Jaemin Lee, Application of U.S. FCPA to Transactions and Interactions between Foreign Corporations － A ‘Two-fold’ Extraterritoriality and Its Implication for International Law, Seoul Law Journal, Vol 61, No. 1 (2020), pp. 425-474.
<Abstract>
Coping with corruption has become a global concern. In particular, bribery of foreign governments’ officials has been found to be causing serious harm to the international community at large. The Foreign Corrupt Practices Act (“FCPA”) of 1977, a U.S. legislation to counter this problem, is being applied robustly in recent years. Anti-Corruption conventions sponsored by the OECD and the UN are also drawing increasing attention in this regard. Close commonalities exist between the FCPA and these international conventions, as the former spearheaded the negotiation and conclusion of these conventions starting from late 1990s. With robust application of the FCPA, attention has been drawn to its broad scope of application, namely treating essentially foreign corporations as U.S. ones by dint of minimal attachment to U.S. market such as registration with the U.S. stock markets and attendant reporting requirements. This exercise of jurisdiction creates a rather typical extraterritorial application situation. Depending upon how one judges the ‘minimal contact’ between foreign corporations and the U.S. market, the legality of the FCPA’s extraterritoriality under international law will be determined. Over the years, attention and controversies surrounding this legislation have continued to increase. A unique feature of the FCPA, which has not received adequate attention though, is its ‘twofold’ or ‘doubled’ extraterritoriality. The act treats a foreign corporation with a certain level of relationship with its government as a foreign government agency. In other words, contact with this ‘government-related’ foreign corporation is the same as contact with the foreign government itself for the purpose of the FCPA. So, the scope of the FCPA is uniquely expansive in that (i) the scope of U.S. corporation has been expanded to include essentially foreign corporations (i.e., conventional extraterritoriality situation), and (ii) the scope of foreign government has also been expanded to include ‘government-related’ foreign corporations. The expansive application thus is twofold and doubled. This structural feature is not found in other conventional extraterritorial legislations and their applications. Controversies and tensions surrounding the FCPA are arguably stemming from this unique feature of the FCPA. Domestic legislations such as the FCPA and related international conventions need to reflect the unique aspects of the twofold application. The scope of ‘foreign government’ should be more carefully and accurately defined. As it currently stands, the term is defined using the criterion developed in other areas of international law such as state responsibility and trade & investment agreements. These norms in other international law, however, serve different purposes. Blind incorporation of such definition into anti-corruption legislations and conventions has arguably caused controversies and concerns. Reconsideration and proper amendment will be needed for a sustainable global anti-bribery and anti-corruption regime.
<Keywords>
Anti-Corruption Legislation, FCPA, OECD Convention on Combatting Bribery, UN Convention Against Corruption, Jurisdiction, Extraterritoriality, State-Owned Enterprises
Jaemin Lee, Application of U.S. FCPA to Transactions and Interactions between Foreign Corporations － A ‘Two-fold’ Extraterritoriality and Its Implication for International Law, Seoul Law Journal, Vol 61, No. 1 (2020), pp. 425-474.
<Abstract>
Coping with corruption has become a global concern. In particular, bribery of foreign governments’ officials has been found to be causing serious harm to the international community at large. The Foreign Corrupt Practices Act (“FCPA”) of 1977, a U.S. legislation to counter this problem, is being applied robustly in recent years. Anti-Corruption conventions sponsored by the OECD and the UN are also drawing increasing attention in this regard. Close commonalities exist between the FCPA and these international conventions, as the former spearheaded the negotiation and conclusion of these conventions starting from late 1990s. With robust application of the FCPA, attention has been drawn to its broad scope of application, namely treating essentially foreign corporations as U.S. ones by dint of minimal attachment to U.S. market such as registration with the U.S. stock markets and attendant reporting requirements. This exercise of jurisdiction creates a rather typical extraterritorial application situation. Depending upon how one judges the ‘minimal contact’ between foreign corporations and the U.S. market, the legality of the FCPA’s extraterritoriality under international law will be determined. Over the years, attention and controversies surrounding this legislation have continued to increase. A unique feature of the FCPA, which has not received adequate attention though, is its ‘twofold’ or ‘doubled’ extraterritoriality. The act treats a foreign corporation with a certain level of relationship with its government as a foreign government agency. In other words, contact with this ‘government-related’ foreign corporation is the same as contact with the foreign government itself for the purpose of the FCPA. So, the scope of the FCPA is uniquely expansive in that (i) the scope of U.S. corporation has been expanded to include essentially foreign corporations (i.e., conventional extraterritoriality situation), and (ii) the scope of foreign government has also been expanded to include ‘government-related’ foreign corporations. The expansive application thus is twofold and doubled. This structural feature is not found in other conventional extraterritorial legislations and their applications. Controversies and tensions surrounding the FCPA are arguably stemming from this unique feature of the FCPA. Domestic legislations such as the FCPA and related international conventions need to reflect the unique aspects of the twofold application. The scope of ‘foreign government’ should be more carefully and accurately defined. As it currently stands, the term is defined using the criterion developed in other areas of international law such as state responsibility and trade & investment agreements. These norms in other international law, however, serve different purposes. Blind incorporation of such definition into anti-corruption legislations and conventions has arguably caused controversies and concerns. Reconsideration and proper amendment will be needed for a sustainable global anti-bribery and anti-corruption regime.
<Keywords>
Anti-Corruption Legislation, FCPA, OECD Convention on Combatting Bribery, UN Convention Against Corruption, Jurisdiction, Extraterritoriality, State-Owned Enterprises