This article explores the efforts of the international community to battle corruption by focusing on the recently promulgated Organization of Economic and Cooperative Development (OECD) Convention on Combating Bribery of Foreign Public Officials in International Business Transactions. For many years the United States battled corruption by prohibiting its domestic businesses from bribing foreign officials. Other countries, however, generally viewed U.S. policy as a form of unilateral commercial disarmament and declined to pass their own anti-bribery legislation. The Convention, therefore, marks a recent shift by the international community, as it requires signatories to enact laws to punish domestic corporations for bribes paid to foreign officials.
The authors begin by examining the U.S. Foreign Corrupt Practices Act (FCPA), the precursor to the OECD Convention, and by describing all cases initiated by the government pursuant to the FCPA. The authors then discuss multinational anti-bribery efforts that ultimately led to the adoption of the Convention. The article focuses on the provisions of the Convention as well as the implementing legislation of various signatories. Finally, the authors explains compliance measures that multinational U.S. corporations have adopted to protect themselves from FCPA
The [OECD Convention] criminalizes the giving of bribes.
-- World Trade, January 1999 at p. 58(1)
Going in [to a developing] country you have to be ready to grease a few palms.
-- World Trade, Same Edition, Different Title, at p. 88(2)
At the outset of the new millennium, thirty-four industrialized countries agreed to outlaw conduct that had previously been standard operating procedure at many multinational corporations by adopting the Organization for Economic Cooperation and Development (OECD) Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (OECD Convention).(3) Under the broadly drafted Convention, the signatories(4) agreed to enact laws that would punish as criminal activity bribes paid by domestic companies to foreign officials for "improper advantage in the conduct of international business."(5)
For decades, the United States was effectively the sole country to prohibit its national businesses from bribing foreign officials.(6) Many overseas competitors were not disappointed to see the high-minded United States engage in a commercial form of unilateral disarmament. They viewed bribery as an integral part of international business culture,(7) particularly in developing countries, to be accepted as any other necessary evil. Some countries even allowed bribes as legitimate income tax deductions. Other competitors felt that, while admirable, U.S. measures were not something they could afford to imitate in a highly competitive global market. Still others took the view that bribery was caused by demand from the payee--not the payor--and that prevention of bribes in foreign developing countries was the responsibility of authorities in those countries.
In this atmosphere of ambivalence, the policy shift of the signatories to the OECD Convention took many companies by surprise, multilateralizing a dilemma that corporate America has faced for years. That is, a company may lose a major foreign contract unless it pays the "right person," yet that payment may violate applicable anti-corruption laws. The two quotations at the beginning of this article, taken from different articles in the same publication, provide a telling illustration of the contradictory forces now impelling business decisions.
How great a threat anti-bribery compliance poses to business relationships remains unclear.(8) For example, it is debatable how much U.S. business has materially suffered from U.S. bans on bribes to foreign officials or whether these prohibitions have created more efficient and better-organized enterprises.(9) What is clear, however, is the magnitude of the risk assumed by a violator of anti-bribery law. Using the U.S. regime as a template, an individual faces, per unlawful payment, a fine of $2 million and incarceration for five years. Given these sanctions, the expansion of criminal punishment throughout the developed world has seized the attention of more than one multinational executive.
Recognizing that companies and individuals involved in international business for the first time may be "damned" if they do not comply with the OECD Convention and applicable implementing legislation, this article focuses on how to abide, in a practical sense, by both the letter and spirit of these new laws. Multinational corporations must ensure that they act to protect themselves from inadvertent and intentional violations of anti-bribery law by their agents.
This article, in Part II, will first describe the precursor to the OECD Convention, the U.S. anti-bribery regime, the U.S. Foreign Corrupt Practices Act (FCPA), as it is currently enforced by the U.S. Department of Justice (DOJ) and the Securities and Exchange Commission (SEC). This section also summarizes the facts and disposition of all cases initiated pursuant to the FCPA.
