BAE: Bribery, Bombs And Black Knights

Photo by Annie MoleIs there a place where anti-corruption policy stops and international politics begins? Andy Spalding — a lawyer and Fulbright scholar who’s a familiar face around here — thinks so. He sent this dispatch from Mumbai, India:

Dear FCPA Blog,

The BAE matter leaves many of us bewildered, struggling to grasp its greater significance. While several FCPA commentators have deemed 2009 “The Year of the Individual,” I wonder if BAE points to another trend that is emerging. . . or rather, re-emerging.  Consider:

1. BAE, Saudi Arabia, and Terrorism. The UK’s anti-bribery enforcement was severely obstructed by seemingly unrelated foreign policy objectives.  Since when, we may ask, did foreign policy impact FCPA enforcement? 

2. Iran and Nuclear Proliferation. Mike Jacobson of the Washington Institute recently suggested that the FCPA might be enforced selectively against companies doing business in Iran, as a form of economic sanctions. I understand that at least some FCPA insiders found Mike’s core idea — selective enforcement of the FCPA to advance foreign policy objectives — not inconceivable.

3. China, Russia, and Political Alliances in the Developing World. Another piece ran earlier this year which demonstrated that as companies subject to the FCPA do less business in heavily bribery-prone countries, the resulting void of foreign capital will be filled by companies from countries that are not enforcing, or have not adopted, anti-bribery laws — so-called “black knights.” Economists predicted that the FCPA specifically would produce this effect, and we are indeed observing it today as China and Russia invest aggressively in Africa, Latin America, Central Asia, and the Middle East without fear of a bribery penalty. This dynamic is likely to significantly alter international politics for many years to come, though the FCPA community seems loathe to admit it.

4. History is Circular: the Forgotten Cold War Origins of the FCPA. Though we generally think of the FCPA as the product of Watergate, legislative history makes all too clear that the FCPA was also conceived, for better or for worse, as a tool of the Cold War — punishing bribery was deemed essential to maintaining capitalism’s credibility and ultimately spreading liberal democracy to politically unstable countries. This was not a partisan idea, advocated by a mere handful of arch-conservatives; to the contrary, both sides of the aisle readily endorsed it, including vociferous, high-profile critics of the Vietnam War such as George Ball. 

With the end of the Cold War, we largely stopped thinking about the FCPA’s foreign policy implications, and were probably happy to do so. But alas, realpolitik has reared its ugly head once again, unlikely to return whence it came. So we’re right back where we started, wrestling with the awkward convergence of anti-bribery laws and international politics. It may not be pleasant, but we should probably get used to it. 

With thanks,
Andy Spalding

 As always, other views are welcome.