosecutor’s Office, agreeing to pay US$3.2 billion for its role in corrupting more than a thousand politicians over the course of a decade. Over the past year, Brazilian enforcement authorities have increasingly utilised plea bargains and leniency agreements both to secure cooperating witnesses and encourage companies to pay fines that ultimately reduce the financial and reputational impact from harsh sanctions.

Likewise, there have been further developments in the worldwide investigations into the misappropriation of more than US$3.5 billion in funds by senior government officials from state-owned strategic development company 1Malaysia Development Berhad (1MDB). The Swiss Office of the Attorney General has been pursuing a money laundering investigation into 1MDB and two Swiss private banks with the help of Singapore, Luxembourg, and the US Department of Justice (DOJ). In June 2017, the DOJ filed additional civil forfeiture complaints seeking recovery of assets valued at approximately US$540 million. Combined with the DOJ’s June 2016 civil forfeiture complaints to recover more than US$1 billion in assets, this remains the largest civil forfeiture action ever brought under the DOJ’s Kleptocracy Asset Recovery Initiative. The DOJ has also turned its focus to a criminal investigation into


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1MDB, particularly in relation to funds used to acquire real estate and other assets in the United States.

Judicial and legislative developments over the past year have further clarified the breadth and scope of anti-corruption investigations and enforcement. For instance, in December 2016, the French parliament passed the Sapin II law, a corporate anti-corruption law that, among other things, established the French Anti-Corruption Agency and required companies with 500 or more employees to establish a compliance programme by mid 2017. In May 2017, the UK High Court in Director of the Serious Fraud Office v. Eurasian Natural Resources Corporation Ltd reduced the scope of litigation privilege to communications created to obtain information when the litigation is in progress or reasonably imminent, is adversarial, and the communication’s primary purpose is conducting the litigation. If upheld, this has an impact on how investigative internal investigations in the UK are structured so as to maintain legal privilege. Finally, in June 2017, the US Supreme Court held in a unanimous decision in Kokesh v. SEC that claims for disgorgement brought by the Securities and Exchange Commission (SEC) were subject to a five-year statute of limitations, thereby limiting the SEC’s ability to seek monetary penalties for misconduct that occurred more than five years before the enforcement action.

Continuing a recent trend, the enforcement actions this year reflect cooperation between authorities all over the globe to investigate and charge companies involved in corruption scandals. For example, the successful investigation into Odebrecht SA and Braskem SA was a result of cooperation between the DOJ, the Brazilian Federal Prosecutor’s Office and the Swiss Office of the Attorney General. Likewise, in January 2017, the DOJ, the UK’s Serious Fraud Office and the Brazilian Federal Prosecutor’s Office reached an US$800 million coordinated settlement agreement with Rolls-Royce Plc, a UK-based multinational engineering company that manufactures, designs and distributes power systems, for its role in a bribery scheme involving payments to foreign officials around the globe in exchange for government contracts. And recently in September 2017, in the only corporate Foreign Corrupt Practices Act (FCPA) enforcement action under the Trump administration to date, Swedish international telecommunications company Telia Company AB and its subsidiary entered coordinated settlement agreements with the DOJ, SEC and the Public Prosecution Service of the Netherlands, agreeing to pay US$965 million in fines and penalties for making bribe payments of over US$331 million to an Uzbek official in exchange for expansion into the Uzbek telecommunications market. This is the second settlement arising from the expansive collaborative investigation into bribe payments made to an Uzbek government official; Amsterdam-based telecommunications company VimpelCom Limited and its subsidiary entered a US$795 million global settlement last year to resolve similar allegations as a result of cooperation between enforcement agencies in, among others, Belgium, Bermuda, the British Virgin Islands, the Cayman Islands, Estonia, France, Ireland, the Netherlands, Norway, Spain, Sweden and Switzerland.

