Professor Rachel Brewster of Duke Law School and Mat Tromme, Project Lead & Senior Research Fellow at the Bingham Centre for the Rule of Law, contribute today’s guest post, which is based on discussions at a recent Bingham Center-Duke Law School FCPA Roundtable:
In the past year, we have twice seen voters make a significant turn toward nationalism. In June 2016, in a move that was largely motivated by protectionist views, the UK voted to leave the EU, and in November, the United States elected Donald Trump, who campaigned on an “America First” promise. What do these developments mean for US and UK enforcement of their respective laws against overseas bribery (the Foreign Corrupt Practices Act (FCPA) and UK Bribery Act (UKBA), respectively)? Many worry that, insofar as government leaders view anticorruption laws as harming their country’s international competitiveness (a dubious assumption), then nationalistic fervor can lead to weaker enforcement. This is a reasonable concern in both countries—but a more careful analysis of the situation suggests uncertainty is greater in the UK than it is in the US.
The concern with American enforcement is primarily based on the personality of President Trump, who called the FCPA a “horrible law,” and of the new Securities and Exchange Commission (SEC) chairman, Jay Clayton, who is widely considered to be an FCPA skeptic. Yet while the concern is reasonable, a number of considerations suggest major changes in US FCPA enforcement policy are unlikely, at least in the short-to-medium term:
- First, other members of Trump’s cabinet, including Secretary of State (and former ExxonMobil CEO) Rex Tillerson, seem happy to support support FCPA enforcement, and Attorney General Jeff Sessions confirmed that the Department of Justice (DOJ) intends to continue enforcing the FCPA. (Indeed, although there is a hiring freeze in the DOJ’s Fraud Section, personnel are not being reassigned to other sections, which indicates that FCPA enforcement will continue apace.)
- Second, the DOJ and the SEC have significant independence from the White House, and are still mainly staffed with officials who served under the past administration. These prosecutors and other enforcement officials have plenty of professional motives to keep bringing high-impact FCPA cases. As a result, the open investigations started under the Obama Administration will almost certainly continue for the next two or three years.
Thus, although the fickleness of the president should not be underestimated, FCPA enforcement is unlikely to decrease in the next couple of years. Admittedly, there may be some changes on the horizon, and if corporations perceive the DOJ and SEC as being less interested in enforcement, fewer corporations may self-report, which would likely result in a decrease in cases coming to the government. It’s also possible that the government may also withdraw the Yates Memo, signaling less interest in going after individuals. These possible changes are important, but do not represent a dramatic shift in enforcement policy.
Across the pond, recent events shed greater doubt over the UK Government’s commitment and ability to prosecute foreign bribery. Most importantly, Brexit is likely to shift government priorities, leading to a greater emphasis laid on business generation and securing trade deals outside of the EU, as opposed to anticorruption. Indeed, to make up for the loss of European market access, the British government will have to work to promote exports to a wide range of countries, and it appears that Brexit has already made the UK government significantly more concerned about expanding its non-EU trade (see here, here and here). Yet exporting to India, South Africa, and other emerging markets is expected to carry greater bribery risks: the average Corruption Perception Index score for EU countries (excluding the UK) is 64, while the average for the BRICS countries is 38.8. The perceived necessity of dramatically increasing exports to these states therefore gives the UK government an incentive to rein in (or at least deemphasize) foreign anticorruption enforcement. Moreover, any economic downturn that might result from Brexit could also lead to cuts in public resources, including for law enforcement.
Although the Conservative Party Manifesto originally aimed to disband the Serious Fraud Office (SFO) – which is in charge of investigating and prosecuting large-scale corruption cases – and merge it with the National Crime Agency (NCA) (which would have raised serious questions about the independence of bribery prosecutions), the Government is now unlikely to go ahead with this policy. Yet, as an OECD report makes clear, Brexit could damage the UK’s effort to prosecute bribery. Some NGOs have expressed concern that the threat of relocation following Brexit might be used as a bargaining chip to reduce charges. So, as the SFO continues to score big wins (most recently with the Barclays case), it will have to be politically astute to navigate what is likely to become a challenging environment, marked by a tension between UK economic and trade interests on the one hand, and prosecution of bribery on the other.
Thus, while fears that Trump’s election would grind FCPA enforcement to a halt are likely overblown, the continued expansion of UK enforcement of the UKBA are very much in jeopardy.