For years I have argued that unilateral (or nearly unilateral) anti-bribery enforcement will make bribery levels in developing countries go up.
Others have said they will go down.
Turns out we were both right.
In a deterrence approach to punishment, we investigate as many companies as we can, penalize them, and publicize the settlements.
We increase the disincentives to bribe. And we think that if we do this vigorously, rates of bribery will go down; the more vigorously we enforce, the further we’ll drive down bribery rates.
That is certainly true among companies subject to our jurisdiction. But I don’t think that’s our only goal.
I think we should aspire to more: to actually reduce bribery in foreign countries. And I think that those who drafted and testified in defense of the FCPA thought the same.
So what happens in these developing countries when we dramatically increase the disincentives of our corporations, but cannot create disincentives for companies beyond our jurisdiction?
To answer that question I put together a simple model, built on assumptions that mirror reality pretty closely.
I assume that bribery is prevalent in developing countries; that some foreign corporations are subject to meaningfully enforced anti-bribery laws and some are not; that the enforcing countries will gradually ramp-up enforcement over time, while the non-enforcing countries do very little; that developing countries need foreign direct investment, and if they cannot get it from one source, will get it from another.
And I assume that multinational corporations from countries that enforce anti-bribery laws bribe less than companies from countries that do not enforce such laws.
In these circumstances, what will eventually happen to overall rates of bribery in developing countries? And what does that mean for our goal — a righteous one – of reducing bribery in the world?
The answers actually surprised me. They may surprise you. We’ll go there next.
Andy Spalding is a senior editor of the FCPA Blog. He is an Assistant Professor at the University of Richmond School of Law.