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« The Accounting Standards Make The Shortlist | Main | Jurisdiction Untangled »
Tuesday
Feb052008

FCPA To The World: I Want You

In its early days, the Foreign Corrupt Practices Act of 1977 stirred up a lot of angry talk from Americans because of its extra-territorial reach. Some legal scholars even questioned the constitutionality of a statute that clung to the citizens wherever they went. These days -- in a strange twist -- most of the angry talk about the FCPA is coming not from inside America but from outside.

Putting foreign companies in the cross hairs is bound to cause resentment. The FCPA, after all, is blowing away traditional concepts of borders and sovereignty. Here's a U.S. law, some would say, that's regulating what non-U.S. parties do with other non-U.S. parties when both are outside the United States. That's a tough sell, even in the age of global corporate scandals.

The change started after 1998, the year the FCPA -- in the words of the U.S. attorneys' manual -- was "expanded . . . to assert territorial jurisdiction over foreign companies and nationals." Non-U.S. companies like ABB Ltd, Vetco Gray UK Ltd, Akzo Nobel, NV and Statoil ASA started making the news with their FCPA problems. Today the foreign targets of FCPA investigations include Siemens AG, BAE Systems, Panalpina, Magyar Telekom, AstraZeneca PLC, Smartmatic Corp, Total SA, Norsk Hydro ASA, Novo Nordisk A/S, Schlumberger N.V., Alcatel SA and Petro-Canada -- and the list keeps growing.

The upset the FCPA is causing across the pond is evident in a January story by Michelle Madsen in legalweek.com. She discusses a survey of U.K. general counsels. About a third of them are in denial about the reach of the FCPA, and two thirds just wish it would go away. Here are some excerpts from her story. We should point out that the article itself tries to be a lot more balanced than our selections would suggest. In any case, we think the story is a preview of a coming flood of debate about the application of the FCPA to non-U.S. companies.

-- Peter Kennerley, general counsel at FTSE 100 brewing group Scottish & Newcastle, dismissed the idea that laws such as the FCPA would change the way UK companies operated. "We have a small export business to the US but these acts have not really been brought to our attention," he said. "If you attempted to second-guess every law that the US Government tried to impose on extraterritorial jurisdictions you would never get anything done."

-- O2 general counsel Justine Campbell agreed and said that far-reaching US laws can prove a real obstacle to business. "Laws like this impose a layer of bureaucracy to the process of business,' said Campbell. The laws, which are rigid, prescriptive and often frustrating, are not always relevant."

-- Such trends often spark resentment. One responding corporate counsel said that it was not the US’s place to dictate anti-corruption laws to companies operating out of other jurisdictions and that cross-border anti-corruption legislation should work both ways. "The asymmetry in the US-UK extradition act should be fixed and reciprocity should be the principle in areas like this. We are now seeing these laws being enforced extraterritorially by political and commercial pressure from the US."


View the January 10, 2008 legalweek.com article here.

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