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On Non-Self-Executing Agreements …

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As discussed in this previous post, in 2014 the Eleventh Circuit affirmed the FCPA (and related convictions) of Joel Esquenazi and Carlos Rodriguez. In doing so, the court defined the term “instrumentality” in the FCPA and concluded that a state-owned or state-controlled enterprise (SOE) could be an “instrumentality” if a two-factor control and function test were met such that SOE employees could be considered “foreign officials” under the FCPA.

The decision was flawed in several respects (see here for the prior post and see here for my Amicus Brief encouraging the Supreme Court to accept the case).

Among the flaws was that, instead of considering the relevant enacting FCPA legislative history as to the “foreign official” issue, the Court supported its conclusion with a flawed analysis of subsequent 1998 amendments to the FCPA as well as the impact of the OECD Convention.

As set forth in the Amicus Brief:

“The Eleventh Circuit failed to consider the legislative history of the 1977 enactment of the FCPA. The court instead relied on statutory amendments passed more than twenty years later to determine the meaning of critical terms that have always appeared in the statute. This Court has cautioned that “[p]ost-enactment legislative history (a contradiction in terms) is not a legitimate tool of statutory interpretation.” Bruesewitz v. Wyeth LLC, 131 S. Ct. 1068, 1081 (2011). Even the Court of Appeals acknowledged that it was “wary of relying too much on later legislative developments to decide a prior Congress’ legislative intent” and specifically cited this Court’s prior warning that “the views of a subsequent Congress form a hazardous basis for inferring the intent of an earlier one.” Pet. App. at 16 & n.7 (citing United States v. Price, 361 U.S. 304, 313 (1960)). Nevertheless, the construction of the statute adopted by the Court of Appeals relied heavily on the legislative history of the 1998 amendments to the FCPA.

Even assuming post-enactment legislative history could theoretically be relevant to this issue, the Eleventh Circuit’s reliance on the 1998 amendments is flawed in at least two respects. First, the 1998 amendments did not modify or address the component of the FCPA’s definition of “foreign official” at issue in this case. Prior to the FCPA’s 1998 amendments, the FCPA defined “foreign official” in pertinent part as:

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 any such government or department, agency, or instrumentality . . .

Omnibus Trade and Competitiveness Act of 1988, Pub. L. No. 100-418, § 5003, 102 Stat. 1107, 1418.

The 1998 amendments to the FCPA modified that definition as follows:

any officer or employee of a foreign government or any department, agency, or instrumentality thereof, or of a public international organization, or any person acting in an official capacity for or on behalf of any such government or department, agency, or instrumentality, or for or on behalf of any such public international organization.

International Anti-Bribery and Fair Competition Act of 1998, Pub. L. No. 105-366, § 3, 112 Stat. 3302, 3305 (emphasis added).

As highlighted by the italicized text, the FCPA’s 1998 amendments added unrelated language to make it clear that public international organizations were within the FCPA’s scope. The amendments did not modify the “foreign official” definition in any way that is relevant to the question presented in this case.

Second, the Eleventh Circuit erroneously concluded that the FCPA’s 1998 amendments fully conformed the FCPA to the OECD Convention. Pet. App. 14–18. Having so concluded, the Court of Appeals decided that the FCPA’s “foreign official” element must include employees of SOEs because the OECD Convention’s “foreign public official” definition can include employees of a “public enterprise” under certain circumstances. Pet. App. at 16.

However, the 1998 Amendments to the FCPA were not intended to and did not bring the FCPA into complete conformity with the OECD Convention. When it passed the 1998 amendments, Congress understood that, while the OECD Convention approximated the FCPA, the two were not identical. During Congressional hearings that led to the 1998 amendments, the OECD Convention was described as “closely model[ing]” the FCPA, being “very similar” to the FCPA; being “largely consistent” with the FCPA; and tracking the FCPA closely. See Hearings Before the Subcomm. on Finance and Hazardous Materials, House of Representatives, 105th Congress, Second Session at 7, 10, 11 (Sept. 10, 1998). None of those statements demonstrates Congress’s intent to establish complete conformity between the OECD Convention and the FCPA.

