Equitable Sharing, Not Deference: How US FCPA Enforcers Should Accommodate Foreign Interests

Frederick Davis recently published two guest posts (see here and here) emphasizing some of the risks that arise when the US government pursues FCPA prosecutions against foreign corporations. He notes that European anticorruption administrators are regularly irritated by aggressive US action in this field and by the apparent discrepancy in the treatment of US and non-US corporations. He also notes that foreign corporations are reasonably worried about being charged twice for the same transgression: While European countries have addressed this concern through an international version of the double jeopardy bar (also known as ne bis in idem), that bar does not protect a corporation against a subsequent US prosecution. Moreover, as Mr. Davis notes, US enforcement agencies (as compared to their counterparts in Europe) have wider authority to charge, are more willing to assert power abroad, wield more procedural tools, and are less subject to judicial supervision in their charging and settlement decisions. To address these problems, Mr. Davis recommends, among other measures, that the US DOJ issue guidelines for when to defer to foreign judgments.

However, US deference to foreign judgments may not be the best solution. It could be true, as Mr. Davis worries, that US prosecutors are “becoming the ultimate arbiters” of foreign bribery cases (at least those involving multinational corporations). But if the US standard is indeed more stringent, then US hegemony could lead to more aggressive anticorruption prosecution across the board, a boon for anticorruption advocates. Since in certain situations competition among administrative and enforcement agencies can create a de facto “race to the top” in terms of standards, it might not be such a good idea for the US to adopt a more deferential posture toward foreign judgments in transnational bribery cases.

That’s not to ignore the significant problems that Mr. Davis describes. Given that the fines and other monetary penalties for corrupt business behavior can be enormous, US FCPA counterparts in other nations would be rightly dismayed if they lost out on the potential recoveries. If a Danish corporation listed on a US exchange bribes an official in Gambia, all three countries should be able to penalize the wrongdoers and share—though not necessarily equally—in the fines and other penalties recovered. If the penalties are appropriately distributed, we need not sacrifice the aggressive anticorruption regime of US hegemony. My response to Mr. Davis is that we need guidelines for distribution of recoveries, not necessarily guidelines for deferral to foreign judgments operating under differing, and less aggressive, standards.

So it is heartening to see, as Mr. Davis noted, penalty-sharing arrangements between the US and foreign authorities, for example in the VimpelCom case. This is the beginnings of a path forward, and the answer to the irritated European anticorruption administrators. As the most active prosecutor, the US must be transparent and cooperative in its approach, in the hopes of avoiding some of the potential backlash described by Mr. Davis. US prosecutors should therefore develop and publish some basic guidelines about how they intend to distribute corporate penalties.

Unfortunately, splitting penalties is not so simple. As Matthew Stephenson explained here, governments obtain money from bribe-payers in four different ways: (1) through the forfeiture of illegally obtained property, (2) compensation for identifiable harm, (3) punitive fines, and (4) disgorgement of the profits from unlawful conduct. In my view, the US should promulgate guidelines that follow two basic principles of international law: those who suffer harm should be compensated for that harm, and States can recover fines from illicit behavior that takes place and/or has negative effects in their territory. Thus, the proposed guidelines should adopt the following, basic structure for distributing recoveries in FCPA cases:

  • Illegally obtained property shall be forfeited to the State from which it was acquired.
  • Compensation for identifiable harm shall be awarded to each State according to the harm it (and its nationals) has suffered.
  • Punitive fines shall be determined by the prosecuting State and shared among the States involved in the corrupt act.
  • Disgorged profits shall be shared by the States involved with the corrupt act.

The first two are consistent with Articles 54-57 of the UN Convention Against Corruption (UNCAC) and are likely to be more easily identified than the latter two. The punitive fines could be divided equally or in proportion to the degree of involvement. Measuring degrees of involvement would be challenging, so a simplified calculus with established ”types” of involvement might be worth developing. Where one of the States is complicit in the corruption, its share might be reduced. Such a State might demonstrate its commitment and receive its full share by prosecuting the public officials involved in the corruption. Allocating disgorged profits is especially difficult, but should be done using a similar balancing approach based on where the illicit profits accrued.

None of this is simple. Non-prosecuting states might desire that smaller or larger punitive fines be levied; profits from the corrupt act might be difficult to trace; and determining the “States involved” might also be challenging. But each could be addressed in guidelines and then adapted as necessary to the specific situation.

The OECD might be a good forum through which the US can initiate consultations among regulatory authorities of countries involved in a given instance of corruption. After all, the OECD Anti-Bribery Convention already calls for cooperation to determine which jurisdiction should take the lead on a prosecution (Article 4.3), and if discussions among prosecutors were situated in the OECD Development Centre, non-OECD member states would be more likely to participate. (Disclaimer: I briefly worked as a Junior Policy Analyst at the Development Centre.) In those discussions, the US could advocate for its general rules but be open to other approaches.

The US may indeed remain the “final arbiter” for foreign bribery cases involving multinational companies. But this arrangement would be less problematic if penalties were distributed among interested States fairly and the US pursued foreign and US-based corporations with equal vigor. It may well be overly optimistic to think that, under a Trump Administration, the DOJ would go out of its way to share money extracted from corrupt individuals or corporations and pursue a cooperative agenda. On the other hand, the risks that Mr. Davis highlights are real, and a unilateral approach targeting prominent foreign corporations would likely lead to retribution and true economic pain at home. So, one can hope that such a possibility encourages US prosecutors to be more transparent and accommodating of foreign anti-bribery agencies.

In any case, we should not promote deferrals to States with less stringent approaches, nor a watered-down global standard, but rather build on the most aggressive regulatory agencies and devise methods by which cooperation among bureaucrats can flourish and those harmed by corruption can recover.

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