On July 12, 2022, the Brazilian Federal Government published Decree no. 11,129/2022 (“New Decree”), revoking Decree no. 8,420/2015 (“Revoked Decree”), and promoting changes in the regulation of the Brazilian Anti-Corruption Law – Law No. 12,846/2013. The New Decree will entered into effect on 18 July 2022, with the new rules already being applicable to the ongoing procedures, regardless of their starting date.
The main aspect altered by the New Decree was the penalties. The year used as reference in the net income determination is now the year previous to the Administrative Procedure of Accountability’s (“PAR”) establishment, instead of the year previous to the offense, as stated in the Revoked Decree. The penalties’ reducing factor arising from the offender spontaneously notifying the authority before the PAR was also changed to the offender admitting its strictly liability on the offense.
Moreover, the New Decree provided three possible methodologies for assessing the offender’s benefit, which are:
(a) when the offense was related to obtaining and executing an agreement, the total amount of income revenue from the administrative contracts and its annexes, with the deduction of the lawful costs the offender proves that were sustained related to the contract’s activities;
(b) the total amount of costs or expenses avoided, including the tax and regulatory costs, which would be incurred by the offender if the offense was not committed; or
(c) the amount of additional profit gained by the offender from an action or omission from a Public Authority, which would not have occurred without the offense committed by the offender.
Regarding the changes in the penalties’ calculation, we have drafted the below chart for summarization:
Category / Decree | Revoked Decree | New Decree |
Multiple offenses | Increase of 1% to 2.5% | Increase of up to 4% |
Management awareness or tolerance | Increase of 1% to 2.5% | Increase of up to 3% |
Public services supply or execution of public work project | Increase of 1% to 4% | Increase of up to 4% |
Delivering of essential goods or services to the provision of public services or non-compliance with regulatory requirements | Nonexistent | Increase of up to 4% |
Reoccurrence | Increase of 5% | Increase of 3% |
Contracts, partnerships, conventions, deals, annexes, and others similar agreements[1] | Increase of 1% for contracts larger than 1.5 million reais; Increase of 2% for contracts larger than 10 million reais; Increase of 3% for contracts larger than 50 million reais; Increase of 4% for contracts larger than 250 million reais; and Increase of 5% for contracts larger than 1 billion reais. | Increase of 1% for agreements with sums larger than 500 thousand reais; Increase of 2% for agreements with sums larger than 1.5 million reais; Increase of 3% for agreements with sums larger than 10 million reais; Increase of 4% for agreements with sums larger than 50 million reais; and Increase of 5% for agreements with sums larger than 250 million reais. |
Offense attempted but not completed | Reduction of 1% | Reduction of up to 0.5% |
Offense refunding | Reduction of 1.5% | Reduction of up to 1% |
Inexistence or lack of sufficient proofs of the obtained advantage | Nonexistent | Reduction of up to 1% |
Offender’s cooperation, regardless of leniency agreement | Reduction of 1% to 1.5% | Reduction of up to 1.5% |
Compliance program existence | Reduction of 1% to 4% | Reduction of up to 5% |
[1] Here, the New Decree broaden the item’s provision, which previously only included the contract, to also consider the partnerships, conventions, deals, annexes and other similar agreements.
According to the New Decree, the PAR’s preliminary investigation can be held by the authority’s internal affairs team, without the necessity of setting up a commission, as stated by the Revoked Decree. The New Decree also established the mandatory proceedings that shall be held in the course of the preliminary investigation, such as the request for the offender’s tax and bank information, even if this information is confidential, as well as the maximum period of 180 days, renewable once by the authority, for the duration of the preliminary investigation.
Regarding the PAR, the New Decree consolidates proceedings that were already occurring since the CGU’s Normative Ruling no. 13/2019, like the obligation that the offender is informed, when the PAR is established, of the infraction’s description, as well as its evidence and legal framework. The foreign entities can be summoned by the manager, representative or administrator of its subsidiary, agency, branch, establishment, or office in Brazil.
On the leniency agreements, the New Decree included as objectives the increase in the public administration’s capacity of investigation and recovering assets, as well as the incentive to the establishment of compliance cultures in the private sector. Moreover, consolidated the participation of the Attorney General’s Office alongside the Office of the Comptroller General in the leniency agreements’ discussion and signing, what was already a current practice in Brazil.
The New Decree also provided that fully repairing the undisputed loss, forfeiting the values obtained due to the offense and admitting the strict liability of the offense are requirements to enter into a leniency agreement. The amounts considered as repairment of the undisputed loss can be offset in other procedures related to the same offense. At last, the New Decree provided that an offender that enters into a leniency agreement will have its compliance program monitored by the authority, although this obligation can be dismissed by the authority.
Moreover, the New Decree changed the criteria to evaluate the effectiveness of the compliance program, establishing that the effective resources destination will be considered on this matter, as well as the obligation to use a risk assessment methodology when hiring contractors, brokers, consultants, commercial representatives, and associates, particularly PEPs and their families.
Our team is at your disposal for further clarifications, as well as to provide trainings and assistance with the procedures for fulfilling compliance regulatory obligations with the Brazilian authorities.
Gustavo Flausino Coelho – gustavo@bastilhocoelho.com.br
Fernando Naegele – fernando@bastilhocoelho.com.br