The French Anti-corruption Agency’s practical guide to preventing conflicts of interests
On 18 November 2021, the French Anti-Corruption Agency (“AFA” or “the Agency”) published its definitive guidelines to preventing conflicts of interests. These guidelines aim at assisting private companies, industrial and commercial public establishments as well their representatives and compliance actors in identifying and addressing situations where conflicts of interests may arise. The guidelines are illustrated with examples of good practices observed by the Agency since its creation, in 2016.
Traditionally, the notion of “conflict of interests” is associated with the duty of probity and implies a contradiction between the personal interest of a public agent and the public interest that he or she must defend with independence, impartiality and objectivity. Thus, the only legal definitions of conflict of interests are limited to the public sphere, such as those given by the Organization for Economic Co-operation and Development (OECD) or by the Law on transparency in public life, which are almost identical. There was no formal definition of conflict of interest in the private sector.
I. A welcome definition of conflict of interests in the private sector
Situations of a conflict of interests within companies can lead to criminal consequences for both the legal entity and its executives. Although breach of probity offenses solely relate to the public sector, the complicity, the laundering and the concealment of such offenses may relate to conflict of interests within the private sector. Additionally, the actus reus of the offence of breach of trust or misappropriation of corporate assets correlate to situations of conflict of interests. Therefore, it is necessary to define what constitute a conflict of interests within the private sector to minimize the occurrence of criminal acts which can be significantly prejudicial to companies’ interests or image.
The Agency’s guidelines define conflicts of private interests as an “existing personal interest whose interference with the activities carried out within the organization is such as to influence or appears to influence the impartial, objective and independent execution of the activity on behalf of that entity”. For there to be a situation of conflict of interests, the ascertained or apparent interference of the personal interest over the corporate interest has to be sufficiently serious, as a personal interest is not in itself incompatible with the pursuit of the company’s interests.
The guidelines recommend that detection measures and preventive measures extend beyond situations of conflict of interests that are proven to exist and that such measures take into consideration those that are apparent and likely to damage the company’s image.
II. Identifying situations of conflict of interests within the private sector through risk-mapping
The Agency stresses that it is impossible to exhaustively detect all risks of conflict of interests as personal interests and corporate interests are numerous and diverse, and do not necessarily clash. The company must identify individuals who, due to their positions within the company, can make decisions that may create obligations for the company, as well as individuals who can exercise significant influence over the company’s decisions, and whose personal interests, because of their nature or importance, may be detrimental to corporate interests.
The AFA’s guidelines provide companies with multiple options in identifying risks of conflicts of interests. The Agency recommends the creation of a risk-mapping specific to conflict of interests, to identify such risks as part of the corruption risk-mapping pursuant to the Law “Sapin II” or even to include the detection process in the operational risk-mapping.
The guidelines also recommend identifying sensitive positions, processes (purchases, sales, financial investments, HR management), and operations (prospecting, searching for new markets, operations with the public sector, external growth). Additionally, the entity can hold a registry with all recurring situations of conflict of interests.
III. Preventing and addressing conflicts of interests
The AFA points out that preventive measures and risk management measures pertaining to conflict of interests depend on the entity’s specific characteristics. While the legislator may set some measures for specific fields of activity, it is commonly up to the entities to define and create their own conflict of interests policies, which may be contained in their anti-corruption policy, or in a dedicated procedure, or in any other document. Among these measures, a clear and precise policy on gifts and invitations is recommended to be able to keep track of goods received from third parties. Proper dissemination of the policies should follow.
The Agency also states that it is possible to adapt employment contracts by inserting specific incompatibility clauses for certain positions or staff rotation procedures for positions identified as presenting risks of conflict of interests. Similarly, the inclusion of contractual clauses creating an obligation for counterparties to declare and address potential conflicts of interests is recommended.
The AFA further reminds entities to provide themselves with the means to detect potential or actual conflicts of interests. The implementation of a disclosure mechanism for such conflicts, together with training and awareness programs for employees and third-party contractors, are necessary to create an environment favorable to the detection of conflicts of interest.
Finally, the guidelines provide several practical examples of remedial measures, such as adjusting the rights and obligations of an individual in a situation of conflict of interest (abstention from voting or participating at board of directors’ meetings) or, in the most sensitive cases, putting an end to the situation of conflict by withdrawing oneself from a specific procedure or action.
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