Fighting Foreign Corruption in a Global Competitive Economy: Re-thinking the Role of International Law

Axelle Vivien
Vol. 41 Associate Editor

For decades, the United States (“US”) was the main – and unique? – driving force behind the worldwide prosecution of corporations and individuals bribing foreign officials. While the American Foreign Corrupt Practices Act (“FCPA”) was originally enacted in an effort to restore confidence in the integrity of the American business system and economy, the US’s unique leadership position in this worldwide fight led some foreign observers to criticize the US for using FCPA enforcement partly as an economic weapon to the detriment of foreign economies.

International law largely helps in solving this problem. Today, the US is not alone in this fight anymore and international law has been instrumental in creating a more neutral framework for the international fight against corruption. International law encourages all countries to use domestic law to aggressively investigate, prosecute, and punish companies and individuals “at home.” It empowers them to do so by setting harmonized anti-corruption standards. The adoption of harmonized standards across home countries undermines the need for far-reaching enforcement actions and ultimately helps avoid the appearance of impropriety. Thus, international institutions – using their standard-setting and pressure powers – help countries solve the problem of extra-territorial enforcement of anti-corruption laws without resorting to the creation of a transnational enforcing institution.

 

Far-reaching extraterritorial enforcement actions and economic interests

Companies traditionally resorted to corruption of foreign officials to retain business abroad. Given the nature of the fight, the anti-bribery legal tools have a direct impact on the economy of the countries involved. Extraterritorial enforcement, such as the FCPA, helps the enforcing country and hurts the corporation’s home country for a number of reasons. First, burdened with a heavy settlement fine, the corporation loses competitiveness internationally, in turn weakening the global reach of the home country. Second, the home country’s government misses out on the settlement money – money which instead is reinjected in the enforcing country’s economy. Third, the corporation might become subject to the enforcing country’s oversight, for example, through a settlement that provides for continuing oversight by the enforcing country’s regulator. The enforcing country’s disruption of the home country’s economy is problematic.

This paradigm has led some foreign observers to raise their voice against the FCPA’s aggressive extraterritorial actions. While initially the FCPA was criticized for putting American businesses at a disadvantage in the global market,[1] currently there are more Department of Justice (DOJ) and Securities Exchange Commission (SEC) enforcement actions against foreign companies than against domestic companies.[2] Some foreign actors believe that the US selectively enforces the FCPA against non-American companies so as to benefit American companies by hurting their competition.[3] For example, the biggest FCPA fine ever paid by a foreign corporation (Alstom S.A. (“Alstom”), a major French company) – and second biggest FCPA fine paid by any company – was immediately followed by the acquisition of the corporation by its American competitor, General Electric (“GE”). In an official report, the French National Assembly acknowledged that the threat of the FCPA fine might have nudged Alstom’s CEO to sell the company to GE.[4]

Fortunately, international law has been instrumental in reducing the imbalance in economic consequences between enforcing countries and home countries.

 

The international law anti-corruption framework

The impetus for a worldwide fight against bribery started in the US but quickly extended to the rest of the world as corporate America felt threatened by the FCPA and feared losing business to foreign competitors.[5] To level the playing field, the US government lobbied for an international anti-corruption treaty.[6] These lobbying efforts proved successful and the Organization for Economic Co-operation and Development (“OECD”) adopted the Convention on Combating Bribery of Foreign Public Officials in 1997, shortly imitated by the United Nations and other regional institutions.[7]

The involvement of international institutions had two effects. First, transnational treaties and conventions introduced harmonized standards and rules.[8] Inspired by the FCPA, these standards encouraged countries to investigate and prosecute companies and individuals “at home” more aggressively than under the existing anti-bribery regime.[9] Second, international and regional institutions applied pressure on countries to fully implement these more stringent standards. For example, OECD Working Groups repeatedly criticized the United Kingdom’s (“UK”) and France’s previous anti-bribery laws which resulted in the adoption by the two countries of the UK Bribery Act and the Loi Sapin II, respectively.[10]

 

The rise of a multijurisdictional framework for enforcement actions

In addition, the harmonization of anti-bribery laws worldwide set the ground for cooperation among countries, which undermined the need for disruptive far-reaching extraterritorial actions. Stronger domestic anti-bribery programs made way for – and encouraged – coordinated multijurisdictional enforcement actions. The US started to cooperate with foreign jurisdictions as the latter increasingly began to prosecute their own individuals and corporations for bribing foreign officials.

