Anti-bribery legislation in the United States and United Kingdom: a comparative analysis of scope and sentencing.

• Author: Ryznar, Margaret

1. INTRODUCTION

   In an annual world economy of thirty trillion dollars, bribery--whereby one person influences the behavior of another through financial payment (1)--is a trillion dollar business. (2) Acts of bribery range from the mordidas paid in Mexico (3) to the sums paid to American politicians for political favors. (4)

   Recently, American prosecutors have begun targeting a particular subsection of bribery that accounts for much of the world's corruption--corporate bribery of foreign government officials to obtain or retain business. (5) For example, from 1994 to 1999, bribery of foreign officials facilitated the award of 294 contracts valued at approximately $145 billion. (6) In 1998 alone, U.S. businesses collectively lost $37 billion worth of contracts abroad due to foreign bribery. (7)

   Although the prohibition of this type of bribery is not new in the United States, (8) its prosecution has recently undergone a renaissance to become one of the most dynamic subsets of white-collar crime. (9) In the United States, these prosecutions often proceed under the Foreign Corrupt Practices Act (FCPA), a post-Watergate law mostly dormant for decades, and have increased dramatically in the wake of corporate misconduct in the last decade. (10)

   By many measures, 2010 was a banner year for FCPA investigations. (11) ongoing FCPA investigations implicate numerous Fortune 500 and other well-known companies, including Maxwell Technologies, Sun Microsystems, Morgan Stanley, Avon Products, Bridgestone, Aon, Johnson & Johnson, United Parcel Service, Bristol Myers Squibb Co., Alltel, ABB Ltd., Alcatel Lucent, Xerox, United Defense Industries, Chiquita Brands Int'l, Accenture Ltd., DaimlerChrysler AG (now Daimler AG), Petro-Canada, and Eli Lilly & Co. (12)

   Generally, companies encounter FCPA-related issues in various circumstances. Some acquire them through the acquisition of a company with unknown bribery practices. (13) Others do so through their foreign subsidiaries, which, in addition to being managed by foreigners in a different culture, do business in corrupt environments, especially in comparison to Western standards. (14) Still others may be implicated under the FCPA by a single rogue employee. (15) Regardless of the source of FCPA problems, however, all these companies would be potential targets of aggressive government enforcement of the Act.

   Commentators have been divided on the benefits of the aggressive prosecution of FCPA cases. Some have suggested that FCPA enforcements counterproductively chill investments in certain markets by discouraging corporate entry into transitioning economies. (16) Others have recognized the benefits to a clean business environment abroad, (17) noting that bribery entangles corporations in "extortionate relationships" (18) and increases transaction costs. (19) Not only is it the corporations that are disadvantaged by a corrupt business environment, but so too are the citizens of that country (20)--societal costs of corruption (21) include compromises to efficiency, (22) fairness, and transparency. (23) In emerging economies, corruption is a particular problem, as it is one of the greatest obstacles to a market's transition to stability. (24)

   For many such reasons, the U.S. Department of Justice (DOJ) and U.S. Securities and Exchange Commission (SEC) have recently renewed their commitment to the enforcement of the FCPA. (25) Assistant Attorney General Lanny Breuer of the DOJ's Criminal Division noted that the DOJ Fraud Section has successfully brought thirty-six corporate FCPA enforcement actions since 2005, resulting in the imposition of fines totaling more than $1.5 billion. (26) Additionally, the DOJ charged seventy-seven individuals with FCPA violations. (27)

   By the numbers, the United States, a member of the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (OECD Convention), prosecutes more bribery offenses than most other countries bound by the Convention. (28) This American prosecution is facilitated by the extraterritorial nature of the FCPA, which creates a powerful legal framework creating significant consequences, including prison sentences and significant fines, for multinational corporations and their individual employees. (29) This extraterritoriality aspect of the FCPA, combined with the Act's strict enforcement in recent years, has earned the United States a reputation as an aggressive prosecutor of bribery. (30)

   While this reputation of the United States for anti-bribery enforcement is among the most notable, recent changes to the United Kingdom's bribery laws will soon provide the United States with a strong transatlantic partner in the quest against corruption. Once the new laws are in place, the U.K. will become increasingly strict on bribery as a result of its dramatic shift from a patchwork of common law to comprehensive legislation on the topic. The new laws are, in some ways, even more aggressive than the FCPA. (31)

