Corruption, corporations, and the new human right.

AuthorSpalding, Andrew Brady
PositionIntroduction through II. Reframing Bribery: From White-Collar Crime to Human Rights, p. 1365-1402


We should no longer expect the Alien Tort Statute to be the principal federal statute that deters overseas corporate rights violations. That distinction rightly belongs to the Foreign Corrupt Practices Act, an anti- bribery statute that rests on undisputed principles of corporate liability, contains a clear congressional statement of extraterritorial application, and routinely collects penalties from multinational corporate defendants. Scholars have not associated the FCPA with human rights, owing principally to a thin understanding of rights theory. But freedom from corruption can and should be understood as a human right, one that is as old as social contract theory but new to federal and international law. With specific reforms--one modeled after environmental law and the other after intellectual property--the FCPA can become a more powerful statutory tool for deterring overseas corporate rights violations than the ATS ever was or will be.

Table of Contents Introduction I. Anti-Bribery's Paradox: the Foreign Policy Problem with a White-Collar Crime Solution A. The FCPA 's Original Ideal of Spreading Democracy Through Commerce B. Empirical Evidence that Modern Enforcement Harms Developing Countries C. How a Rights Paradigm Resolves the Paradox II. Reframing Bribery: From White-Collar Crime to Human Rights A. Redefining Corruption for the Anti-Bribery Era B. Rediscovering Corruption as a Violation of Natural Rights C. Rejecting the Modern View of Corruption as Merely a Means of Violating Rights III. A New Cornerstone: Rebuilding Corporate Liability after Kiobel A. The FCPA as the ATS Might Have Been B. Compensating Victims by Following the Precedent of Environmental Law C. Pursuing Global Enforcement by Following the Precedent of Intellectual Property Conclusion Introduction

The Supreme Court is thought to have dealt a near-fatal blow to the doctrine of corporate liability for overseas human rights violations. Kiobel v. Royal Dutch Petroleum Co. (1) limited the extraterritorial application of the Alien Tort Statute ("ATS") almost to the point of nonexistence. Because the ATS is (or was) widely regarded as the sole provision of the U.S. Code holding corporations liable for overseas rights abuses, we assume the doctrine now lies on its deathbed.

But the ATS may not have been particularly well-suited to protect human rights from overseas corporate intrusions. The 225-year-old, one sentence statute contains no express grant of extraterritorial application. (2) Neither does it provide for the liability of corporations. (3) And its capacity to deter violations has been greatly hampered by the near impossibility of collecting corporate judgments. (4) As the cornerstone of a federal statutory regime, the ATS was rather precarious. Perhaps we should not be surprised to now bemoan its fate.

What the world needs now is a federal statute that holds both U.S. and foreign companies liable for overseas human rights abuses; a statute that contains an express congressional statement of extraterritorial application and rests on well-established principles of corporate liability. Ideally, the statute would plainly provide a specific cause of action, amply supported by an accessible legislative history. It would not have the courts unilaterally intervening in delicate foreign affairs, but would involve the executive branch in enforcement. And in the best of all possible worlds, its settlements would be consistently won and collected, inducing an international culture of compliance. What we need, in other words, is a statute that does the work the ATS never could and, after Kiobel, likely never will.

That statute already exists. It is the U.S. Foreign Corrupt Practices Act ("FCPA"), which criminalizes the bribery of overseas officials for business purposes. (5) Congress originally enacted this statute in 1977 specifically to promote democratic values across the world through international business. (6) The FCPA recently accounted for half of all criminal penalties collected by the U.S. Department of Justice. (7) Indeed, that agency has publicly stated that after fighting terrorism, combating overseas corporate bribery is its first priority. (8)

Still, anti-bribery law is not generally thought of in relation to the broader movement to hold corporations accountable for human rights violations, for two reasons. The first is an impoverished understanding of rights. While we may consider corruption to be a means of violating human rights, we do not generally regard it as an inherent rights violation. (9) Secondly, we enforce, and regard, overseas corporate bribery as essentially an issue of white-collar crime. This owes to a historical accident whereby Congress codified the bribery prohibition as an amendment to the 1934 Exchange Act, vesting enforcement authority with the Securities and Exchange Commission. (10) We thus enforce a prohibition on corrupting foreign governments as if that conduct were really no different than domestic insider trading or market manipulation.