In the United States, the DOJ has continued to emphasise the importance of an effective compliance programme and self-reporting. In February 2017, the DOJ Fraud Section released a guidance document, ‘Evaluation of Corporate Compliance Programs’, identifying a list of 119 common questions that the Fraud Section may ask in evaluating corporate compliance programmes in the context of a criminal investigation. Relatedly, April 2017 marked the one-year anniversary of the DOJ’s Pilot Program, aimed at providing greater transparency on how business organisations can obtain full mitigation credit in connection with FCPA prosecutions through voluntary self-disclosures, cooperation with DOJ investigations, and


Preface

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remediation of internal controls and compliance programmes. The Pilot Program remains in effect under the current administration, but its future remains uncertain as the DOJ continues to assess its utility and efficacy. To date, the DOJ has issued seven declinations to companies that self-reported and disgorged profits under the Pilot Program, with no monitorship requirements.

I wish to thank all of the contributors for their support in producing this volume. I appreciate that they have taken time from their practices to prepare chapters that will assist practitioners and their clients in navigating the corruption minefield that exists when conducting foreign and transnational business.

Mark F MendelsohnPaul, Weiss, Rifkind, Wharton & Garrison LLPWashington, DCNovember 2017


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Chapter 16

LUXEMBOURG

Anne Morel1

I INTRODUCTION

According to the latest Corruption Perceptions Index (of Transparency International),2 Luxembourg ranks among the 10 least corrupt countries in the world, out of a total of 175 countries and territories. Despite the low level of corruption perceived in the public sector, it is by no means insignificant, and appears especially in conflicts of interests between the private and the public sector and in the real estate sector.

To prevent and combat corruption, soft law instruments were developed to supply the judges and members of the government with an ethical framework. Moreover, codes of conduct and whistle-blower systems have been established in several sectors by private companies. However, a code of ethics is still lacking for elected officials.3

The legal framework on anti-bribery and anti-corruption has notably improved since 2001 and is strongly implemented.4 On 15 January 2001, Luxembourg approved the Organisation for Economic Co-operation and Development (OECD) Convention of 21 November 1997 on Combating Bribery of Foreign Public Officials in International Business Transactions, introducing a number of important articles into the Luxembourg Penal Code. In 2007, an inter-ministerial committee, the Corruption Prevention Committee, was established to coordinate the fight against corruption, highlight future challenges and raise awareness with regard to the sectors that are most targeted through publications and seminars. The Law of 13 February 2011 strengthened the efforts to combat corruption as it implemented the recommendations put forward in the evaluation by the OECD and the Council of Europe’s Group of States against Corruption. This was also a turning point because the same Law introduced legal provisions on whistle-blowing in the Labour Code and in the law on public service. The new legal provisions prohibit bribery of a person in the public sector and of law enforcement officials, and grant protection to employees or public agents who alert their superiors or competent authorities to the existence of corruption or abuse of influence.

1 Anne Morel is a partner at Bonn Steichen & Partners.2 Available at www.transparency.org. 3 European Commission, ‘Annex Luxembourg to the EU Anti-Corruption Report, Brussels 3.2.2014:

COM(2014) 38 final, Annex 16’, p. 2. 4 GAN Business Anti-Corruption Portal, ‘Luxembourg Corruption Report’, available at www.business-anti-

corruption.com/country-profiles/luxembourg.


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II DOMESTIC BRIBERY: LEGAL FRAMEWORK

In domestic law, the distinction has to be made between active and passive bribery. It is considered active when a party instigates the bribe and passive when the bribe is received by a party.

The offence includes not only (1) the corruption of persons holding public authority or public officials or agents entrusted with an elective public mandate (i.e., politically exposed persons (PEPs))5 or with a public service mission, including from another state, EU officials and in general the staff of the institutions of the EU and international organisations6 and magistrates, but also (2) the corruption of individuals who manage or work for a private sector entity.

A bribe is defined as an offer, promise, donation, gift or advantage given or received, directly or indirectly, for the person offering or receiving the bribe or for a third party.

