This recent post highlighted the Supreme Court’s decision in the Halkbank matter holding that the Foreign Sovereign Immunities Act does not provide immunity to foreign states and their instrumentalities from criminal prosecution in the United States.
Logical commentary has suggested that as a result of the decision, there may be an increase in criminal prosecutions in the U.S. of foreign states and their alleged instrumentalities.
However, long before the Halkbank decision the DOJ has criminally prosecuted alleged instrumentalities of foreign states for Foreign Corrupt Practices Act violations.
As highlighted in this prior post, in 2018 Petrobras resolved a net $170 million DOJ and SEC FCPA enforcement action “in connection with Petrobras’s role in facilitating payments to politicians and political parties in Brazil, as well as a related Brazilian investigation.”
The DOJ described Petrobras as:
“[A] Brazilian state-owned-and-controlled oil and gas company headquartered in Rio de Janeiro, Brazil, and operating in 18 other countries, including the United States. The vast majority of the Company’s shares traded either on the New York Stock Exchange in the form of American Depository Shares, on the So Paulo Stock Exchange, with the Brazilian government directly owning approximately 50.26 percent of Petrobras’s common shares with voting rights, and an additional 9.87 percent of its common shares controlled by the Brazilian Economic and Social Development Bank as of February 28, 2018. Petrobras’s common and preferred stock was registered with the United States Securities and Exchange Commission (“SEC”) pursuant to Section 12(b) of the Securities Exchange Act of 1934 as amended and currently trades on the New York Stock Exchange.”
As to immunity issues, and foreshadowing the ultimate issue in the Halkbank case, the DOJ’s NPA stated:
“By entering into this Agreement, notwithstanding anything contained herein, the Company does not prospectively waive any arguments that, as an instrumentality of the Republic of Brazil, it is protected by sovereign immunity from criminal prosecution in the United States, and it reserves the right to assert this argument in any future prosecution or civil action by the United States.”
In 2006, the DOJ brought a $10.5 million FCPA enforcement action against Statoil – believed to be the first criminal prosecution of a foreign company in FCPA history. (See here). According to the DOJ, Statoil made “bribe payments to an Iranian official in order to secure valuable oil and gas rights in Iran.” (Statoil also resolved a parallel SEC enforcement action for $10.5 million).
In announcing the enforcement action, the DOJ’s Assistant Attorney General stated: “Although Statoil is a foreign issuer, the Foreign Corrupt Practices Act applies to foreign and domestic public companies alike, where the company’s stock trades on American exchanges.” Even though Statoil was presumptively a state-owned or state-controlled company, the DOJ’s DPA did not mention this aspect of Statoil nor did the DOJ’s resolution documents discuss sovereign immunity issues.
