Investigations trends/developments
ESG litigation and investigations: an important trend
A criminal complaint was filed by several NGOs against four major French banks. The banks are accused of money laundering the proceeds of illegal deforestation in Brazil from the financing of two Brazilian agribusiness firms.
ESG civil litigation is also expanding, based on the French “duty of vigilance” framework, introduced by the Law No. 2017-399 of 27 March 2017:
- In a trade union’s claim against the French company La Poste for the use of undocumented workers by subcontractors, the Paris Civil Court ordered La Poste in December 2023 to: (i) revise its risk mapping; (ii) revise its procedures for assessing third parties; (iii) implement a whistleblowing system; and (iv) duly publish its system for monitoring the ‘duty of vigilance’ measures.
- Several NGOs sent a formal notice to a French firm specialized in micro technology, ordering it to comply with its environmental obligations under the ‘duty of vigilance’ framework.
A new agreement was reached between the European Parliament and Council in December 2023, for an EU “duty of vigilance” framework, which is likely to fuel a similar trend in 2024.
Finally, on the regulatory contentious front, French agencies, in particular the financial watchdog, continue to make clear that the fight against greenwashing practices will be a top priority in the coming months and years. Inspections into compliance with relevant ESG professional rules of the practices, systems and controls of investment service providers running activities in France should be expected in 2024.
Settlements
Revised guidelines on the use of CJIPs were published in January 2023, adding more protections for companies who engage in early dialogue with the PNF, eg by offering to keep the settlement discussions confidential even if no agreement is reached. The guidelines do however point to new tougher penalty calculations.
Several additional CJIPs have been entered into during 2023. The mechanism is exclusively reserved for corporates and cannot be used by individuals who face criminal prosecution on the grounds of the same facts, as can be seen from a recent French Supreme Court ruling in November 2023 in which a CJIP was reached by a corporate, whereas a related individual is to face trial (failing the approval of the guilty plea procedure by the Paris Criminal Court).
The 2024 Finance Bill contains a new offence of facilitating tax fraud, targeting individuals or legal entities which offer legal and financial tools specifically designed to help conceal income or assets from public authorities. The new offence would be punishable by up to three years’ imprisonment and/or a fine of up to EUR250,000 for individuals and a fine of up to EUR1 million for legal entities, which could be increased if the services are offered using an online communication service.
In May 2023 the government announced its intention to strengthen its response to fraud committed against the French State. It has committed to hiring 1500 new agents to combat tax fraud by 2027. A dedicated intelligence unit is being set up to focus on international tax fraud schemes. The tax authority is also receiving extra resource to better detect and sanction abusive transfer pricing by multinationals. The 2024 Finance Bill containing these measures is currently being debated in Parliament.
Recent legislative attempts to extend legal professional privilege to in-house lawyers’ legal advice failed. A proposed amendment to draft legislation was struck down by the French Constitutional Court, mainly on procedural grounds. It is likely to be resurrected. As such, at least for now, in-house lawyers do not benefit from the same protection as external counsel, with regards to their own advice and communications during an investigation.
Internal investigations – key considerations
A joint guide on anti-corruption internal investigations was published by the French Anti-Corruption agency (AFA) and the PNF in March 2023. It aims to provide ‘best practices’ when conducting an internal investigation relating to alleged corrupt practices. It focuses primarily (but not exclusively) on companies and groups caught by the anti-bribery and anti-corruption measures in Article 17 of the Sapin II Law. The guide is not legally binding, but aims to assist corporates faced with internal investigations regarding internal investigation triggers, how to conduct an internal investigation and action to be taken following an investigation.
The PNF guidelines on CJIPs in January 2023, and the CJIPs entered into in 2023, show a growing expectation from the PNF to be given access to information gathered for the purpose of an internal investigation, where it touches on the same facts as those covered by CJIP negotiations.
The French Financial Intelligence Unit (Tracfin) and Legal Affairs Department of the Ministry of Economy continue to flag and highlight crypto assets as a money laundering risk, as well as being used for the purposes of tax fraud and terrorist financing. Crypto asset businesses are attracting more and more attention, not only from the regulators under whose supervision they are now placed, but also by French criminal authorities.
The banking sector has also come under increased scrutiny from the authorities, in particular in relation to offences of aiding and abetting, and laundering the proceeds of, tax fraud.
Cross-border coordinated investigation or enforcement activity
As shown by the recent ‘CumCum’ affair, French criminal authorities are increasingly cooperating with their foreign counterparts. In March 2023, several dawn raids were conducted by the PNF at the headquarters of major French banks as part of the ‘CumCum’ investigation, in collaboration with German authorities who were also present. Similar operations were then conducted in Germany in June 2023.
We can expect increased cooperation with the European Public Prosecutor’s Office, with whom Tracfin recently entered into a bilateral agreement in order to establish a structured framework for the exchange of information between these two authorities.
Latest developments and trends with respect to market abuse offences
The first criminal conviction on the grounds of market manipulation was handed down by the Paris Criminal Court in May 2023.
Such conviction is part of a wider trend in France, whereby an increasing number of criminal investigations are being initiated by French criminal authorities on the grounds of market abuse offences.
More generally, there has been an increased focus on the quality of reporting by listed companies, including non-financial reporting which was part of the French market regulator's action and supervisory priorities for 2023, and is expected to lead to further regulatory enforcement action in 2024 (see also above ESG litigation and investigations: an important trend).
Predictions
- We expect ESG-related civil, regulatory and criminal litigation and investigations to increase during the upcoming year, under the impetus of trade unions and NGOs in particular.
- We don’t expect the CJIP to go out of fashion in 2024, despite the impact it can have on individuals facing criminal prosecution for the same facts.
- We also expect to see more investigations conducted in relation to tax fraud and laundering the proceeds thereof, especially targeting entities in the financial sector.
This article is part of our Cross-Border White Collar Crime and Investigations Review. Please click here for our overviews and insights in other jurisdictions.
