To understand where the FCPA should go from here, we need to understand where, and how, it began.
We generally think of the FCPA as a response to Watergate, and therefore designed to prevent corporations from participating in public corruption. That story is true, but it is only half the truth. We forget that the FCPA was also a response to a foreign policy crisis, and is endowed with an important foreign policy purpose.
In the early 1970s, at about the same time the Watergate scandal was breaking, we learned that a U.S. defense contractor had bribed a number of foreign officials in Italy, Japan, and the Netherlands. The geopolitical context of the time — particularly the Cold War — would very much shape our response. As the legislative history reflects, we feared that such revelations confirmed the communists’ portrait of the greedy, socially-destructive capitalist. And they did.
We further feared losing our credibility as proponents of liberal democracy and, in turn, losing allies overseas. We believed that a law prohibiting the bribery of overseas officials for business purposes — the first law of its kind in the world — would help build economic and political alliances with developing countries. By encouraging ethical business, we would represent the best of democratic values and, through our example, bring other nations to our side.
The FCPA, then, was an alliance-building instrument. And we believed that the instrument would work only to the extent that we remained engaged with countries in transition. We would promote transparency specifically, and democracy generally, by our ethical business practices in the developing world.
I will argue in my next post that our enforcement regime today is not fully consistent with this fundamental, and defining, policy goal. Rather, mounting empirical data demonstrates that the FCPA now functions in a way that would surprise and disturb many of those who most forcefully advocated for its enactment. The FCPA reform debate should begin by looking at the empirical data, and then asking which reforms might enable the statute to more fully achieve its original purpose. That’s where we’ll go next.
Andy Spalding teaches international business law at the Chicago-Kent College of Law; effective June 1, he’ll be an Assistant Professor at the University of Richmond School of Law. A former Fulbright Senior Research Scholar and lawyer at a major international firm, he has lectured and conducted research on anti-corruption law throughout the developing world. He can be contacted here.
We’re grateful to Professor Spalding for allowing us to serialize ‘Beyond Balance’ in a series of posts.
Beyond Balance I can be viewed here.