Active bribery is foreseen by Article 247 of the Penal Code. Under this article, imprisonment for five to 10 years and a fine of €500 to €187,500 shall apply to any person unlawfully proposing or giving a bribe to a person holding public authority, or carrying out a public service mission, or to a person holding a public electoral mandate.

The objective of active bribery is to cause a person to:a carry out or abstain from carrying out an act relating to his or her office, duty or

mandate, or facilitated by his or her office, duty or mandate; andb abuse his or her real or alleged influence with a view to obtaining from any public

body or administration any distinction, employment, contract or any other favourable decision.

A person is considered to have committed active bribery if it can be proved that he or she carried out the above.

Article 310-1 of the Penal Code also provides that active bribery is committed if the target of the bribe is a director or manager of a legal entity, or who is acting as a proxyholder or agent for a legal entity or natural person, whose actions are carried out without the knowledge and the authorisation of the board of directors or managers, the shareholders, the principal or the employer. The same applies under Article 310 for passive bribery, when the director or manager, etc., solicits or accepts the bribe.

Passive bribery is foreseen by Article 246 of the Penal Code. Under this article, the unlawful solicitation or receiving of a bribe when made by a person holding public authority or carrying out a public service mission, or by a person holding a public electoral mandate, is punishable by imprisonment for five to 10 years and a fine of €500 to €187,500.

The offence of passive bribery applies whenever the following persons are involved:a any person holding a legislative, administrative or judicial office, whether appointed or

elected;

5 PEPs are defined as natural persons who occupy or hold prominent public positions, and direct family members or persons closely associated with them. PEPs must in principle be subject to enhanced due diligence, notably because they may, where appropriate, be targets for acts of corruption, such as an infringement consisting of behaviour by which offers, promises, gifts or presents are requested, received, proposed or given for the purpose of performing or refraining from performing an act, obtaining particular favours or benefits or exercising undue influence to get jobs, contracts or other favourable decisions.

6 See Section IV, infra, on foreign bribery.


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b any person, agent or representative of public authority in charge of a public service mission or holding a public elective mandate for Luxembourg;

c any person exercising a public function for a foreign country, including for a public agency or public enterprise;

d community officials and members of the European Commission, the European Parliament, the Court of Justice of the EU and the Court of Auditors of the EU;

e any official, agent or member of a public international organisation; andf a company or organisation’s managing bodies.

Related offences, such as trading in influence, are punishable if the aim is to persuade a person to use his or her influence to obtain a favour from a public authority or an administration, without any distinction as to the occupation or the title of the person to be influenced, or if this intended result was achieved and if an intermediary was used.

The duties of a government official or a foreign public official are classified as any functions or powers that are conferred on the official, or that the official considers himself or herself to have.

Under Article 248 of the Penal Code, any person who unlawfully solicits or receives a bribe, to abuse his or her real or alleged influence with a view to obtaining from any public body or administration any distinction, employment, contract or any other favourable decision, shall be punished by imprisonment for six months to five years and a fine of €500 to €125,000. The same provisions shall apply to persons proposing or giving a bribe.

Under Article 249 of the Penal Code, any person holding public authority or carrying out a public service mission, or any person holding a public electoral mandate, who unlawfully solicits or receives a bribe from a person who benefits from the improper act, will be punished by imprisonment for five to 10 years and a fine of €500 to €187,500. The same provisions shall apply to persons proposing or giving the bribe.

Under Article 250 of the Penal Code, any judge, arbitrator or expert, or any other person sitting in judicial matters appointed either by a court or by the parties, who unlawfully requests or receives the bribe and accepts the offer or promise to carry out or to abstain from carrying out an act related to his or her duty, will be punished by imprisonment for 10 to 15 years and a fine of €2,500 to €250,000. The same provisions apply to persons proposing or granting the bribe.

