Foreign Corrupt Practices Act Legal Analysis - Antibribery Provisions

Roi Bak, Advocate1

I Introduction 1. The Foreign Corrupt Practices Act2 [“FCPA”] was first enacted in 1977 by the

U.S. Senate, and it is in fact the first recorded attempt of enacting an extraterritorial criminal law which aims to address the phenomenon of bribery among foreign government officials by U.S. originated individuals and entities. This article will analyze the provisions of the FCPA, as well as bring several legislations which address this matter in other jurisdiction or the international level.

II Origins 1. The origins of the FCPA derive from the Watergate scandal, where U.S.

companies held foreign funds overseas for the purpose of contributing to former President, Richard Nixon’s campaign, as well as bribing foreign officials. As was revealed in the report of the Senate’s Committee3: “Recent investigations by the SEC have revealed corrupt foreign payments by over 300 U.S. companies involving hundreds of millions of dollars. These revelations have had severe adverse effects… the image of American democracy abroad has been tarnished. Confidence in the financial integrity of our corporations has been impaired. The efficient functioning of our capital markets has been hampered”.

1 Advocate Roi Bak, a member of the Israel Bar Association and its Foreign Relations Committee - East Asian Countries, holds LL.B. (cum laude) from Bar-ilan University, Israel, and LL.M. (Business Law) from Chulalongkorn University, Bangkok, Thailand (in collaboration with University of British Colombia and University of Victoria - Canada, and the Kyushu University - Japan). Adv. Bak currently advises to an international law firm in Bangkok, Thailand, and acts as the correspondent of the Israel Broadcasting Authority -"Kol-Israel" in the region. He can be reached by e-mail: Rbak77@gmail.com2 Pub. L. No. 95 213, 91 Stat. 1494 (1977), as amended by the Omnibus Trade and Competitiveness Act of 1988, Pub. L. No. 100 418, tit. V, §§ 5001 03, 102 Stat. 1415 (1988), and the International Anti Bribery and Fair Competition Act of 1998, Pub.L. No: 105 366 (1998) (codified as amended at 15 U.S.C. §§ 78m, 78dd-1, 78dd-2, 78dd-3, 78ff). 3 Report No. 95-114 of the Senate’s Committee on Banking, Housing, and Urban Affairs, 95th Congress, 1st Session.

2. The approach chosen by the drafters of the FCPA was the one preferring criminalization of foreign corporate bribery over a disclosure approach (as was proposed by Secretary of the Treasury, Blumenthal)4, since it does not place a reporting burden over the corporations’ shoulders and “less of an enforcement burden on the Government”.

3. The legislators’ stand point was that “a strong antibribery law is urgently needed

to bring these corrupt practices to a halt and to restore public confidence in the integrity of the American business system”5.

III Amendments and International Approach 1. During its almost thirty three years since enacted, the FCPA was amended twice;

in 1988 by the Omnibus Trade and Competitiveness Act of 19886, and in 1998 by the International Anti-Bribery and Fair Competition Act of 19987 [the “1998 Amendment”]. Said amendments were made to address heavy criticism mainly regarding the lack of material standard for accounting compliance, an ambiguous “grease payments” exception, the controversial “reason to know” standard, and the initial unilateral nature of the FCPA8.

2. In this regard, it is noted that the 1998 Amendment was made to adhere with the

principles of the OECD Convention9 of 1997, and so eventually, after years of criticism from U.S. businessmen and corporation of the unilateral nature of the FCPA, which puts them in lower standing point and disadvantage when doing business overseas, and lack of international cooperation, it can be noted that the internationalization of an anti-bribery exterritorial legislation (at least with respect to the public sector), as the FCPA, is prevailing. Some examples of this statement are the above-mentioned OECD Convention, the Criminal Law Convention on Corruption - Council of Europe (both to be further discussed below), the ICC’s

4 Ibid. 5 Ibid. 6 Pub. L. No. 100 418, tit. V, §§ 5001 03, 102 Stat. 1415 (1988). 7 Pub.L. No: 105 366 (1998). 8 See, for example, Judith L. Roberts, “Revision of the Foreign Corrupt Practices Act by the 1988 Omnibus Trade Bill: Will it Reduce the Compliance Burdens and Anticompetitive Impact?” Brigham Young University Law Review, No. 2 (1989), p. 506. 9 Organization for Economic Co-operation and Development Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, DAFFE/IME/BR(97)16/REV [hereinafter, the “OECD Convention”].

rules of Conduct to Combat Extortion and Bribery10, the UN General Assembly’s Declaration against Corruption and Bribery in International Commercial Transactions11, and the United Nations Convention against Corruption12, being a legally binding international anti-corruption instrument, etc.

