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Congress Knows How To Draft Legislation That Expressly Captures SOEs

Recently, H.R. 5105 [1] titled “Better Utilization of Investments Leading to Development Act” passed the House of Representatives. The bill has little to do with the Foreign Corrupt Practices Act, however the bill expressly addresses (and defines) state-owned enterprises (SOEs) and once again demonstrates that Congress is fully capable of enacting legislative that expressly captures SOEs (something Congress failed to do in the FCPA).

As highlighted in numerous prior posts and my 2014 amicus brief [2] urging the Supreme Court to hear the Esquenazi “foreign official” challenge, if Congress wanted to include SOE employees in the FCPA’s statutory definition of “foreign official,” it easily could have done so — when enacting the FCPA in 1977, when amending the FCPA in 1998, or on any other occasion.

During its multi-year investigation and deliberation leading up to enactment of the FCPA in 1977, Congress clearly was aware that SOEs existed and that some of the foreign payments at issue may have involved employees of such enterprises. Indeed, some of the bills introduced to address the foreign payments issue in the Senate and the House during both the 94th and 95th Congresses included definitions of “foreign government” that expressly included SOEs.

But none of those bills became law.

For instance, in August 1976, S. 3741 was introduced in the Senate, and H.R. 15149 was introduced in the House. Both bills defined “foreign government” to include, among other things, “a corporation or other legal entity established or owned by, and subject to control by, a foreign government.” S. 3741 (Aug. 6, 1976); H.R. 15149 (Aug. 10, 1976). Similarly, in June 1977, H.R. 7543 was introduced in the House and defined “foreign government” to include “a corporation or other legal entity established, owned, or subject to managerial control by a foreign government.” H.R. 7543 (June 1, 1977).

The above-quoted language from S. 3741 and H.R. 15149 provoked a comment from an American Bar Association (“ABA”) committee, which informed Congress that the definition of “foreign government” in these bills was “somewhat ambiguous.” The ABA committee suggested a “more precise definition of this aspect of the definition of ‘foreign government’” and proposed the following language: “a legal entity which a foreign government owns or controls as though an owner.”

Even though Congress was obviously aware of SOEs and even though language in other bills addressing foreign payments expressly included SOEs, Congress chose not to include these definitions or concepts in the bill that ultimately became the FCPA in December 1977.

Rather, the FCPA defined “foreign official” in pertinent part as follows: “Any officer or employee of a foreign government or any department, agency, or instrumentality thereof, or any person acting in an official capacity for or on behalf of such government or department, agency or instrumentality.”

In short, in enacting the FCPA Congress specifically contemplated — but rejected — statutory language that would have included SOEs. Indeed, by rejecting the definitions that appeared in S. 3741 and H.R. 15149, Congress rejected the very ownership and control test the Eleventh Circuit articulated in Esquenazi to determine when individuals employed by SOEs may be considered “foreign officials” under the FCPA.

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Moreover, and as further highlighted in the above-linked amicus brief, both before and after enactment of the FCPA Congress has consistently demonstrated a capability to pass legislation that expressly captures SOEs and it is axiomatic that when a particular term is explicitly included in other statutes, but is not included in the statute at issue, courts should presume that Congress did not intend to include that term in the statute at issue. See, e.g., Whitfield v. United States, 543 U.S. 209, 216 (2005).

Congress has repeatedly enacted statutory definitions that expressly include SOEs, but the definition included in the FCPA does not. Under such circumstances, the absence of any mention of SOEs in the FCPA indicates Congress’s intent that employees of SOEs do not fall within the FCPA’s definition of “foreign official.” Indeed, if the Eleventh Circuit’s interpretation of the FCPA’s statutory language were correct, the express references to SOEs that appear in other statutes would be rendered entirely superfluous.

For instance, the Foreign Sovereign Immunities Act (“FSIA”) passed by Congress in 1976 (one year before the FCPA) expressly provides the following definition: (a) “foreign state” . . . includes a political subdivision of a foreign state or an agency or instrumentality of a foreign state as defined in subsection (b). (b) An “agency or instrumentality of a foreign state” means any entity — (1) which is a separate legal person, corporate or otherwise, and (2) which is an organ of a foreign state or political subdivision thereof, or a majority of whose shares or other ownership interest is owned by a foreign state or political subdivision thereof, and (3) which is neither a citizen of a State of the United States . . . nor created under the laws of any third country. 28 U.S.C. § 1603 (emphasis added).

Likewise, the Economic Espionage Act (“EEA”) passed by Congress in 1996 (after the FCPA) regulates certain conduct that “will benefit any foreign government, foreign instrumentality, or foreign agent” and expressly provides the following definition: “foreign instrumentality” means any agency, bureau, ministry, component, institution, association, or any legal, commercial, or business organization, corporation, firm, or entity that is substantially owned, controlled, sponsored, commanded, managed, or dominated by a foreign government. 18 U.S.C. § 1839(1) (emphasis added).

Similarly, the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”), passed by Congress in 2010 (after the FCPA), required certain resource extraction companies to disclose information regarding payments for development of oil, natural gas, or minerals made to “foreign governments.” The law expressly includes the following definition of “foreign government”: the term “foreign government” means a foreign government, a department, agency, or instrumentality of a foreign government, or a company owned by a foreign government, as determined by the Commission. 15 U.S.C. § 78m(q)(1)(B) (emphasis added).

Fast forward to H.R. 5105. It defines “state-owned enterprise” as follows:

‘‘State-owned enterprise’’ means any enterprise established for a commercial or business purpose that is directly owned or controlled by one or more governments, including any agency, instrumentality, subdivision, or other unit of government at any level of jurisdiction.

H.R. 5105 further notes:

“The term ‘‘control’’ with respect to an enterprise, means the power by any means to control the enterprise regardless of the level of ownership; and whether or not the power is exercised.

The term ‘‘owned’’, with respect to an enterprise, means a majority or controlling interest, whether by value or voting interest, of the shares of that enterprise, including through fiduciaries, agents, or other means.”

The quoted language of the above statutes, which expressly includes SOEs, would be rendered surplusage if the Eleventh Circuit’s interpretation of the FCPA were correct. In short, Esquenazi was a flawed decision for many reasons and the notion that employees of alleged SOEs are “foreign officials” under the FCPA remains a disputed issue and one that the current Supreme Court would likely strike down based on simple statutory construction issues.  (see here [4] for a prior post).

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