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29 June 2015
In 2011 the Group of States against Corruption (GRECO) released the Third Evaluation Round Report on Switzerland on Incriminations, concerning the effectiveness of Swiss measures taken to comply with the Criminal Law Convention on Corruption (ETS 173).(1) The report identified certain deficiencies in Swiss criminal law, notably in connection with the rules on corruption in the private sector.
Tackling the concerns raised by GRECO, in 2013 the Swiss government published for consultation a draft bill on the amendment of anti-corruption laws. The draft bill introduced changes that were widely perceived as overdue, in view of a series of scandals relating to the practices of international sports organisations headquartered in Switzerland.(2)
On June 3 2015 the Council of States substantially approved the proposed changes to the law. The parliamentary debate generated exceptional public interest due to its coincidence with the arrest of high-ranking officials of football associations in the run-up to the annual Fédération Internationale de Football Association (FIFA) congress in Zurich on May 27 2015. Details of (purported) machinations in connection with the awarding of events such as the FIFA World Cup and respective marketing rights by FIFA and regional football federations continue to surface as investigations develop in the United States, Switzerland and other jurisdictions. These revelations are likely to keep the anti-corruption momentum high, and it may be taken for granted that the National Council will approve the new rules as well.
Penal provisions for bribery in the private sector are currently contained in Articles 4a and 23 of the Unfair Competition Act. The Unfair Competition Act aims to ensure fair and undistorted competition(3) by prohibiting conduct that conflicts with the principle of good faith in dealings between competing parties or between suppliers of goods and services and customers.(4) The act covers bribery in the private sector only where it affects the competitive relationship between two or more players in a particular market.
This may prove problematic in relation to forthcoming US requests for extradition of the FIFA officials recently arrested in Switzerland. It is widely assumed that neither Swiss domestic law nor applicable treaty law would provide a basis for extradition solely on the allegation that the arrested individuals accepted undue advantages in the context of a tender process for football events or respective marketing rights.
Further, prosecution of bribery in the private sector requires the filing of a criminal complaint.(5) Although the range of parties that are legally entitled to file such a complaint is broad, it has historically proven to be a high hurdle to clear: in the past seven years, criminal investigations had been opened in only a handful of cases.
Adopting the government proposals, the Council of States resolved on June 3 2015 to supplement the Penal Code with two new provisions concerning bribery in the private sector, thereby eliminating the need to resort to competition law.(6) The elements of punishable conduct under the new provisions will encompass offers of or requests for undue advantages in exchange for an employee, member, agent or another auxiliary person carrying out – or failing to carry out – an act in connection with his or her function in a private undertaking or organisation. The act may be carried out (or omitted) in contravention of duty or in the exercise of discretion. The provision covers undue advantages for the benefit of the employee or a third party (eg, the employer).
However, the Council of States abolished the requirement for a criminal complaint as a prerequisite to prosecution only in relation to cases of public interest. According to the parliamentary debate, public interest will typically be assumed in matters involving organisations that hold a powerful position in their sector, where a lack of governance could negatively affect a multitude of stakeholders. Another example given was the use of false deeds (eg, untrue company accounts) to enable or cover up bribe payments, since such behaviour would undermine public trust in the reliability of such instruments. It remains to be seen whether this view will stand debate in the National Council.
The penalty framework applicable to private bribery remains unchanged. As under the Unfair Competition Act, perpetrators may be punished with imprisonment for up to three years. Consequently, bribery in the private sector (unlike bribery in the public sector) continues to qualify as a misdemeanour and therefore cannot constitute a predicate offence to money laundering under Article 305bis of the Penal Code.
The first step towards a legal framework for effectively combating corruption in the private sector has been accomplished. In the wake of the FIFA affair, there is little doubt that the National Council will endorse the Council of States' resolutions during its session in Autumn 2015. Time is running out for sporting associations and other private organisations to adjust their governance and make compliance policies work.
For further information on this topic please contact Bernhard Loetscher at CMS von Erlach Poncet Ltd by telephone (+41 44 285 11 11) or email (firstname.lastname@example.org). The CMS von Erlach Poncet website can be accessed at www.cms-vep.com.
(2) A copy of the federal communique (in French) is available on the Federal Department of Justice and Police website, including links to the draft bill and consultation document.
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