IV FCPA - Provisions The FCPA, which as shown above, is a pioneering example of an extraterritorial criminal legislation, is basically dealing with two main parts: (i) antibribary provisions; and (ii) accounting provisions. The antibribery and accounting provisions are enforced by the Department of Justice (DOJ) and the Securities and Exchange Commission (SEC) respectively13. 1. Antibribery

1.1. Applicability

1.1.1. The antibribery provisions are applicable to any Issuers, Domestic Concerns (also regarding their forbidden acts outside of the United States) and Covered Persons (while acting in the territory of the United States), as defined under the FCPA or the Securities Exchange Act 193414 [the “SEC Act”]. In simple words, the antirbibery provisions apply to the prohibited acts (also “outside of the United States” per the 1998 Amendment regarding U.S. concerns and issuers - whether or not means or instrumentality of interstate commerce were used) of any U.S. individuals, companies and other juristic persons incorporated in the U.S.A, as well as to foreign or U.S. companies that their shares are traded on a U.S. exchange market or that are required to file reports under the SEC Act (and/or any of such issuers’ officer, director, employee, agent or any stockholder thereof, acting on such companies’ behalves). The last category, which was added in the 1998 Amendment, applies to non-U.S.

10 Combating Extortion and Bribery: ICC Rules of Conduct and Recommendations. http://www.iccwbo.org 11 A/RES/51/191, 86th plenary meeting, 16 December 1996. 12 Resolution 58/4 of 31 October 2003. The Convention came into force on 14 December 2005. 13 For the DOJ, please refer to http://www.justice.gov/criminal/fraud/fcpa; for the SEC, please refer to http://www.sec.gov 14 15 U.S.C. §78m(b)(2)-(5).

individuals, companies and other juristic persons incorporated outside of the U.S.A, “while in the territory of the United States”.

1.2. Principles of offence The FCPA’s antibribery provisions prohibit the applicable persons mentioned-above from:

1.2.1. "Corruptly". 1.2.2. Make an “offer, payment, promise to pay… of any money, or offer,

gift…or authorization of the giving of any thing of value”.

1.2.3. “To any… foreign official” (including a “foreign political party, party official, or candidate”), or to “any person, while knowing that all or a portion of such money or thing of value will be offered, given…directly or indirectly, to any foreign official…” for the purposes mentioned-below.

1.2.4. “For purpose of influencing any act or decision of such foreign

official… in its or his official capacity”, or “inducing such foreign official… to do or omit to do any act in violation of the lawful duty of such foreign official…”, or “securing any improper advantage”, etc.

1.2.5. “In order to assist such” applicable person “in obtaining or retaining

business for or with, or directing business to any person”

1.3. Certain emphasis: Per the above antibribery provisions, further emphasis should be given to the following expressions:

1.3.1. “Anything of Value”

This term is not expressly defined under the FCPA or the explanatory notes prior to its enactment. However, the authorities have used a wide interpretation of this phrase, thus it is not limited to cash or monetary contribution, and can represent other sorts of benefits15. It seems that

15 Ley Person’s guide - http://www.justice.gov/criminal/fraud/fcpa. See also http://www.fcpaenforcement.com/explained/explained.asp.

a subjective criteria will apply to these wordings, hence even minimal contribution can be considered as a prohibited one, if it is considered as valuable in the eyes of its recipient.

1.3.2. “Foreign Official”

This term is defined under the SPA as: “any officer or employee of a foreign government or any department, agency, or instrumentality thereof, or a public international organization, or any person acting in an official capacity for or on behalf of any such…” We can learn from the above definition that a broad interpretation is applicable, and employees of state-owned or controlled entities (“SOE”) which are instrumentality of the foreign government will be also included under the Foreign Official definition; thus, expanding the range of prohibited actions under the FCPA16.

1.3.3. “Obtaining or Retaining Business”

It is important to understand that these wordings were given a wide interpretation as well. It means that the payment of money or anything of value will be prohibited under the FCPA, even if consequently, it did not lead to the obtaining of a certain government approval, contract, etc. The FCPA does not necessarily require that the corrupt act succeed in its purpose. It is the corrupt intent17, i.e., the offer or promise of a corrupt payment to a foreign official (or any person, if it leads to such foreign official), for the inducement or influence for obtaining or retaining business which matters.

