A little while back I expressed some concern (perhaps excessive) about the possibility that we might be seeing a revitalized movement to “reform” (that is, weaken) the FCPA; I also worried a bit that a greater focus on prosecutions of individuals might lead to judicial rulings that would force the government to substantially narrow its reading of the statute (for example, with respect to the definition of “foreign official,” or what counts as “anything of value,” or the scope of statutory jurisdiction, or other matters where the statute itself is arguably ambiguous). In response to the latter concern, Duke Law Professor Rachel Brewster raised an intriguing possibility (in addition to several other reasonable responses to my worries): The OECD Anti-Bribery Convention, she suggested, might limit the degree to which the U.S. Congress or courts narrow or limit the FCPA. As Professor Brewster succinctly put the point in her comment on one of my earlier posts:
[T]he OECD treaty … is even broader than the FCPA. Moreover, the courts of appeal that have ruled on the meaning of the FCPA (Kay, Esqenazi) have explicitly relied on the more robust OECD treaty provisions to support the government’s position. That gives me some comfort that the US court system is going to continue to support the DOJ/SEC’s current enforcement strategy. Even if the OECD treaty does not explicit answer questions like “who is a foreign official” and “what is anything of value” (although it does help with the narrow interpretation of the facilitating payments), the general tenor of the treaty (and subsequent treaties the US has backed and joined) supports the government’s strong enforcement approach.
This is a valuable point, and to a certain extent I agree. But I am less sanguine than Professor Brewster that the OECD Convention will prove much of a firewall against a potential congressional or judicial backlash against the DOJ and SEC’s aggressive approach to interpreting and enforcing the statute.
- First, with respect to judicial rulings on the FCPA’s meaning, I think it’s worth noting that the two cases that Professor Brewster cites (U.S. v. Esquenazi and U.S. v. Kay) are in fact the only FCPA cases that have referenced the OECD Convention. By itself that’s not very significant, as there are only a handful of total cases on the FCPA. But it does suggest that we need to be cautious about extrapolating too confidently about what other courts might do in other cases. Indeed, part of my argument in my original post is that the government’s track record in the FCPA cases it’s litigated so far might not be a good guide to what would happen if the volume substantially increased, especially if some of the defendants looked more sympathetic.
- Second, both Kay and Esquenazi are cases in which the courts thought that the government’s interpretation of the statute was in fact correct, such that the discussion of the OECD Convention was to confirm an interpretation that the court already was inclined to accept. It is true that U.S. courts are supposed to construe ambiguous domestic statutes to avoid a conflict with U.S. treaty obligations. But at least for non-self-executing treaties, the statute rather than the treaty is the binding domestic law, and the court could well conclude that the statute (here, the FCPA) is “unambiguous” on the relevant point.
- Third, while some of the potential limitations to the FCPA’s scope (such as the meaning of “foreign official”) may be covered by the OECD Convention, others (such as the reach of the jurisdictional provisions) may not be.
- Fourth, Professor Brewster clearly and correctly limits her argument to the question of potential judicial narrowing of the statute; the related but distinct concern about potential congressional narrowing is unlikely to be affected or meaningfully constrained by the OECD Convention—though if Professor Brewster is correct, and other courts follow the lead of the Esquenazi and Kay courts, any congressional deviation from the OECD Convention may be construed narrowly.
So those are some of my reasons for continued concern, notwithstanding Professor Brewster’s valid and helpful observation. But I do want to close on a more optimistic note, and a point of agreement with Professor Brewster: Insofar as Professor Brewster’s analysis is correct, and the OECD Convention actually influenced the decisions in Esquenazi and Kay (as opposed to being just an after-the-fact makeweight), it highlights a way that the OECD Convention can have a meaningful effect on anticorruption law, separate and apart from whatever political pressure is induced by the Convention’s peer review process. Even if the Convention does not have “teeth”, insofar as domestic courts believe they are bound to interpret domestic law so as to avoid conflicts with the Convention, the Convention can lead to more expansive constructions of laws against foreign bribery. Now, I don’t know how many other countries have interpretive doctrines similar to those applied by U.S. courts. And I also have the impression that in most other countries the problems have less to do with how courts construe the laws, and more with the reluctance or inability of prosecutors to vigorously pursue cases. Nonetheless, this is an encouraging and perhaps overlooked positive feature of the Convention—even if, as I noted above, I’m more skeptical than Professor Brewster about how robust it will prove when push comes to shove.
