LECTURE 22 - Legal Extra-Territoriality of the Powerful

Question 1

National Laws Constraining Action
Abroad

Answer 1

• Legal principle is that the laws of a specific country only apply in that country and
  can only be enforced in that country
• Contrasting reality is that many activities cross national boundaries
• Two approaches here to extra-territorialization of law
  1. An attempt by Country A to make its laws directly applicable in countries B, C,
  etc…
• Direct violation of norm of sovereignty
• Not practical without de facto occupation of other territories or consent
  2. The formulation of laws by Country A that make conduct/behaviour/acts
  carried out by entities based in Country A in countries B, C, etc… illegal
• This means what you do anywhere must comply with the laws of Country A
  if you either are based there or wish to visit

Question 1

What do
we mean
by ‘extra-territorial’?

Answer 1

• Strict definition: “The legal ability of a government to
  exercise its authority beyond its normal boundaries.”
• Three principle methods of having this apply
  1. Through the application of coercive force to
  compel application or de facto act with authority
• Much application to US war on terror
  2. Through the legal agreement of another country
  to allow it to apply
• Can be found in areas such as anti-money
  laundering, piracy, narco trafficking, human
  trafficking
  3. Through the framing of domestic laws to restrain
  actions of domestically based entities abroad

Question 2

Why
extra-territorialize your
laws?

Answer 2

• National Security imperatives
• US Trading With The Enemy Act, 1917
• In time of war can restrict trade with any national
  enemy
• Principles now applied to restrictions on trade in
  technology and other goods
• Regulatory/normative compliance and
  change
• California emission standards in auto industry
• Enforce patterns of global governance and
  liberal norms
• US Foreign Corrupt Practices Act, 1977
• UK Bribery Act, 2010

Question 3

Why am I not
talking about
Canada?

Answer 3

• 1978-1998: Organization for Economic Cooperation
  and Development adopts ban on bribery. 38
  countries sign on
• Canada: Corruption of Foreign Public Officials Act,
  1988
• https://laws-lois.justice.gc.ca/eng/acts/c-45.2/
• There is a difference between restraining the
  actions of entities based in your country and de
  facto compelling compliance by entities based
  elsewhere
• Factors allowing this to happen
• Size and importance of your domestic
  capital market
• Desirability of your country as a travel
  destination
• Importance of your country as a market
  for goods and services
• Extent to which you country is positioned
  as a global economic hub

Question 4

Case study: Odebrecht, Corruption, and FCPA

Answer 4

• Sourcing for this case study
• Briefing video: Vice (2018), “The biggest
  corruption scandal in Latin America’s history,”
  (October 26): https://youtu.be/uMXumMJZYYI
• Powerpoint slides on FCPA and corruption:
  Hispanic National Bar Association
• Contextual, implication, and analytical material:
  Course professors field interviews with corporate
  executives in Mozambique, Angola, and Brazil
• Recommended additional background viewing on
  the Odebrecht scandal: Al Jazeera (2018), “Brazil:
  The Car Wash Scandal | People and Power”
  (March 8): https://youtu.be/boK0Mh2T5nk

Question 5

Working through the Odebrecht case

Answer 5

• Key concepts to review
• What is corruption
• What is a thing of value
• Central outcome from case
• Odebrecht paid ~$3.5 billion in fines under an
  FCPA settlement with SEC/DOJ
• Funds to US, Brazil, Swiss authorities
• Fine reduced to ensure firm not
  bankrupted
• Application of FCPA provisions underpinned
  cross-national investigation
• Corruption and laws like FCPA emerge as one way
  to push governance norms

Question 6

What Is Acting “Corruptly”?

Answer 6

An act is “corrupt” for purposes of the FCPA if it is
intended to induce a government official to misuse
his or her official position by, for example:
* Wrongfully directing business to a person paying a
bribe;
* Granting preferential treatment as a result of the
bribe; or
* Refraining from taking official action against the
person paying the bribe.What Is Willful

Question 7

What Is Willful Blindness?

Answer 7

An individual may be liable under the FCPA if he or
she:
* Has actual knowledge of a bribe;
* Has a suspicion that a transaction involves a bribe; or
* Deliberately avoided knowledge of bribery through willful
blindness.

Question 8

What Is a “Thing of Value”?

Answer 8

A “thing of value” for purposes of the FCPA can be
any benefit or service that has value to its
recipient, no matter how small. For example:
* Cash
* Excessive travel and entertainment
* Gifts
* Gift cards
* Loans
* Political and charitable
contributions/donations
* Employment, internships, or scholarships

Question 9

What is the FCPA?

Answer 9

1. The anti-bribery provision:

• U.S. persons and businesses are prohibited from offering, promising, authorizing or making corrupt payments to foreign officials to improperly obtain or retain business or obtain an improper business advantage.

VS

2. The “books and records”
   provision:

• Requires accurate
  reporting and recording
  of all transactions.
• Covers all payments to
  non-U.S. government
  officials, regardless of
  why the payments were
  made.

Question 10

FCPA Demonstration Effects

Answer 10

• The U.S. was a pioneer in passing legislation (FCPA) against the payment of bribes to foreign officials.
• Since then several other countries have followed, including Latin American countries and today there is a strong
  global movement to against corruption.
• OECD Anti-bribery Convention – In force: February 1999.
  Ratified by 36 countries – including Argentina, Brazil, Chile, and Mexico.
• Inter-American Convention Against Corruption – In force: March 1997.
  Ratified by the 35 members of the Organization of American States (OAS) and 3 non-member countries.
• U.N. Convention Against Corruption – In force: December 2005.
  Ratified by 34 countries – including Brazil, Ecuador, El Salvador, Honduras, Mexico, Panama, Paraguay and Peru – not
  the United States.
• Latin American countries have issued their own anti-corruption laws
  Chile Anti-corruption law 20393 (2009)
  Colombia Anticorruption law 1474 (2011)
  Mexico Federal Law against Corruption in Public Procurements (2012)
  Brazilian Clean Company Act 12.846 (2014)
  Sistema Nacional de Anti-Corrupcion (enacted 2016 - effective July 2016)
  Ley de Responsabilidad de Personas Juridicas por Corrupcion (enacted 2016 - effective July 2016)

Question 11

Implications of FCPA and Similar laws

Answer 11

1. 2017 field research in Sao Paulo
   * Conversations constantly referred back to anti-corruption compliance
   * Metrics being used were those of FCPA
   * Clear understanding that Brazilian rules could be ‘law-fared’ to death
2. A constructivist lens
   * Extra-territorial component creates pressures to reshape applied norms
   * Immediate returns in form of economic actor conduct; state conduct following, sort of
3. Raises awareness that domestic laws can shape global norms
   “Courting influence: China is becoming more assertive in international legal disputes,” The Economist (September 18,
   2021): https://www.economist.com/china/2021/09/18/china-is-becoming-more-assertive-in-international-legal-disputes
4. Cycles us back to idea of complex interdependence

• Legal questions now cross jurisdictions, sometimes with contradictions