III ENFORCEMENT: DOMESTIC BRIBERY

i Conditions for enforcement and additional penalties

The constitutive elements for offences related to corruption are:a active or passive behaviour aimed at influencing an official;b the intention of the person committing the act to misuse his or her influence;c the role of the person (any agent or representative of public authority, in charge of a

public service mission, or holding a public elective mandate, any foreign public official, as well as any person (including a legal person) who proposes or grants the promises, gifts or presents) as an element of the infringement; and

d an improper advantage to be obtained for oneself or another party, regardless of whether the intended result is achieved or whether an intermediary is used.


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The willingness to corrupt or to be corrupted is the pyschological element of the offence. It shall be demonstrated that there was a link between the advantage required or offered and the action expected from the receiver of the bribe.

The solicitation or acceptance of an advantage (passive bribery), or the offering of an advantage (active bribery) and the aim of the solicitation or offering (i.e., to carry out or abstain from carrying out an action or the abuse of influence), are the material elements of the offence. Whether the advantage has been effectively obtained is irrelevant.

Bribery implies the existence of an illegal agreement between two persons. Such an agreement shall be concluded prior to the action or abstention from action.

Under Article 253 of the Penal Code, various additional penalties, particularly ineligibility, can be applied in corruption cases even with regard to lesser offences and circumstances in which recategorisation of the offence occurred.

ii Legal entities

Legal entities are criminally liable for the offences committed on their account by their corporate bodies (managers, directors, shareholders, statutory auditors or the de facto managers acting in the name and in the interest of the legal entity). The criminal liability of legal persons extends to any natural persons who are perpetrators or accomplices to the same act.

Legal persons that have committed a misdemeanour or an offence, including extortion, bribery, trading in influence and corruption offences, may be subject to one or more of the following penalties, in addition to the compensation of damages to the person who has suffered because of the fraudulent act:a a fine, in the conditions and modalities provided for in Article 36 of the Penal Code;b specific confiscation;c disqualification from public tenders; ord dissolution, in the conditions and modalities provided for by Article 38 of the

Luxembourg Penal Code.

In addition to these penalties, the judge may order the following measures, if there are sufficient elements evidencing the criminal liability of a legal entity:a the suspension of proceedings entailing the liquidation or the dissolution of the legal

entity (including a merger);b the prohibition of any specific asset transaction that could lead to its insolvency; orc a request for the deposit of a warrant.

The maximum amount of the fine applicable to legal persons having committed extortion, bribery (active or passive), trading influence and corruption (in the public and private sectors) offences is €750,000.

iii Case law

In a decision dated 2 February 2011, the Court of Appeal considered that misappropriation of funds and bribery cannot be qualified with the same facts at the same time. The Court also considered in the same decision that the benefit that is derived from the illegal action is not a condition of the offence but only a description of the interest that drives a person to offer a bribe, or the consideration a public officer may think he or she can obtain from a person.


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The case concerned a public servant, assigned to the tax administration, who was accused of having unduly granted tax advantages and a favourable advance ruling to a company. The civil servant received a four-year suspended jail sentence and a fine of €10,000.

IV FOREIGN BRIBERY: LEGAL FRAMEWORK

Article 252 of the Penal Code refers to foreign public officials. This article also provides that the provisions applicable to active and passive bribery at a domestic level also apply to foreign public officials, who are defined as:a persons entrusted with, or agents of, public authority or law enforcement, officers or

persons holding elected office or charged with a public service mission in another state;b persons sitting in a foreign jurisdiction, even non-professional members of a collegiate

entity in charge of deciding a case, or practising as arbitrators under foreign state regulations or a public international organisation regulation concerning arbitration;

c community officials and members of the Commission of the European Communities, the European Parliament, the Court of Justice and the Court of the Auditors of the European Communities, in full respect of the relevant provisions of the treaties instituting the European Communities, the Statute of the Court of Justice, and the implementing regulations thereof, with regard to the withdrawal of immunities; and

d officials or agents of another public international organisation, members of a parliamentary assembly of a public international organisation and persons practising judicial functions or who record office functions in another international court whose competence is accepted by Luxembourg in full respect of the relevant provisions of those public international organisations, public international parliamentary assemblies, or international courts and the implementing regulations thereof, with regard to the withdrawal of immunities.

