TABLE OF CONTENTS I. INTRODUCTION 627 II. BACKGROUND 629 A. Enactment of the Foreign Corrupt 629 Practices Act B. 1998 Amendments: Extension of 630 Jurisdiction to Foreign Corporations C. Increase in Overall Enforcement 632 Matters under the FCPA from 1998 to Today D. Future Enforcement under 634 the Trump III. ANALYSIS 637 A. Purpose and Framework of 637 the FCPA B. Scope of Jurisdiction over Foreign 639 Corporations and Individuals under [section] 78dd-3 and Affirmative Defenses C. The FCPA in Practice: Broad 640 Enforcement with Little Oversight 1. Increased NPA and DPA 640 2. Ambiguity in the Definitions of 642 "Foreign Official" and "Giving Value" 3. Consequences of Expansion to 644 Foreign Entities and Individuals: Arbitrary Enforcement and Higher Penalties D. Issues Facing Enforcement against 645 Foreign Entities and Individuals 1. Violations of International Norms of 645 Sovereignty and Ineffective International Enforcement a. Anti-Bribery Cultural 645 Norms and International Customary Law Regarding Sovereignty b. Unequal Global Enforcement 647 of Foreign Bribery 2. Practical Costs to US Interests 648 E. Using Diplomacy and International 650 Treaties 1. Public Diplomacy Efforts by 650 Politicians and Bureaucratic Agencies to Realize Global Objectives 2. OECD Convention Mandates and 652 Ways to Ensure Compliance IV. SOLUTION 653 653 A. Limit [section] 78dd-3 to Foreign Entities and Individuals Acting within US Borders B. Utilize Diplomacy to Increase 655 Prosecution 1. Executive Branch Plan to Encourage 655 Compliance 656 2. Invoke the OECD Convention to Boost Compliance V. CONCLUSION 656 I. INTRODUCTION
Enacted in 1977, the Foreign Corrupt Practices Act (FCPA or the Act) was a laudable effort by Congress to tackle the epidemic of corporate greed in the international realm. Having recently dealt with extensive political corruption, the United States sought to regain its international prestige by criminalizing the corporate bribes of foreign officials. (1) However, prosecuting US corporations and individuals while failing to account for foreign corporations and individuals resulted in a competitive disadvantage for US companies operating in the global market. (2) To resolve this issue, Congress amended the Act to extend jurisdiction to foreign corporations and individuals. (3) Consequently, US agencies were statutorily authorized to enforce the FCPA against entities and individuals who were not citizens of the United States. (4)
This amendment has led to an increase in the prosecution of companies and individuals--both foreign and domestic--under the Act over the last decade. (5) But the Act also leaves the United States vulnerable to criticism from the international community. (6)
Specifically, the Act's broad language allows government agencies to bring charges against foreign entities and individuals whose illegal conduct has virtually no connection to the United States. (7) This practice is bolstered by the fact that few individuals or corporations have challenged the Act's broad language, so little judicial precedent limits the agencies' authority. (8) While this increase in enforcement ostensibly promotes the original purpose of the Act, the exercise of broad jurisdiction over foreign entities and nationals is not worth the risk to the international reputation of the United States, nor is it guaranteed to eradicate further corporate corruption. With a new administration in the White House as of last year, US agencies may now have an opportunity to change the direction of this enforcement.
This Note addresses the tension between the broad enforcement of the FCPA against foreign companies and individuals and the need to respect international norms of sovereignty. Part II outlines the background and context of the FCPA. Specifically, Part II details the origins of the FCPA, describes the Act's evolution over the past few decades, and assesses potential patterns of enforcement based on the Trump administration's current enforcement actions and its members' opinions of the law. Part III discusses the purpose and framework of the FCPA and explains how US agencies are able to exercise jurisdiction over foreign corporations and individuals whose illegal actions take place almost entirely outside of the United States. It subsequently addresses the issues implicated by broad enforcement against those entities, including potential harms to the United States' reputation and its economy. Finally, Part IV rejects the US Securities and Exchange Commission's (SEC) and Department of Justice's (DOJ) recent FCPA enforcement practices and recommends those agencies limit one provision's jurisdiction over foreign entities and individuals to those who are physically within the United States. Furthermore, this Note suggests that the United States use its diplomatic channels, such as the State Department or influence in global organizations, to encourage other countries to enforce their own anti-corruption legislation to further eliminate international corporate corruption.
