Business Law Legal Topics

Foreign Bribery Actions Hit Record Numbers

The Securities and Exchange Commission and the Department of Justice are bringing record numbers of actions under the Foreign Corrupt Practices Act these days, and the trend is likely to continue.  In one case (.pdf) Johnson & Johnson subsidiaries are accused of paying bribes to public doctors in Greece who use the company’s surgical implants. Maybe it’s time for businesses to get a refresher course on a very simple rule: You can’t bribe foreign officials to get or keep business deals.

The Foreign Corrupt Practices Act  (15 USC §§78dd-1-78dd-3) is an antibribery statute that prohibits any U.S. person or company from corruptly paying or offering to pay anything of value to a foreign official directly or indirectly to assist in obtaining or retaining business. 15 USC §78dd-2(a). The term “foreign officials” includes not only government employees but also employees of state-controlled enterprises. 15 USC §78dd-2(h)(2).

And no bribe is too small. There is no de minimis exception, and “anything of value” can include cash, gifts, and entertainment whether or not for the direct benefit of the foreign employee.

The penalties for violation of the Act include substantial fines, imprisonment for up to 5 years, loss of export licenses, and the risk of private litigation. 15 USC §78dd-2(g)(2).

To make sure that everyone is on board with the anti-bribery rules, make sure that any international licensing, development, manufacturing, and distribution agreements you enter into include express covenants requiring compliance with the Act and the anti-corruption laws of the relevant jurisdictions. These provisions are especially important if a licensee is permitted to sublicense to third parties.

Here’s some sample language for such a clause:

_ _[Licensor/Manufacturer]_ _ and _ _[Licensee/Distributor/Reseller]_ _ each agree that it and its affiliates will fully comply with the United States Foreign Corrupt Practices Act and the anticorruption laws of any other applicable jurisdiction at all times, and will not offer any payment or other gift or promise, or authorize the giving of anything of value, for the purpose of influencing an act or decision of an official of any government or of an employee of any company in order to assist it or any of its affiliate in obtaining, retaining, or directing any business.

For coverage of the Foreign Corrupt Practices Act and other international issues, check out CEB’s Intellectual Property in Business Transactions, chap 11.

© The Regents of the University of California, 2011. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited.

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