CGU: New ordinance provides for Early Ruling of Administrative Liability Procedures (PARs)

In short

On July 22, 2022, the Brazilian General Comptroller’s Office (CGU) published Ordinance No. 019, which comes into force on August 01, 2022 allowing the Early Ruling of the Administrative Liability Procedures (PARs) related to violations of the Anti-Corruption Act. The Ordinance regulates the form of request for Early Ruling by the company, the benefits as well as the prerogatives of the CGU.

More details 

Format and Elements for the Request for Early Ruling

• The request for an Early Ruling made by the legal entity shall be addressed to the General Inspector’s Office (GRC – a sector of CGU) with:

1. admission of strict liability for the practice of the investigated harmful acts; 
2. information and evidence that the legal entity is aware of;
3. commitment to (i) reimburse the damages caused to the Public Administration, (ii) return the amount of the benefit obtained, (iii) pay a fine of 0.1 to 20% of the gross revenue of the previous year (or three times the amount of the benefit obtained or intended, in case it results in an amount higher than the percentage defined on gross revenue), (iv) respond to requests for information related to the process (v) not file administrative appeals against the decision related to the proposal for an Early Ruling (vi) waive the filing of a defense and, finally, (vii) waive the filing of lawsuits related to the PAR.
4. proposal for the form and terms of payment of the financial obligations above.

Request Analysis

• The CGR may, at its discretion, reject the request or accept it. If it accepts the proposal, it must start the production of a final report containing the recommendation for the Early Ruling (or decision not to start the PAR, if the proposal occurs in the Preliminary Investigation phase);
• The withdrawal of the request for Early Ruling or its rejection by CGU, will not imply recognition of the practice of the alleged harmful act – nor will it constitute a justification for imposing or aggravating the applicable sanctions;
• There will be no disclosure of the withdrawal or rejection of the proposal;
• The final report must contain a brief description of the charges made against the legal entity, an analysis of the proposed financial obligations assumed by the company, a justified conclusion regarding the acceptance of the Early Ruling, and a suggestion penalties to be applied.

Possible Benefits of a Request for Early Ruling

• CGU may decide to apply the following sanction reductions:

                   I.  reduction of the fine in the following parameters (which can never be less than the benefit obtained), depending on the moment of the request:

a) 4,5% – before the establishment of the PAR

b) 3,5% – before the deadline for presenting a defense

c) 2,5% – before the deadline for presenting closing arguments

d) 1,5% – after the deadline for presenting closing arguments

                    II.  isolated application of the fine, without cumulating with the sanction of extraordinary publication of the conviction.

                    III. mitigation of sanctions that prevent bidding and contracting with the Government, when applicable.

Decision and Impacts

• The CGU Minister will carry out the ruling of the request (considering the opinion of CGU’s Legal Counsel).
• Records of sanctions against the legal entity will be excluded from the National Register of Punished Companies (CNEP) as soon as the commitments established in the proposal are fulfilled.
• The Early Ruling cannot be granted:

                       I. to companies that already benefited from the Early Ruling in the past, which will not be able to receive such benefit again for any new PARs in the 3 (three) years following the granted Early Ruling; or

                       II. when a leniency agreement is applicable.

Applicability in Already-in-Progress PAR’s

• PARs that were already established, but not ruled, may receive the benefit of the Early Ruling, provided that the request must be made within 60 days after the entry into force of the Ordinance (August 01, 2022) and that the statute of limitations is not foreseen to occur during this 60-day period;
• If the final report has already been prepared based on Decree 8420/15, which was revoked, the benefits will be of 6% (maximum application of reimbursement, collaboration and spontaneous communication reductions);
• The provisions of the new CGU Ordinance create an even more encouraging environment for legal entities to take the initiative to assume objective responsibility for harmful acts;
• The Early Ruling also allows cost savings for both companies and the government;
• The fact that the withdrawal of the request for anticipation does not imply a presumption of guilt will make the possibility of Early Ruling even more attractive for legal entities that are afraid that this request will be harmful in the near future.