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Monday
Mar192012

Beyond Balance VIII: Clean Hands or Constructive Engagement?

 In this series’ previous installment, I argued that our doctrine of holding acquiring companies criminally liable for pre-acquisition conduct was deterring investment in developing countries. But is that really so bad? If diminished M&A activity is the price we pay for principled anti-bribery enforcement, should we not gladly pay it?

The question gets at the heart of the FCPA’s fundamental policies and, in turn, the assumptions that shape our contemporary reform debate. I want to suggest that this debate is ultimately a clash between two distinct paradigms of anti-corruption law: we’ll call them Clean Hands and Constructive Engagement.

The Clean Hands approach seeks to pull away from corrupt sectors or countries; Constructive Engagement wishes to remain there, pushing for corruption reforms. Clean Hands aims for the moral high ground; it seeks to conduct business untainted. Constructive Engagement rolls up its sleeves; it concedes the messiness of worldly work. Clean Hands draws lines between us and them, while Constructive Engagement sees a sliding scale; Clean Hands withdraws from the realm of the corrupt, while Constructive Engagement dives in. The former is rooted in the early American instinct to isolate and protect itself from the debasement of Europe; think Jefferson’s report of a “government of wolves,” and James Monroe’s famous 1823 doctrine. The latter emerges from the 20th-Century vision of a U.S. actively fighting for ideals in the world; think of the then-revolutionary foreign policies of Teddy Roosevelt and Jimmy Carter.

And from which era of history was the FCPA born? Enacted in 1977, it was a central plank of the human rights agenda of President Carter. And the legislative history is replete with images of a U.S. that is actively engaged in foreign affairs, seeking to exemplify and promote our better values. Make no mistake: the FCPA was not motivated by an impulse to isolate ourselves from overseas corruption, of a desire to wash our hands of the world’s governance problems. How could it have been? No one was to blame for Watergate but ourselves.

But this is not just a matter of history; it’s also a matter of policy. Virtually all of us would agree that an anti-bribery regime should aim concern itself with the victims of bribery, and bribery’s true victims are the citizens of developing countries. But if we withdraw, we do the victims no good; indeed, because more aggressive bribe-payors tend to fill the void, we do them much harm.

The Layperson’s Guide to the FCPA (pdf) asserts that “Congress enacted the FCPA to bring a halt to the bribery of foreign officials and to restore public confidence in the integrity of the American business system.” This is true, but it’s only half the truth; it’s Clean Hands thinking. But as I have discussed here and here, the legislative history makes abundantly clear that we enacted the FCPA to promote values and to build alliances with countries in transition. It was rooted in the paradigm of Constructive Engagement; so too should our reforms be.

If engagement is the goal, then the criterion for evaluating a proposed reform is whether it will increase ethical business. We might call it the ethical business criterion. And we should keep this criterion in mind as we venture, next post, into what may be the most hotly contested terrain of the reform debate: the proposed compliance defense.

__________________

Andy Spalding teaches international business law at the Chicago-Kent College of Law; effective June 1, he’ll be an Assistant Professor at the University of Richmond School of Law. A former Fulbright Senior Research Scholar and lawyer at a major international firm, he has lectured and conducted research on anti-corruption law throughout the developing world. He's currently in Beijing, teaching a two-week course on International Business Transactions to a group from the Beijing Lawyers Association. He can be contacted here.

We're grateful to Professor Spalding for allowing us to serialize 'Beyond Balance.'

Beyond Balance I can be viewed here, II here, III here, IV here, V here, VI here, and Beyond Balance VII here.

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