In the Kay case18, for example, the appellate court held that the FCPA is applied “broadly to payments intended to assist the payor, either directly or indirectly, in obtaining or retaining business”. When mentioning that “bribes paid to foreign tax officials to secure illegally reduced customs and tax liability constitute a type of payment that can fall within this broad coverage”, the Court in fact ruled that the payment to a foreign official to secure certain custom benefits in a

16 See http://www.fcpaenforcement.com/explained/explained.asp. 17 See footnote no. 12. 18 U.S. V. Kay, et al., 359 F. 3d 738 (5th Cir. 2004).

foreign jurisdiction was improper as per the FCPA’s antibribery provisions, so long as a business-related connection can be established.

1.3.4. Third party payment provisions

According to the FCPA, a U.S. company (for a mere example) cannot hide under the notion that it did business through third parties, as subsidiaries, agents, consultants, etc. due to the broad applicability and interpretation of the “knowledge” component19. The FCPA prohibits making the unlawful payments to “any person, while knowing that all or a portion of such money or thing of value will be offered… to any foreign official” for the prohibited purposes set under the FCPA. The FCPA defines that a person’s state of mind is “knowing” with respect to conduct, a circumstance, or a result if: “such person is aware that such person is engaging in such conduct, that such circumstance exists, or that such result is substantially certain to occur; or such person has a firm belief that such circumstance exists or that such result is substantially certain to occur”.

In this regard, I wish to further emphasize that as of the 1998 Amendment, the alternative nationality test is applicable20. It means that the FCPA applies to such prohibited payments made by U.S. nationals (whether U.S. issuers, corporations, individuals, or otherwise), outside of the U.S.A. “whether or not that United States person makes use of the mails of any means or instrumentality of interstate commerce in furtherance of” said payment. It means that a proof of U.S. territorial bond of such mails or interstate commerce is not required. Furthermore, a wide interpretation may find U.S. companies liable to the FCPA for actions that took place outside of the U.S.A. without the knowledge of the U.S.-based employees. Again, the FCPA prohibits the use of third parties (as subsidiaries, agents, etc.) for the conduct of the prohibited activities in case that the U.S. person, company, etc. knows of the prohibited use of money or thing of value, for the purposes which are restricted under the FCPA. Bear in mind that U.S. parent company may be found liable for the actions

19 See also William M. Hannay and Patricia Brown Holmes, “The Nuts and Bolts of Conducting an FCPA internal Investigation”. http://www.schiffhardin.com/binary/hannay_holmes_pli_050808.pdf 20 See footnote no. 13.

of its foreign subsidiary, when the parent company authorized, directed or controlled the prohibited payment.

1.4. Exceptions and Affirmative Defenses

1.4.1. One Exception: The FCPA allows one exception for the general

prohibition regarding payment (or promise to pay, etc.) in case to “any facilitating or expediting payment to a foreign official… to expedite or to secure the performance of a routine governmental action by a foreign official…” The FCPA continues to clarify that such “routine governmental action” means only an action which is “ordinarily and commonly performed by a foreign official” as part of the following examples: obtaining permits, licenses, or other official documents to qualify a person to do business in a foreign country; processing of visa and work orders; providing police protection, scheduling transit of goods inspections, providing public utilities (phone, water, power), etc. and actions of a similar nature. Pursuant to the FCPA, this action however does not include any decision to award new business or to continue business with a particular party, or any action which is involved in the decision-making process to encourage a decision to award new business or continue business with a particular party.

o It was noted in the committee’s discussions prior to the legislation of

the FCPA21 that “the statue does not, therefore, cover so-called grease payments such as payments for expediting shipments through customs…” and for such reason, the word “corruptly” was used to differentiate between proper and improper payments.

1.4.2. Two Defenses: The FCPA permits two kinds of affirmative defenses,

i.e., (i) the payment, offer (or otherwise) was lawful under the written laws and regulations of the foreign official’s country; or (ii) the payment, offer (or otherwise) made was a reasonable and bona fine expenditure, as travel and lodging expenses incurred by or on behalf of a foreign official, and that such was directly related to the (A) promotion, demonstration, or explanation of products or services; or (B) execution or performance of a contract with a foreign government or agency thereof.