But history is proving circular, and we must now rediscover that which we once understood all too well. Corruption does indeed violate a human right: the right to a liberty that can be realized only in civil society, where the government confers benefits in accordance with standing laws, common to everyone, and directed to the public good. (11) In Lockean political theory, it is the right to not be under "the arbitrary will of another." (12) The violation of this right voids the social contract, destroys civil society, and returns humankind to the state of nature. Indeed, Locke claimed that abusing public office for private gain was the very definition of tyranny. (13)

So too is corporate bribery closely associated with other rights already recognized in international law: the right to equal protection, to political representation, to self-determination, to food, housing, and medical care, to education, to equal access to a country's public services, to safe working conditions, to control natural resources, and indeed to the very rule of law itself. (14) Corruption, properly defined, is the source from which so many other violations spring.

The starting point for reframing federal corruption policy lies in a recent policy paper of the Obama Administration. In 2010, the Administration publicly claimed that "corruption is a violation of basic human rights." (15) The paper was both underpublicized, and undertheorized; it did little to promote or defend this assertion. But when subjected to a rigorous philosophical defense, this executive statement of foreign policy can begin to fill the void that the judicial branch's Kiobel decision has created.

Meanwhile, the catalyst for a broad public debate on anti-bribery policy lies in a now-pending FCPA enforcement action that should prove the highest-profile in history: Wal-Mart, perhaps the most infamous U.S.-based multinational corporation, is under investigation for systematically paying bribes across the developing world, inducing violations of various long-recognized rights. (16) With the convergence of these forces, now is the time to reconceptualize corporate bribery as an issue of human rights.

This Article undertakes that project, making three claims. First, corruption generally, and bribery specifically, can and must be regarded as violating a human right. Second, once the FCPA is understood as a human rights statute, it provides a far more effective model for deterring overseas rights abuses by corporations than the ATS ever did, or could. Third, with two specific reforms modeled after other areas of federal law, we could more fully achieve the FCPA's purpose of promoting human rights through international business.

The analysis proceeds as follows. Part I demonstrates that the FCPA was, at its inception, understood as a statute for promoting democratic values in developing countries through ethical commerce. It then provides empirical data which show that enforcement now creates the conditions in which bribery proliferates: enforcement deters investment in countries perceived to be corrupt, leaving a foreign direct investment void which is filled by aggressive bribe-payors from nondemocratic jurisdictions. I have previously called this dynamic the sanctioning effect of anti-bribery law. (17) Part II first provides a new definition of corruption that is suitable to the era of anti-bribery enforcement, then demonstrates that corruption, properly defined, can and indeed must be regarded as violating a right. Having reframed bribery as a human rights issue, Part III explains how the FCPA provides a far surer foundation on which to build a federal statutory regime of corporate liability for overseas rights violations than the ATS ever could. It proposes two specific reforms, the first based on environmental law and the second on intellectual property law, to more fully achieve anti-bribery's original purpose. Corporate liability for human rights violations is thus a legal principle that must lose its life to find it: with its imminent death in the ATS, it can find new life in the FCPA.I. Anti-Bribery's Paradox: The Foreign Policy Problem with a White-Collar Crime Solution

At its inception, Congress understood the FCPA as an instrument for promoting democratic values in developing countries. As this Part will show, that vision was deeply shaped by the historical context of the Cold War. But with the collapse of Soviet Union, we ceased to see the world through that lens, and the foreign policy implications of anti-bribery law gradually grew obscure. The goal of promoting democracy would be displaced with "leveling the playing field," a metaphor that pervades congressional testimony of the 1980s and 90s (18) and popular commentary of the last decade. (19) The metaphor goes only to the FCPA's anticompetitive effects on U.S. companies, tellingly capturing the limitations of our present anti-bribery...

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