September 19, 2020

Volume X, Number 263

September 18, 2020

Subscribe to Latest Legal News and Analysis

September 17, 2020

Subscribe to Latest Legal News and Analysis

September 16, 2020

Subscribe to Latest Legal News and Analysis

Making Foreign Corrupt Practices Act “Reasonable” — Exceptions & Affirmative Defenses

So, we have covered the Foreign Corrupt Practices Act’s (“FCPA”) scope, but the FCPA anti-bribery provisions also contain certain exceptions and affirmative defenses. These exceptions and affirmative defenses attempt to carve out legitimate payments to foreign officials, so the FCPA does not unreasonably hamper international business. Be wary, however, because prosecutors narrowly interpret these exceptions and affirmative defenses. Moreover, as most FCPA cases settle, the prosecutor’s perspective will ultimately drive the settlement negotiations and the prosecutor may have a different view of an automotive company’s payments to the foreign officials.

As an important point, these “exceptions and affirmative defenses” are really affirmative defenses. Simply put, if the government accuses a company or individual with violating the FCPA, the burden is on the defendant to prove one of the following exceptions or affirmative defenses apply.

The Waning Facilitating Payments Exception

This exception purports to exculpate business and individuals for making payments to foreign officials to prompt routine government action by a foreign official. The exception attempts to distinguish between payments made to expedite an inevitable process, on the one hand, and payments to influence a decision, on the other hand. But this exception has been interpreted so stringently by prosecutors that it has almost disappeared in practice. Moreover, a corporate policy that permits employees to pay facilitating payments is morally indefensible, as it would be difficult to determine which facilitating payments are “legal.”

Accordingly, companies should prohibit facilitating payments, with one exception. Though not technically facilitating payments, payments made to foreign officials to prevent harm to employees have been acknowledged under this exception.

The Written Local Law Affirmative Defense

If a payment, gift, or promise to pay something of value was “lawful under the written laws and regulations of the foreign official’s” country, then such a payment does not violate the FCPA. For example, the payment of a registration fee, mandated by a municipality’s written regulations, would not violate the FCPA.

But beware, a custom is not the same as written laws and regulations. In other words, no matter how universally routine a payment is, if it is not in the foreign country’s written laws or regulations, this exception will not exculpate a company or individual from FCPA liability. Thus, to avoid FCPA liability under the written local law defense, be sure to request or locate written authority requiring any “mandatory” payment.

The Reasonable & Bona Fide Expenditures Affirmative Defense

Under this exception, “reasonable and bona fide” expenditures do not violate the FCPA anti-bribery provisions if they are directly related to either of the following:

  • The promotion, demonstration, or explanation of products or services; or

  • The negotiation, execution, or performance of a contract with a foreign government or agency.

Examples include travel and expenses paid for government officials to visit company facilities, observe demonstrations, receive training, or attend meetings. However, automotive companies should not attempt to use this exception as a way to provide lavish experiences or gifts to influence government officials’ decisions. Instead, this exception exists so companies can facilitate appropriate business relationships with foreign officials in the course of conducting business.

To interpret these exceptions’ application to specific facts, please seek the advice of legal counsel. Still to come: the FCPA’s penalties and specific, common FCPA issues.

© 2020 Foley & Lardner LLPNational Law Review, Volume V, Number 323

TRENDING LEGAL ANALYSIS


About this Author

Jaime Guerrero, White collar criminal defense attorney, Foley law firm
Partner

Jaime Guerrero is a partner and litigation lawyer with Foley & Lardner LLP. Mr. Guerrero focuses in the areas of government enforcement actions, white collar criminal defense, Foreign Corrupt Practices Act ("FCPA") investigations, accounting litigation, securities litigation, and partnership disputes. He represents companies and individuals in parallel civil and criminal proceedings initiated by regulatory and prosecuting agencies for a variety of alleged wrongdoing and business disputes. Mr. Guerrero has conducted internal investigations, in both English and Spanish...

213-972-4634
Associate

Nicholas Williams is an associate and litigator with Foley & Lardner LLP. His practice focuses on general commercial litigation, including non-compete, construction, white collar defense, and bankruptcy litigation. Mr. Williams has successfully obtained judgments and negotiated settlements for clients, including regional and national banks, in commercial disputes. He is a member of the firm's Legal Innovation Hub® for NextGen Manufacturers.

813.225.4172