21 See footnote no. 3.

o It is important to understand that since such defenses are “affirmative defenses”, then the defendant in such case must first prove that the so called prohibited payments under the FCPA fall under one of these two defenses, i.e., the defendant bears the burden of proof.

1.5. Penalties

1.5.1. Criminal penalties for juristic person and other entities that violated the

antibribery provisions of the FCPA may be fines of up to US$2,000,000, while natural persons may be subject to fines of up to US$100,00022 or up to 5 years imprisonment, or both. Fines may not be paid by the employers or principles of such natural persons23.

1.5.2. Civil actions against juristic person, other entities as well as natural

persons that violated the antibribery provisions of the FCPA may result in fines of up to US$10,000.

1.5.3. In addition to the criminal and civil liabilities described above, the U.S.

government may stop/not do business with any entity or individual who violated the FCPA. Other actions as delisting, non-issuance of export licenses, etc. may be taken against violators as well.

2. Books, records and internal accounting directives

2.1. The legislators’ intention, when enacting the FCPA, was that “the accounting standards… are intended to operate in tandem with the criminalization provisions of the bill to deter corporate bribery. S. 305 expresses a public policy which encompasses a unified approach”24. It was further noted that “the purpose… is to strengthen the accuracy of the corporate books and records and the reliability of the audit process which constitute the foundations of our system of corporate disclosure… The establishment and maintenance of a system of internal control and accurate books and records are fundamental responsibilities of management. The expected benefits to be derived from conscientious discharge of these responsibilities are of basic importance to investors and the maintenance of the integrity of our capital

22 A fine of up to US$250,000 may be imposed on an individual under 18 U.S.C. § 3571(b). 23 Under the Alternative Fines Act (18 U.S.C. § 3571(d)), fines may be increased up to twice the benefit that the defendant sought to obtain by making the corrupt payment. 24 See footnote no. 3.

market system”25. Lastly, it was agreed that the “issuers records should reflect transactions in conformity with accepted methods of recording economic events and effectively prevent off-the-books slush finds and payment of bribers”26.

2.2. In brief, the FCPA’s accounting provisions apply to issuers only. Such

provisions require: (A) maintaining books, records, and accounts which, in reasonable detail, accurately and fairly reflect transactions and dispositions; (B) a system of internal accounting controls is devised and maintained, to provide reasonable assurance that: (i) transactions are executed according with management’s general or specific authorization; (ii) transactions are recorded as necessary so that financial statements can conform with generally accepted accounting principles or other applicable criteria, and to maintain accountability for assets; (iii) access to assets shall be only according with management’s general or specific authorization; and (iv) recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.

2.3. A person who “knowingly” circumvents or “knowingly” fails to implements a

system of internal accounting controls or “knowingly” falsify any book, record, or account described above, shall be liable under the FCPA.

o The FCPA defines “reasonable assurances” and “reasonable detail” as

levels that would satisfy prudent officials in the conduct of their own affairs.

o It was noted during the legislative process of the FCPA27, that “the

conference committee adopted the “in reasonable detail” qualification to the accurate and fair requirement in light of the concern that such a standard, if unqualified, might connote a degree of exactitude and precision which is unrealistic. The amendment makes clear that the issuer’s records should reflect transactions in conformity with accepted methods of recording economic events and effectively prevent off-the-book slush finds and payments of bribes”.

25 Ibid. 26 House of Representatives; Committee of Conference, Conference Report No. 94-831, 95th Congress, 1st Session, December 6, 1977. 27 Ibid.

o Note that the FCPA also exempts this Accounting provisions in cases of national security of the United States, as prescribed therein.

2.4. The FCPA makes it voluntarily for an issuer to use its influence to cause any

subsidiary which is 50% or less controlled by said issuer (in terms of voting rights) to adhere with the internal accounting controls provisions described above.

2.5. Criminal Penalties:

2.5.1. Penalties for willful violation of the FCPA’s accounting provisions, may reach to a fine of not more than US$5,000,000 or imprisonment of not more than 5 years, or both - for natural persons; and a fine not exceeding US$25,000,000 for juristic person and other entities28. The general enforcement remedies under the SEC Act will apply.

o A person shall not be subject to imprisonment for the violation of any rule

of regulation, if he proves that he had no knowledge of such rule or regulation”.

