GAB is pleased to welcome back Frederick Davis, a lawyer in the Paris office of Debevoise & Plimpton, who contributes the following guest post:
Last fall, I published two posts in which I raised concerns about overlapping jurisdiction in foreign bribery cases, and about the appropriate role of US enforcement authorities in such cases. My first post noted that the US is not bound by the outcome of criminal processes in other countries, but can—and sometimes does—bring FCPA cases against foreign companies that have already resolved investigations for the same conduct brought initiated by their home countries. (As I also observed, the absence of any such constraint on US authorities creates an asymmetry with respect to countries that endorse an international ne bis in idem/double jeopardy bar, which can block such countries from pursuing a corporation or person that has already been pursued in the US.) My second post urged that the US Department of Justice (DOJ) should be more transparent in articulating when it will defer to non-US prosecutions in the corruption area.
A few weeks back, Michael Maruca posted an interesting critical commentary on my posts. The main thrust of Mr. Maruca’s very thoughtful comment was that the DOJ should not unnecessarily defer to non-US counterparts, partly because he worries about downgrading the effectiveness of US FCPA enforcement efforts, and partly because he envisions competition among national authorities as encouraging a “race to the top” in achieving optimal enforcement of foreign bribery laws. He proposes that the DOJ, rather than being more deferential to foreign resolutions of conduct that might violate the FCPA, the DOJ should go further in sharing the monetary outcomes of multinational investigations, and he provides commonsense principles for how it might do so.
Mr. Maruca’s intervention usefully advances the discussion on a very important issue. I agree with much of what he says. Nonetheless, I continue to view the lack of sufficient US deference to foreign resolutions of foreign bribery cases as a problem, and I have the following concerns about the points Mr. Maruca’s makes:
- First, Article 4.3 of the OECD Bribery Convention obligates national authorities to confer in order to identify the “most appropriate jurisdiction for prosecution.” To me, that mandate – while not creating an enforceable individual right by a target person or company – contemplated that authorities in countries other than the one deemed “most appropriate” defer to the one that is. Thus respect for the spirit of this international agreement counsels strongly in favor of deference, at least in those cases where the foreign jurisdiction could be considered the most appropriate forum (as will often be the case when the corporation is domiciled in the foreign country, and/or most of the relevant conduct took place in that country).
- Second, Mr. Maruca’s comment seems based on a belief that in the area of corporate crimes, the higher the penalty the better; I’m not sure what a “race to the top” means otherwise. The problem is that different countries have very different views of corporate criminal responsibility, as a post by myself and a more recent one by Gönenç Gürkaynak have generally described; countries also differ in their policies and principles for determining appropriate penalties. A lesser outcome in a non-US country may not reflect softness on corruption, but rather good faith but differing views about the utility of imposing sanctions on corporations.
- Third, the reason that the US DOJ has a disproportionate voice in ultimate outcomes, and indeed can act as the “ultimate arbiter,” is not that it is “right” in any internationally recognized sense, nor that it has succeeded in persuading other authorities to its point of view, but simply because US prosecutors are vastly more powerful than their European counterparts and can in essence impose their views on a “my way or the highway” basis. I am sure that US authorities are absolutely sincere in their statements otherwise and in emphasizing the spirit of international cooperation, but based on conversations with prosecutors, defense counsel, and in-house counsel in Europe (particularly France, where I live and practice law) I am equally sure that US prosecutors are viewed as simply imposing their will because they can.
- Fourth, we are at a dangerous moment in international cooperation. Very recently in France, an article in a mainstream weekly expressed the view that US prosecution of French companies is a “big racket” designed to siphon money to US treasuries, and an article in Les Echos – the most important daily business newspaper – expressed the view that DOJ prosecutions are intended to protect US companies. Legislation is being considered in the National Assembly to combat the “hegemony” of US extraterritorial application of its criminal laws. When viewed in the context of the essentially protectionist, go-it-alone mentality of the Trump administration, and the rise of European parties hostile to international cooperation, there is a real risk that the coordination inspired and mandated by the OECD Bribery Convention and other international agreements will devolve into retaliation.
