Foreign Policy Blogs

Those pesky Americans

There was a time when a bribe to obtain a driver’s license was corruption, but a bribe to obtain a contract was just business. No longer. Companies around the world are now paying attention not just to the practices of their own employees, but to those of their subsidiaries and partners. And most of the change is due to a single U.S. law: the Foreign Corrupt Practices Act (FCPA).

The FCPA makes bribery of government officials illegal. The tricky part is, its application is extremely broad. Any American company, citizen, or resident as well as foreign corporations with registered securities in the United States fall under its jurisdiction. Participation in a joint venture with a company that pays bribes can result in liability. And “government official” has thus far been generously interpreted to include anyone employed by a state or state-owned entity, including for example most of the energy and health sectors in many countries.

The FCPA was first passed after a wave of corporate bribery was uncovered in the 1970s, but it found new life in particular after the official inquiry into the oil-for-food scandal in the mid-2000s. This new momentum did not die out, and the justice department has vowed still greater action going forward. Since 2005, 58 cases have been prosecuted, more than the total in the 23 years before that.

In many ways, the United States is on its own in this formidable fight against bribery. Despite the adoption of the so-called OECD Anti-Bribery Convention in 1997, now with 38 signatories, enforcement in the United States dwarfs that of the rest of the world. According to a study by Transparency International, in 2008 the United States brought 103 cases, compared to 151 cases for the other 33 included countries combined (and just 108 cases excluding second-best performer Germany). The study found little or no enforcement in major economies Canada, Japan, and the United Kingdom. But rather than an inexorable pull towards the least common denominator as is often the case, the United States may be pulling its peers up. The UK announced an FCPA-type bill in late 2009. Germany’s enforcement has increased exponentially since the Siemens scandal broke in 2006. France’s investigations may be increasing as well.

Just like the petty corruption that results in police asking for bribes in some countries, corporate bribery is a culture that can be changed. As more and more corporate activities become targets of government regulators and prosecutors, executives will no longer be at liberty to tolerate bribes in the course of doing business. And ultimately this should benefit both the companies and the citizens of the countries where they are operating.