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Compliance programme in the agribusiness sector

| News | Corporate Compliance

José Miguel Soriano analyses the need to implement the compliance program in the agribusiness sector to avoid risks such as sanctions or reputational damages for non-compliance with the regulatory framework

José Miguel Soriano, a partner at Andersen Tax & Legal who was also part of Garrigues y Cremades & Calvo-Sotelo, is an expert in corporate litigation and a professor of Constitutional Law. He is also part of the specialized working food sector group, a firm bet of Andersen Tax & Legal for the transversal and integral advice in industries and sectors.

Why the creation of a specific working group on Agri-food?

At Andersen we believe that specialization is synonymous with efficiency and better service. It is not just a matter of having professionals specialised in commercial, procedural, labour law or any other discipline, we go one step further, we also try to familiarise ourselves with and have knowledge of certain specific industries, including the agri-food sector.

It is clear that there is no specific agri-food law, but there are different parts of the legal system that are applied more intensively and with a series of particularities in the agri-food world. If we add to that the dedication and knowledge of the economic reality of the industry, the result can only result in a more qualified service for the client, that is the reason for the creation of this area of work.

What do you think are the main challenges that our partners have to face in their international strategy in the short and medium term? 

Perhaps the greatest adversity of business development in the face of internationalisation is the possible exit of the UK from the EU, especially if it occurs without agreement. This possible rupture would leave us with a panorama of great uncertainty and may be a disincentive, given that, on the one hand, the European Union could demand that UK products comply with their limits in terms of pesticide residues, contaminants, microbiological parameters, and so on. On the other hand, the United Kingdom can make its own demands, giving rise to a commercial confrontation on account of the parameters required on both sides of the English Channel.

Likewise, there may be an alteration in the logistics of distribution and transport; new procedures and tariffs in external health, plant health, commercial quality, etc.

On the other hand, the United Kingdom could disregard the particular legal regime that foods with Protected Designation of Origin or Geographical Indication (D.O.P/I.G.P.) have within the European Union and apply the same rules as "normal" products, which will seriously harm these foods. Perhaps this forecast can be tremendous, but what is certain is that seeing how the latest developments are developing in relation to this matter, we must foresee all the possibilities.

In any event, Brexit is going to change the scenario of food law in the European Union.

Nor should we forget the development of the recently signed agreement between the EU and Mercosur, which aims to facilitate exports by providing them with greater legal security based on international regulations.

And what precautions should be taken when internationalizing?

In view of the possibility of going abroad it is vital to carry out a correct planning in all the risk plots in favour of the prosperity of the business and its legal security. Thus, it is necessary to have adequate commercial and corporate planning, an updated fiscal and transfer pricing policy, a well-developed compliance protocol, as well as the introduction of conflict resolution clauses to avoid prosecution in countries where legal certainty is not as consolidated as in Spain.

Indeed, in the area of compliance, since 2010 there has been much talk in our country about the criminal liability of legal persons. Why do you think it is necessary that AEFA or its associates should have implemented in their respective organizations a program for the prevention of criminal risks or a system for their management?

The introduction of crime prevention or compliance programmes went hand in hand with the reform of the Penal Code in 2015. It is known that this reform articulated a list of crimes that generate criminal responsibility for the legal person and, in turn, the legislator enabled the possibility of being able to exempt or mitigate the penalty that could correspond to a legal person if it had implemented a crime prevention program in the organization. I believe that the mere fact that a company can exempt or mitigate the penalty would be sufficient reason for its elaboration and implementation, but we should not forget that jurisprudence and the Attorney General's Office itself give great importance to the degree of compliance culture that exists in companies. Ethics, values and zero tolerance to any conduct that may pose a criminal risk have become very important when doing business, especially for those companies that operate in international markets, as large companies are demanding their suppliers to have compliance programs. And, finally, it is in the general interest of the organization itself since the company that controls its risks and establishes the appropriate mechanisms to control them can achieve the fundamental objectives of control, cost savings, avoid reputational damage and operate more easily, especially in highly regulated sectors such as the sector in which AEFA members operate.

In your experience, from the catalogue of crimes that generate criminal responsibility in the legal individual, what risks could be more relevant for the associates and companies in AEFA's field of action?

The risks to which any company in our country is exposed can be differentiated into two types: transversal and specific. Depending on the sector in which they operate, companies will be more exposed to one or the other. These would be, for example, transversal risks, which affect all companies: risks of discovery and disclosure of secrets, fraud, crimes against the market and consumers, fraud against public administrations, including crimes against the Treasury, Social Security, subsidy fraud or breach of accounting obligations and, finally, those related to public and private corruption, including in the former all those crimes related to influence peddling, bribery and bribery and in the latter corruption in business, bearing in mind the risk of corruption in international business transactions for those companies operating abroad. As specific risks of the sector, and fundamentally because of its regulation, I would highlight the risk of committing crimes against public health, because of the type of product it commercializes, and the risk related to environmental crimes, both because of the production of the product and its final destination. But beware, depending on the markets in which it operates, it would not obviate other risks that may be very relevant for the sector, such as the commission of a money laundering crime, if international transactions do not comply with the requirements imposed by Law 1/2010, on the prevention of money laundering.


As far as the sector is concerned, the registration of a phytosanitary product entails a large investment in studies, formulation and trials. How can these data and documents be protected once they have been submitted to the Administration?

It may seem obvious, but the registration process is an administrative procedure that, as such, is public. This means that all documents and essays may become accessible to a third party with a legitimate interest applying for access. In addition, the Law of Access to Environmental Information and the Law of Transparency facilitate access to a plurality of subjects (from competitors to pressure groups) and, to all this are added the provisions of the Law on Plant Health that even allow the "expropriation" of certain trials in order to avoid their repetition.

The best way to protect yourself against these threats is prevention. Regulation 1107/2009, the Transparency Law, and the very recently approved Business Secrets Law, dispense instruments so that entrepreneurs can protect the most sensitive aspects of their formulae. For this reason, it is essential to properly plan the registration processes from the point of view of the protection of industrial secrets.

The regulation of special products based on microorganisms presents deficiencies that sometimes make it very difficult to reconcile technical criteria with the criteria imposed by the Royal Decree. How can the law help us?

The Law must adapt to the reality of the sector it regulates and, therefore, Royal Decree 506/2013 (modified by Royal Decree 999/2017) must incorporate the technical improvements necessary to facilitate its application by operators.

Although there are numerous aspects that would require a modification of the Royal Decree there are many others that have their solution in a correct application of the rule. Thus, there are limits such as that relating to the expiry date of products containing micro-organisms, which can be solved by modifying the Annex through a ministerial order, which makes the reform process much simpler than that which initially implied its approval. On the other hand, there are problems that have their origin in the interpretation that the Administration makes of the norm. In this sense it is important to be clear that the Administration has limits to this interpretation. The Administration cannot impose criteria not foreseen in the norm that limit the exercise of the activity under the argument that it is an interpretation or application of the same.

Finally, what advice can you give on how to act in conflict situations: non-payments, contractual interpretations, etc?

The pre-trial and out-of-court phase is key. That is to say, to try to avoid the judicial or arbitral procedure if it were possible, and for it it is advised to put in hands of specialists when before. Designing strategies from the very moment a controversy may arise is fundamental, since a bad step, although well-intentioned, can drag you to the Courts without evidence or grounds on which to base a solid position.


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