Today’s Guest Post is from Craig R. Arndt, a Yale-trained American lawyer living in Bangkok. During a lengthy career, he advised multinational clients on a range of corruption-related matters and has represented those injured by corruption in actions to recover damages.

Buried in year-end legislation arming America’s military, Congress created two new weapons to advance the global fight against corruption. Section 5101 of the 2024 National Defense Authorization Act makes it a federal crime for a foreign public official “to corruptly demand [or] receive” a bribe from any person or entity subject to the Foreign Corrupt Practices Act. Sections 5403 and 5404 require the Secretary of State to publish an annual report ranking countries in a “three-tiered system with respect to levels of corruption in their governments.”

Both are important, if perhaps controversial, developments in the global fight against corruption.

The Foreign Extortion Prevention Act

The Foreign Extortion Prevention Act (FEPA), resolves an issue which has been the subject of litigation, debate, and discussion since the passage of the FCPA in 1997 – criminalization taking or soliciting bribes by foreign government officials, “passive foreign bribery.” See, for example, U.S. v. Castle, 925 F.2d 831 (5th Cir. 1991) here, United States v Hoskins (902 F.3d 69 (2d Cir. 2018)  here; Professor Stephenson’s 2018 and 2022 GAB Posts and Professor Mike Koehler’s  2012 The Story of the Foreign Corrupt Practices Act.

The new legislation does not amend the FCPA. Instead, it amends section 201 of title 18 of the United States Code, the law outlawing the bribery of U.S. federal government personnel. Foreign officials (including staff of a U.N. agency or other international organization) convicted under the newly amended section face a prison sentence of up to 15 years, a fine of up to $250,000 or 3 times the value of bribe, or both. To remove any doubt that offenders can be prosecuted no matter whether they have ever set foot in the United States, ever transacted in U.S. dollars, or had any other contact with the United States, the new statute expressly states that offenses “shall be subject to extraterritorial Federal jurisdiction.”

As one insightful law firm note on the new law observed, FEPA may cause the DOJ to change its approach to investigations and case resolutions and result in new legal challenges:

“The creation of a criminal offense specifically targeting demands from foreign officials for bribes could be the harbinger of new anti-corruption enforcement activity, reaching beyond the usual targets of FCPA cases. It remains to be seen, however, whether DOJ will use this new authority to investigate and prosecute cases that it otherwise would not open or instead will use FEPA largely to enhance their existing enforcement of the FCPA (including by charging additional individual defendants). FEPA’s enforcement also could encounter significant jurisdictional challenges, including foreign officials charged under the statute who may remain beyond the reach of U.S. authorities and never see the inside of a U.S. courtroom. From a political perspective, charging foreign officials also may invite diplomatic repercussions and even spark international conflict.”

These considerations are the same ones that led Congress to exclude foreign government officials from the reach of the FCPA in enacting the FCPA in 1977, in later amending it, and in the US promoted OECD Antibribery Convention. See District Court judge Barefoot Sanders’ review of the legislative history in the Castle case, and Professor Koehler’s article above.

As the State Department explained when asking the U.S. Senate to give its consent to the ratification of the United Nations Convention Against Corruption (here), parties are encouraged but not required to consider criminalizing passive foreign bribery: The Convention does mandate but only “requires States Parties to consider criminalizing the solicitation or acceptance of bribes by foreign public officials.”

At the time the U.S. ratified UNCAC, it declined the invitation to criminalize passive foreign bribery. The new law now reverses that position, joining with the other UNCAC parties which have. But the question remains: how will the new law be implemented and how will the US courts deal with existing investigations and past decisions in criminal and civil cases involving bribe taking by foreign officials?

Will companies subject to the FCPA need to revise their compliance policies?

Absent a law permitting prosecution of foreign government officials, the DOJ has  been reluctant to disclose the names of bribe recipients and has occasionally pursued them indirectly by using conspiracy theories, money laundering laws  such as the Anti-Money Laundering Act of 2020 (here) and civil forfeitures (here, here, here, here, here, here and here). Will the DOJ use its expanded powers? Or will it continue its present practice of pursuing them indirectly in view of the potential legal challenges and foreign policy repercussions?

We do not know how the FEPA may impact US new civil cases against FCPA offenders by foreign governments. Until now they have been largely unsuccessful in recovering damages under UNCAC article 35 and by intervention in US civil and criminal case against FCPA violators (here, here).  Will it affect the UNODC’s, the World Bank and UNCAC’s efforts on asset recoveries (here, here here and here)?

For further background and a discussion of the new law and its implications, see this excellent post by Transparency International’s American chapter.

The Combating Global Corruption Act

The second addition to America’s anticorruption armory added by the defense legislation has received little attention. The Combating Global Corruption Act, found in sections 5403 and 5403 of the bill, originated as a stand-alone bill in 2021. As its sponsors explained last January when reintroducing it —

“The Combating Global Corruption Act would require the State Department to identify corruption in countries and rank them in a public, three-tiered system with respect to levels of corruption in their governments, similar to the Department’s annual Trafficking in Persons Report. The bill would also establish minimum standards for combating corruption; evaluate foreign persons engaged in grand corruption in the lowest tiered countries for consideration under the Global Magnitsky Human Rights Accountability Act; and designate an anti-corruption point of contact at U.S. diplomatic posts in the two lowest tiered countries.”

Ironically, when Congress was considering the legislation that became the FCPA then Treasury Secretary Michael Blumenthal warned against criminalizing passive foreign bribery. He argued that in many countries such payments were already illegal under the recipients’ domestic law.

Now, however, the State Department is charged with ranking countries by level of corruption meaning U.S. embassies must now monitor compliance with local antibribery laws in their respective countries. Embassies will need to scrutinize how effective local enforcement agencies are in policing corruption and how well governments are complying with a variet of international treaties including the United Nations Convention Against Corruption, the Inter-American Convention Against Corruption, the African Union Convention on Preventing and Combating Corruption, and the Council of Europe’s Civil and Criminal Law Conventions Against Corruption.

One can imagine both the FEPA and the Combatting Global Corruption Act are unlikely to be viewed favorably by at least some countries. Their governments will see the two as infringing on their sovereign rights and existing treaty obligations, as one more example of US legal overreaching.

However, there is an important difference between the two new laws. The DOJ can use prosecutorial discretion in deciding whether to charge foreign officials, but the State Department enjoys no such discretion with the Combatting Global Corruption Act. It must evaluate anti-corruption everywhere and, where appropriate, require individual Embassies to play an active role in “enhancing local anticorruption efforts.”

Organizations such as Transparency International  and the UNCAC Coalition already rank countries by “their perceived level of corruption,” and promote  anticorruption efforts (here and here);  the UNODC currently conducts compliance reviews (here), and the World Bank has its own guidelines and sanctions (here). It remains to be seen if the United States intends to develop its own ranking system, pre-empt these efforts of other organizations, or work out some sort of cooperative mechanisms with them.

Will there be Information sharing and coordination between the State Department and the DOJ in their respective implementations of these new laws? There is no indication that the two Acts were considered together or how their enforcement would be harmonized.

The new laws are both Congressional initiatives. It will be up to Congress to ensure they are implemented correctly and to regularly evaluate their effectiveness.