The European Union this month released a startling report with a headline “corruption continues to be a challenge for Europe.” Here’s the link to the webpage, which houses both the “EU Anti-Corruption Report” and various associated materials. The press conference included the summary assertion: “There are no corruption free zones in Europe.” Estimated to cost the European economy €120 billion (approximately $164 billion), this has now triggered the European Commission to ask all member states to “attack” corruption because they are “not doing enough.”
This is potentially more important to our industry than meets the eye. First, on our side of the Atlantic, certain companies are formally subject to the U.S. Foreign Corrupt Practices Act (FCPA). Second, even if a U.S. company is not subject to the FCPA that does not mean it wouldn’t be subject to European anti-corruption statutes. Each EU member state plus the EU, itself, has a significant body of laws and enforcement mechanisms to ferret out and punish companies which engage in corrupt practices.
What companies are we thinking about in our analysis?
Let’s begin with a refresher in which U.S. persons and businesses come under the FCPA: (1.) U.S. and foreign companies listed on a U.S. stock exchange or required to file periodic reports with the Securities and Exchange Commission; and, (2.) certain foreign persons and businesses conducting business on U.S. territory. For these subject entities, there are anti-bribery provisions and accounting provisions administered by the Department of Justice and the SEC, and penalties can be civil and criminal. If this isn’t a refresher, grab a copy of the “Resource Guide to the U.S. Foreign Corrupt Practices Act” and start reading.
As we say, the end of your analysis is not exclusion from anti-corruption compliance if you don’t fall under the FCPA; you may still be subject to foreign anti-corruption enforcement. Just one example of which companies this might include are those listed in the ATF annual report titled “Firearms Imported into the United States by County.” This list includes thirteen European countries, including Germany, the Czech Republic, and Italy. All U.S. companies engaged in business transactions abroad would do well, also, to consider anti-corruption compliance measures.
Our consistent recommendation for clients is to develop and engage employees in an anti-corruption compliance program. The FCPA is not unlike HIPAA. Whether or not your company is technically subject to the letter of the statute, laws can be used to shape robust compliance programs that help to insulate a company in the event of any form of investigation. It also ensures employee best practices for the overall health and success of the company.
With the EU announcement of its findings, the added bonus for your vigilance may well be the advance positioning of your company in the event the EU and DOJ/SEC begin to engage in combined investigations of US-EU business transactions.
Orchid Advisors provides electronic newsletter (“Advisory and Alert”) and blogs for general informational purposes only. It should not be considered a formal or informal interpretation of law. It is not intended as professional counsel, should not be considered legal advice and should not be used as such.