V Other Jurisdictions and Conventions 1. OECD Convention

1.1. Introduction The U.S. government, pursuant to heavy criticism of American businessmen and multinational concerns regarding their lost of competitive edge in the international business world due to the FCPA, has lead the fight for antibribery exterritorial legislation among other countries. As a result of the negotiation and cooperation among the U.S., NGOs’, developed countries and economies who wishes to put an end to the corruption in the public sector and its devastating consequences, the OECD Convention was drafted. The OECD Convention of 199729 has become the major tool for exterritorial antibribery legislation in the public sector. In fact, the OCED Convention had lead to the 1998 Amendment, as well as new laws and

28 Under the Alternative Fines Act (18 U.S.C. § 3571(d)), fines may be increased up to twice the benefit that the defendant sought to obtain by making the corrupt payment. 29 Adopted by the Negotiating Conference on 21 November, 1997, DAFFE/IME/BR(97)16/REV.

policies among its member states (and other non members who wished to adhere with the Convention’s principles). The OECD Convention aims set measures to “deter, prevent and combat the bribery of foreign public officials in connection with international business transactions, in particular, the prompt criminalization of such bribery”30.

1.2. Criminal Offence- Foreign Public Official

1.2.1. In essence, the OECD Convention makes it a criminal offence for any person to “intentionally…offer, promise or give any undue pecuniary or other advantage, whether directly or through intermediaries, to a foreign public official, for that official or a third party, on order that the official act or refrain from acting in relation to the performance of official duties, in order to obtain or retain business or other improper advantage in the conduct of international business”31. Members are to establish that “complicity, incitement, aiding and abetting, or authorization of an act of bribery of a foreign public official shall be a criminal offence”32.

1.2.2. The OECD also requires the need for legal measures for maintaining

“books and records, financial statement disclosures, and accounting and auditing standards”, to fight such related offences33. This provision however does not set any specific standard or norm in this regard.

1.2.3. Lastly, the OECD Convention defines “foreign public official” as “any

person holding a legislative, administrative or juridical office of a foreign country, whether appointed or elected; any person exercising a public function for a foreign country, including for a public agency or public enterprise; and any official or agent of a public international organization”. “Foreign country” includes “all levels and subdivisions of government, from national to local”. The Convention refers to the bribery of foreign public official, while there is no direct reference or prohibition with respect to “foreign political party or official thereof or any candidate for foreign political office”, as in the FCPA.

30 Preamble of the OECD Convention. 31 Article 1(1). 32 Article 1(2). 33 Article 8.

1.3. Jurisdiction

1.3.1. The OECD Convention asks each Member State to establish its governing antibribery laws also with regard to “bribery of foreign public official when the offence is committed in whole or in part in its territory”34. This provision lead to the 1998 Amendment concerning the improper acts of any person (who is not an issuer or a domestic concern/individual) while “in the Territory of the United States”.

1.3.2. The OECD Convention then prescribes that “each Party which has

jurisdiction to prosecute its nationals for offences committed abroad shall take such measures as may be necessary to establish its jurisdiction to do so in respect of the bribery of a foreign public official, according to the same principles”35.

1.3.3. Each Member States is also asked to “review whether its current basis

for jurisdiction is effective in the right against the bribery of foreign officials and, if it is not, shall take remedial steps”36.

1.3.4. It seems to me that the jurisdiction provision mentioned-above are

ambiguous and not as clear and precise as the FCPA’s “Alternative Jurisdiction” clause, which expressly prohibits the improper activities, when taken (also) “outside the United States”. Another example which demonstrates such softer approach is Article 10(2) of the OECD Convention, which prescribes that a Member State “may” consider using this Convention as the legal basis for extradition in respect to the office of bribery of a foreign public official, in case it must be a member to an extradition treaty.

2. The Corruption of Foreign Public Officials Act 1999 - Canada

2.1. Introduction

Pursuant to Canada’s participation in anti-corruption initiatives, as well as the negotiation in the draft of the OECD Convention, the Corruption of Foreign

34 Article 4(1). 35 Article 4(2). 36 Article 4(4).

Public Officials Act37 [the “Canadian Act”] was introduced (as part of the Bill S-21). The Canadian Act aimed to support the criminalization of any bribery of foreign public officials.

2.2. The Offences

In essence, the Canadian Act prohibits three (3) offences, namely: (i) bribing a foreign public official; (iii) laundering property and proceeds; and (iii) possession of property and proceeds.

