The Foreign Corrupt Practices Act is at its core an anti-bribery, anti-corruption measure enacted by Congress in 1977 to prohibit American companies from paying off foreign officials and to create an international example for ethical business practices.
While that goal seems straightforward enough, the actual legislation runs more than 13,000 words, full of complex legal descriptions about what types of activities are allowed and forbidden.
In recent years, as the government has ramped up enforcement of the decades-old law, the U.S. Chamber of Commerce and other industry groups have pushed to amend and clarify parts of the statute. They argue in part that a lack of clarity about what qualifies as improper behavior has had a chilling effect on companies that have sought to expand into new international markets while maintaining compliance with the law.
Meanwhile, dozens of human rights and corporate governance groups say that the trade associations and individual companies that have sought alterations to the law are actually hoping to undermine its effectiveness.
To better understand the prevailing arguments on both sides, below are summaries of five proposed amendments to the FCPA that the Chamber’s Institute for Legal Reform issued in 2010 in a paper entitled “Restoring Balance.” Each is followed by a brief rebuttal summarized from a paper entitled “Busting Bribery,” published last year by the Open Society Foundation, which is backed in part by liberal philanthropist George Soros.
Click on the links above to read each policy paper in its entirety.
1) Compliance defense
Chamber: Currently, a company can be held accountable for the FCPA violations committed by individual employees or subsidiaries, even if the company has a robust FCPA compliance program. Adopting a “compliance defense” would protect a corporation from being punished for employees who commit crimes despite the firm’s diligent efforts to comply with the law.
Rebuttal: Federal officials already take into account a company’s compliance efforts throughout the enforcement process, and prosecutors must prove that violations were done knowingly or with corrupt intent. Creating a “compliance defense” would amount to eliminating criminal liability and inappropriately insulate companies from intentional wrong-doing.
2) Successor liability
Chamber: Under the current enforcement approach, companies can be held liable under the FCPA not only for their own actions but also the actions of other companies they have acquired or merged with — even if the corrupt acts predate the merger or acquisition. This should not be the case, particularly for historical violations, as companies might not be aware of wrongdoing even despite undertaking due diligence.
Rebuttal: Successor liability is rarely imposed, but it remains an important tool to prevent companies from escaping liability through restructuring. It also helps to ensure that companies conduct proper due diligence during the course of mergers and acquisitions.