According to Article 252, the definition of ‘community officials’ includes ‘any person who is an official or other contracted employee within the meaning of the Staff Regulations of officials of the European Communities or the conditions of employment of other servants of the European Communities’ and ‘any person seconded to the European Communities by Member States or by any public or private body who carries out functions equivalent to those performed by European Community officials or other servants’.

Members of bodies set up in accordance with the treaties establishing the European Communities and the staff of such bodies shall be treated in the same way as Community officials, insofar as the staff regulations of officials of the European Communities or the conditions of employment of other servants of the European Communities do not apply to them.

V ASSOCIATED OFFENCES: FINANCIAL RECORD-KEEPING AND MONEY LAUNDERING

i Financial record-keeping

According to the Law of 19 December 2002, as amended, regarding the trade and companies registry and the accounting and annual accounts of companies, companies and legal entities shall keep up-to-date accounts covering all their activities, assets and liabilities. There are no specific provisions in this Law regarding anti-bribery or anti-corruption, but criminal


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sanctions apply to persons who have committed forgery in the annual accounts of a company either by false signature, forgery or alteration of records, or by fabrication of agreements, provisions, obligations or discharges or by alteration of clauses, declarations or facts.

ii Money laundering

The predicate offence that may give rise to a money laundering offence is limited, in principle, only to the public or private passive corruption of the persons committing forgery (referred to above), including PEPs, given that it is the concealment by the corrupt party of the source of the corruption’s proceeds that constitutes money laundering.

Money laundering is foreseen by Article 506-1 of the Penal Code and is punishable by one to five years’ imprisonment and a fine of €1,250 to €1.25 million.

VI ENFORCEMENT: FOREIGN BRIBERY AND ASSOCIATED OFFENCES

Corruption offences and related offences may also be prosecuted in Luxembourg if the offence, or an act that constitutes one of the elements of the offence, is deemed to have been committed in Luxembourg territory. The courts in Luxembourg have jurisdiction to hear cases involving offences committed abroad without the dual criminality requirement.

In a decision dated 3 July 2013, the Court of Appeal considered that knowing the anticipated benefit of the bribe may help to resolve any issues concerning the performance undertaken as part of the agreement. The aim of the briber does not necessarily rely on one specific action to be taken by the official on one occasion, but it can be limited to obtaining and maintaining good relations with the official to ensure their cooperation in all occasions. The Court also considered that the offence is complete even though the offer has not been accepted. The case concerned a personal adviser of the Ministry of Transport of a foreign state, who handed an envelope containing €10,000 in cash to an official of the European Investment Bank. The superior of the official returned the envelope to the personal adviser on the same day that it was handed to the official. The adviser was sentenced on the basis of Article 247 of the Penal Code.

VII INTERNATIONAL ORGANISATIONS AND AGREEMENTS

Luxembourg has signed and ratified the following international conventions or treaties:a the OECD Convention on Combating Bribery of Foreign Public Officials in

International Business Transactions dated 21 November 1997 (approved by the Law of 15 January 2001);

b the United Nations Convention against Transnational Organized Crime and the Protocols Thereto dated 15 November 2000 (approved by the Law of 18 December 2007); and

c the United Nations Convention against Corruption dated 31 October 2003 (approved by the Law of 1 August 2007).

VIII LEGISLATIVE DEVELOPMENTS

We are not aware of any government or parliamentary initiatives to amend the existing legal provisions or to introduce new legal provisions.


