The ATS, the FCPA, and Being Thankful for Criminal & Civil Liability

In a recent post, Matthew teased out a counterintuitive worry that has bothered FCPA supporters in recent years — the fear that increased enforcement against individuals might actually be bad for the FCPA on the whole. Matthew’s argument is straightforward and intuitive: DOJ has long been able to press expansive interpretations of some of the statute’s more ambiguous provisions because corporations have been unwilling to litigate FCPA liability. But as the Esquenazi, Shot Show, and Aquilar cases show, individual defendants are far more likely to go to trial to combat FCPA charges. So, as DOJ prosecutes more individuals, we’re likely to see more extended legal challenges to the FCPA and, perhaps, more sympathetic defendants. Maybe the decisions will continue, like Esquenazi, to go DOJ’s way. The fear, though, is that they may not, and that narrowing constructions of the statute could undercut its deterrent force.

Matthew’s post drew my thoughts to another statute — specifically, the Alien Tort Statute (“ATS”) — which has graced our pages a couple times courtesy of Maryum (here and here). Over the past few decades, the ATS — a two-centuries-old statute that permits aliens to sue in U.S. courts for torts committed in violation of the law of nations — has followed a path that is, in a way, the inverse of the FCPA: at first it was used primarily to sue individual foreign officials who often fled U.S. jurisdiction rather than litigate; only after a few decades was the ATS commonly used to target corporations, and these targets began to push back in court. Unfortunately for ATS plaintiffs, that inverse story arc hit its climax in the Supreme Court’s 2013 decision in Kiobel, a case that did to the ATS what Matthew fears might happen to the FCPA.

Fret not, though, supporters of the FCPA! Yes, the rise and fall of the ATS might teach us something about the fate of the FCPA — but I think the lesson is to be thankful, not fearful. Here’s why:

First, some more background on the ATS. In 1980, a U.S. court of appeals, in a case named Filartiga, breathed new life into this statute, prompting a wave of suits against individuals alleged to have committed human rights abuses abroad. That first wave followed a typical pattern: ATS plaintiffs served defendants with process while they were in the United States and secured default judgments (and solid precedent) when those defendants inevitably chose flight over fight. Because it was hard to recover money from those individual defendants, however, ATS plaintiffs eventually began to target the deep-pocketed corporations who aided and abetted such abuses. Predictably, the corporations fought back and began to win significant victories, victories like Sosa v. Alvarez-Machain, a 2004 case that substantially narrowed the scope of claims cognizable under the ATS. After years of litigation, corporate ATS defendants secured their crowning achievement in Kiobel, a decision that concluded that federal courts have no jurisdiction to hear ATS claims against foreign corporations for foreign conduct.

Now, there are some worrisome parallels that might be drawn between the ATS’s arc and the potential fate of the FCPA. Plenty have written on the intersection of these two statutes, and some have even talked about the potential impact of Kiobel on FCPA actions, but it’s worth making the connection explicit here: As Matthew suggested, and the ATS’s history shows, increasingly aggressive jurisdictional theories are vulnerable to judicial pushback if and when defendants begin to litigate the underlying legal issues on the merits. In the context of the ATS, that came with the second wave of suits against corporate defendants like Royal Dutch Shell (one of the defendants in Kiobel). In the FCPA context, the fear is that individual defendants with skin in the game and a willingness to go to trial might begin to make headway on trimming back ambiguous terms like “instrumentality,” “facilitating payment,” and “anything of value.”

But that overlooks a key difference between the statutes: whereas the ATS only provides for civil remedies, FCPA defendants face a mix of criminal and civil liability. Corporations are not averse to litigating FCPA liability generally; they’re averse to criminal charges. Thus, while corporate defendants were willing to step up to bat against civil tort suits under the ATS, they have chosen to address FCPA charges in the conference room — not the courtroom — precisely because they have generally faced the threat of criminal penalties. (When companies have faced only civil penalties for FCPA violations, the penalties — and the resulting incentives to litigate — have been relatively small.) Corporations’ reluctance to risk criminal indictment has been crucial to the success of the FCPA program: By authorizing criminal penalties in the statute, and frequently pairing civil and criminal enforcement actions in practice, the U.S. government has been able to build a robust anti-bribery enforcement program without significant legal pushback. And against the backdrop of this robust enforcement program, DOJ has been able to pick and choose its litigation battles.

What does this mean for the future of the FCPA program? Well, I think there is another distinction between the ATS and the FCPA that bodes well for the latter: the type of defendant likely to challenge DOJ’s enforcement theories. As ATS plaintiffs quickly learned, corporate defendants’ deep pockets are often more of a curse than a blessing — they can hire huge, sophisticated legal teams to press powerful arguments. But individual FCPA defendants and their less sophisticated counsel are probably far more likely to be outmatched. So Matthew may be right that more litigation brings more (legal) risk. But, if we’re willing to accept that the lawyers — just like the clients — can sometimes impact a court’s decision of a tough legal question, then FCPA supporters might take solace in knowing that at least it won’t be Royal Dutch Shell that’ll be fighting back.