GAB is pleased to welcome back Frederick Davis, a lawyer in the Paris and New York offices of Debevoise & Plimpton and a Lecturer at Columbia Law School, who contributes the following guest post:
Much has been written about the long-awaited decision in US v. Hoskins, on this blog (see here and here) and elsewhere. In Hoskins, a US federal appeals court held that the U.S. cannot charge a foreign national acting abroad (and who therefore couldn’t be charged directly with violating the anti-bribery provisions of the Foreign Corrupt Practices Act (FCPA)) by alleging vicarious liability under either the aiding and abetting statute, 18 U.S.C § 2, or the conspiracy statute, 18 U.S.C. § 371. Judge Pooler’s opinion for the court relied on two justifications: First, under the principle established by a Supreme Court cased called Gebardi v. United States and its progeny, Congress clearly indicated an affirmative legislative policy to exclude from complicity or conspiracy liability parties like Mr. Hoskins (foreign nationals acting abroad). Second, the FCPA lacks the requisite affirmative indication of congressional intent, demanded in cases like Morrison v. National Australia Bank, that Congress intended the FCPA to apply extraterritorially to the kind of conduct in question. (Analytically, these two tests are very similar, as they both ask, “What did Congress intend?” The principal difference is the burden of persuasion: The Gebardi line of cases, while not always entirely consistent, seem to indicate that prosecutors can generally invoke complicity or conspiracy liability even of someone who could not be prosecuted as a principal unless there’s a strong showing that this is contrary to congressional intent, while the extraterritoriality analysis, on the other hand, typically puts the burden on the prosecutor to show that a statute was intended to apply extraterritorially in the circumstances raised by a specific indictment.) The court dismissed the conspiracy and complicity charges against Hopkins, but remanded the case on the assumption that Mr. Hoskins might still be directly liable under the FCPA if the government could prove that he was acting as an agent of Alstom’s US subsidiary.
In my view, the court’s decision was clearly correct. But the court could have gone further to address another issue that, while not formally before the court, will need to be addressed on remand: The implications of the OECD Anti-Bribery Convention. The OECD Convention is far more important to the appropriate interpretation of the FCPA than the court acknowledged, provides compelling support for the Hoskins outcome, and should also control the resolution of the issue the appeals court left open for consideration on remand.
The OECD Convention is critical to the FCPA and key to its interpretation. The FCPA was essentially a dead letter for twenty years after its adoption in 1977, and the reason is no secret: as originally written, the FCPA could, at least as a practical matter, only be enforced against US companies and their American personnel. This was not only unfair, but inimical to US interests since it would put US companies at a competitive disadvantage against companies operating under more permissive regimes, many of which allowed tax deductions for overseas bribes. The 1997 OECD Convention changed that by committing all signatories (there are now 43) to enacting and enforcing their own versions of the FCPA, with the goal of creating a level playing field. While enforcement has been uneven, since the Convention came into force there have been literally hundreds of overseas bribery investigations in the US, the UK, Europe, and elsewhere, compared to almost none before the Convention took effect. The US clearly benefits from this arrangement: it now can and does vigorously prosecute overseas bribe-givers, knowing that companies from other countries are subject to essentially the same legal prohibitions.
Judge Pooler’s option in Hoskins notes that the 1998 amendments to the FCPA were clearly designed (in the words of a congressional committee report) to “amend the FCPA to conform it to the requirements of and to implement the OECD Convention.” In fact, the OECD Convention is fundamental to FCPA enforcement and interpretation because the Act would be meaningless without it.
What is missing from the Hoskins opinions is a recognition that by joining the OECD Convention, the US agreed to share decision-making authority about whom to prosecute. The basic structure of the Convention is that each country will prosecute companies and individuals subject to its jurisdiction under normal principles of territoriality, and otherwise defer to the countries that clearly have such jurisdiction. This is apparent in two ways:
- First, Article 4 of the Convention (entitled “Jurisdiction”) recites two, but only two, bases for a country’s power to prosecute: (1) when “the offence is committed in whole or in part in its territory” and (2) when the country has established through its own laws “jurisdiction to prosecute its nationals for offences committed abroad.” These principles, which mirror the categories set forth in the FCPA regarding individuals, are universally recognized as appropriate territorial bases for prosecution.
- Second, and more specifically, in a section 4.3 of the same Article, the Convention mandates that when “more than one [State] Party has jurisdiction over an alleged offence described in this Convention, the Parties involved shall, at the request of one of them, consult with a view to determining the most appropriate jurisdiction for prosecution.” The use of the mandatory “shall,” together with the phrase “the most appropriate jurisdiction for prosecution,” makes it unmistakably clear that countries are not to prosecute companies or individuals simply because, under their own laws, they consider themselves empowered to do so, but should defer to another country if that country’s links to the company or individual make it more the “appropriate” jurisdiction to bring a prosecution.
