Deterring Global Bribery: Where Public and Private Enforcement Collide

By: Rashna Bhojwani

 

The international community has become increasingly concerned with deterring global bribery. While the Foreign Corrupt Practices Act of 1977 (FCPA) serves as the dominant public enforcement mechanism, international arbitration tribunals function as the primary private enforcement mechanism, refusing to enforce contracts that were obtained by paying bribes. Although both enforcement mechanisms share the goal of deterring bribery, the overlap between them may frustrate that goal. Specifically, this overlap occurs in situations where private companies doing business abroad pay bribes in order to obtain contracts with foreign governments or individuals. U.S. enforcement agencies may charge these private companies with violations of the FCPA, yielding an extensive government investigation into the companies’ conduct and possibly a settlement agreement. However, an FCPA settlement enables foreign contracting parties to obtain concrete evidence of bribery with which to void their contracts in the case of an alleged breach. The leverage to the foreign contracting parties at the expense of the FCPA-violating companies constitutes an additional penalty for the violators. This Note argues that the overlap between the enforcement schemes frustrates the goals of the FCPA in two ways: First, FCPA-violating companies experience higher penalties than public enforcement agencies otherwise expect, which reduces the companies’ incentives to voluntarily disclose their misconduct, and second, FCPA violations increase the payoffs to foreign contracting parties who are also bribe receivers. To reduce the extent to which these private consequences interfere with the FCPA’s goal of deterring global bribery, this Note proposes a two-pronged solution. The Department of Justice should offset the heightened penalties imposed on violating companies due to private multijurisdictional enforcement, and arbitral tribunals should take a tempered approach to voiding contracts obtained by bribery.

 

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