Guest Post: The Impact of Foreign Anti-Bribery Laws on the Demand-Side Countries

Francesco De Simone, an Advisor at the U4 Anti-Corruption Resource Centre, contributes the following guest post:

What are the consequences of “supply side” foreign bribery laws, like the US Foreign Corrupt Practices Act (FCPA) and UK Bribery Act (UKBA), on the developing countries that are often the bribe receivers in foreign bribery cases (the “demand side”)? When can OECD country (say, the United States) prosecutes a company for paying a bribe in a developing country (say Nigeria), what are the implications for Nigeria – for its institutions and for its overall corruption environment and anti-corruption framework? How does the investigation or prosecution affect Nigeria’s ability to investigate prosecute the same case? What are the consequences if the U.S. case is settled? How can Nigeria obtain restitution of the proceeds of the bribe? And should it?

Although foreign anti-bribery laws like the FCPA have attracted a great deal of analysis and discussion (including on this blog: see here, hereherehere, and here), there is much less material on those sorts of questions. (An exception is the work by Professor Kevin Davis, see here and here, also discussed on this blog.) In a new U4 paper I co-wrote with Bruce Zagaris, we attempt to provide a more in-depth analysis of how supply-side enforcement of foreign anti-bribery laws by OECD countries affects parallel investigation and enforcement action in the demand-side country whose officials allegedly took the bribes. Unfortunately, reliable information on how many supply-side enforcement actions result in parallel investigations by the demand-side host countries is not currently available (so far as we know), but we were able to extract a great deal of useful information from FCPA and UKBA cases, as well as other recent studies like the Stolen Asset Recovery Initiative (StAR) Left Out of the Bargain report.

The main takeaways from our study can be summarized as follows: Continue reading

Should FCPA Enforcers Focus on Corruption in the Poorest Countries?

A few months ago, the Wall Street Journal published an interview with Charles Duross, the current Morrison & Foerster partner who up until last February led the U.S. Justice Department’s Foreign Corrupt Practices Act Unit. Among the interview’s most interesting revelations was Duross’s description of how he set enforcement priorities. When asked about likely future priorities Duross provided this response:

To be clear we do prioritize cases, based on the significance of the case. For example how big are the bribes? Are we talking about $100 million or $100? But in terms of saying “I have decided what we’re going to do is look at X industry or everybody that’s going to be dealing with this country or this region, and we’re going to scrub those folks in particular,” I don’t think we do that.

Although Duross may well be correct that DOJ doesn’t target particular countries or regions, there is some evidence that FCPA enforcement does disproportionately involve particular kinds of countries–in particular, poorer countries and countries with poorer governance. A working paper by Stephen Choi and Kevin Davis (which Matthew also discussed in a recent post) found that “aggregate total monetary sanctions related to a particular violation country, controlling for the overall bribe level in that country, is greater for countries with a lower GNI [gross national income] per capita, as well as weaker government effectiveness and rule of law scores.” What to make of this? Is it true that companies are penalized more heavily (controlling for the size of the bribe) when they pay bribes in poorer countries with less effective legal systems? If so, is this desirable?

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Do Companies Benefit from Self-Disclosing FCPA Violations?

At last Month’s Chatham House conference on Combating Global Corruption, much of the discussion focused on how to create incentives for corporations to uncover and voluntarily disclose violations of foreign anti-bribery laws like the U.S. Foreign Corrupt Practices Act (FCPA). This is important, because as I noted in last week’s post, most FCPA violations are revealed because of self-disclosures, rather than government or media investigation. During the conversation, a distinguished lawyer (whom I cannot identify by name, because of the Chatham House Rule) made the following argument: Although the U.S. Department of Justice claims to give corporations credit for self-disclosure of FCPA violations, “a careful examination of the evidence reveals” that self-disclosure does not result (on average) in any reduction in penalties.

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