Using Foreign Relations Law to Limit Extraterritorial Application of the Foreign Corrupt Practices Act
Ross, Lauren Ann, Duke Law Journal
Because the Foreign Corrupt Practices Act (FCPA) can be used to regulate conduct that has but a tangential connection to the United States, the statute exemplifies the potential difficulties of applying U.S. criminal law extraterritorially. The FCPA's heightened enforcement environment and the norm of deferred-prosecution agreements that settle FCPA charges out of court combine to increase the probability that a foreign individual or firm will be prosecuted under the FCPA for bribery that occurred in and affected a foreign country. This Note proposes drawing from the presumption against extraterritoriality, a concept from foreign relations law, to find a reasonable limit to the territorial provision of the FCPA, which applies to foreign individuals and foreign companies that are not listed as issuers in the United States.
JGC Corporation (JGC), a construction and engineering firm headquartered in Japan, entered into a deferred-prosecution agreement with the United States Department of Justice (DO J) on April 6, 2011. (1) As part of the agreement, JGC agreed to pay a fine of more than $200 million and to waive certain rights as a criminal defendant in the United States in exchange for a deferred-prosecution agreement that would most likely lead to nonprosecution. (2) The proceedings in the Southern District of Texas stemmed from an alleged violation of U.S. law that began in Europe and occurred in Nigeria. (3) The U.S. law at issue was the Foreign Corrupt Practices Act (FCPA), (4) which criminalizes bribery of foreign officials for commercial gain.
In the affair, JGC and three joint-venture partners used European and Asian agents to pay bribes to obtain construction contracts for a project in Nigeria (the Bonny Island Project). (5) One of the joint-venture partners, Kellogg, Brown & Root, Inc. (KBR), corresponded regarding the Bonny Island Project through facsimiles and e-mails from its Houston, Texas, headquarters, (6) and funds were electronically routed through New York when agents wired money from Dutch to Swiss bank accounts. (7) Once the Bonny Island Project bribery came to light, the DOJ initiated investigations of all of the joint-venture partners and involved individuals. (8) JGC initially refused to cooperate because it felt that the United States lacked jurisdiction, (9) but the Japanese company later acquiesced and signed the offered agreement. (10) Each entity that was implicated eventually signed a deferred-prosecution or plea agreement with the government; (11) in total, the DOJ collected more than $1.5 billion in fines from the companies that participated in the Bonny Island Project bribery. (12)
How was a Japanese company haled into court in Texas for conduct--bribing foreign officials to obtain business--that was initiated in Europe, the effects of which were felt in Africa, and that had only a tangential connection to the United States? The DOJ relied on a combination of two U.S. connections to establish U.S. jurisdiction: (1) that JGC possessed vicarious liability through agency relationships with an American joint-venture partner, (13) and (2) that wire transfers through New York banks served as a territorial act in furtherance of the crime. (14) To understand the potential significance of these connections, it is necessary to understand the FCPA's structure. (15) The FCPA's antibribery provisions (16) apply to three classes of persons: 15 U.S.C. [section] 78dd-1 applies to issuers of securities on U.S. exchanges; (17) [section] 78dd-2 applies to domestic concerns; (18) and [section] 78dd-3 applies to all other persons or entities when acting within the United States. (19) Each section also provides for vicarious liability for companies whose agents or employees violate the provision. (20) Because JGC was neither an issuer (21) nor a domestic concern, (22) it was subject only to [section] 78dd-3--which provides for jurisdiction over acts that occur within the United States, that is, territorial jurisdiction (23)--as well as the FCPA's vicarious-liability provisions. …