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