Second Circuit Narrows FCPA’s Reach Yet Enforcement Risk Remains

Melinda Bothe

The Second Circuit recently ruled that the general criminal statutes of conspiracy and complicity cannot be used to draw non-U.S. persons or companies within the jurisdiction of the Foreign Corrupt Practices Act (the FCPA) where their conduct would not otherwise fall within the statute’s ambit. That is, prosecutions under the FCPA cannot be brought against non-U.S. persons who do not act while in the United States solely on a theory that they conspired to violate the FCPA or aided and abetted a FCPA violation.

Relying on Supreme Court precedent and on the FCPA’s text and legislative history, the Circuit found in U.S. v. Hoskins that the statute was cautiously designed to specifically enumerate the categories of people over whom the FCPA applied and to limit the FCPA’s extraterritorial reach. This is consistent with a series of recent Supreme Court cases relying upon the presumption against extraterritoriality to reject claims brought against foreign nationals for conduct occurring abroad in connection with other federal statutes (see e.g. Kiobel v. Royal Dutch Petroleum Co., 569 U.S. 108, 125 (2013)).

In practice, Hoskins is unlikely to have a meaningful impact on continued FCPA enforcement against non-U.S. persons and companies. First, the majority of FCPA actions brought against non-U.S. persons or companies do not rely on accessorial liability as the sole basis for jurisdiction. Instead, FCPA actions primarily rely on a more affirmative jurisdictional nexus, such as the use of U.S. mails or accounts in the furtherance of an improper payment scheme.

Second, the Circuit’s ruling is narrow and leaves intact the FCPA’s defined scope of liability for foreign nationals who: (1) act on American soil; (2) are officers, directors, employees or shareholders of U.S. companies; or (3) are acting as agents of U.S. companies. In fact, the Circuit expressly left open the possibility that Hoskins, a U.K. citizen employed by a U.K. subsidiary of a French parent company, could be found liable as acting as an agent of the U.S. company.

Third, Hoskins does not offer any protection against the growing trend of anti-corruption enforcement by non-U.S. regulators. Foreign regulators are no longer content to allow the U.S. alone to collect large penalties in anti-corruption investigations. In addition, the DOJ and SEC regularly coordinate enforcement efforts with its counterparts in the United Kingdom, France, Germany, Switzerland, the Netherlands, Brazil, and others. In recent months, the DOJ has announced its first coordinated settlements with authorities in France and Singapore. This trend of non-U.S. enforcement and cooperation between regulators is only likely to increase.

In short, although Hoskins limits U.S. jurisdiction when relying solely on criminal statutes other than the FCPA, this decision does not alter the corruption risk calculus for companies operating in high-risk markets. U.S. and non-U.S. companies should continue to take efforts to detect, prevent, and remediate bribery-related conduct.

Further analysis of U.S. v. Hoskins can be found here.

 

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