The Scope of the Brazilian Anti-Corruption Law Revealed by the Brumadinho Case


Luís G. Senna
Head of Compliance, CCEP-I

Brazilian anti-corruption law (Law No. 12,486 / 13) was published in August 2013 as a consequence of Brazil’s signing of the OECD and UN Anti-Corruption Conventions. Despite the correct media coverage, some issues seem to have gone unnoticed by the general public. Much has been said about the provision that determines company’s strict liability, a rule that has raised discussions among scholars. But another Brazilian innovation passed by without much notice: the fact that other acts against the public administration are also punishable by the Law – not just corruption.

In fact, the purpose of the law is much more than to punish corruption, and this is explicitly stated in its first article: “This Law provides for the administrative and civil strict liability of legal entities for the conduct of acts against the national or international public administration. ”

The law defines that “acts against the public administration” are not only the concession of “improper advantage” to public agent – concept borrowed from the Brazilian Penal Code to define the crime of “corruption” – but also a series of other actions considered harmful to the public administration, here listed in summarized form: to finance the practice of any illicit acts provided for in the Law; use of interposed person to hide the identity of the beneficiaries of the acts practiced; to defraud public procurement or public contracts; to defraud the economic-financial balance of public contracts; and hamper investigation or inspection activities of public agencies.

Despite this broad and clear concept, the general public defined the law as the “Anti-Corruption Law”, which may pass on the idea to those unfamiliar that the law punishes only corruption.

This limited perception of the scope of Law no. 12.846 / 13 seems to be observed until the present day. The reason may be that since the enactment of the law no relevant case not related to corruption, but framed in the law, has been noticed by the press. In fact, due to the great repercussion that the so-called “Operação Lava-Jato” has been taking in Brazil and worldwide since 2014, focused primarily on corruption, little space was left for cases based on other hypotheses listed in the law.

Perhaps because of this, the statement of the Secretary of Geology, Mining and Mineral Transformation of the Ministry of Mines and Energy, published during Carnival celebrations, it caused surprise for some as he declared that Vale, Brazilian mining giant, could be punished by the Anti-Corruption Law in the case of the dam rupture in Brumadinho, State of Minas Gerais, which has so far caused 186 deaths and 122 disappeared so far. Actually, there was no news until then (and so it remains) regarding eventual occurrence of an act of corruption in the case. But the Secretary invoked a possible applicability of the Anti-Corruption Law in this case. The provision invoked would be precisely one of the other hypotheses provided in the law regarding acts against public administration: an alleged action by Vale to impede the investigation and inspection activity by public agencies in mining tailings dams. The Secretary’s statement was as follows: “The law is clear when punishing companies if they conspired to prevent proper monitoring by the government.”

The application of the Anti-Corruption Law, in this case, is relevant because the law provides that the company considered responsible for harmful acts may suffer a fine up to twenty percent (20%) of gross sales in the year prior to the initiation of the administrative proceeding, excluding taxes. In Vale’s case, it is estimated that such a fine could reach approximately US $ 6.6 billion. Immediately after the announcement of the Secretary’s interview, Vale’s shares felt by 2%.

This episode serves to remind compliance officers and other compliance agents subject to Brazilian jurisdiction regarding the scope of the Brazilian Anti-Corruption Law, which achieves acts against public administration beyond corruption itself. The statement by the Ministry of Mines and Energy’s Secretary of Geology, Mining and Transformation confirms that the risk of invoking the Anti-Corruption Law for other acts against public administration in is not only theoretical but also concrete, and national authorities are showing signs of their appetite about the subject. This issue increases the complexity of the application of compliance programs in Brazil, as well as their comprehensiveness, requiring the application of new actions by compliance agents, such as greater monitoring and implementation of additional controls, in several sectors of the company that operates in Brazil.