The more things change, the more things stay the same, including the skittishness of the business community surrounding the Foreign Corrupt Practices Act and related laws and its attendant real-world consequences.
This recent “Global Anti-Corruption Survey” (a survey of 330 “respondents around the world to understand companies’ usage of anti-corruption programs and its impact on business decisions as well as due diligence in practice) contains a litany of responses concerning the 50% (or so) of respondents who, because of “concerns about violating anti-corruption regulations”
- “delayed/stopped working with a business partner”
- “delayed/stopped entering emerging markets”
- “delayed/stopped expanding in emerging markets”
- “delayed/stopped working in a particular location”
According to the survey, 49% of respondents indicated that the “delay or calling off” of business endeavors was because of “questioned legality because anti-corruption regulations were unclear.”
This survey response demonstrates, that despite the passage of nearly forty years, things have not materially changed when it comes to the skittishness of the business community surrounding the FCPA and related laws and its attendant real-world consequences.
For instance, almost as soon as the FCPA was passed in 1977 concerns were raised across a wide spectrum that the law was vague and ambiguous, and because of that, harmful to U.S. businesses seeking to compete in the global marketplace. The early 1980’s saw much FCPA reform activity. In 1980, the Carter administration (recall that President Carter signed the FCPA into law in 1977) sent a report to Congress prepared by the Secretary of Commerce and the U.S. Trade Representative titled “Report of the President on Export Promotion Functions and Potential Export Disincentives.”
In pertinent part, the report stated:
“The [FCPA] is identified by businessmen and attorneys as one of the most significant export disincentives. […] The Act inhibits exporting because of uncertainty within the business community about the meaning and application of some of its key provisions.
“Uncertainty about the meaning of key provisions of the FCPA and how it will be applied is having a negative effect on U.S. exports. Many of the businessmen and attorneys consulted expressed the view that this uncertainty has a far greater impact than the actual prohibition against bribery. The problem described, in essence, is that what conduct is prohibited and what conduct is not prohibited under the Act is often unclear. In order to avoid possible violations of the Act, attorneys often give such cautious guidance that their clients simply forego any transactions where the FCPA could possibly become an issue.”
“The effects of these uncertainties reportedly manifest themselves in various ways. Consultations with the private sector revealed instances in which U.S. companies:
- withdrew from joint ventures for fear they later could be held responsible for the acts of their foreign partners;
- incurred substantial legal and investigative costs to check the backgrounds of their sales agents abroad;
- were unable to obtain the services of effective sales agents;
- lost contracts simply because of the time needed to investigate sales agents abroad and institute safeguards;
- withdrew from existing markets; and
- declined to enter new markets.”
“Finally, companies point out that the extent to which companies have been successfully prosecuted under the FCPA does not define the extent of the disincentive. Uncertainty can be a disincentive without any prosecutions and, moreover, exports are inhibited merely by the possibility of public charges and the adverse publicity surrounding them. Even where a company is totally convinced that a court would find that it had not violated the FCPA, it nonetheless may forego the export opportunity for fear that an enforcement agency could publicly charge it with a violation of the Act.”
Whether rational or not, the recent survey results indicate that the business community remains skittish about the FCPA and related laws – and that this skittishness – has real-world consequences.
These real-world consequences beg the question: is the FCPA a net positive or net negative?