No one contests the obvious fact the United States has led, and leads, the fight against overseas corruption. I am not in favor of lessening that effort. I strongly believe however that the US risks losing that leadership role if it is abused, and that an important task for the DOJ is to be much more transparent about how it is dealing with non-US prosecutions. Even if, as Mr. Maruca posits, in some cases “deferring” by non-prosecution may be less appropriate than sharing in monetary outcomes, what are the standards being applied? The DOJ “deferred” in the 2014 case involving Dutch offshore company SBM, in the more recent VimpelCom case it shared monetary proceeds roughly 50/50 with Dutch authorities, and in the even more recent Embraer case it also shared the proceeds with Brazil, but kept roughly 80% for itself. In the four principal French negotiated FCPA outcomes involving Total, Technip, Alcatel and Alstom, the DOJ sometimes praised their French counterparts for their “cooperation,” but did not share a single dollar of the more than $2 billion paid in fines and forfeitures. If those distinctions were based on principle, those principles should be transparent; otherwise we really are at risk of a “race to the bottom” of protectionist prosecutions.
Great post with a tone of interesting information (especially regarding the reaction in France to U.S. prosecution abroad.) I am left wondering if your second point reveals a disparity in perceptions regarding corporate responsibility that may ultimately need to be resolved in some manner. If it is in both the U.S.’s and global community’s best interest for the U.S. to play a more deferential role in these prosecutions, it may be that the global community has to move closer to some consensus on how effective these prosecutions are and how stringent penalties will be. Otherwise, it seems that there would be continuing pressure within the U.S. not to defer to a potentially “softer” country.
The OECD has set up a “public consultation” on corporate criminal responsibility that has assembled quite a bit of interesting information and research, including a study summarizing the laws in most countries. You can see the principal site here.http://www.oecd.org/corruption/public-consultation-foreign-bribery-liability-legal-persons.htm (I have worked as a consultant on the project). One goal of the effort may be to try to arrive at “common principles” of corporate criminal responsibility. I personally am dubious that this is really feasible, since not only the laws but the fundamental policies and principles are so fundamentally different in various countries that it is hard to see them developing too much of a consensus.
Has there been in the past a noticeable difference in the frequency with which FCPA cases are brought against foreign firms compared with American firms? Thinking about the “America first” mentality and the discretionary nature of prosecutions, it seems like continued aggressive enforcement of foreign firms’ misconduct combined with a more lax attitude towards US firms could be an element of an platform designed to advantage US companies. Is this realistic, and if so, how severe would the consequences be for both business and diplomatic relations?
Thank you for this! On your very last paragraph, I wholeheartedly agree–the DOJ should outline rules/principles for deferral and penalty sharing. Greater transparency over why a particular approach was pursued in one case and not another is important. Unfortunately, the US’s role under the new Administration might very well change for the worse. I would find it unsurprising if the new AG, a longtime fan of the President, decided that leading the fight against extraterritorial corporate corruption is no longer a useful endeavor.
On your 1st point, I do not think the wording of 4.3 necessarily implies a double jeopardy bar. Given the nature of OECD Conventions, I think it is appropriate to read the language fairly narrowly. If the parties contemplated a double jeopardy bar, they would have used more specific language.
As for your 2nd and 3rd points, I think my underlying assumption that more prosecutorial power and larger penalties are a good thing relied upon some sort of basic trust in the prosecutor. As you pointed out in your article I was initially responding to, I could see how foreign actors would not necessarily have such trust. As mentioned, the new AG does not have my trust, so I will be on guard against such assumptions in the future. However, it seems the underlying issue is that different countries take different approaches towards corporate criminal responsibility. We should have a frank discussion, then, about which approaches are more likely to deter corruption. I would be hesitant to say a certain state’s approach is the right one to take, purely by virtue of the fact that the corporate headquarters of the company is within that state.
Interesting analysis. You write: “Legislation is being considered in the National Assembly to combat the “hegemony” of US extraterritorial application of its criminal laws”. Can you please expand on how this French law may “combat” the perceived hegemony of the relevant US laws? Thanks.
It is hard to say where this “movement” might lead. In the short term, two legislators have proposed a “study” of US “extraterritorial” application of its criminal laws, where the US$9.2 billion settlement paid by BNPP (in a non-corruption case involving US-imposed sanctions for operations in countries boycotted by the US (including Cuba, where most European countries have fine relations) still rankles. This is likely to lead to more political noise than anything else. Somewhat more ominous is the threat one occasionally sees that French authorities should go after US companies. In that context, the recently adopted Loi Sapin II (on which I will be commenting soon with respect to its anti-corruption measures) has a little-noticed provision that enlarges the statutory basis for French “extraterritorial” enforcement of its anti-corruption laws to make it easier for authorities to go after non-French companies.