Part III then discusses the global efforts to combat bribery that preceded the OECD Convention and analyzes the provisions of the OECD Convention itself. This section also compares the implementing legislation of various signatories to the OECD Convention, and sets out the future prospects of the OECD Convention and its progeny.
Lastly, Part IV surveys compliance measures that multinational U.S. corporations have adopted to protect themselves from violations of the FCPA. This section then enumerates steps that non-U.S. companies can take to assure their compliance with applicable implementing legislation under the OECD Convention.
LEADING THE WAY--U.S. EFFORTS TO CURB BRIBERY
Since the enactment in 1977 of the Foreign Corrupt Practices Act (FCPA), U.S. businesses have faced criminal penalties if they engaged in business-related bribery of foreign public officials. Foreign competitors, however, did not have similar restrictions and could engage in this corrupt activity without fear of penalty. --William Jefferson Clinton(10) A. The Statutory Framework
Foreign Corrupt Practices Act
In the mid-1970s, it was revealed that U.S. corporations were making potentially illegitimate payments to foreign officials.(11) Allegations of questionable transactions were not confined to insignificant businesses or minor officials in obscure countries. Rather, the public became aware that corporate giants like Exxon, Gulf, Mobil, and Lockheed had made payments to presidents, prime ministers, and royalty of major trading partners.(12)
The media exposure surrounding apparent bribes of foreign officials catalyzed the creation of a voluntary disclosure program by the SEC under which the SEC agreed that enforcement actions would not target corporations that disclosed past payments and created internal anti-bribery procedures.(13) The SEC's voluntary program opened the disclosure floodgates. Over 400 companies, 117 of which were Fortune 500 companies, voluntarily disclosed substantial bribes.(14) Hearings were held,(15) an anti-bribery bill was introduced and passed with little debate,(16) and President Carter signed the FCPA into law in late 1977.(17) Until last November, the FCPA had been amended only once, in 1988, to provide two affirmative defenses.(18)
b. Anti-Bribery Provisions
The FCPA is divided into two discrete areas of application, the anti-bribery provisions and the accounting provisions. The anti-bribery provisions make it unlawful for any issuer or domestic concern
to make use of the mails or any means or instrumentality of interstate commerce corruptly in furtherance of an offer, payment, promise to pay, or authorization of the payment of any money, or offer, gift, promise to give, or authorization of the giving of anything of value to (1) any foreign official ... (2) any foreign political party or official thereof or any candidate for foreign political office for purposes of- (A)(i) influencing any act or decision of such party, official, or candidate in its or his official capacity, (ii) inducing such party, official, or candidate to do or omit to do any act in violation of the lawful duty of such party, official, or candidate, or (iii) securing any improper advantage; or (B) inducing such party, official, or candidate to use its or his influence with a foreign government or instrumentality thereof to affect or influence any act or decision of such government or instrumentality in order to assist such issuer in obtaining or retaining business for or with, or directing business to, any person.(19) Stated simply, it is a federal crime for any U.S. person or entity to offer or to pay, either directly or through an intermediary, anything of value to a foreign government official in order to gain an improper commercial advantage in obtaining or retaining business.
The FCPA's anti-bribery provisions apply to persons or entities subject to U.S. jurisdiction who knowingly participate in a prohibited transaction. Specifically, these provisions apply to any "issuer" of securities registered with the SEC, as well as to any officer, director, employee, agent, or stockholder acting on behalf of the issuer.(20) They apply with equal force to U.S. persons and entities designated as "domestic concerns."(21) The anti-bribery provisions do not apply directly to foreign persons, that is, natural persons who are not citizens, nationals, or residents of the United States, or to foreign entities that are not SEC-registered.(22) If they are otherwise subject to U.S. jurisdiction, however, such foreign persons and entities can face liability for knowingly assisting a U.S. person or entity in making an improper payment.(23) Furthermore, while the anti-bribery provisions do not apply to foreign-incorporated subsidiaries of U.S...