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FCPA Enforcement Actions Against Foreign Companies From OECD Convention Peer Countries

2016 was a record-breaking year for Foreign Corrupt Practices Act enforcement, both in terms of the number of core corporate actions resolved as well as overall settlement amounts.

As highlighted in this post, much of the largeness of 2016 FCPA enforcement resulted from corporate enforcement actions against foreign companies. (For purposes of this post, a foreign company means the “residence” of the corporate parent company and not for instance, Analogic’s foreign subsidiary or JPMorgan’s foreign subsidiary being offered up to resolve the DOJ prong of the corporate enforcement action). 

Specifically, of the 27 corporate enforcement actions from 2016, 11 (41%) were against foreign companies (based in many instances on mere listing of securities on U.S. markets and in a few instances on sparse allegations of a U.S. nexus in furtherance of an alleged bribery scheme). Even more dramatic, of the net $2.27 billion settlement amounts from 2016 corporate enforcement actions, approximately $1.44 billion (63%) resulted from enforcement actions against foreign companies.

Given that all of the foreign companies that resolved 2016 FCPA enforcement actions were from peer OECD Convention countries, the question should be asked whether these FCPA enforcement actions represented a proper use of the FCPA – at least from a policy standpoint.

The below chart (pardon the spacing issues, working with charts in WordPress is a bear) highlights the 2016 FCPA enforcement actions against foreign companies.

Company

(Headquarters)

 

General Allegations
SAP

 

(Germany)

Improper payments to official(s) in Panama and associated books and records and internal controls deficiencies
VimpelCom

 

(The Netherlands)

Improper payments to official(s) in Uzbekistan and associated books and records and internal controls deficiencies
LAN Airlines

 

(Chile)

 

 

Improper payments in Argentina and associated books and records and internal controls deficiencies
Nordion

 

(Canada)

 

Improper payments to official(s) in Russia and associated books and records and internal controls deficiencies
Novartis

 

(Switzerland)

 

 

 

Improper payments to official(s) in China and associated books and records and internal controls deficiencies
AstraZeneca

 

(United Kingdom)

 

Improper payments to official(s) in China and Russia and associated books and records and internal controls deficiencies
ABInBev

 

(Belgium)

 

Improper payments to official(s) in India and associated books and records and internal controls deficiencies
GlaxoSmithKline

 

(United Kingdom)

 

Improper payments to official(s) in China and associated books and records and internal controls deficiencies
Embraer

 

(Brazil)

 

Improper payments to official(s) in Dominican Republic, Saudi Arabia, Mozambique, and India and associated books and records and internal controls deficiencies
Odebrecht / Braskem

 

(Brazil)

 

Improper payments to official(s) in Brazil, Angola, Argentina, Brazil, Colombia, Dominican Republic, Ecuador, Guatemala, Mexico, Mozambique, Panama, Peru, and Venezuela and associated books and records and internal controls deficiencies
Teva Pharma

 

(Israel)

 

Improper payments to official(s) in Russia, Ukraine and Mexico

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From a policy perspective, what legitimate U.S. law enforcement interests are implicated when, for example, a German company interacts with Panamanian officials; a Canadian company interacts with Russian officials; a United Kingdom or Swiss company interacts with Chinese officials; a Brazilian company interacts with officials in Dominican Republic, Saudi Arabia, Mozambique, and India; or an Israeli company interacts with officials in Russia, Ukraine and Mexico?

As alluded to above, all of the 2016 FCPA enforcement actions against foreign companies were against companies headquartered in countries that, like the U.S., are parties to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions [2] (OECD Convention).

In other words, Germany, Switzerland, the Netherlands, Canada, Brazil, Israel, Belgium, and Chile are all “peer” countries with mature FCPA-like laws governing the conduct of their companies coupled with reputable legal systems to prosecute such offenses.

Given this reality, as well as the specific provision in Article 4 of OECD Convention that “when more than one Party has jurisdiction over an alleged offence described in this Convention, the Parties involved shall, at the request of one of them, consult with a view to determining the most appropriate jurisdiction for prosecution,” can it truly be said that the U.S. is the most appropriate jurisdiction to prosecute certain foreign companies for alleged interactions with non-U.S. officials?

In the minds of some [3], FCPA enforcement has become a convenient cash cow for the U.S. government. The above enforcement actions in 2016 against foreign companies, which resulted in approximately $1.44 billion flowing into the U.S. treasury, only amplify these concerns.

From a historical perspective, it is worth noting that part of the FCPA reform discussion in the 1980’s were bills – introduced by Democrats – seeking to waive the FCPA’s provisions “in the case of any country which the Attorney General has certified to have (1) effective bribery or corruption statutes; and (2) an established record of aggressive enforcement of such statutes.” (See S. 1797, Competitive America Trade Reform Act of 1985, introduced on October 29, 1985 by Senator Gary Hart (D-CO) and H.R. 3813, Competitive America Trade Reform Act of 1985, introduced on November 21, 1985 by Representative Vic Fazio (D-CA)).

While waiving the FCPA’s provisions – as those bills sought to do – does not seem like a good idea, perhaps the time has come with the maturity of the OECD Convention – for U.S. enforcement agencies to adopt a policy of not bringing FCPA enforcement actions against foreign companies from peer OECD Convention countries.

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