Regardless of Congress’s intent, as the Fifth Circuit has stated, the OECD Convention and the FCPA, as modified by the 1998 amendments, remain different in significant respects. See United States v. Kay, 359 F.3d 738, 754 (5th Cir. 2004). For instance: (i) while the FCPA contains an express statutory exception for facilitating payments, the OECD Convention does not; (ii) while the FCPA prohibits certain corrupt payments to political parties, the OECD Convention does not; and (iii) while the FCPA requires that corrupt payments be for the purpose of “obtain[ing] or retain[ing] business,” the OECD Convention contains no such requirement. Compare 15 U.S.C. §§ 78dd-2(b), 78dd-2(a), with the Organization for Economic Cooperation and Development’s Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, Dec. 17, 1997, S. Treaty Doc. No. 105- 43, 37 I.L.M. 1 (ratified Dec. 8, 1998, entered into force Feb. 15, 1999).

The erroneous assumption of equivalence between the OECD Convention and the FCPA is a critical flaw in the Eleventh Circuit’s analysis of the statute. Based on that false premise, the Court of Appeals inferred that Congress “considered its preexisting definition [of ‘foreign official’] already to cover” employees of SOEs. Pet. App. at 16. After all, the Court of Appeals reasoned, if the 1998 amendments were designed to conform the FCPA to the OECD Convention, and if the 1998 amendments did not modify the relevant portions of the definition of “foreign official,” then the definition of “foreign official” must have already conformed to the OECD Convention definition.

However, the Eleventh Circuit’s reasoning finds support in neither the FCPA’s enacting legislative history, the legislative history relevant to the 1998 amendments, nor accepted norms of statutory construction. This Court has warned against divining legislative intent from Congress’s inaction. United States v. Craft, 535 U.S. 274, 287 (2002). Furthermore, international agreements like the OECD Convention — which is not self-executing — may be given legal effect only insofar as Congress separately enacts legislation to implement them. See Bond v. United States, 134 S.Ct. 2077, 2084 (2013) (a convention that is not self-executing “does not by itself give rise to domestically enforceable federal law” absent “implementing legislation passed by Congress” (quoting Medellín v. Texas, 552 U.S. 491, 505, n.2 (2008))).

The scope of a key element of a top-priority federal criminal statute that applies to countless businesses and individuals engaged in international commerce should be determined by ordinary tools of statutory construction, not through a process of inference based on mistaken assumptions about a non-self-executing international agreement.”

The flaw in the Eleventh Circuit’s reasoning that the OECD Convention (a non-self executing international agreement) has legal effect in the absence of Congressional action implementing legislation specific to an issue was further exposed by recent Sixth and Seventh Circuit decisions in the FCPA context (broadly speaking) regarding the United Nations Convention Against Corruption (UNCAC).

As highlighted in this post, the Sixth Circuit recently affirmed dismissal of a complaint on forum non conveniens grounds filed by Instituto Mexicano del Seguro Social (IMSS – the Mexican Social Security Institute) against Stryker in the aftermath of the company’s FCPA enforcement action. In doing so, the Court stated that “IMSS also neglects to mention that most of the [U.N.] Convention is explicitly non-self-executing” and that “IMSS has identified no implementing statute that turns the Convention into binding federal law.”

Likewise, in a similar decision (see here for the prior post) the Seventh Circuit recently affirmed dismissal of a complaint on forum non conveniens grounds filed by IMSS against Biomet in the aftermath of the company’s FCPA enforcement action. In doing so, the Court stated:

“IMSS claims the UNCAC alters the forum non conveniens analysis, but not all international treaties constitute binding federal law. Treaties are “equivalent to an act of the legislature,” and thus self-executing, when they “operate[] of [themselves] without the aid of any legislative provision.” Treaties which are not self-executing “‘can only be enforced pursuant to legislation to carry them into effect.’” The Supreme Court has “long recognized” this distinction.

Although the UNCAC comprises an international commitment, it is not domestic law unless Congress enacted implementing legislation or “the [UNCAC] itself conveys an intention that it be ‘self-executing’ and is ratified on these terms.” Neither are the case.

The United States ratified the UNCAC subject to the following declaration:

[T]he provisions of the [UNCAC] (with the exception of Articles 44 and 46) are non-self-executing. UNCAC Declarations and Reservations; S. Exec. 109-18 at 10.

Apart from provisions irrelevant to the present suit, the UNCAC is expressly non-self-executing. Nor did Congress pass legislation implementing the UNCAC. The UNCAC is not binding federal law. This alone dooms IMSS’s argument under the treaty.”

Relevant to the “foreign official” issue, the OECD Convention is not self executing and has no legal effect absent specific Congressional legislation as to specific issues. Ignoring this basic legal point was just one of the many flaws in the Eleventh Circuit’s 2014 “foreign official” decision and the underlying issue of whether employees of SOEs are “foreign officials” very much remains a viable a legal issue (particularly – as highlighted here – given the Supreme Court’s many analogous statutory interpretation decisions).

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