Redeeming Extraterritorial Bribery and Corruption Laws

• Date: 01 December 2017
• Published date: 01 December 2017
• DOI: http://doi.org/10.1111/ablj.12108

Redeeming Extraterritorial Bribery

and Corruption Laws

Steven R. Salbu*

INTRODUCTION

Over a decade ago, I wrote a series of law review articles that were criti-

cal of the Foreign Corrupt Practices Act (FCPA)

1

and the international

treaty initiatives that seek to export the FCPA philosophy.

2

Since then,

the United States and other nations around the world have embraced,

and attempted to enforce, the FCPA and its global progeny with an

ever-growing vigor.

3

The objectives of extraterritorial corruption legislation are certainly

laudable,

4

and the climate of escalating global commitment to such laws

suggests they are here to stay. The challenge for legislators and the judi-

ciary approaching the third decade of the twenty-f‌irst century is to

enhance the laws’ effectiveness, fairness, economic feasibility, and cul-

tural respectfulness.

*Professor and Cecil B. Day Chair, Georgia Institute of Technology. B.A., Hofstra

University; M.A., Dartmouth College; J.D., College of William and Mary; M.A., Ph.D., The

Wharton School of the University of Pennsylvania.

1

Pub. L. No. 95–213, 91 Stat. 1494 (codif‌ied as amended at 15 U.S.C. §§ 78m(b), 78dd-1

to 23, 78ff (1998)).

2

See infra Section I.C.

3

See David E. Dworsky, Foreign Corrupt Practices Act,46AM.CRIM.L.REV. 671, 690 (2009)

(“As a result of the increased volume of trade and international business, the international

community has taken substantial steps to combat corruption in international business

transactions.”).

4

For discussion of the pernicious effects of bribery, see infra notes 5–9 and accompanying

text.

V

C2017 The Author

American Business Law Journal V

C2017 Academy of Legal Studies in Business

641

American Business Law Journal

Volume 54, Issue 4, 641–682, Winter 2017

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This article reviews the history and the current state of the extraterri-

torial antibribery legislation movement. It identif‌ies major weaknesses,

f‌laws, challenges, and shortcomings of the current approach, and makes

recommendations for improvement.

Part I provides background information. It begins with (A), a discussion

of the pernicious nature of corruption and the FCPA-styled movement to

f‌ight it. This is followed by (B), an overview of the current legislative envi-

ronment as it addresses transnational bribery. Next is (C), a brief review of

my earlier critical work regarding the current legislative approach, followed

by (D), recent concerns voiced by others. The suggestion at the end of this

discussion is that the FCPA-patterned approach is thoroughly entrenched,

with increasingly stepped-up enforcement, so that it is more important than

ever to address the law’s def‌iciencies and shortcomings.

Parts II through IV each identify a particular shortcoming of current leg-

islative models as well as some potential ways either to mitigate or to elimi-

nate the shortcoming. Specif‌ically, Part II examines the “foreign off‌icial”

requirement of the FCPA. Part III looks at the failure of laws to address the

demand side of corruption. Part IV explores challenges relating to the

grease payments exception. The f‌inal part contains concluding remarks.

I. BACKGROUND

It is important to understand the harmful effects of bribery, as well as the

historic governmental efforts to battle it. This part sets that stage, followed

by a brief summary of critical analyses of current legislative initiatives.

A. The Pernicious Nature of Corruption, and the FCPA-Styled Movement to Fight It

Corruption has long been recognized as a pernicious force. Heineman

and Heimann summarize its harmful effects succinctly: distortion of

markets, the breeding of cynicism, the undermining of rule of law, dam-

age to government legitimacy, the corrosion of the private sector’s integ-

rity, and the impairment of international development.

5

From an economics perspective, corruption undermines the market’s

pricing function; encourages the misallocation of scarce resources, poten-

tially diverting funds from the most benef‌icial uses; and contributes to the

5

Ben W. Heineman, Jr. & Fritz Heimann, The Long War Against Corruption,85FOREIGN AFF.,

May/June 2006, at 75, 76.

642 Vol. 54 / American Business Law Journal

intransigence of poverty.

6

Because of its harmful economic effects,

7

corrup-

tion has been cast as a human rights violation.

8

Spalding has suggested that

“[t]he natural right to liberty is ...violated when off‌icials confer benef‌its in

contravention of standing law, off‌icial duty, and the public good.”

9

Others and I have discussed and debated the value, eff‌icacy, conse-

quences, and morality of the approach taken by the United States in this

area, which has formed the basis of the current global legislation move-

ment

10

—including legislation even more far-reaching than the FCPA.

11

In

the wake of this debate, corruption has come to be framed as a global chal-

lenge that requires a collective approach generally, and coordinated regula-

tion in particular.

12

Under this collective-approach model, lack of perfect

social and moral consensus across the globe cannot be permitted to thwart

progress. Transnational laws are viewed as a necessary “leveler”; in other

words, the law intentionally imposes “socially shared values.”

13

6

Leah M. Trzcinski, Note, The Impact of the Foreign Corrupt Practices Act on Emerging Markets:

Company Decision-Making in a Regulated World, 45 N.Y.U. J. INT’LL. & POL’Y1201, 1279

(2013).

7

Flagging economies are often attributed, at least in part, to endemic corruption. See, e.g.,

Leopoldo Pagotto & Ana Paula Bartol Teixeira, The Brazilian Anti-Corruption Policy in

Motion,17B

US.L.INT’L103, 103 (May 2016) (observing that “corruption can be largely

blamed for making the country’s economic condition even worse,” in reference to Brazil’s

present economy).

8

See, e.g., Anita Ramasastry, Is There a Right to Be Free from Corruption?, 49 U.C. DAVI S L.

REV. 703, 705–06 (2015) (noting the recent ruling by India’s Supreme Court taking this

approach).

9

Andrew Brady Spalding, Corruption, Corporations, and the New Human Right,91WASH.

U. L. REV. 1365, 1397–98 (2014).

10

See, e.g., Philip M. Nichols, Regulating Transnational Bribery in Times of Globalization and

Fragmentation,24Y

ALE J. INT’LL. 257 (1999); Steven R. Salbu, Extraterritorial Restriction of

Bribery: A Premature Evocation of the Normative Global Village,24Y

ALE J. INT’LL. 223 (1999).

11

The UK Bribery Act is one example of recent legislation more severe than the FCPA,

and some have argued that it overreaches. See, e.g., Jessica A. Lordi, The U.K. Bribery Act:

Endless Jurisdictional Liability on Corporate Violators,44C

ASE W. RES.J.INT’LL. 955 passim

(2012) (contending that the extraterritorial reach of the UK Bribery Act is harmful).

12

Diana Schmidt, Anti-corruption: What Do We Know? Research on Preventing Corruption in the

Post-Communist World, 5P

OL.STUD.REV. 202, 202–03 (2007).

13

Cornelia Rink, Leges Sine Moribus Vanae? On the Relationship Between Social Morality and

Law in the Field of Foreign Bribery,17G

ERMAN L.J. 19, 30 (2016).

2017 / Extraterritorial Bribery 643