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IX OTHER LAWS AFFECTING THE RESPONSE TO CORRUPTION

As mentioned in Section I, the Law of 13 February 2011 has introduced specific provisions in the Labour Code to protect employees or public agents who alert their superiors or competent authorities to the existence of corruption or the abuse of influence. According to Article L 271-1 of the Labour Code, an employee who, in good faith, has alerted his or her superiors, colleagues or any third party, cannot be subject to reprisals, and his or her agreement cannot be terminated because of this alert.

X COMPLIANCE

The Law of 5 April 1993 on the financial sector, as amended, which is applicable to credit institutions and to other professionals in the financial sector, imposes that credit institutions and investment firms ‘shall have robust internal governance arrangements, which include a clear organisational structure with well-defined, transparent and consistent lines of responsibility, effective processes to identify, manage, monitor and report the risks they are or might be exposed to, and adequate internal control mechanisms, including sound administrative and accounting procedures as well as control and security arrangements for information processing systems’. Adequate internal control mechanisms include ‘remuneration policies and practices allowing and promoting a sound and effective risk management’.

A professional financial service (PFS), with the exception of an investment firm, must provide evidence that it ‘has a sound administrative and accounting organisation and adequate internal control procedures. “The administrative and accounting organisation and internal control procedures shall be comprehensive and proportionate to the nature, scale and complexity of the activities of a PFS other than an investment firm.”’

Such robust internal governance arrangements or sound administrative and accounting organisation and adequate internal control procedures imply that there is a compliance system.

The internal governance arrangement shall include, in particular, the implementation of a management information system, incorporating risk factors, as well as internal communication arrangements, including a whistle-blower procedure that enables the staff of the institution to inform those responsible of their legitimate concerns regarding the internal governance of the institution. Such a system shall respect the confidentiality of the persons who raise a concern outside the established reporting lines as well as with the board of directors. The warnings, given in good faith, shall not result in any liability of any sort for the persons who issued them.7

There is no legal obligation for commercial companies or other legal entities to have a compliance system but it is common to find that companies have corporate governance rules in place.

On 29 June 2016, the Luxembourg Criminal Court gave two former employees of a Luxembourg-based accounting firm suspended jail sentences of nine and 12 months for leaking confidential documents to a journalist relating to favourable tax rulings known as Advance Tax Agreements, which several foreign companies with headquarters in Luxembourg benefited from thanks to a lenient tax administration, with a view to reducing their taxes (the LuxLeaks). The court in this instance refused to apply the whistle-blowing excuse to

7 Circular CSSF 12/552 as amended by Circulars CSSF 13/563 and CSSF 14/597.


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the ‘violation of professional secrecy’ charge that the two accused claimed to be entitled to, because it held that Luxembourg used this excuse solely for acts of ‘bribery, influence peddling, conflict of interest [or] money-laundering’.8

The Court of Appeal partially reversed this judgment in a decision of 15 March 20179 and acceded to the accused’s defence on this point, judging that, based on Article 10 of the European Convention on Human Rights and its interpretation by the European Court of Human Rights (ECHR), as well as on a 2014 recommendation of the Council of Europe,10 the two accused should benefit from the whistle-blowing excuse. However, the excuse served only as a mitigating factor for one of the accused because the leaked information was not of great interest to the public, while the other accused was fully excused. In this decision, the Court of Appeal applied the six-prong test the ECHR developed in Guja v. Moldova,11 namely that (1) ‘the information divulged must present a real public interest’, (2) ‘the information divulged must also be genuine’, (3) ‘its disclosure to the public should only be envisaged in last resort where it proves impossible to act otherwise’, (4) ‘public interest to gain access to this information should weigh more that the harm caused by its disclosure’ (5) ‘the whistleblower must have acted in good faith and with the conviction that the information was genuine’, and (6) ‘in order to gauge whether the state’s interference is proportional to the legitimate goal pursued, the court should check which charges the whistleblower may expose himself to, and thoroughly analyse the sanction inflicted, whether civil or penal, and its consequences’. Though this decision was rendered in the context of the LuxLeaks, it is likely that the six-prong test referred to above would apply to any whistle-blowing case, and it may therefore be the new applicable case law in Luxembourg. The two accused, however, petitioned the Supreme Court against this decision, which granted review of this case. It will be heard on 23 November 2017.

