For years, the U.S. Department of Justice (DOJ) has taken the position that theories of conspiracy and aiding and abetting allow it to prosecute foreign nationals for Foreign Corrupt Practices Act (FCPA) violations even if those individuals otherwise would not be subject to liability under the FCPA. Last week, in a rare federal court of appeals decision interpreting the FCPA, the U.S. Court of Appeals for the Second Circuit rejected that expansive view of the FCPA’s jurisdiction, holding that an individual cannot be guilty as a co-conspirator or accomplice if he or she is incapable of committing the crime as a principal.

As we noted in a previous Anti-Corruption Quarterly, the DOJ brought charges against Lawrence Hoskins in connection with the DOJ’s prosecution of Alstom S.A., a French power and transportation company, which resulted in a $770 million corporate settlement. Hoskins, a former British citizen based in France, never worked for Alstom’s American subsidiary in a direct capacity, but was alleged to have approved the selection of, and authorized payments to, consultants knowing that a portion of the money was intended to influence Indonesian officials.

Hoskins did not clearly fall within the three categories of persons that the FCPA prohibits from offering bribes to foreign officials: “issuers,” “domestic concerns” and persons who act within the territory of the United States. “Issuers” are defined as companies registered on the U.S. stock exchange or with certain reporting obligations to the Securities and Exchange Commission. “Domestic concerns” include U.S. citizens, nationals, residents and businesses with their principal place of business in the United States. Agents of “issuers” or “domestic concerns” are also included in these categories. The FCPA applies only to non-resident foreign nationals — like Hoskins — when such persons are agents or commit an act within the United States in furtherance of an improper payment.

The DOJ charged Hoskins with conspiring to violate the FCPA based on its longstanding theory that if the DOJ has jurisdiction over one conspirator, it has jurisdiction over all co-conspirators. As the DOJ advised in the November 2012 FCPA Resource Guide, foreign nationals and companies “may ... be held liable for conspiring to violate the FCPA ... even if they are not, or could not be, independently charged with a substantive FCPA violation.”

In August 2015, however, the trial court in Hoskins’ case held that for an individual to be convicted of conspiring to violate the FCPA, the individual must also fall within a category of persons directly liable under the FCPA. On that basis, the court dismissed the conspiracy charge against Hoskins.

On appeal, the Second Circuit, analyzing the text and legislative history of the FCPA, held that because the statute omits jurisdiction over foreign nationals who act outside of the United States and are not an officer, director, employee, agent or stockholder of an issuer or domestic concern, Hoskins cannot instead be charged as a co-conspirator or accomplice to an FCPA violation. The court went on, however, to state that if prosecutors are able to show that Hoskins acted as an agent of Alstom’s American subsidiary (a domestic concern), then there would not be improper extraterritorial application of the FCPA to his conduct.

This decision is a significant blow to the DOJ’s expansive view of the jurisdictional reach of the FCPA and a crucial judicial check on the DOJ’s prosecutorial practices with respect to the FCPA. Significantly, it also offers guidance to foreign nationals in future DOJ prosecutions and emphasizes the importance of judicial opinions in checking the DOJ’s broad interpretations of the FCPA.