To be frank it’s remarkable that it took Donald Trump a whole three weeks to get round to freezing enforcement of the Foreign Corrupt Practices Act, given that it’s designed to stop malfeasance and has the word “foreign” in it, neither of which is exactly a signature cause of his.
Trump’s reasoning is somewhat similar to that on tariffs, the next two waves of which (on steel and aluminium, and reciprocal taxes to those charged by trading partners) he announced this week. He regards the FCPA, which prohibits companies bribing foreign officials, as putting American companies at a disadvantage compared to foreign competitors. It’s also a constraint on freewheeling executives. And therefore it’s automatically suspicious.
But this ignores that the FCPA may help rather than hinder fair competition. By extending US law abroad, not just over American companies but essentially any company with even a tenuous connection to the US, the FCPA has often been the closest thing to a heavy-duty enforceable legal international anti-bribery regime in existence.
The FCPA dates back to 1977 and was extended significantly in 1998. By extending US jurisdiction via the Department of Justice and the Securities and Exchange Commission over American companies worldwide, it mirrors the extraterritoriality of the US tax code, the Untouchables/Eliot Ness anti-corruption tradition in US enforcement going global.
It’s easy to forget now that as late as the 1990s, corporate backhanders weren’t just tolerated but subsidised. German law made foreign bribes tax-deductible until 1999. The sleaze uncovered in the “Siemensgate” bribery scandal in the 2000s showed a corporate culture rotten with corruption. Before the creation of the anti-corruption campaign Transparency International in 1993 and the OECD Anti-Bribery Convention in 1999, the FCPA was one of the few semblances of constraint.
As the FCPA has been extended to US citizens working abroad, whether for an American company or not, and indeed for foreign companies even if they only use US banks or issue securities in America, its reach has lengthened. In 2013, the French oil company Total paid a penalty for bribes paid to an Iranian official in Iran. In 2019, the Swedish telecoms business Ericsson paid more than a billion dollars to settle an FCPA action over its activities in Djibouti, China, Vietnam, Indonesia and Kuwait. In the same year, the Russian telecoms company Mobile Telesystems paid penalties of $850mn because of a bribery scheme in Uzbekistan.
These actions don’t just make executives think twice before offering backhanders — and indeed provide them with a good excuse for turning down demands for bribes — but also help level the global playing field for US businesses. Companies trying to outdo each offer in offering bribes rather than competing in the market helps neither honest executives nor consumers. Trump pulling the FCPA out of the game would make the world more corrupt without necessarily making it easier for US companies at home or abroad.
alan.beattie@ft.com