XI OUTLOOK AND CONCLUSIONS

A notable innovation is the hotline set up by Transparency International Luxembourg for private and legal persons to denounce instances of corruption and support whistle-blowers.12

Although the OECD recognised Luxembourg’s efforts to raise awareness of anti-corruption in its report of 2013,13 it concluded that the provisions on liability of legal persons need to be amended and that measures have to be taken to rectify the omissions identified by the OECD in what constitutes a foreign bribery offence and the corporate liability regime. The report also highlighted that further measures are also necessary when it comes to investigations and prosecutions of the offence of bribery of public officials.

Corruption is not considered as a threat or serious issue for businesses in Luxembourg and the levels of corruption are quite low (and at least lower than in most EU countries).

8 Judgment of the Luxembourg District Court of 29 June 2016 (No. 1981/2016).9 Decision of the Luxembourg Court of Appeal of 15 March 2017 (No. 117/17 X).10 Recommendation CM/Rec (2014) 7 of the Committee of Ministers to Member States on the protection of

whistle-blowers.11 Guja v. Moldova (12 February 2008), ECHR, Grand Chamber, No. 14277/04.12 See transparency.lu/hotline/whistleblowing. 13 OECD, ‘Luxembourg: follow-up to the Phase 3 Report and recommendations, August 2013’.


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However, case law reveals that corruption cases do occur and there is still room for improvement. In the Luxembourg annex to the EU Anti-Corruption Report,14 the authors of the report highlighted that three areas require attention, namely:a political parties’ accounting duties: this area would require clarification of the applicable

accounting obligations. The introduction of a supervisory mechanism specifically applicable to campaign accounts and to the financing of individual candidates is also among the points that require attention;

b conflicts of interest of elected officials and civil servants at national and local levels. Verification by an independent mechanism would be required and legislation on access to public information should also be considered; and

c resources used to combat financial and economic crime. Increasing such resources should be considered to ‘ensure a proportional response to the risks, in line with the importance of Luxembourg as a financial centre’.

The lack of legislation regarding lobbying and access to information of public interest is also an area that will require future attention.

14 European Commission, ‘Annex Luxembourg to the EU Anti-Corruption Report, Brussels 3.2.2014: COM(2014) 38 final, Annex 16’, p. 8.


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Appendix 1

ABOUT THE AUTHORS

ANNE MOREL

Bonn Steichen & PartnersAnne is a partner at Bonn Steichen & Partners where she heads the employment, compensations and benefits practice.

Anne assists clients in individual as well as collective employment relationships such as the drafting of employment contracts, staff handbooks, internal policies, individual termination procedure, negotiating compromise agreements, assisting clients in information and consultation procedures, negotiations with employees’ representatives and trade unions and entering into collective bargaining agreements, collective redundancies, but also setting up whistle-blowing systems and assisting clients on non-discrimination issues.

She has extensive experience in structuring schemes or alternative forms of remuneration for large international companies, such as share option plans, employee participation schemes and supplementary pension plans.

In addition, Anne has a proven track record in providing specialist advice on data protection law and data privacy matters, and brings a wealth of experience in dealing with Luxembourg and EU data protection regulators.

Anne is vice-president of the Luxembourg Employment Law Specialists Association and a member of the European Employment Lawyers Association, the International Bar Association and the Industrial Relations and Social Affairs Committee of the Luxembourg Bankers’ Association.

BONN STEICHEN & PARTNERS

2 rue Peternelchen, Immeuble C22370 HowaldLuxembourgTel: +352 26 025 1Fax: +352 26 025 [email protected]


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