Tag Archives: extraterritorial enforcement

Guest Post: The Impending Reckoning on the U.S. Government’s Expansive Theory of Extraterritorial FCPA Liability

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Today’s guest post is from Roxie Larin, a lawyer who previously served as Senior Legal Counsel for HSBC Holdings and is now an independent researcher and consultant on corruption, compliance, and white collar crime issues.

The U.S. Foreign Corrupt Practices Act (FCPA) is a powerful tool that the U.S. government has wielded to combat overseas bribery—not just bribery committed by U.S. citizens or firms, but also bribery committed by foreign nationals outside of U.S. territory. (The FCPA also applies to any individual, including a non-U.S. person or firm, who participates in an FCPA violation while in the United States, but this territorial jurisdiction is standard and noncontroversial.) The FCPA, unlike many other U.S. statutes, does not require a nexus of the alleged crime to the United States so long as certain other criteria are satisfied. For one thing, the statute applies to companies, including foreign companies, that issue securities in the U.S. In addition, the FCPA covers non-U.S. individuals or companies that act as an employee, officer, director, or agent of an entity that is itself covered by the FCPA (either a U.S. domestic concern or a foreign issuer of U.S. securities), even if all of the relevant conduct takes place outside U.S. territory.

In pursuing FCPA cases against non-U.S. entities for FCPA violations committed wholly outside U.S. territory, the agencies that enforce the FCPA—the Department of Justice (DOJ) and Securities and Exchange Commission (SEC)—have pushed the boundaries of this latter jurisdictional provision. They have done so in part by stretching to its limits (and perhaps beyond) what it means to act as an “agent” of a U.S. firm or issuer. (The FCPA provisions covering foreign “officers” and “employees” of issuers and domestic concerns are more straightforward, but also more rarely invoked. It’s rare for the government to have evidence implicating a corporate officer, and the employee designation doesn’t help unless the government is either able to dispense with notions of corporate separateness, given that foreign nationals are typically employed by a company organized under the laws of their local jurisdiction.) Until recently, the government’s expansive agency-based theories of extraterritorial jurisdiction had neither been tested nor fully articulated beyond a few generic paragraphs in the government’s FCPA Resource Guide. In many cases, foreign companies affiliated with an issuer or domestic concern have settled with the U.S. government before trial, presumably conceding jurisdiction on the theory that the foreign company acted as an agent of the issuer or domestic concern. (This concession may be in part because a guilty plea by a foreign affiliate is often a condition for leniency towards the U.S. company.) Hence, the government has not had to prove its jurisdiction over these foreign defendants.

But there was bound to be a reckoning over the U.S. government’s untested theories of extraterritorial FCPA jurisdiction, and the SEC and DOJ’s expansive theories are increasingly being tested in court cases brought against individuals who, sensibly, are more prone to litigating their freedom than companies are their capital. And it turns out that the U.S. government’s expansive conception of “agency” may be difficult to sustain in cases where the foreign national defendant—the supposed “agent” of the U.S. firm or issuer—is a low- or mid-level employee of a foreign affiliate, and even more difficult to sustain so where the domestic concern is only an affiliate and not the parent company. Continue reading →

Was U.S. v. Hoskins Correctly Decided? (Probably Not.)

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My post last week discussed the recent U.S. Court of Appeals decision in United States v. Hoskins, which held that a foreign national cannot be charged with aiding and abetting a violation of the Foreign Corrupt Practices Act (FCPA), or with conspiracy to violate the FCPA, unless that foreign national either took some action connected to the violation within US territory, or else acted as an agent of a US domestic concern or an issuer of securities in the US. That’s a bit of a mouthful. To put this another way: The FCPA itself says that it applies extraterritorially to US nationals (including US firms), to non-US firms that issue securities on US markets, and to the officers, employees, directors, and to agents of firms in either of the preceding categories. The FCPA also applies to foreign individuals or firms (other than issuers) if but only if they engage in some part of the wrongful conduct while in US territory. The question is whether such foreign individuals (including non-issuer firms), who act outside of US territory, and so cannot be charged directly with violating the FCPA’s anti-bribery provisions, can nevertheless be charged with aiding and abetting, and/or conspiring with, some other actor’s FCPA violation. In Hoskins, the U.S. Court of Appeals for the Second Circuit said no: Not only can a foreign national (other than an issuer or an agent of a US domestic concern or issuer) not be charged with FCPA violations based on conduct abroad, but such a defendant’s conduct abroad also cannot support a charge of aiding, abetting, or conspiring in an FCPA violation.

