After conducting statistical analysis on Foreign Corrupt Practices Act penalties, it’s clear that foreign firms are paying nearly four times higher FCPA penalties as domestic U.S. firms.
In “The Extraterritorial Application of the Foreign Corrupt Practices Act” I explore the proposition that the U.S. government’s targeting of non-U.S. firms, and the lack of prosecution of their American counterparts, has the effect of giving U.S. companies an unfair competitive edge in the global marketplace. This is a shocking revelation, considering that most claim that the FCPA puts American companies at a competitive disadvantage.
The new research suggests that, to the contrary, it is actually foreign companies that are paying the highest fines to settle FCPA related charges. This represents a recent shift in the trends, whereby the SEC and DOJ are increasingly targeting foreign firms for FCPA violations, illustrated by the FCPA Blog’s top ten list. However, the discrepancy in fines between foreign and domestic firms suggests that the regulating agencies may be straying from the FCPA’s original purpose, which was to restore faith in the American corporation.
I examine several recent case examples to show that the broad application of the FCPA jurisdiction is, in practice, in conflict with certain customary principles of international law. When the SEC or DOJ assert jurisdiction based on a mere e-mail or wire transfer through a correspondent bank account, these acts alone may not be sufficient to meet the territorial nexus test required under international law.
Additionally, given the ease with which the U.S. government can bring charges against a foreign company, coupled with the fact that such charges are usually settled as opposed to litigated, the FCPA looks more like an international anti-corruption business tax, rather than a domestic criminal law with limited extraterritorial applications. I explore in the article the consequences of this new “international business tax” — namely the power of the U.S. federal government to determine who pays the tax, how much they pay, and when they pay are further explored. I also examine certain separation of power issues that come into play when prosecutors are given so much power to force companies into settlement.
The paper was also presented in September at a conference at Yale Law School and was included in the Worth Reading Section of the e-newsletter “War Crimes Prosecution Watch,” which is affiliated with Case Western University School of Law.
Annalisa Leibold currently clerks for the Honorable Judge David Campbell, District Court, Phoenix, AZ. She previously worked on FCPA matters and international arbitration at Hughes, Hubbard, & Reed in Washington, D.C. She’s a graduate of Yale Law School (2011) and received her Bachelors with highest honors in economics and political science from the University of Michigan (2008).