Brazil Enacts Strict Anticorruption Law, Implements New GMP Framework

September 20, 2013

Brazilian President Dilma Rousseff has signed into law legislation aimed at stemming corporate bribery of government officials across all business sectors. The law brings the country’s antibribery policies in line with other major nations and the Organization for Economic Cooperation and Development (OECD).

The “Clean Company Act” requires the government to establish procedures for investigating alleged bribery and corruption and sets fines and penalties for companies that run afoul of the law. Companies found guilty of offering bribes may be fined up to 20 percent of their gross annual revenue from the previous year, or a maximum of about US $26 million. The government can also suspend or dissolve the company’s operations and confiscate its assets, depending on the egregiousness of the bribes.

The law calls on competent authorities to establish policies, at the penalty phase, that take into account whether a company has a compliance program in place. Those that do could fare better than those that don’t. And it calls for the establishment of credits for companies that voluntarily disclose corrupt practices.

“I think this law fills some gaps, and the legislation shows that Brazil is compliant with the international agreements,” attorney Carlos Ayres, co-chair of the Brazilian Institute of Business Law’s anticorruption and compliance committee, said.

The legislation was prompted by a 2007 peer review of Brazil’s anticorruption efforts by the OECD’s Anti-bribery Convention, Ayres says. While not an OECD member, Brazil has participated with the convention and was asked to take “urgent steps” to make companies liable for bribing foreign officials.

“This new law is a tough law,” Ayres says. The government needs only to show that bribes were paid — a lower bar for prosecution than the U.S. Foreign Corrupt Practices Act, which requires the government to show intent to corrupt.

Decentralized Enforcement

Before signing the bill on Aug. 1, Rousseff vetoed three provisions she believed would weaken the law. For instance, the legislation approved by the Brazilian Senate would have limited financial liability to the value of the contract obtained with the bribe. Rousseff said this could impair the government’s ability to “effectively punish offenders and deter future violations.”

Also nixed were provisions on the establishment of intent and on leniency for less-extensive crimes.

The new law says nothing about gift-giving. Ayres says a law already on the books limits company gifts to public officials to about US $45.

The “Clean Company Act” will be enforced by the compliance offices of the competent authorities responsible for various market segments. Drugmakers will answer to investigators from the Ministry of Health. During debate on the bill, industry had asked that a neutral, centralized agency handle the inspections, to avoid the potential for conflicts of interest.

GMPs Revised

Brazil’s law comes as other governments have been cracking down on foreign corrupt practices. The most recent case, involving China’s investigation of GlaxoSmithKline, has now mushroomed into an industrywide probe.

Separately, Rousseff signed a decree giving Anvisa the authority to implement a new good manufacturing practice framework that is more in line with U.S. drug GMP.

The new framework “corrects the root problem of the GMP certificate problem,” whereby companies had to have a Brazilian GMP (B-GMP) certificate in order to register their products, says Marcelo Antunes, regulatory affairs strategy consultant with SQR Consulting in São Paulo. The problem stemmed from a 1988 decree that “explicitly tied the presentation of the B-GMP certificate to the registration,” Antunes explains.

Among other changes, the new GMP framework:

  • Eliminates certain requirements limiting registration transfers and gives Anvisa additional authority to define other options to transfer registrations; and

  • Permits manufacturers to outsource the quality control of products to third parties that adhere to criteria defined by Anvisa.

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