Anti-bribery legislation under attack in the US
by Katie Shay
In 1977, the United States took a powerful first step in curbing global corruption by passing the Foreign Corrupt Practices Act. The law aims to remove the incentive for bribery, and does so by creating both criminal and civil penalties for U.S. persons and certain foreign issuers who bribe foreign officials to obtain or retain business. It was intended to change the global landscape by leveling the playing field, and in many ways it has—companies have taken notice, and other countries have followed suit by passing similar laws.
Recently, the Chamber of Commerce issued a report advocating for several changes to the legislation that could severely weaken the power of the Department of Justice and the Securities and Exchange Commission to enforce the law by creating loopholes for companies. Senators Klobuchar (D-MN) and Coons (D-DE) are expected to introduce legislation that incorporates the Chamber’s proposals, despite opposition from human rights and anti-corruption organizations.
The Chamber says these amendments are necessary to give business more guidance as to what activities could expose them to liability under the Act.
Assistant Attorney General Lanny Breuer urged against amending the FCPA, and announced that the DOJ expects to publish improved guidance in the coming year, eliminating the necessity for any legislative clarifications. “[I]t took decades for the Act to become as strong an enforcement tool as it is today. Having come this far, on what I believe is a noble journey, we cannot, and should not start going backwards. On the contrary, the United States must continue leading the charge against transnational bribery.”
Currently, the DOJ offers a Lay Person’s Guide to the FCPA on its website, and has an Opinion Procedure, by which companies can obtain an official opinion from the Attorney General as to whether conduct they plan to engage in would violate the Act.
Analysis of the proposals further erodes the Chamber’s assertion that the changes are simply about clarity. In “Busting Bribery,” a report published by the Open Society Foundation, professors David Kennedy of Harvard Law School and Dan Danielsen of Northeastern University Law School examined each of the proposed amendments and found that for the most part, they would not clarify any supposed ambiguities in the law. Rather, each of the proposed amendments is designed to go right to the very heart of the FCPA, creating loopholes and incentivizing corrupt behavior.
The proposed amendments include adding a compliance defense, which lets companies off the hook if they have measures in place intended to identify and prevent violations; eliminating successor liability, which cuts off liability if a company is acquired by or merges with another company; adding a willfulness component, which would limit liability if a company did not specifically know that the FCPA prohibited its actions; limiting parent liability for the actions of a subsidiary company, a company under its control; and further defining the term “foreign official,” to give companies greater clarity as to specific people to whom bribes would be considered unlawful.
These terms can be unclear for the uninitiated, so let’s unpack them one by one. First, a compliance defense is unnecessary because the FCPA currently requires proof of actual knowledge and corrupt intent to influence a foreign government to gain an unfair business advantage. Second, limiting successor liability would create perverse incentives for companies to restructure in order to escape liability. Third, a willfulness component would absolve companies of longstanding, knowing and intentional unlawful activity if the company did not specifically know that its actions violated the FCPA. Fourth, eliminating parent liability for the actions of a subsidiary would de-incentivize parent company oversight, and would allow companies to engage in bribery through a subsidiary, something that Congress has recognized foreign companies do. Finally, defining “foreign official” would actually create more problems, as power structures are not organized uniformly in all parts of the world.
Now is not the time to amend the FCPA. Several countries including the United Kingdom, China, and Russia have recently passed anti-bribery statutes of their own. Amending the FCPA now would send the wrong message to the international community, suggesting that curbing corruption is no longer a priority, and could even bring the United States out of compliance with the OECD Anti-Bribery Convention, which over 40 countries have now signed.
The FCPA remains a strong and effective mechanism for prosecuting those who knowingly and intentionally make corrupt payments to foreign governments in order to secure business. Moreover, anti-bribery laws facilitate a fair and competitive business environment in which businesses compete based on their merits, rather than on their ability and inclination to hand out bribes. It ensures that contracts are priced fairly, and allows companies to accurately budget for the costs of operating overseas. In addition, it acts as an “insurance policy” for companies that are not interested in obtaining business by engaging in corruption. Amending the law would undercut these basic notions of fairness.
The United Nations has recognized December 9 as International Anti-Corruption Day. As such, today is a fitting day to call attention to the pervasive effects of the Chamber’s proposed amendments, and to urge Senators Klobuchar and Coons to reconsider proposing legislation that would codify the Chamber’s proposals. Students in the University of Minnesota Law School’s International Human Rights Clinic have joined human rights and anti-corruption organizations in doing just that. Information about how to contact Senator Klobuchar can be found on their facebook page.