Enactment of the Foreign Corrupt Practices Act
Congress enacted the FCPA in direct response to the increased interest in political and corporate corruption during the 1970s. Still reeling from the public backlash against Watergate and Vietnam, the Carter administration was determined to restore the pristine image of the United States in the international arena. (9) To do this, federal officials began probing into unusual payments by US corporations to foreign officials, as the US government feared that these exchanges were threatening the country's reputation abroad. (10)
One investigation demonstrated that the Nixon administration had personally benefitted from bribes of officials--both foreign and domestic--with money that was pooled together by US multinational corporations. (11) At the same time, Congress held multiple hearings in which it discovered that the practice of bribing foreign officials was common among members of corporate America. (12) These investigations culminated in an SEC report that detailed the rampant bribery of foreign officials by US corporations in exchange for business opportunities in their countries. (13) After determining that no US law prohibited US corporations from bribing foreign officials, Congress enacted the FCPA to combat this issue in 1977 with overwhelming public support. (14)
When it was enacted, the FCPA granted the DOJ and the SEC the ability to bring civil and criminal charges against corporate entities and their officers for bribing foreign officials in exchange for business opportunities. (15) It was revolutionary for its time, as the United States was the only country that criminalized this type of behavior. (16) Initially, the FCPA prohibited only US corporations and individuals from bribing foreign officials. (17) Specifically, its two main anti-bribery provisions barred "issuers" and "domestic concerns" from bribing foreign officials. (18) "Issuers" are defined as corporations that trade on a US stock exchange, and "domestic concerns" are defined to comprise American citizens and corporations that originated under US laws. (19) Although these definitions could include foreign individuals and corporations as well, Congress and other US officials expressly limited the FCPA's jurisdiction to those residing within the United States. (20)
Congress limited the FCPA's jurisdiction to US entities and individuals because it assumed foreign countries would enact and implement their own anti-corruption statutes. (21) However, foreign countries failed to follow suit, which resulted in US corporations falling to a competitive disadvantage compared with their foreign counterparts. (22) Because companies routinely secured government contracts through bribes to foreign officials, the threat of criminal and civil liability limited US corporations' ability to pursue those contracts compared with foreign entities that faced no such issues. (23) Consequently, public dismay over this inequity compelled Congress to expand the Act's jurisdiction to foreign entities and individuals. (24)
1998 Amendments: Extension of Jurisdiction to Foreign Corporations and Nationals
To ensure other countries would enact anti-bribery laws that corresponded with the standards set by the FCPA, the US government participated in the Organization for Economic Cooperation and Development Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (the OECD Convention) in 19 9 7. (25) During that convention, thirty-four member states of the OECD signed a treaty in which they agreed to enact new or modify existing anti-bribery legislation within their own countries so that their laws would more closely mirror the FCPA's stringent anti-corruption provisions. (26) Every member state increased its commitment to combating foreign corruption, even though each differed in the kind of legislation it propagated under the treaty. (27) The OECD Convention's call to reduce foreign corruption inspired the enactment of current, powerful anti-bribery legislation, such as the UK Bribery Act. (28)
The treaty also stated that any jurisdiction governed by these pieces of legislation should be interpreted broadly so that no physical connection to the prosecuting country shall be required. (29) Accordingly, for the United States, this treaty served the dual purposes of criminalizing foreign bribery on an international scale as well as ensuring that US corporations were ostensibly on the same legal playing field as their competitors. (30) Emboldened by its success at the OECD Convention, the United States tried to further accomplish these goals by clearly extending the FCPA's jurisdiction to non-US corporations and individuals through a 1998 amendment to the Act. (31)
The 1998 amendment added a new provision, [section] 78dd-3, to the Act, which extended jurisdiction to foreign nationals through the...