New Regulation on Anti-corruption Integrity Programs

Law No. 27,401 has been in force since March 1, 2018 setting forth criminal liability for legal entities that engage in certain corrupt interactions with public officials. Such conducts are local and transnational bribery and influence peddling; negotiations incompatible with public office; illegal payments made to public officials under the appearance of taxes or fees owed to the relevant government agency upon undue request by the official (“concusión”); illegal enrichment of public officials and employees and aggravated false balance sheets and reports.

The Law 27,401 (the “Law”) establishes requirements and benefits related to anti-corruption integrity programs. Said programs must consist of actions, mechanisms and internal procedures to promote integrity, supervision and control, aimed at preventing, detecting and correcting irregularities and illegal acts covered by the Law. Among other requirements, the programs must be related to the risks of the activities that the legal entity carries on, its size and economic capacity.

The program has an impact on   the severity of penalties, for the possible exemption from penalties and administrative liability, and for collaboration agreements to be entered into with the authorities in legal cases under the Law.

On April 6, 2018, Decree 277/2018 (the "Decree"), that regulates certain aspects of the Law related to integrity programs, was published in the Official Gazette.

The recitals of the Decree state that the objective of this regime is to provide more effectiveness to the policies for the prevention and fight against corruption. In this sense, the regime establishes incentives for legal entities to prevent the commission of crimes against the Public Administration through integrity programs and cooperate with the authorities in investigations in order to contribute to greater efficiency in the fight against corruption.

Firstly, the Decree delegates the Argentine Anti-Corruption Office of the Ministry of Justice and Human Rights with the capacity to establish rules and guidelines in connection with the provisions of articles 22 and 23 of the Law. These articles define and establish the requirements of the integrity programs under the Law.

Secondly, the Decree gives more precision on the application of article 24 of the Law.

Article 24 establishes that having a compliance program will be a requisite for contracting with the Federal Government when (a) according to applicable regulations such contracts must be approved by a public official ranked as or above a level of Minister; and (b) if the contracts fall under those regulated by article 4 of decree 1023/01 (e.g. procurement, sale and purchase, consulting, services, leases, leasing, swaps, concession for using goods in the public and private domain of the Federal Government, public works, concessions of public services and licenses, and all those contracts not specifically excluded from this regime), Laws 13,064 (public works), 17,520 (construction, conservation or exploitation of public works through tolls or tariffs) and 27,328 (public-private participation), and concession or licensing contracts for public services.

The Decree establishes that the value of the contracts referred to in subsection (a) of article 24 of the Law, is the one established in the annex to article 9 of the "Regulation of the Regime to Contract with the Federal Administration" approved by decree 1,030/16 -or whichever replaces it in the future- to approve procedures and/or award contracts by Ministers, officials with rank and category of Ministers, the Secretary General of the Presidency or highest authorities of the decentralized organisms. The analysis of said annex shows that (i) in public or private bids and tenders or public auctions, the value must exceed ARS 50,000,000, and (ii) in abbreviated bids for tender and simple adjudications, the value must exceed ARS 30,000,000. The annex sets forth values in modules, establishing 50,000 modules for case (i) and 30,000 modules for case (ii) above. Each module is worth ARS 1,000 as per article 28 of Decree 1,030/2016.

Thirdly and finally, the Decree establishes that the implementation of an integrity program as a condition precedent for legal entities to enter into certain contracts with the Argentine Federal Government after the Law becomes enforceable must be evidenced in the form and terms that each contracting agency decides on in each procurement process.

In this way, the Decree opens a clear path for the Argentine Government, through the Anticorruption Office, to provide more details on such a complex issue as integrity programs and clarifies when said programs are mandatory to contract with the Federal Government.