On April 25, professors and experts in the areas of public administration control, corruption and economic criminal law from the FGV Sao Paulo Law School met to present current challenges involving leniency agreements and discuss changes needed to make this instrument more effective.

A central instrument provided for in Brazil’s Anti-Corruption Law (Law 12,846 of 2013), leniency agreements were widely used in Operation Car Wash, as they allow information and evidence to be obtained through the collaboration of companies that collaborate with the public authorities in exchange for a reduction in their punishment.

In March 2023, three political parties – the Socialism and Liberty Party, Communist Party of Brazil and Solidarity Party – filed Action Against the Violation of a Constitutional Fundamental Right 1,051, which is now in the settlement negotiation phase at the Federal Supreme Court. The court recently extended the consensual renegotiation period for the leniency agreements in question.

Raquel Pimenta, a professor on the Academic Master’s and Doctoral Program at the FGV Sao Paulo Law School and co-coordinator of the school’s Nucleus for Law and Political Economy (NUDEP), says that this instrument’s evolution in the 10 years since it was created can be divided into two stages. The first, between 2013 and 2018, was a period “a period of rapid and troubled learning,” when around 45 agreements were signed at federal level.

“During this period, we learned how to make leniency agreements, yielding many benefits but also posing many challenges. The challenges can be summarized at three levels: problems with contract design; problems with how institutions interpret certain elements (such as fines and compensation); and institutional design issues, which require greater coordination between regulators,” she explains.

Pimenta also points to some positive factors in this period, such as the leverage of investigations and the establishment of a culture of anti-corruption integrity in the private sector.

She adds that in the second period, between 2019 and 2023, there were a similar number of agreements, but there was “still insufficient incrementalism.” She explains that “efforts began to identify and try to solve problems, but challenges persisted, leading to lawsuits filed with the Federal Supreme Court.” According to Pimenta, when we look back on this period, it is important to identify some key areas for improvement, which could help make leniency agreements more effective.

Juliana Palma, a professor on the Professional Master’s and Doctoral Program at the FGV Sao Paulo Law School, says that reviews of leniency agreements should be seen as natural, given that negotiations occur both when they are drafted and when their clauses are executed, especially when the Federal Supreme Court is called to oversee their renegotiation, when extended deadlines are granted. According to Palma, the Introductory Law to the Brazilian Legal System can help build these parameters for ordinary review, such as the duty for clauses to be proportional and fair throughout the term of leniency agreements.

“Reviews of leniency agreements need to be standardized. The conditions for these reviews and optimizations must be provided for in the agreements themselves and they must comply with legislation. For example, Article 26 of the Introductory Law to the Brazilian Legal System establishes some conditions that must be observed not only in renegotiations, but throughout the duration of agreements,” she explains.

André Rosilho, the coordinator of the Federal Audit Court Observatory at the FGV Sao Paulo Law School and a professor on the school’s Professional Master’s and Doctoral Program, has been trying to understand why the Federal Audit Court, which is not even mentioned in the Anti-Corruption Law, ended up taking center stage in discussions about leniency agreements. His hypothesis is that this phenomenon has to do with a movement of self-assignment of powers.

According to him, even though the court’s stance on overseeing leniency agreements is legally questionable, the fact is that it has gained a foothold, which it is unlikely to relinquish. Most likely, the future of leniency agreements will continue to pass through the court.

Recalling the solution reached for some agreements, Rodrigo de Grandis, a professor on the FGV Sao Paulo Law School’s Professional Master’s Program and a former public prosecutor, notes that most of them were resolved by consensus, involving mechanism such as antitrust agreements, criminal prosecution, non-civil prosecution, plea bargains and administrative leniency agreements within the scope of the Brazilian Securities and Exchange Commission, Central Bank and other parties in the legal system.

He believes that the main thread that runs through antitrust agreements, plea bargains (provided for in Law 12,850) and leniency agreements is the possibility of producing evidence that under other procedures would not be possible, given that the negotiations were carried out behind closed doors.

According to de Grandis, there is still a lack of regulations on leniency agreements to establish their legal nature and define their criminal consequences. And it is precisely this gap that can lead to legal uncertainty.