On November 10, 1998, President Clinton signed into law the International Anti-Bribery and Fair Competition Act of 1998 (the "Act"). The Act amends the Foreign Corrupt Practices Act ("FCPA") to implement the international Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (the "Convention").
The FCPA prohibits U.S. companies and their employees, directors, officers and agents from paying bribes to foreign government officials, political parties, party officials, political candidates, and intermediaries for the purpose of "obtaining or retaining business" abroad. Since the enactment of the FCPA in 1977, critics have contended that American businesses have faced a competitive disadvantage in the foreign markets since other countries do not have similar prohibitions against foreign bribery.
In an effort to address these criticisms, the 29 members of the Organization for Economic Co-operation and Development plus 5 other countries signed the Convention on December 17, 1997. The Convention requires parties (1) to enact or amend legislation that criminalized bribery of foreign public officials, (2) to punish foreign bribery on a basis comparable to domestic bribery, and (3) to cooperate in the investigation and enforcement of transnational anti-bribery laws.
Specifically, the Convention makes it a criminal offense "for any person intentionally to offer, promise or give any undue pecuniary or other advantage, whether directly or through intermediaries, to a foreign public official, for that official or for a third party, in order that the official act or refrain from acting in relation to the performance of the official duties, in order to obtain or retain business or other improper advantage in the conduct of international business." In addition, the Convention directs all parties to assert jurisdiction broadly based on nationality. All 34 nations agreed to seek approval of the Convention and enact implementing legislation by the end of 1998. The United States is the first Convention signatory to approve and ratify the Convention and pass the required implementing legislation.
The Act makes the following changes to the FCPA:
1. Expansion of the FCPA’s scope.
a. Prior to the Act, the FCPA only prohibited payments made to influence or induce a foreign official to do or omit to do any act "in order to obtain or retain business." In addition to acts to influence or induce, the FCPA now prohibits any payments made to secure "any improper advantage." Given this broader language, the FCPA now applies to a greater range of activities.
b. Prior to the Act, the FCPA applied only to U.S. persons or entities, foreign persons with their principal place of business in the U.S. (referred to as "domestic concerns" in the Act) and issuers of publicly traded securities. The FCPA’s prohibitions are now imposed on all foreign persons who commit an act in furtherance of a foreign bribe while in the territory of the United States.
c. The FCPA’s definition of "foreign officials" has been broadened to include foreign officials of public international organizations.
2. Expansion of the FCPA’s extraterritorial jurisdiction. Prior to the Act, the U.S. government was required to show that a person used the mails or means or instrumentalities of U.S. interstate commerce to perpetuate a bribe in order to invoke the jurisdiction of the FCPA for acts performed outside the United States (extraterritorial jurisdiction). The FCPA, as amended by the Act, eliminates this requirement and creates an alternative basis to establish extraterritorial jurisdiction. Now, extraterritorial jurisdiction can be established by the mere fact that a person is a national of the United States or a business entity organized under the laws of the United States or any State, territory, possession, or commonwealth of the United States.
3. Elimination of the current disparity in penalties applicable to U.S. nationals and foreign nationals employed by or acting as agents of U.S. companies. Prior to the Act, the FCPA provided only civil penalties against foreign nationals serving as employees or agents of a U.S. company while imposing both civil and criminal penalties on U.S. citizen employees and agents. As amended, the FCPA now subjects all employees or agents of U.S. companies to both civil and criminal penalties regardless of nationality. Civil penalties include a fine of up to $10,000 while criminal sanctions include a fine of up to $100,000 or imprisonment of up to 5 years, or both.
Given the expanded scope of the FCPA, U.S. businesses should review and amend their FCPA policy statements. Businesses that require employees to sign statements acknowledging familiarity with the Act should have those employees sign new statements covering the FCPA as amended by the Act. Finally, U.S. companies should stress to their foreign subsidiaries and foreign nationals the expanded coverage of the Act.