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Legal Update

Court held FCPA criminal liability does not apply to foreign nationals without sufficient U.S. ties

14 September 2018
Tauil & Chequer Legal Update

On Friday, August 24, 2018, the United States Court of Appeals for the Second Circuit held in a 73-page opinion in United States v. Hoskins, that criminal liability under the U.S. Foreign Corrupt Practices Act (FCPA) should not apply to non-United States persons and companies if the crimes took place outside the United States and the person or entity is not sufficiently tied to a United States company or United States-based company.

As a general matter, the FCPA provides jurisdiction over a non-United States person or company in 3 circumstances: (1) when a company issues securities on a U.S. exchange, (2) when the person or entity resides or is based in the U.S. or (3) when the crime is committed within the United States. These are territorial limitations on the Department of Justice’s power to prosecute violations of the anti-bribery law involving foreign nationals.

In Hoskins, the DOJ prosecuted a British executive who worked in a U.K. subsidiary of a multinational based in Paris involved in a corrupt scheme to win certain contracts in Indonesia, charging that he was an accomplice in a conspiracy to violate the FCPA.

On appeal, the Second Circuit ruled that the executive did not have sufficient connection to the United States to be subject to criminal liability for conspiring to violate the FCPA: “the FCPA does not impose liability on a foreign national who is not an agent, employee, officer, director or shareholder of an American issuer or domestic concern – unless that person commits a crime within the territory of the United States” and “the government may not expand the extraterritorial reach of the FCPA by recourse to the conspiracy and complicity statutes.”

The Second Circuit’s ruling limits the U.S. government’s powers over foreign nationals by interpreting the FCPA in such a way as to ensure that the extraterritorial reach of the statute is not broadened, through the use of a conspiracy or aiding and abetting charge, to allow jurisdiction over acts and persons without sufficient connection to the United States.

Although the FCPA was enacted in 1977, U.S. authorities have been steadily increasing its enforcement since the early 2000's.  From a total of nearly 550 enforcement actions, over 75% were filed in the last 10 years1. Since 2010, 17 investigations are related to Latin American companies and 10 of them are Brazilian.

With offices across the world and global white collar crime and anti-corruption & compliance practices, including the United States, Brazil, the United Kingdom, France, and Hong Kong, Mayer Brown is uniquely placed to assist clients who have national and international bribery and corruption concerns.

1 http://fcpa.stanford.edu/statistics-analytics.html

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