A broad and bipartisan coalition of leaders worked together to develop and pass FEPA, and the law serves as the first expansion of US bribery and anti-corruption law in nearly 50 years.
The Act makes it a crime for a foreign official to demand or accept a bribe from an American or American company, or from any person while in the territory of the United States, in connection with obtaining or retaining business.
“Foreign official” is defined any employee of a foreign government or any current or former senior official of a foreign government’s executive, legislative, judicial, or military branches or any immediate family member or close associate of that person.
This has been a much-lamented gap in the FCPA, making that law one that just focuses on the “supply side” and not the “demand side” of foreign bribery.
FEPA was approved as part of the annual defense spending bill, known as the National Defense Authorization Act, or NDAA, passed by Congress the same day.
Culpable persons “will be fined not more than $250,000 or three times the monetary equivalent of the thing of value, imprisoned for not more than 15 years, or both,” the law states.
Foreign Corrupt Practices Act
Current US law under the Foreign Corrupt Practices Act (FCPA) makes it a crime for an American or American company to offer a bribe to a foreign official – but it does nothing to punish a foreign official who demands or accepts such a bribe.
This has been a much-lamented gap in the FCPA, making that law one that just focuses on the “supply side” and not the “demand side” of foreign bribery since only the bribe payer, but not the bribe receiver, can be convicted for violating its antibribery provisions.
The DOJ has responded to this limitation in the FCPA, in part, by using other statutes to prosecute the demand side of foreign bribery, such as the Money Laundering Control Act. (Mail and wire fraud laws in the US are limited in the same way as the FCPA and have not been helpful to go after bribe seekers.)
The domestic bribery laws of other nations have been rather ineffective in combating the demand side of foreign bribery.
In limiting the FCPA to bribe payers, Congress considered the “inherent jurisdictional, enforcement, and diplomatic difficulties” raised by the application of the FCPA to non-citizens of the US and the fact that many foreign nations already prohibit the receipt of a bribe by an official. The congressional intent is referred to in a case called United States v. Castle in which the Department of Justice unsuccessfully tried to prosecute two Canadian officials who allegedly accepted bribes from executives at a US-based bus company in exchange for a municipal bus contract.
Over the years, however, the domestic bribery laws of other nations have been rather ineffective in combating the demand side of foreign bribery. In a 2018 study, the Organization for Economic Cooperation and Development’s Working Group on Bribery found that only one-fifth of surveyed supply-side foreign bribery prosecutions were accompanied by a domestic sanction on the demand side.
Critics of the FCPA have pointed out that while corrupt officials face little threat of prosecution by their home governments or the US government, US companies face serious criminal liability for their involvement in such schemes, leading to an unjust outcome. Plus, it does nothing to stop bribery at its source, since demands and expectations for bribes thereby go unchecked.
FCPA versus FEPA
FEPA amends the current federal domestic bribery statute, Title 18 of the US Code, Section 201, rather than in any way adding to or changing the FCPA.
Although their definitions are similar, there are some important distinctions. One important one is that FEPA uses a broader definition for “foreign official,” so it includes not only persons acting in official capacities on behalf of a government, department, agency, instrumentality or public international organization but also persons acting in unofficial capacities for such entities.
FEPA also expressly includes senior executives of foreign government-owned commercial enterprises within the definition of foreign official.
“People living in more than 120 countries face serious corruption problems, according to Transparency International’s annual Corruption Perceptions Index.”
Transparency International
The FCPA and FEPA both include employees of instrumentalities of foreign governments within their definition of foreign official without specifically defining the term “instrumentality.” A still-valid case decision from 2014, United States v. Esquenazi, says under certain circumstances, a state-owned enterprise can be considered an instrumentality.
Supporting Senators
Key sponsor of the legislation, Senator Sheldon Whitehouse (D-RI), shared his excitement on “X” (formerly Twitter) saying: “My bipartisan, bicameral Foreign Extortion Prevention Act passed in this year’s NDAA! This legislation defends the rule of law and sends a clear message that demanding a bribe from American companies will not be tolerated.”
In addition to Whitehouse, the other senators that had lent their staff and support to draft the bill were Thom Tillis (R-NC), Richard Blumenthal (D-CT), John Kennedy (R-LA), and Reps. Sheila Jackson Lee (D-TX), Joe Wilson (R-SC), Steve Cohen (D-TN), Brian Fitzpatrick (R-PA), William Keating (D-MA), John Curtis (R-UT), Dean Phillips (D-MN), and Maria Salazar (R-FL).
Transparency International (TI) issued a statement saying: “People living in more than 120 countries face serious corruption problems, according to Transparency International’s annual Corruption Perceptions Index. Many are governed by kleptocracies where corrupt officials routinely steal resources from their citizens with impunity.
FEPA has the potential to disrupt these dynamics by empowering the US Government to criminally prosecute any foreign official who demands or accepts a bribe from any American or American company, anywhere in the world,” TI said.
GRIP comment
The law will need to take some more shape in the form of prosecutions and court interpretations before a lot can be said about it in practice. One question for the Justice Department is whether its Criminal Division’s Corporate Enforcement Policy’s cooperation credit regime applies equally to FEPA as it does to the FCPA, and what differences and expectations might lie therein.
And, politically speaking, it will also be interesting to see how this plays out in the real world. If someone like Xi Jinping in the People’s Republic of China or one of his trusted deputies was targeted it would court disfavor with an essential trading partner who has immense control over business operations in his nation across industry sectors.
And will the US truly pursue a foreign official whose nation is engaged in war, suffering some other catastrophe, or generally plagued by poverty? Are there going to be nuances to FEPA’s application in reality, which could undermine its core principles?
Regardless, any new law means policies, procedures and internal controls need to be reevaluated. Trainings need to be updated. Regulatory technology will need to be recalibrated.
And the care taken to select and oversee third parties transacting business in far-off places cannot be under-appreciated – this third-party liability potential is always pertinent in bribery contexts. It is also imminently relevant to vendor contracts and employment-based agreements for services in which foreign official involvement is likely, so it is best to reexamine these with counsel promptly.
The FCPA remains a considerably active arena of enforcement activity for the Justice Department as evidenced by Freepoint Commodities LLC agreeing on Thursday (the same day FEPA was announced) to pay over $98m to resolve an investigation stemming from the company’s involvement in a scheme to bribe Brazilian government officials. The Justice Department separately charged three individuals in relation to Freepoint’s bribery scheme
The commodities trading company also agreed to disgorge more than $7.6m to the Commodity Futures Trading Commission in a related matter.