Some Lawyers Say Petrobras Sovereign Immunity Claim Fostered Leniency: Kate Hamann in Global Investigations Review

Excerpted from an October 11, 2018 article by Clara Hudson published in Global Investigations Review

Petrobras, a Brazilian state-owned petroleum company, recently agreed to an $853 million settlement under the Foreign Corrupt Practices Act. As part of the settlement, Petrobras maintained its right to argue that it is immune from prosecution under the Foreign Sovereign Immunities Act, which bars foreign states or instruments of foreign governments from being sued in a US court, unless that entity acts as a commercial enterprise.

Petrobras settled with US and Brazilian authorities in September 2018, and admitted that a handful of its most senior executives paid hundreds of millions of dollars in bribes to Brazilian politicians and political parties in a sweeping corruption scandal. Brazilian authorities took in 80% of the fine, while the remainder is to be split between the Department of Justice and the Securities and Exchange Commission.

It's not the first time that Petrobras has claimed sovereign immunity. For years, the company has repeatedly asserted that it cannot be prosecuted in the US because it is acting as a government enterprise (rather than a commercial one) when it sells the country’s natural resources.

However, US courts have not looked kindly upon Petrobras’s claims. Following a corruption-related lawsuit brought by private equity investment fund EIG Management, the DC Circuit upheld in July that Petrobras could in fact be sued as a commercial enterprise.

Some lawyers, however, say the DOJ probably hesitated to push for tougher terms in Petrobras’s recent $853 million settlement because of the unusual circumstances under which the company entered into the resolution.

Pierce Atwood litigation partner Kathleen Hamann, a former FCPA prosecutor who also spent ten years at the State Department, theorized that sovereign immunity didn’t have a major role to play in securing the NPA. The leniency may have had more to do with the primacy of the Brazilian enforcement, Hamann said.