Perhaps because appellate court decisions on legal issues related to the FCPA are so rare, Hoskins has attracted considerable commentary. Most of this discussion, including my post last week, focuses on summarizing the court’s holding, considering its implications for future cases, and assessing whether Hoskins’ limitation of complicity and conspiracy liability is likely to improve or worsen FCPA enforcement overall. However, I haven’t seen very much commentary on the question whether, as a matter of legal doctrine and legal interpretation, Hoskins was decided correctly—that is, whether it is consistent with precedent, statutory text, and generally-accepted jurisprudential principals. That’s entirely understandable—most of the initial wave of commentary is coming either from law firms that want to explain to their clients what this decision means for them, or from those interested more in the policy issues than in parsing the doctrine. Nevertheless, I do think it’s worth getting a conversation going about whether Hoskins’ reasoning is (legally and doctrinally) sound. I may not be the best person to do this, as I’m not a criminal law specialist, but I figured I might as well take a crack at it, if only in the hopes that doing so might prompt some of the real experts to weigh in.

After reading the case a few times, and delving into some of the earlier case law and other materials, it seems to me that Hoskins is a hard case. Really really hard. And I tentatively think that is was probably decided incorrectly. Or maybe “incorrectly” is too strong—instead, perhaps I should say that the Hoskins result is in tension with existing doctrine, and the result the court reaches, though defensible, requires an aggressive expansion of traditional doctrinal principles, one that the court doesn’t really acknowledge. For those readers out there who care more about the policy bottom-line than about the intricacies of legal doctrine, you may want to stop here. Law nerds, read on! Continue reading →

Guest Post: A Pending Federal Case Could–and Should–Limit the FCPA’s Extraterritorial Reach

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GAB is pleased to welcome back Frederick Davis, a lawyer in the Paris office of Debevoise & Plimpton, who contributes the following guest post:

Can the U.S. government prosecute an individual for Foreign Corrupt Practices Act (FCPA) violations if that individual is not a U.S. citizen or resident, and committed no unlawful act in U.S. territory? An important case posing that question is now before a U.S. appeals court. The decision may have important implications on the territorial reach of the FCPA.

The facts and relevant statutory provisions are straightforward, although the analysis is not. The defendant, Lawrence Hoskins, is a British national who at all relevant times was an officer of a British subsidiary of French manufacturing giant Alstom. Alstom and several of its subsidiaries were investigated by the US Department of Justice for alleged illicit payments in Indonesia, and ultimately reached a global corporate settlement that included several corporate guilty pleas and Deferred Prosecution Agreements, pursuant to which the corporate entities paid US fines of over US$750 million. The DOJ also pursued several individuals, including Mr. Hoskins, who was ultimately arrested when he arrived in the United States on vacation. His attorneys moved to dismiss the indictment on the ground that the US prosecutor lacked power to prosecute him. After energetic procedural activity by both sides, the District Court granted his motion in significant part. Unusually, the prosecutor appealed, and oral argument was heard on March 2, 2017.

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The OECD Convention and Extraterritorial FCPA Jurisdiction

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I suggested in an earlier post that a major reason for the increase in foreign anti-bribery prosecutions in other countries since the passage of the OECD Anti-Bribery Convention is increased enforcement of the FCPA against foreign companies by the US government. In this post, I will set out, in a little more depth, one factor that contributed to bringing this effect about, namely a broadened scope for enforcement jurisdiction under §78dd-3 of the FCPA.

An important effect of the entry into force of the OECD Convention was that it provided “cover” for expansive US enforcement of the FCPA. Equally important, though, was the contribution it made in providing the legal means by which the US Department of Justice was actually able to undertake this expansion. Broader enforcement has helped to push standards for anti-bribery enforcement into convergence around the world, and has encouraged other countries to start enforcing their own laws more seriously.

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