Proposed legislation for transparency in economic activity: what should businesses expect?

In the current environment marked by the Panama Papers scandal and the question of global coordination in the fight against tax avoidance and corruption, the draft bill initiated by the government to create more transparency in French economic activity comes just at the right time.

By Jeremy Seeman

The law named ‘Sapin II’, in reference to the anti-corruption law in 1993 by the same author, claims to be effective and exemplary. It enables the French state to catch up their delay in the fight against corruption, after regular criticism from international regulatory authorities of the lack of severity in French regulation on the subject.

Ranked 23rd in the countries considered the least corrupted by the NGO Transparency International, France primarily wishes to send a political and economic message with the announcement of significant changes in its approach to the fight against corruption, with an eventual goal of guaranteeing a healthy and therefore attractive economy.

In order to achieve this, the Finance minister Michel Sapin is taking the reins, with a draft bill presented to the Council of Ministers at the end of March and examined in Parliament from 25 May.

The fight against corruption in focus

The main challenge in the law is the reinforcement of the arsenal for the fight against corruption, which means businesses, notably large national and international groups, need to adapt their internal procedures.

All firms with more than 500 employees and more than 100 million euros in revenue will have to put in place measures that aim to combat corruption more effectively: risk mapping, a code of conduct shared in each department, training of managers. The relevant companies will have to ensure they adapt their internal procedures or risk being given a penalty fine.

As many of these procedures will be soon be obligatory, they should be already anticipated by management as this could involve a change in culture within the firm.

Moreover, whistleblowers will be better protected. A special status will be created in order to avoid them being punished for having alerted the public. In this way, the government hopes to respond to citizens’ demands with a better protection of these ‘modern day heroes’ and to avoid controversies such as the case in the ‘Luxleaks’ scandal.

Finally the draft bill anticipates the creation of a national agency for the prevention and detection of corruption, with the responsibility of overseeing the introduction of anti-corruption programmes in large companies.

A more fluid economic environment

The draft bill also includes a section dedicated to the modernisation of French economic activity. The measures presented mainly draw on propositions defended by the Minister of the Economy, Emmanuel Macron, who will be taking the lead on this part.

Among these measures there will be a reinforcement of sanctions for firms that do not pay on time and a clarification in the rules relating to qualifications in certain handicraft professions.

Savers will be better protected with a reinforced framework of modes of financing such as crowdfunding and a reinforced control of websites for trading on risky instruments.

A desire to better supervise lobbying activities

Finally, the last section of the draft bill, the control of activities of representatives of certain interests is in keeping with the continual desire for wider transparency. A register of contacts between lobbys and cabinet ministers or public officials needs to be created. In principal, this list should not immediately concern parliament, where each chamber already has its own internal regulation concerning representatives of specific interests.

Examined at the end of May by the National Assembly, this draft bill claims to be the first change in the model in the fight against corruption. Although its overall framework still broadly needs to be defined, companies should take note and prepare themselves and anticipate the changes the new law will bring, in order to avoid being caught off guard. Foresight is a matter of good management and as the saying goes ‘gouverner c’est prévoir’ (to govern is to foresee).