News

Early in his second term, President Donald Trump issued an executive order pausing enforcement of the Foreign Corrupt Practices Act (FCPA) on the grounds that it harms U.S. business and national security interests.

Rachel Brewster, an expert in international economic law who studies anti-corruption, says the FCPA has fostered a more positive global business environment for American companies and, in many cases, has worked to their benefit. 

Nine of the ten largest FCPA enforcement cases involve foreign corporations including European-owned Airbus, a competitor to Boeing, and Germany’s Siemens, which competes with GE and Honeywell, Brewster notes in a forthcoming paper The Rise of Global FCPA Settlements. 

“I think that the FCPA is often maligned because it's seen as this unilateral constraint on American businesses, but that's a misunderstanding of how the FCPA operates,” said Brewster, the Jeffrey and Bettysue Hughes Distinguished Professor of Law and co-director of the Center for International and Comparative Law at Duke Law School.

“The FCPA seeks to promote American competitiveness by applying anti-bribery rules to both domestic and foreign firms. It has effectively become a nearly global enforcement regime for major multinational corporations. I don’t think that most people are aware that non-American companies are within its jurisdiction."

A broad scope and jurisdiction covering most global corporations

Enacted in 1977 and enforced by the Department of Justice and Securities and Exchange Commission, the Foreign Corrupt Practices Act is the main instrument for investigating and prosecuting acts of transnational corporate bribery. It prohibits individuals and firms from offering anything of value to foreign government officials or employees to obtain or retain business, according to the agencies' FCPA Resource Guide.

The FCPA covers not only American concerns but also any foreign company that lists on a U.S. stock exchange, including more than 900 international corporations listed on NASDAQ and more than 400 listed on the New York Stock Exchange, as well as any company engaging in a bribery scheme that touches American territory.

And enforcement has not advantaged foreign companies over domestic ones, Brewster said. While more enforcement actions have been taken against U.S. companies, most of the largest cases have been brought against foreign firms — and they also pay far higher penalties.

A 2019 study found that between 2004 and 2018, foreign firms paid an average of $75 million compared to an average of $21 million for US firms, for a total of $7.8 billion in penalties paid by foreign firms, compared with $3.4 billion paid by U.S. firms.

Large American companies including Boeing and GE pushed for greater global enforcement of the FCPA, Brewster writes in Enforcing the FCPA: International Resonance and Domestic Strategy. After Boeing claimed it was losing contracts to its foreign rivals due to bribery, the U.S. successfully prosecuted British aerospace company BAE and France’s Airbus under the FCPA in the cooperation of the foreign governments involved. In 2010 BAE paid $400 million in criminal fines and in 2020 Airbus paid more than $3.9 billion to settle foreign bribery charges with the U.S., France, and the United Kingdom.

“That's an example where suspending the FCPA would, I think, be a problem for Boeing, because the FCPA has been very effective in regulating its rivals in their desire to bribe,” Brewster said.

And even if the U.S. suspended enforcement of the FCPA altogether, most U.S.-based multinational corporations would still be subject to anti-bribery laws in countries where they do business. The UK’s Bribery Act, for example, covers any company that sells goods to British consumers.  

“Most countries that have multinationals who engage in a lot of international transactions have pretty robust anti-bribery laws,” Brewster said, noting that those laws have been modeled on the FCPA under U.S. leadership. “This is now a very common law to have, and many countries invest significant resources in enforcing them and levy hundreds of millions of dollars in fines on their own corporations for engaging in foreign bribery.”

A force for promoting economic development

An important benefit of robust FCPA enforcement by the U.S. has been the promotion of anti-corruption as a global norm, Brewster said. That helps to combat the corrosive effect of corruption in countries like South Africa, where rampant bribery at electric company Eskom has left it unable to provide stable electricity services, restraining growth and development.

"Corruption is one of the major problems that stops developing countries from experiencing greater economic growth,” Brewster said.

“Suspending the FCPA is not only a concern for American corporations, but it’s a concern for welfare and development in some of the poorest places on the planet. And the U.S. desire to suspend it, I think, sends an unhelpful signal that corruption is just a normal part of the global economy. It ignores the devastating effects of corruption in much of the world.”