2.2.1. Bribing a foreign public official

• This is prohibition is applicable to “every person”, i.e., Canadian or not. A

person may be an individual, a corporation, etc., as per the full meaning of the Canadian Criminal Code referred therein. The offence refers to any prohibited payments made “in order to obtain or retain an advantage in the course of business”38.

• It is important to note that the Canadian Act defines “business” to cover undertakings carried on in Canada or elsewhere for profits; thus it aims to prohibit any such acts, whether conducted overseas or in Canada, regardless of the use of interstate commerce or not, as the FCPA mentions. The Canadian Act refers to a very broad spectrum of prohibitions, and it may have been useful to better clarify this matter, as the FCPA's “Alternative Jurisdiction” clause does.

• This offence covers bribes (“loan, reward, advantage or benefit of any kind”) given “directly or indirectly… to a foreign public official or to any person for the benefit of the foreign public official.” It means that the unlawful payment cannot be made through a third party, as an agent, subsidiary, etc. In this regard, the Canadian Act uses a wide definition of “foreign public official”, to include an official or agent of a public international organization. The wording of the Act mentioned above makes sure that it also prohibits any payment to a family member, for an instance, on behalf of the real target, being the foreign public official.

• Such prohibited payments are for the foreign public official’s “act or omission… in connection with the performance of the official’s duties or

37(Bill S-21) Corruption of Foreign Public Officials Act, S.C. 1998, c. 34, as was further amended by An Act to amend the Criminal Code (organized crime and law enforcement) and to make consequential amendments to other Acts (S.C. 2001, c. 32), assented to on December 18, 2001. 38 Section 3(1).

functions; or to induce the official to use his or her position to influence any acts or decisions of the foreign state or public international organization for which the official performs duties or functions”. This provision corresponds with Articles 1.1 and 1.4 of the OECD Convention.

• Note that to be subject to the jurisdiction of the Canadian courts, a significant part of the offence must take place in Canada. It means a sufficient linkage between the offence and Canada.

• Penalties would be up to five (5) years imprisonment, which makes this offence as an extraditable offence. Fines will not be subject to a maximum cape and no limitation period will apply.

• The Canadian Act does allow certain exceptions in the virtue of “facilitation payment” which are made to expedite or secure any act of routine nature, such as the issuance of a permit, license to qualify a person to do business, etc. However this exception does not include “a decision to award new business or to continue business with a particular party…”

• The Canadian Act’s two (2) defenses are similar in nature to the ones which are prescribed under the FCPA (i.e., lawful payments under the related foreign states’ law; or when the payment made covers reasonable expenses which incurred by the official in good faith, and are directly related to the promotion, demonstration or explanation of the person’s products and services or to the execution or performance of a contract between the person and the foreign State for which the official performs duties or functions).

2.2.2. Possession or Laundering of Property and Proceeds

• Section 4 and 5 of the Canadian Act prohibit the possession or laundering

of property or proceeds obtained or derived, directly or indirectly, who from the bribery of foreign public official, as described above.

• The maximum penalty for such offences prosecuted by indictment may be up to ten (10) years imprisonment, and fines are unlimited for corporations. Prosecution by summary conviction may lead to a maximum 6 month imprisonment or up to CAD$50,000 fine, or both.

• Section 6 provides an exemption from criminal liability for a peace officer or a person acting under the direction of a peace officer when conducting investigation or performing under duties. This Section aims to ensure that law enforcement agencies (as the police) are protected when operating

undercover to expose the possession and laundering of proceeds of bribery made to foreign public officials per the Canadian Act.

3. Criminal Law Convention on Corruption - Council of Europe

3.1. Introduction

3.1.1. This Convention [the “CE Convention”] of 1999 aims to include a wide range of anti-corruption measures, from bribery of foreign officials, to money laundering and possession, as well as prohibited conducted in the public sector.

3.1.2. The Preamble of the CE Convention begins with a strong statement

whereby "corruption threatens the rule of law, democracy and human rights, undermines good governance, fairness and social justice, distorts competition, hinders economic developments and endangers the stability of democratic institutions and the moral foundations of society”.

