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It’s good news to many that the government is seriously considering overhaul of the Foreign Corrupt Practices Act. On Friday, a senior Justice Department official confirmed to the media that the DOJ is setting up meetings with the U.S. Chamber of Commerce to prepare new guidance on enforcing the law. Among the new changes sought is a better definition of who or what constitutes a “foreign official” under the act. The U.S. Chamber of Commerce has long been arguing that companies which form compliance programs cannot be held accountable for acts of rogue employees committed on foreign soil.
So, why is this good news and how does it matter?
Obviously, the answer to why U.S. business in foreign countries has lost the competitive edge, and how the situation has led to the huge trillion dollar trade deficit, cannot be attributed to any single set of reasons, but most of the drag can be laid down at the feet of two acts – The Alien Torts Act, and the Foreign Corrupt Practices Act.
Diligently trying to follow the rule of law laid down by these two acts have severely handicapped U.S. business in foreign markets, as other international competitors in the same markets are not handicapped by similar laws from their home countries.
The Alien Torts Act allows an alien from any country to sue a U.S. business in U.S. courts for acts committed outside U.S.
The Foreign Corrupt Practices Act allows an alien from any country to sue U.S. business in U.S. courts for acts or attempts of bribery committed elsewhere outside U.S.
Combined, these two acts stop U.S. business from having a level playing field abroad, where competitors from other countries are not constrained by similar fears of being tried back home for their acts in a foreign market – unless such acts were against the interests of their own nations.
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While businesses from nation X can with impunity bribe and bag contracts in nation Y, U.S. businesses present in the same market and with better goods and prices are precluded from winning the contract by constraints of laws imposed back home.
The U.S. Chamber of Commerce have long been criticizing the anti-bribery law as a drag on the economy, and quite rightly so. Last month, the Chamber along with many other trade groups sent a letter to law enforcement officials at the DOJ asking for a change in the application of the law.
In its recent actions, the U.S. government had increased the application of FCPA penalizing more than 20 companies in 2010 for a total of $1.8 billion.
The issue raised by the businesses is proper. Penalize any business or entity that tries corrupt practices within U.S. (leaving out politicians or there would be few left to lead the country), but why extend the handicaps on our businesses in the international arena?
Lex Loci, or the application of “law of the land” principle in jurisprudence warrants that acts should be tried according to the law of the land where such acts are committed – if U.S. businesses do offensive acts in country Y according to the law of the land of country Y, then they should be tried in country Y according to the laws of that land and not back at home. That is just and logical.
A $1.8 billion state earning in penalties and sanctions hardly justifies the trillions lost by the economy because American business continues to be scared to play the game according to the rules in practice in other countries.
This does not mean we support bribery anywhere, but it does mean that we do support a level playing field. If the country cannot stop others from changing the rules of the game, it’s hardly just to let our players get injured and return home bleeding because mamma said so.
