The FCPA was enacted on December 20, 1977, in the backdrop of the Watergate scandaland remained a paper statute largely until the late 90s and early 2000s. The law prohibits US companies as well as any issuer of US securities, from paying bribes to foreign officials anywhere in the world to obtain or retain business. Aside from its cold start, the dual enforcement by the US Department of Justice (DOJ) and the Securities and Exchange Commission (SEC), has resulted in several hundred corporate and individual enforcement actions, over 250 FCPA settlementswhich have collectively resulted in billions of dollars of fines and penalties being imposed.
The DOJ and SEC have published guidance on what is expected of US companies and multinational companies that have securities listed on US stock exchanges, and it would be virtually impossible today to enter a contract with a multinational company that would not have representations, warranties or covenants surrounding FCPA compliance. Entities were expected to have a compliance program to prevent bribery, undertake diligence before selecting business partners, ensure accurate books and records, investigate allegations and self-report if they wanted to seek cooperation credit when facing a government investigation.Both Democrat and Republic administrations were largely consistent in their enforcement efforts. The peak would of course be President Obama’s Attorney General – Eric Holder’s remarks thatcorruption is “one of the great struggles of our time” signalling their enforcement priorities. Even President Trump who has remarked that the FCPA is a “ridiculous,” and “horrible law”had close to 35 actions being brought in the first year alone of his first administration.
The US government’s enforcement approach coupled with substantial and existential fines significantly shaped the global fight against corruption. Lest we forget, until the turn of the millennium European businesses could seek tax deductions against bribes paid to foreign government officials, and most enforcement bodies even in so called developed countries barely had and still don’t have budgets or the political will to prosecute sophisticated cases of corruption.
This approach was in stark contrast to the enforcement resources that the US deployed and hence if I may daresay FCPA enforcement has undeniably done more than all international conventions and domestic laws prohibiting bribery and corruption put together have to alter corporate behaviour, build coalitions for good governance and start conversations on the possibility of conducting ethical business in countries where this was not a priority; including at times by shaming foreign governments to act because the US was investigating issues in their jurisdiction. FCPA enforcement of course was not without valid criticism and several professionals and academics like me have consistently called out the significant and irresponsible prosecutorial overreach. Very few cases actually underwent judicial scrutiny and hence were not concluded “beyond reasonable doubt”, which is the common law standard of conviction. The DOJ and SEC for most part became judge, jury and executioner and often placed ridiculous demands on those being investigated including asking them to breach their national laws on matters of data privacy and self-incrimination, all under the garb of being granted fabled “cooperation credit” (which remained a shifting goal post).
Non US companies received much harsher treatment than US companies, and there is sufficient empirical and anecdotal evidence to suggest this was not an equally enforced law, which leaves one perplexed at the executive order’s references to “American competitiveness”. Then and now, “American competitiveness” remains a driving factor and I would not be surprised that the new FCPA regime will continue to have differing standards for US companies versus foreign companies, even if not in letter but spirit.
The casualty of the executive order, the pause in FCPA enforcement and the likely new regime — will be to take away the biggest stick in the global fight against corruption. Bribery and corruption practices that the White House has labelled as “common among international competitors”while common would still be a crime and prohibited under the laws of over 191 countries, including India. It cannot be anybody’s case that corruption is good nor can a clarion call to violate foreign laws with the objective of increasing “competitiveness” be an end that justifies the means, especially when the journey to such end involves undermining fairness and government institutions.
Nations act in self-interest and prosecutorial priorities are a sovereign function, hence there is no cause to lament or pass moral judgment on President Trump’s executive order. Nation states must do more to fight bribery and corruption themselves, and it never ought to have been the sole prerogative of the US nor was the FCPA designed to achieve that goal. Several countries enjoyed the benefits of US enforcement actions while abdicating their own sovereign responsibilities to combat corruption, and to that extent US heartburn is entirely justified. The FCPA’s contribution was at best a by-product and a rather telling indictment of how little countries have done, that a US law with contextually limited enforcement left such an oversized imprint.
The executive order leaves an equally large vacuum which the new world order and leaders like India must strive to fill, not just by substantive law but through timebound enforcement, prosecution budgets and political will. At least that’s what hope and idealism dictate of us, even if historical actions do not.
—The author, Sherbir Panag, is one of India’s leading white collar crimes and corporate governance lawyers, who has been at the forefront of a multitude of cases involving the US FCPA and other global and Indian anti-bribery laws. The views are personal.
First Published: Feb 12, 2025 11:29 am IS
