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Harry Cassin
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More Unfortunate Data On The FCPA As Economic Sanction

About three years ago, a young aspiring academic on a research grant overseas suggested on the FCPA Blog that the FCPA was functioning as a kind of economic sanction against developing countries. It was me, and I could never have anticipated how polarizing that thesis would turn out to be; a great many accused me of being an FCPA hater. So I went low-key, choosing to write instead on topics that were less divisive, more likely to help build a consensus on one fundamental point: that this is a very good law, in need of some adjustments.

But I never doubted the thesis. And now, Dow Jones has released a survey providing more empirical evidence that the FCPA is functioning in precisely this way. It should give us all pause.

The theory goes something like this. FCPA enforcement at present (and not inherently), is inducing companies to withdraw from projects in developing countries. In this respect, it’s analogous to an economic sanction — the withdrawal of capital from a developing country in protest of its political conditions. And the problem with enforcing the FCPA this way is the same problem we’ve always seen with sanctions: companies from countries that aren’t enforcing such prohibitions — so-called “black knights” — will step in to fill the capital void, and engage in the very practice we’re trying to stop. The net result: U.S. companies bribe less, but bribery proliferates in developing countries. It’s not a pretty picture, but it needed to be painted simply because so much empirical evidence supports it.

And now we have more. The new Dow Jones survey tells us that about 50% of companies surveyed reported stopping or delaying entrance or expansion into emerging markets because of FCPA risk. Almost the same percentage believe they have lost business overseas to companies that are not subject to bribery prohibitions.

Not good.

This is not the way the FCPA was meant to work. The missile is sideways. The task, then, is to get the missile straightened out. For further discussion on how we originally thought the FCPA would operate, and how we might recapture that purpose in practice today, see my earlier Beyond Balance series.

But for starters, the Morgan Stanley declination is a big step in the right direction. Kudos to the DOJ and SEC. Maybe we’re starting to get this thing straightened out after all.


Andy Spalding is a contributing editor of the FCPA Blog. He 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.



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1 Comment

  1. Do you believe that there should be an international body that drafts and enforces FCPA-like principles?

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