3.2. Main Offences

3.2.1. Articles 2 and 3, the backbone of the CE Convention, requires each Party to adopt legislation necessary to establish criminal liability when any “undue advantage” is intentionally made by any person, directly or indirectly, to any public official, whether domestic or foreign, or vise versa - when asked or received by said official (whether for him/herself or for anyone else), for such official to act or refrain from acting in the exercise of his/her functions. We can see that the wordings of these articles are very general, perhaps leaving more room for the Member States to fill in such provisions with their own content. It seems to me that that the CE Convention aims to cover all gaps and loopholes, as shall be further discussed below, as it also prohibits any undue advantage given or promised to “anyone who asserts or confirms that he or she is able to exert an improper influence over the decision making of any” public officials mentioned under said Convention39.

3.2.2. Members States are asked to create the required legislation to effect the

above prohibitions also with respect to members of domestic or foreign

39 Article 12.

public assembly exercising legislative or administrative powers. The same requirement also applies to any official or other contracted employee of any public international or supranational organization, as well as any person carrying similar functions thereof. This is indeed a broad definition which aims to widen the compliance of any such public officials with the antibribery provisions. Furthermore, the EC Convention also includes under the umbrella of public officials (who again, cannot receive or provide any undue advantage per the Convention’s wording) members of intentional parliamentary assemblies, as well as holders of judicial office or officials of any international courts, which are under the jurisdiction of the CE Convention40.

3.2.3. An interesting addition is the Convention’s requirement for preventive

legislation with respect to the private sector; an issue that so far could not obtain a vast consensus among countries that pioneered the struggle against corruption in the public sector as described in this article. Articles 7 and 8 of the CE Convention prescribe that it would be a criminal offence when any undue advantage was given (or promised) intentionally, in the course of business activity, whether directly or indirectly, to any persons who work in the private sector, to act or refrain from acting, in breach of their duties; and vise versa, when said persons ask or receive such undue advantage. Note that corporations (legal persons) may be held liable for the actions of their organs, or other representatives being natural persons.

3.2.4. The CE Convention also include prohibitions regarding money

laundering of proceeds received from corruption offences, as well as other participatory acts with respect to the prohibited undue advantage gained41. In this context, the CE Convention asks each Party to adopt accounting provisions to tackle the concealing of offences, etc42.

3.3. Jurisdiction

Each Party should establish (unless reserved otherwise) jurisdiction over the criminal offences established with respect to the CE Convention whenever there is a linkage to its own jurisdiction, i.e., (i) the offence is committed

40 Articles 9 - 11. 41 Article 13. 42 Article 14.

(partially or wholly) in its territory; (ii) the offender is a national of such state; (iii) the offence involves public officials of such state.

3.4. Extradition The CE Convention prescribes that the criminal offences under the Convention be treated as extraditable offences in any existing extradition treaty. However, it does not use a clear and strong language when it comes to the non existence of such mutual treaties. In such an event, a Party “may consider this Convention as the legal basis for extradition with respect to any criminal offence established in accordance with this Convention”. Again, this means “may” and not “must”43.

3.5. General The CE Convention calls for the use of special investigative techniques to enable a better gathering of evidence related to criminal offences established under the Convention. In this regard, the competent authorities may be empowered to obtain bank and other financial records, and bank secrecy shall not be an issue. Lastly, States are to implement protective measures for whistleblowers who report criminal offences, and others who cooperate or testify concerning these offences44.

4. The Bribery Act 2010 - U.K.

4.1. Introduction

The Bribery Act of 201045 [the “Bribery Act” or the “UK Act”] was recently enacted46 in the U.K. It seems that said Act goes one step further when presenting a stricter approach then the FCPA47.

43 Article 27. 44 Article 22. 45 Lords: Vol 718 Col 1738; Commons: Vol 508 Col 1256. 46 It passed the British House of Commons and House of Lords on April 7 and 8, 2010 respectively. 47 As noted in the Ministry of Justice's Impact Assessment of bill on reform of the law on bribery: "Bribery is a serious crime that destroys the integrity, accountability and honesty that underpins ethical standards both in public life and in the business community. Reform of the law on bribery is necessary to deal effectively with the increasingly sophisticated, cross-border use of bribery in the modern world. In addition the current law has been criticised by domestic and international stakeholders alike. The Bill will ensure our laws are at the forefront of the fight against bribery". http://www.justice.gov.uk/publications/bribery-bill.htm

4.2. Main Provisions

4.2.1. Offences

• The Bribery Act is drafted in a very comprehensive manner, making it illegal to briber not only “foreign public officials”, but also “another person”. The Act’s prohibitions would apply whether such advantage is given to or requested directly by the person who improperly performs such acts, or by a third party.

