I'm dubious that THE Foreign Corrupt Practices Act, as it stands on the books today, is a particularly wise statute. Among the many cogent criticisms that have been lodged against the FCPA are the following:
- It seems clear that Congress intended to exempt so-called facilitation payments (such a slipping a few bucks to a customs official to keep your shipment of perishable products from rotting in the sun on a loading dock, but the current law is unclear and unworkable, which has allowed the DoJ to start cracking down on such payments.
- The definition of who constitutes a foreign official is unclear and unworkable. Parties thus are unsure whether paying, e.g., an agent of a state-owned corporation is a violation.
- The penalties are unduly harsh relative to the harms associated with the conduct.
- Vague rules coupled with high penalties encourage firms to settle cases that lack real merit.
- The government claims that voluntary disclosure of an internal investigation will lead to lower sanctions, but many commentators believe that the government in fact does not mitigate sanctions in response to voluntary disclosure.
- US corporations (and foreign issuers subject to US jurisdiction) face a more vigorously enforced statute with higher penalties than do firms based in some of our major global competitors, which puts our firms at a competitive disadvantage.
- Imposition of US business ethics on officials of foreign countries represent neo-colonial insensitivity to cultural values and an intrusion on foreign nation's sovereignty.
- The FCPA has been far more successful at chilling legitimate conduct than deterring intentional misconduct. As a result, honest firms are burdened, while dishonest ones go free.
Having said all that, however, I believe that there is a case to be made for A FCPA. As the OECD has observed in connection with its anti-bribery convention:
Bribes to high-level officials for government contracts, such as for defence contracts, infrastructure projects, and oil and gas concessions, can result in the plundering of national assets, and endemic “confusion” between private and public funds in some developing and transition economies.
Foreign bribery distorts international competitive conditions and denies companies the ideal “level playing field” on which to do business. The OECD is leading global efforts to level this playing field for international business by fighting to eliminate bribery of foreign public officials from the competition for contracts and investment.
Corruption in awarding business contracts exacts social, political, environmental and economic costs that no country can afford. If public officials take bribes when awarding contracts to foreign businesses for public services such as roads, water or electricity, serious consequences result: prices are inflated, allocation of resources is distorted, foreign investment becomes less appealing, and competition is undermined. The effects on investment, growth and development are devastating.
As Elizabeth Spahn has demonstrated, moreover, bribery is not a victimless crime (41 GEOJIL 861):
Modern economic research reveals that while bribery may facilitate an isolated transaction, when examined over a longer timeframe bribery provides market incentives to increase regulations. Bilateral monopolies of insiders (business and government), misnamed crony ‘capitalism,’ use their relationships to restrict market access and harass competitors, reducing actual market-based competition. ‘Friendly’ regulatory environments, reducing regulatory burdens for bribe-paying insiders, erode safety regulations and distract business from tending to safety and quality control, focusing business efforts instead on developing relationships with powerful officials. The longer timeframe reveals an eco-cycle of regulations, bribery and deteriorating safety/quality control.
As a business transaction from the micro-economic viewpoint, bribery is a high-risk business model. [She] provides specific examples of various risk-points in a bribe-transaction, including unreliability of corrupted partners and intermediaries, difficulties establishing fair prices for bribes, and very risky exit strategies. Where entire cultures tolerating bribery arise, modern scholarship reveals opportunistic penetration by transnational organized criminal syndicates.
It strikes me that the solution is a multi-national treaty among the members of the OECD and G-20, in which a workable set of global rules are developed to ensure that all firms compete on a level playing field. In addition to harmonized rules, you'd need some sort of mechanism for sanctioning countries that fail to achieve some agreed level of enforcement efforts.