In 2018, the DOJ adopted the “Anti-Piling On Policy.”[11] The policy encourages DOJ attorneys to coordinate with foreign enforcement authorities seeking to resolve a case with a company for the same misconduct.[12]  The goal of the policy is to “enhance relationships with [American] law enforcement partners . . . abroad, while avoiding unfair duplicative penalties.”[13]

The “Anti-Piling On Policy” has already proved successful. After its adoption, the DOJ announced two coordinated anti-bribery resolutions: one with the French authorities and one with the Brazilian authorities.[14] In a settlement with the French bank Société Générale, half of the original penalty imposed by the US government was offset by the penalties paid to the French government.[15] Moreover, as Société Générale was to be subject to the oversight of the French anti-bribery agency – created by the Loi Sapin II – DOJ refrained from imposing American oversight.[16] Tougher domestic actions do not preclude extraterritorial enforcement but encourage coordinated action with local authorities. These domestic actions give local authorities back a central role.

By pressuring countries to adopt more stringent anti-bribery laws, international law indirectly reduced the need for extra-reaching enforcement actions against foreign companies, facilitated coordination among countries, and ultimately alleviated the risk of appearance of impropriety in the global fight against corruption. This is an example of how international law and international institutions can help solve global issues while diminishing tensions among sovereigns without resorting to the creation of a transnational.


[1] Jay Clayton, Comm. on Int’l Bus. Transactions, N.Y. City Bar Ass’n, The FCPA and Its Impact on International Business Transactions – Should Anything Be Done to Minimize the Consequences of the U.S.’s Unique Position on Combating Offshore Corruption? (Dec. 2011).

[2] Stanford Law School, FCPA Clearing House, Foreign & Domestic Entities Charged per Year, chart available at: http://fcpa.stanford.edu/statistics-analytics.html.

[3] Pierre Periucci & Matthieu Aron, Le Piège Américain (2019, JC Latès) https://www.amazon.com/American-Trap-Fr%C3%A9d%C3%A9ric-Pierucci/dp/1529326869. To be published in English in 2020.

[4] Assemblée Nationale, Rapport de la Commission d’Enquête chargée d’examiner les décisions de l’État en matière de politique industrielle, au regard des fusions d’entreprises intervenues récemment, notamment dans les cas d’Alstom, d’Alcatel et de STX, ainsi que les moyens susceptibles de protéger nos fleurons industriels nationaux dans un contexte commercial mondialisé (Apr. 19, 2018).

[5] Jan Wouters et al., The Fight against corruption in International Law 6 (Leuven Center for Global Governance Studies, Working Paper No. 94, 2012).

[6] Id. at 7

[7] A number of international legal instruments exist to fight bribery such as international (UN Convention Against Corruption entered into force on the 14th of December 2005 by resolution 58/4) and regional treaties (OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions signed on the 17th of December 1997 and entered into force on the 15th of February 1999; African Union Convention on Preventing and Combating Corruption, adopted in 1999 and entered into force in 2002; in the European Union: the Civil Law Convention on Corruption, adopted in 1999 and entered into force in 2003; the Criminal Law Convention on Corruption, adopted 199 and entered into force in 2002), anti-corruption initiatives in international financial institutions (World bank and other multilateral financial institutions ) and private initiatives (Transparency international, international chamber of commerce). Indispensable too in the global fight against corruption are treaties addressing the procedural aspects of the prosecution of corruption such as Mutual Legal Assistance Agreements used to extradite or give notice of service.

[8] United Nations Convention Against Corruption, Forword at iii, Oct. 31, 2003.

[9] For example, the European Additional Protocol to the Criminal Law Convention on Corruption requires member countries to pass national law criminalizing active and passive bribery in both the public and private sectors. Additional Protocol to the Criminal Law Convention on Corruption.

[10] Joseph Warin et al., The British Are Coming!: Britain Changes Its Law on Foreign Bribery and Joins the International Fight Against Corruption, 46 Tex. Int’l L.J. 1, 4 (2010).

[11] Rod Rosenstein, Deputy Attorney General, Dep’t of Justice, Remarks to the New York City Bar White Collar Crime Institute (May 9, 2018) (transcript available at: https://www.justice.gov/opa/speech/deputy-attorney-general-rod-rosenstein-delivers-remarks-new-york-city-bar-white-collar).

[12] Id.

[13] Id.

[14] Covington, 2018 Year in Review: Top Anti-Corruption Enforcement Trends and Developments 3 (2019)

[15] Id.

[16] Id.

The views expressed in this post represent the views of the post’s author only.

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