France: Conseil Constitutionnel rules elements of new tax fraud statute unconstitutional

In a decision dated 4 December 2013, the French Conseil Constitutionnel – a court vested with the power to review the constitutionality of legislation – ruled that part of the new legislation intended to strengthen the government’s fight against tax fraud (the “New Legislation”, passed by Parliament on 5 October 2013 and on which we reported in our November 2013 edition of Financial Crime Update), was unconstitutional.

In particular, the Conseil Constitutionnel ruled that, pursuant to the French Constitution, a fine imposed on a company could not be calculated as a proportion of its turnover and considered that disproportionate sentences could result from the New Legislation as initially passed by Parliament.

The fine imposed on legal persons under the New Legislation (up to 10% of a company’s turnover for minor offences (délits) and 20% for major offences (crimes)) was therefore declared unconstitutional and therefore ineffective.

On the other hand, the Conseil Constitutionnel declared most of the rest of the New Legislation constitutional.

It is noteworthy that one provision of the New Legislation appears unusual under French Criminal law and political trends. The law provides for the reduction of or immunity altogether from sanctions for legal entities or individuals who cooperate with the criminal authorities in matters dealing with money laundering, and a reduction of the penalty in matters related to bribery. 

Hong Kong: Court of Appeal decision over bribery of Macanese official highlights limitations of Hong Kong’s anti-bribery legislation

In the recent decision of HKSAR v Lionel John Krieger & Tam Ping Cheong James (2013) HKCU 2898 (CACC99/2012, 18 December 2013), the Court of Appeal (“CA”), in allowing the two applicants’ appeals, has clarified the extra-territorial application (or the lack of it) of different provisions under the Prevention of Bribery Ordinance (“POBO”) and their interplay with the statutory conspiracy offence under the Crimes Ordinance. The applicants, Krieger and Tam, the former president and director respectively of Companhia de Sistemas de Residuos Limitada (“CSR”), a waste services company, had been convicted and jailed in 2012 for conspiracy to offer advantages to an agent, contrary to s.9(2) of the POBO and s.159A of the Crimes Ordinance. They had been found to have paid bribes to the former Secretary for Transport and Public Works of Macau, Ao Man Long, in order to ensure the renewal and award to CSR of a number of public work contracts in Macau.

The CA had to consider in particular what would constitute a corrupt “offer” under s.9(2) POBO. In allowing the two appeals, the CA has helpfully confirmed and clarified the following:

  • Section 4 of the POBO has extra-territorial effect and will catch the bribing of a Hong Kong public servant even if the bribery took place outside Hong Kong. However, unlike section 6 of the UK Bribery Act, s.4 does not criminalise the bribery of foreign public officials.  
  • Section 9 of the POBO does not have extra-territorial effect, so there will be no breach unless the corrupt offer was made in Hong Kong. However, the offer can be made to a foreign person (including foreign public officials), for acts to be performed by that person in respect of his principal outside Hong Kong. 
  • The Hong Kong courts recognise the common law principle that unless there are clear and specific words to the contrary, an offence-creating provision of a statute is not intended to criminalise conduct that took place overseas. The effect is that a conspiracy to commit an act of bribery outside Hong Kong is not a conspiracy contrary to s.9(2) POBO and the Crimes Ordinance.

The CA’s decision has created a peculiar lacuna in Hong Kong’s anti-bribery framework, where a corrupt payment offered by representatives of a Hong Kong business to a person outside Hong Kong, for the purpose of inducing that person to take certain actions outside Hong Kong, would not be penalised under the POBO, even if the corrupt payment has resulted in benefits for the Hong Kong business (as was the case here).

The Hong Kong government has reserved its position as to whether it would, in the event of a successful appeal, seek a retrial.