Appreciation of this aspect of the OECD Convention leads to two conclusions relevant to Hoskins:
- First, as far as one can tell from the various opinions in the case, and in particular from the Third Superseding Indictment against Hoskins, he could have been investigated by authorities in the United Kingdom or France, and “appropriately” prosecuted in either country, because he clearly satisfied both of the jurisdictional requirements noted by the OECD Convention. He lived and worked in the UK; his direct employer was a UK corporation, itself wholly owned (and essentially controlled by) a large French company, Alstom SA; he had a formal assignment to a French subsidiary of Alstom SA; and the US prosecutor admitted that Hoskins committed no relevant acts in the United States, but rather only in the UK (and probably France). Hoskins’ only connections with the US were the fact that a subsidiary of his employer’s parent company (with whom Hoskins apparently had no formal status) was incorporated in the United States, and that he is alleged to have communicated with that subsidiary in furtherance of the bribery scheme. It is inconceivable that the drafters and signers of the OECD Convention would have concluded that that made the US “the most appropriate” jurisdiction to prosecute Hoskins, or that it could argue that use complicity or conspiracy liability to do so. Thus the Hoskins decision is clearly correct, though for an additional reason that the court itself didn’t mention: to have allowed the prosecutor to convict Hoskins on a theory of aiding and abetting or conspiracy would fly in the face of the United States’ obligations under the OECD Treaty
- Second, the OECD Convention should also guide the trial court’s handling, on remand, of the remaining question of whether Hoskins can be prosecuted under the FCPA as an agent of a US company. Both the text and logic of the FCPA on this subject are clear. The FCPA, when first adopted in 1977 and consistently thereafter, is intended to prohibit US companies (and nationals) from bribing foreign officials. When applied to corporations, it made sense to contemplate that in addition to the corporate entities themselves, the individuals through whom they acted should also be prohibited from engaging in foreign bribery on the company’s behalf. The text of the FCPA thus provides that “any officer, director, employee, or agent” of a US firm or US issuer can also be liable for FCPA violations, regardless of their nationality or where they act. We all know what officers, directors and employees are. But what is an “agent” in the FCPA context? The Hoskins court specifically declined to address this question, but in the world of cross-border bribery, the concept of “agents” has a very specific meaning: when working in foreign countries, US firms frequently hire local third parties (often literally called “agents,” sometimes called “consultants”) to advise them, to introduce them to appropriate officials, to lobby—and sometimes to funnel illegal payments to foreign officials. The Hoskins indictment itself refers to two unnamed “consultants.” Subjecting such agents to FCPA liability is uncontroversial. But Hoskins wasn’t that kind of “agent;” and while exactly the conduct subsumed under the “agent” rubric of the FCPA was alleged in the Hoskins indictment, it was only alleged against the unidentified “consultants” – but not Hoskins. Rather, he appears to have been a mid-level executive of one of many Alstom subsidiaries involved in this case (no fewer than five are specifically identified) who is alleged to have to have participated from Europe in a number of telephone and email communications with others working for “Alstom,” and to have attended a meeting in Indonesia. Indeed, it’s not clear that Hoskins was at any point acting on behalf of Alstom US at all; the indictment itself notes that the various subsidiaries “were often referred to by Alstom employees as ‘Alstom’ without distinction” — a habit repeated by the indictment itself. Even assuming that Hoskins was in some loose sense acting in coordination with Alstom US along with the parent and the several other subsidiaries, that might satisfy the elements of aiding-and-abetting or conspiracy – that is, the theories the Court rejected – but does not satisfy the more specific and rigorous question of whether he was an agent of his employer’s sister subsidiary. On remand, it will be important for the trial judge to be vigilant in evaluating the prosecutor’s proof of that specific alleged relationship; proof of looser coordination would simply allow the aiding and abetting and conspiracy theories in by the back door.
Looking ahead, the Hoskins decision is only a partial step toward aligning U.S. FCPA jurisprudence with the requirements of the OECD Convention. Both Judge Pooler for the Court and Judge Lynch in his concurrence note that the drafters of the FCPA were sensitive to issues of “sovereignty;” both quote the famous statement in Morrison that the presumption of territoriality is designed in part to avoid a perception that the United States attempts to “rule the world” by implementing its statutes extraterritorially. But they did not appear to fully recognize that the sovereignty interests in multi-national criminal includes not only care in indicting foreigners, but also respect for decisions of foreign prosecutors. In return for the “level playing field” of consistent laws and of enforcement obligations, the U.S., in signing onto the Convention—most particularly Article 4.3—agreed to defer to prosecutorial decisions in countries that have a more “appropriate” relationship with the crime, even if U.S. prosecutors disagree with how those other countries exercise their prosecutorial discretion. This of course raises difficult policy questions, especially when there’s a case to be made that the other jurisdictions are not adequately enforcing their own laws (see, for example, here, here and here). But that concern does not apper to be relevant here: the UK’s Serious Fraud Office has actively pursued Alstom in matters unrelated to the Indonesia project, and several Alstom officers have been tried or face trial in London on criminal charges under the UK Bribery Act.