How to Jump Start Enforcement of Anti-Bribery Laws

by Roger Alford

Since the late 1990s, thirty-nine nations have signed the OECD Anti-Bribery Convention. So far so good. But unfortunately, the treaty essentially is toothless, requiring nations to implement national laws that prohibit foreign bribery, but doing little more. Only a handful of countries are effectively enforcing their anti-bribery laws. Which ones? Well, the answer seems to be the countries where the United States has gone after their corporations.

Under the FCPA, of course, the United States has jurisdiction over foreign companies that bribe foreign officials, provided they issue shares on a U.S. stock exchange. That is a very large category of foreign corporations. The United States can also go after foreign corporations if there is some territorial nexus. The DOJ and the SEC take an expansive interpretation of territoriality, such that the payment of a bribe through a U.S. correspondent bank or the sending of an email sent through a U.S.-based email account is considered a sufficient territorial nexus to permit prosecutions of foreign companies for bribing foreign officials on foreign soil.

So precisely how does the extraterritorial application of U.S. anti-bribery laws affect the regulatory behavior of other nations? That was the question of a recent study by Sarah Kaczmarek and Abraham Newman published in International Organization. The findings are fascinating, and strongly support the idea that an FCPA prosecution will jump-start corruption enforcement in other OECD countries.

The study by Kaczmarek and Newman found “strong statistical evidence linking extraterritoriality to national policy implementation.” Thus, if the U.S. prosecuted a German or British firm under the FCPA, the enforcement behavior of the German and British authorities increased dramatically. “[T]he odds of a country enforcing its first case are twenty times greater if a country has experienced extraterritorial application of the FCPA as compared to countries that have not.”

In other words, the regulatory behavior of OECD Parties changes dramatically following an FCPA prosecution of one of its nationals. This convergence trend suggests that, as the study put it, “lead regulators from large markets may alter domestic enforcement decision making in other jurisdictions, underscoring the subtle legal authority enjoyed by bureaucracies from powerful states to influence international markets.”

American corporations have long complained of the comparative disadvantage they have vis-à-vis other corporations because of U.S. anti-bribery laws. The OECD Convention went a long way toward leveling the playing field. But if you really want a level playing field, one of the best ways to achieve it is for the United States government to go after foreign corporations under the FCPA. This will increase the likelihood that other countries will launch their first corruption case under their own domestic laws by a factor of twenty!

If our world is a global village, I guess we could say that as long as there is one sheriff in town serious about government corruption, others will join the posse.

http://opiniojuris.org/2012/06/22/how-to-jump-start-enforcement-of-anti-bribery-laws/

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