• The UK Act describes several scenarios which constitute an offence

under said Act. In essence, the UK Act prohibits any bribe, i.e., giving “financial or other advantage, to another person”48, for the purpose of inducing a person to perform improperly of such person’s function or activity. The UK Act makes it clear that it does not matter whether the advantage proposed or given is for the same person, or whether a different person will improperly perform the relevant function or activity concerned.

• It would be also an offence when the giver of bribe “knows or believes

that the acceptance of the advantage would itself constitute the improper performance of a relevant function or activity”.

• Like the CE Convention mentioned-above, the UK Act prohibits both

passive and active bribery, i.e., whether granted or requested for the improper performance.

• The Bribery Act goes far by also defining the meaning of “a function

or activity to which bribe relates”49. Such function or activity may be of a public nature, connected with a business, in the course of person’s employment or on behalf of a body of persons. It also relates to function or activity which a person is expected to perform in good faith, impartially, or when it comes to a “position of trust by virtue of performing it”.

48 See, for example, Section 1(2). 49 Section 3.

• The UK Act further relates to the “improper performance to which bribe relates” and the “relevant expectation” involved. In this regard, a certain expectation test of “what a reasonable person in the United Kingdom would expect in relation to the performance of the type of function or activity concerned” will apply50. If the performance hereto is not subject to the laws of the U.K., the relevant local custom or practice will be disregarded, and any permission will be granted so long as the written laws of the applicable county allow so.

4.2.2. Foreign Public Officials

• In the context of bribery of foreign public officials, the Bribery Act repeats the FCPA’s concept and prohibits any intention to “obtain or retain business or an advantage in the conduct of business” by bribing a foreign public official. Again, bribe is prohibited whether made directly to the official or indirectly through a third party. The defense of written foreign law exists in the Bribery Act as well.

4.2.3. Individuals and Corporations

• It is important to understand that the Bribery Act applies to companies (and similar “commercial organizations”, “partnerships”, etc.) whether registered in the U.K. or not (i.e., being foreign entities) in case the latter carry on “a business, or part of a business in any part of the United Kingdom”. In this regard, the Bribery Act is stricter then the FCPA which will apply to foreign entities so long as they are “issuers”, as defined therein. The Bribery Act further elaborates on the liability of a corporation to the acts of any agents or representatives operating on behalf of such “commercial organizations”51.

4.2.4. Defenses

• Unlike its U.S. counterpart (the FCPA), the Bribery Act does not include any defense of facilitating payments or payments which are meant to expedite the performance of routine government functions. The Bribery Act prescribes defense in case of any briery which was

50 Section 5. 51 See Sections 7 and 8.

necessary for the intelligence or armed forced, when relevant, and as described therein. You may also refer to the written law defense explained above (although I note that it is drafted in a passive rather then an express manner).

• The Bribery Act provides a specific defense to commercial

organizations for the unlawful acts of their associated persons (e.g., employees, agents or subsidiaries, etc.) in case that they "had in place adequate procedures designed to prevent persons associated… from undertaking such conduct"52. I believe that this issue may be controversial and of great importance due to its impact on corporations. See Lord Bach's words: "It is not our intention to drag well run companies before the courts for every infraction. It would be wrong to leave organisations open to a heavy fine if a rogue element within its ranks bribes on behalf of the organisation when those who mange it can show they have put in place procedures designed to prevent bribery on its behalf… we intend Government guidance to be flexible and indicative by setting out relevant principles backed up by illustrative good practice examples"53.

4.2.5. A Wide territorial application

• Lastly, the UK Act provides wide scenarios and possibilities which will be sufficient to establish the “territorial application” of the UK Act and its prohibitions in such cases.

52 Section 7. 53 Lord Bach's letter on adequate procedures guidelines from December 2009. http://www.justice.gov.uk/publications/bribery-bill.htm

VI Conclusion There is no doubt that the modern business world has made a long and meaningful way in combating corruption. We could see that there is a vast consensus among countries and societies, whether among developed or developing countries, that corruption in the public sector must be eliminated. The FCPA, as a pioneering legislation, as well as other laws and international conventions, set proper standard and efforts for the right against corruption. This is a joint efforts which, I believe, will bear fruits in the near future. Meaningful as it is, there are still lessons to be learnt and contents to be created so that the fight against corruption, both in the public and private sectors, will be successful.

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