This previous post highlighted the petition for certiorari filed in the Supreme Court requesting the Court hear U.S. v. Esquenazi (the recent 11th Circuit decision of first impression in which the court concluded that certain state-owned or state-controlled enterprises (SOEs) can be “instrumentalities” of a foreign government such that employees of SOEs can be “foreign officials” under the FCPA).
Under the heading “Introduction and Summary of Argument,” the brief states:
“The Petition presents this Court, for the first time in the FCPA’s thirty-seven year history, with the opportunity to construe a key element of a top-priority federal criminal statute of significant importance to all businesses and individuals engaged in international commerce.
The issue presented in Question 1 of the Petition is whether a state-owned or state-controlled enterprise (“SOE”) can constitute an “instrumentality” of a foreign government as that term is used in the FCPA. If so, as the Court of Appeals held, employees of SOEs could qualify as “foreign officials” under the FCPA’s anti-bribery provisions such that anything of value offered or provided to them to obtain or retain business could violate the FCPA’s criminal anti-bribery provisions.
The FCPA defines a “foreign official” as “any officer or employee of a foreign government or any department, agency, or instrumentality thereof, or of a public international organization.” The FCPA’s legislative history indicates that Congress did not intend that statutory term to include employees of SOEs. In the legislative process that ultimately produced the FCPA, Congress specifically considered competing bills that would have included employees of SOEs as “foreign officials” yet rejected those definitions in the version of the FCPA it enacted.
The proper scope and meaning of the “foreign official” element of the FCPA’s anti-bribery provisions is an issue of extraordinary practical significance as it affects all businesses and individuals engaged in international commerce. The FCPA’s criminal anti-bribery provisions prohibit certain business conduct with “foreign officials,” but those prohibitions do not apply to conduct that does not involve a “foreign official.” Thus, it would not violate the FCPA to offer or provide something of value to a private customer, but offering or providing the same to a “foreign official” could be a crime. Consequently, drawing the line between individuals who could qualify as “foreign officials” and those who could not is critically important in a wide range of international business interactions.
An issue that has developed so little in the lower courts would not ordinarily satisfy the criteria for this Court’s review. However, the way FCPA enforcement actions are resolved makes it unlikely that lower courts will often consider this issue in the foreseeable future. The vast majority of FCPA investigations are resolved through out-of-court settlements including non-prosecution agreements (“NPAs”), deferred prosecution agreements (“DPAs”), and other administrative settlements not subject to judicial scrutiny. As a result, courts rarely construe the FCPA. The court below was the first Court of Appeals to address this statutory issue since Congress first enacted the FCPA thirty-seven years ago. Given these dynamics, there is little reason to believe that other federal appellate courts will examine this issue in the foreseeable future. Yet the Eleventh Circuit’s erroneous interpretation of the statute is likely to affect numerous future FCPA enforcement actions — negotiated and resolved in the absence of judicial scrutiny and in the shadow of scant precedent interpreting the FCPA — and thus the conduct of countless businesses and individuals subject to the FCPA.
The Eleventh Circuit’s interpretation of the statute was erroneous. The decision below failed to consider the enacting legislative history of the provisions it construed. It instead mistakenly relied on amendments enacted more than twenty years later and mistakenly concluded that those amendments were intended to bring the FCPA into strict conformity with the OECD.
The Eleventh Circuit’s express reliance on amendments to the FCPA in 1998 is flawed in at least two respects. First, the 1998 amendments to the FCPA are, on their face, irrelevant to the statutory-interpretation question at issue in this case because those amendments did not modify the portion of the “foreign official” definition in question here. Second, contrary to the Eleventh Circuit’s conclusion, the 1998 amendments did not fully conform the FCPA to the OECD Convention. Because they did not conform the FCPA to the OECD Convention, the amendments the Eleventh Circuit relied upon do not support the conclusion that the FCPA’s “foreign official” element includes employees of SOEs.
Amending a key element of a top-priority federal criminal statute of such significance to international commerce is not properly accomplished through a process of judicial inferences about the supposed purpose of subsequent, unrelated statutory amendments. Rather, actual legislative action is required to amend the FCPA. If Congress wished to include employees of SOEs in the 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. Congress has expressly included employees of SOEs in similar statutory definitions contained in other legislation passed both before and after the enactment of the FCPA. Similarly, the legislative bodies of several signatory countries to the OECD Convention have taken specific legislative action to include SOEs and related concepts in their comparable anti-corruption legislation.”
Last week, as highlighted in this post, the Washington Legal Foundation and the Independence Institute joined to file an amicus brief in support of Petitioners as to Question 1 of the Petition (the “foreign official” issue).