On November 10, 1998, President Clinton signed the International Anti-Bribery and Fair Competition Act of 1998. Pub. L. No. 105-366, 112 Stat. 3302, Nov. 10, 1998. The Act implements the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions by amending the Foreign Corrupt Practices Act (FCPA).
Enacted in 1977, the FCPA generally prohibits U.S. nationals and U.S. corporations from making payments to foreign officials for the purpose of obtaining or retaining business. Because the 1998 amendments expand the scope of the FCPA, companies will need to revisit their policies to ensure compliance with the new provisions of the Act. Significantly, the new provisions empower the Department of Justice to subpoena witnesses and documents in the course of certain civil investigations. Other important amendments to the FCPA are summarized below.
Prohibition on Securing any Improper Advantage
The FCPA originally prohibited payments to foreign officials for purposes of:
- influencing a foreign official's acts or decisions; or
- inducing a foreign official to act in violation of a lawful duty in order to obtain or retain business.
The 1998 amendments added a prohibition against payments made to secure .any improper advantage. that will assist in obtaining or retaining business. The effect of this particular amendment is unclear since the term "improper advantage" is not defined. The Department of Justice (DOJ), for one, apparently considers the change ministerial. According to DOJ, the FCPA already reached this type of conduct. Curiously, Congress does not appear to have fully complied with the Convention's intent.
Article I of the OECD Convention requires signatories to criminalize payments made to foreign officials "to obtain or retain business or other improper advantage". However, the 1998 amendments do not expand the FCPA to prohibit payments made for the purpose of "securing any improper advantage" in addition to those made to "obtain or retain business". Instead, the amendments condition liability for payments made to "secur[e] any improper advantage" on whether such improper advantages were secured to assist in obtaining or retaining business. In other words, the amendments do not make "securing any improper advantage" an alternative to "obtaining or retaining business" as an element of the offense.
Application to all U.S. Persons
Prior to 1998, U.S. nationals or companies were not subject to FCPA liability unless they corruptly used the mails or any means of interstate commerce in furtherance of a prohibited payment. The 1998 amendments expand the jurisdictional reach of the statute. Now, U.S. nationals or U.S. companies that do any act outside the U.S. in furtherance of an improper payment, regardless of the method of doing so, will be subject to the Act.
Extension to Foreign Nationals in the United States
Until now, the FCPA has essentially applied only to U.S. companies, foreign employees or agents of U.S. companies, and U.S. nationals. The 1998 amendments, however, extend FCPA liability to foreign nationals and foreign businesses that, while in U.S. territory, do any act in furtherance of a prohibited payment. Foreign businesses, including foreign subsidiaries of U.S. companies, must now ensure that employees acting within the United States adhere to the FCPA.
Application of Penalty Provisions to Foreign Nationals
The 1998 amendments are an attempt to eliminate what Senate Report 105-277 called the current disparity in treatment between U.S. businesses, American employees or agents, and U.S. businesses foreign employees or agents. Under the prior version of the statute, the FCPA imposed only civil liability upon non-U.S. employees or agents of U.S. companies. Now, foreigners employed by, or acting as agents of, U.S. businesses will be subject to criminal sanctions for violations of the Act. Those sanctions include a $100,000 fine and/or imprisonment for five years for natural persons. Foreign businesses may be fined up to $2,000,000.
Expansion of the Act to Include Improper Payments to Officials of Public International Organizations
The FCPA forbids covered persons from making payments to "foreign officials" for the purpose of obtaining or retaining business. In accordance with the OECD Convention, the 1998 amendments expand the definition of "foreign officials" to include officers or employees of "public international organizations". The amendments:
- authorize the President to designate public international organizations specifically for purposes of the Act; and
- incorporate public international organizations previously designated by the President under a different statute.
As a result of this reference to another statute, the list of designated public international organizations includes, among others, the United Nations, the International Committee of the Red Cross, various international development banks, and the World Health Organization.
The 1998 amendments expanded provisions of the FCPA in both the persons covered and the activities prohibited. While initially, embracing these bribery standards may initially reduce competitiveness, over time has more countries adopt the OECD standards the competitve disadvantage will disappear.