Most people are aware that the Foreign Corrupt Practices Act (FCPA) prohibits the payment of bribes to foreign government officials in order to obtain or retain business, but there are also many misperceptions about the FCPA. Plus there are limited exceptions to the FCPA.
One misperception is that the FCPA applies only to public companies and not to private companies. This is false with regard to the FCPA anti-bribery provisions. Any corporation, partnership, association, trust, unincorporated organization, or sole proprietorship with its principal place of business in the United States, or organized under US law, is subject to the anti-bribery provisions of the FCPA. However, books and records and internal control provisions of the FCPA apply only to companies with securities traded on a US stock exchange or otherwise required to file periodic reports with the SEC.
Another myth is that the FCPA applies only when attempting to obtain or retain business with foreign government customers. This is also incorrect. United States case law has held that making improper payments to foreign officials to lower taxes or customs duties could equate to a violation of the FCPA anti-bribery provisions by providing an unfair advantage to the payor over its competitors. Additionally, an FCPA violation can occur where payments are made to non-government third parties acting for or on behalf of any foreign government agency.
There are exceptions to the anti-bribery provisions of the FCPA, but the guidance on when they apply is vague and the exceptions are only available as an affirmative defense to an alleged violation. Federal law allows payments to foreign officials for expenses related directly to “the promotion, demonstration, or explanation of products or services” that are “reasonable and bona fide.” This affirmative defense is very difficult to use primarily because “reasonable and bona fide” differ based on the facts of the specific situation. Another exception to the anti-bribery provision is for payments to facilitate or expedite performance of a “routine governmental action.” In essence, this equates to payments to speed up or expedite a government activity that the foreign government official routinely performs. Federal law identifies the obtaining of permits, licenses, or other official documents as examples of such an exception. In essence, this exception appears to be available where the foreign government official is being paid to do his or her job as opposed to exercising his or her discretion in favor of the payor.
Enforcing the FCPA is a priority of both the Department of Justice and the SEC. US companies are encouraged to include FCPA compliance in their internal training and policies.