   The development of stringent U.K. anti-bribery law, however, has encountered many delays. In August 2010, the U.K. Ministry of Justice announced delays in the implementation of the Act, and in January 2011, the Ministry confirmed that the Bribery Act of 2010 will not come into effect until July 1, 2011, more than one year after receiving royal assent. (32) The official reason for this delay was that a short "consultation exercise" became necessary in order to publish guidance for corporations seeking compliance with the new law. (33) However, some commentators suspected that the new U.K. government, resulting from a change of administrations, bowed under pressure from the business lobby to delay and perhaps dilute the force of the legislation, (34) but this was unlikely.

   Although the U.K. government has delayed the enforcement of its new anti-bribery law, it is important to understand this newly enacted legal framework. A comparison of U.S. and U.K. anti-bribery laws, in particular, offers insight into some of the world's most aggressive anti-bribery laws, triggering important questions on the proper scope of bribery legislation and sentencing. These issues are especially relevant given that the U.S. and U.K. anti-bribery legal regimes, as well as others around the world, almost inevitably will impact multinational companies, regardless of their country of origin.

   This Article therefore begins by considering American anti-bribery law in Part II, focusing on the FCPA. Part III then analyzes British anti-bribery law, identifying its history and recent changes. Next, Part IV considers and contrasts the scopes of the U.S. and U.K.'s anti-bribery schemes, including their respective sentencing components and their wide-reaching consequences to businesses. The Article concludes that public policy goals and the costs of bribery prosecution will shape many of the characteristics of the anti-bribery legal landscape, which likely will be aggressive in targeting corporate bribery of foreign government officials.

2. AMERICAN ANTI-BRIBERY LEGISLATION: THE FOREIGN CORRUPT PRACTICES ACT

   Both the United States and the United Kingdom are parties to the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (OECD Convention), which was signed in 1997 by the members of the Organisation for Economic Co-operation and Development (OECD). (35) Under the OECD Convention, countries must "prohibit the bribing of foreign officials, set criminal and civil penalties for violations, and either extradite or prosecute its nationals who are accused of bribery by another signatory." (36) The OECD publishes its findings on the progress of implementation in various countries. (37) As signatories, both the U.S. and the U.K. must operate within this framework.

   Pursuant to the OECD Convention, Congress enacted the Foreign Corrupt Practices Act (FCPA) to prohibit the bribing of foreign officials. (38) The FCPA was enacted in 1977 on the heels of the post-Watergate corporate environment when more than 400 American companies admitted to making questionable or improper payments in excess of $300 million to foreign government officials in return for business benefits. (39) The Act, signed by President Jimmy Carter on December 19, 1977, (40) aimed to prevent such improper conduct and to restore confidence and integrity in corporate America. (41) The Act amended the Securities Exchange Act of 1934 (42) and underwent amendments itself in 1988 and 1998. (43)

   In general, the FCPA prohibits: (1) the payment or offer to pay anything of value to a foreign official to obtain or retain business (anti-bribery provisions), (44) and (2) the inadequate keeping of books, records, and accounts (books and records and internal controls provisions). (45) The specific requirements prescribed by the FCPA have been illuminated by judicial interpretations and by the enforcement actions of the Act's implementers, the SEC and DOJ.

   The DoJ is primarily responsible for the criminal and civil enforcement of the anti-bribery provisions. (46) The SEC plays a coordinating role and is concerned primarily with civil enforcement of the anti-bribery provisions with respect to issuers, as well as matters related to the books and records and internal controls provisions. (47) The office of General Counsel of the Department of Commerce, meanwhile, focuses its efforts on offering guidance to U.S. exporters. (48)

   In general, this Part examines the substance of the FCPA by exploring its language, interpretation, and enforcement. This Part begins by considering the FCPA's vast jurisdictional reach and then examines the interpretation and enforcement of key statutory language. It next turns to the statute's limited exception, affirmative defenses, and proscribed penalties for violations. This discussion of the FCPA describes a legal framework to be compared with Part III, which addresses the U.K.'s anti-bribery laws that establish...