The Foreign Corrupt Practices Act of 1977, an amendment to the Securities and Exchange Act of 1934 (Exchange Act), criminalizes bribery of foreign officials and requires audit controls and accurate reporting of transactions by United States companies. By enacting the legislation, Congress condemned foreign bribery as distorting trade and investment, undermining public confidence in United States enterprise, and damaging foreign relations. The Securities and Exchange Commission (SEC) also opposed corporate bribery as a threat to managerial accountability to shareholders. President Carter, while signing the legislation, emphasized its basic policy considerations.
The Act responded to increasing revelations concerning the widespread practice of United States corporations making improper payments to foreign nationals. These disclosures stemmed largely from Watergate investigations which uncovered illegal domestic political contributions. Subsequent investigations by the SEC revealed the existence of off-the-record corporate accounts of questionable domestic and foreign payments. A program was initiated by the SEC encouraging businesses to disclose voluntarily the existence of such payments. As a result, nearly five hundred firms have disclosed questionable payments of hundreds of millions of dollars. Corporate payoffs range from bribing high-ranking foreign officials to secure favorable foreign governmental action, to facilitating payments allegedly made to ensure that governmental functionaries discharge certain ministerial or clerical duties.
Although intended as a strong antibribery measure, the Act has failed to eliminate overseas payoffs. The Act contains numerous loopholes due to exceptions and vagueness. Moreover, the SEC has indicated that as a matter of policy, it will not render interpretive advice on an ad hoc basis. More importantly, due to its extraterritorial application, the Act is difficult to enforce. Principles of international comity may be offended by prosecuting extra-territorial crimes. The act of state doctrine may preclude judicial inquiry into the facts and motivations underlying foreign state or official acts. Finally, constitutional questions of fairness and due process arise from burdens placed upon a defendant facing criminal penalties for foreign conduct.
This note will examine specific provisions of the Foreign Corrupt Practices Act in light of its legislative history. Difficult questions of enforceability relating to principles of international comity, the act of state doctrine, and constitutional defenses will be investigated.
The Foreign Corrupt Practices Act: Problems of Extraterritorial Application,
12 Vanderbilt Law Review
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