This is a perplexing discussion of Kay given that the 5th Circuit explicitly rejected the DOJ’s most broad interpretation based on the OECD Convention. In the words of the 5th Circuit – “if the government is correct that anytime operating costs are reduced the beneficiary of such advantage is assisted in getting or keeping business, the FCPA’s language that expresses the necessary element of assisting is obtaining or retaining business would be unnecessary, and thus surplusage—a conclusion that we are forbidden to reach.”
In Kay both the trial court and appellate court rejected the DOJ’s position that the FCPA captured payments to secure an “improper advantage” because the OECD Convention captured such payments.
The trial court decision stated:
“The OECD Convention had asked Congress to criminalize payments made to foreign officials ‘‘ ‘in order to obtain or retain business or other improper advantage in the conduct of international business.’’ . . . Congress again declined to amend the ‘‘obtain or retain business’’ language in the FCPA . . . . Congress did not insert the ‘‘improper advantage’’ language into the ‘‘obtain or retain business’’ provision of the FCPA.”
Although the Fifth Circuit overruled the trial court’s decision granting the defendants’ motion to dismiss, the appellate court likewise stated as follows concerning the FCPA’s 1998 amendments:
“When Congress amended the language of the FCPA, however, rather than inserting ‘any improper advantage’ immediately following ‘obtaining or retaining business’ within the business nexus requirement (as does the Convention), it chose to add the ‘improper advantage’ provision to the original list of abuses of discretion in consideration for bribes that the statute proscribes.’’
For the reasons outlined in this amicus brief, the 11th Circuit botched its analysis of the OECD Convention as relevant to the “foreign official” issue.
You’re correct that I was a bit sloppy when I wrote that Kay court thought “that the government’s interpretation of the statute was in fact correct”; as you point out, the government had in fact argued (in the context of defending the sufficiency of the indictment) for an even more capacious understanding of the “business purpose” element, which the court rejected. But overall the Kay court’s position was much closer to that of the government than to that of the defendants.
And on the specific issue of the 1998 Amendments that implemented the OECD Convention, I think it’s important to focus on the court’s language immediately following the second passage that you quote. Right after noting that Congress did not insert the “other improper advantage” language (as an alternative to “obtaining or retaining business”), the court observed that the trial court and the defendants argued that by amending the statute in this way, Congress “declined to amend the ‘obtain or retain’ business language in the FCPA.” However, the court then noted that the government essentially agreed that the amendment did not effect a substantial change, but in the government’s view this was only because “Congress already intended for the business nexus requirement to apply broadly.”
While you’re right that the court had earlier rejected the most aggressively expansive of the government’s interpretation, in this (crucial) section of the opinion, the court clearly sided with the government (and rejected the trial court’s view). Here’s the key language:
“The [OECD] Convention’s broad prohibition of bribery of foreign officials likely includes the types of payments that comprise defendants’ alleged conduct…. As we have demonstrated, the 1977 and 1988 legislative history already make clear that the business nexus requirement in not to be interpreted unduly narrowly. We therefore agree with the government that there really was no need for Congress to add ‘or other improper advantage’ to the requirement.”
In other words, right after the passage you quote, where the court acknowledges the trial court (and defendant’s) point that Congress did not alter the business nexus language in 1998, the 5th circuit proceeds to _expressly reject_ the claim that this should make a difference, precisely because the 5th circuit agreed with the government that the business nexus requirement was already broad enough to cover the defendant’s conduct (though, as you rightly note, the 5th circuit still requires the government to prove such a business nexus, rather than treating tax reductions as ipso facto sufficient to meet that requirement).
And, circling back to the original subject of my post, the Kay court invoked the OECD Convention as one reason for interpreting the statute in this way:
“That the Convention, which the Senate ratified without reservation and Congress implemented, would also appear to prohibit the types of payments at issue in this case only bolsters our conclusion that the kind of conduct allegedly engaged in by defendants can be violative of the statute.”
Nonetheless, as I note in my post, it’s not clear how much work this consideration was actually doing, given that the court, in the earlier passage I quoted, concluded (based on the earlier legislative history) that the best reading of the FCPA is that the business nexus requirement is not very demanding, such that there is no tension or inconsistency with the OECD Convention.
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