Congress Extends Anti-bribery Laws to the Demand Side with Enactment of the Foreign Extortion Prevention Act

Though a pioneer in the fight against foreign public corruption, the United States has long only criminalized foreign bribery's supply side. That changed when President Joseph R. Biden, Jr. signed into law the Foreign Extortion Prevention Act (FEPA),¹ extending the scope of federal criminal law to the demand side. Previously, under the Foreign Corrupt Practices Act (FCPA), federal prosecutors could proceed just against issuers of U.S. securities, U.S. domestic concerns (U.S. companies, nationals, and residents), and foreign nationals for acts while in the United States who “offer, pay[], promise to pay, or authoriz[e] . . . the payment of any money, or offer, gift, promise to give, or authoriz[e] the giving of anything of value” to foreign officials in order to obtain or retain business.² Under FEPA, the Justice Department can now also bring cases against foreign officials who “demand, seek, receive, accept, or agree to receive or accept . . . anything of value” from an issuer, a domestic concern, or any person while in the territory of the United States.³ FEPA's enactment is part of a broad set of U.S. anti-corruption measures under the Biden administration, including enhanced visa restrictions and new reporting requirements, which aim to put greater pressure on corrupt foreign actors.⁴

The drafters of the FCPA chose not to criminalize foreign bribery's demand side because Congress was primarily concerned with the behavior of U.S. companies and because a more expansive law could affect U.S. foreign relations. As one court explained, “[m]ost likely Congress made this choice [not to criminalize the demand side] because U.S. businesses were perceived to be the aggressors, and the efforts expended in resolving the diplomatic, jurisdictional, and enforcement difficulties that would arise upon the prosecution of foreign officials was not worth the minimal deterrent value of such prosecutions.”⁵ The Justice Department nonetheless interpreted the FCPA creatively so that it would apply to foreign officials, but courts rejected that view and concluded that foreign nationals, including foreign officials, fall outside the scope of the statute “when they do not act as agents, employees, directors, officers, or shareholders of an American issuer or domestic concern, and when they operate outside United States territory.”⁶ Unable to proceed under the FCPA, the Justice Department has prosecuted, with some success, corrupt foreign officials under other federal statutes (such as mail and wire fraud, the Travel Act, and money laundering).⁷ Such prosecutions, though, are indirect and require proof of acts beyond the demand or receipt of a bribe that cannot be shown against many foreign officials.⁸ Sanctions and visa denials have also been used by the Treasury and State Departments, respectively, against foreign officials engaged in corruption, but those are not criminal penalties.⁹ In the absence of demand-side criminalization, federal law has not fully or effectively regulated foreign corruption at its source.

Following the U.S. lead, foreign anti-bribery regimes around the world initially focused on the supply side, but domestic legislation criminalizing the demand side has become more common. Article 16 of the UN Convention Against Corruption required state parties to consider codifying the offense.¹⁰ The Council of Europe's Criminal Law Convention on Corruption (COE Convention) went further by obligating parties to criminalize the “the request or receipt [by any foreign public official] . . . , directly or indirectly, of any undue advantage.”¹¹ Partly as a consequence of obligations instituted by the COE Convention, approximately thirty states have criminalized foreign bribery's demand side, including France, Germany, the Netherlands, and the United Kingdom.¹²

The advantages of criminalizing the acts of foreign officials are evident. As Transparency International has explained, “bribes are used to evade public health and safety rules, ignore national security risks, and divert scarce taxpayer money to wasteful or harmful projects. Writ large, such corruption increases the cost of doing business, undermines business confidence, and makes it much harder for small and medium enterprises . . . to do business abroad.”¹³ The Organisation for Economic Co-operation and Development (OECD) notes that effective anti-bribery enforcement requires that public officials and bribers must both face the risk of prosecution.¹⁴ “If both sides of a bribery transaction face such risks,” the OECD observes, “the overall deterrence effect of the global law enforcement system is enhanced. Public officials will be more afraid to ask for bribes and businesses will be more cautious when offering them.”¹⁵

The Biden administration has prioritized curbing global corruption since it entered office. In June 2021, the president announced in a National Security Study Memorandum that “[c]orruption threatens United States national security, economic equity, global anti-poverty and development efforts, and democracy itself” and therefore “countering corruption . . . [is] a core United States national security interest.”¹⁶ Later that year, the White House issued the first United States Strategy on Countering Corruption.¹⁷ One of the Strategy's objectives was to “update the tools available to hold corrupt actors accountable at home and abroad.”¹⁸ Internationally, the Strategy promised that the United States would “work[] with allies and partners on enacting legislation criminalizing the demand side of bribery, and enforcing new and existing laws, including in the countries where the bribery occurs.”¹⁹ Domestically, the administration promised to “work[] with the Congress to criminalize the demand side of bribery by foreign public officials.”²⁰

FEPA was enacted with bipartisan backing²¹ and the broad support of business groups and anti-corruption organizations.²² It establishes a federal offense for demanding a bribe:

It shall be unlawful for any foreign official or person selected to be a foreign official to corruptly demand, seek, receive, accept, or agree to receive or accept, directly or indirectly, anything of value personally or for any other person or nongovernmental entity, by making use of the mails or any means or instrumentality of interstate commerce, from any person . . . while in the territory of the United States, from an issuer . . . , or from a domestic concern . . . , in return for—

1. (A) being influenced in the performance of any official act;

2. (B) being induced to do or omit to do any act in violation of the official duty of such foreign official or person; or

3. (C) conferring any improper advantage,

in connection with obtaining or retaining business for or with, or directing business to, any person.²³

Any person convicted of the offense “shall be fined not more than $250,000 or 3 times the monetary equivalent of the thing of value, imprisoned for not more than 15 years, or both.”²⁴ In addition to establishing the offense, the statute requires the attorney general to submit an annual report to Congress on, among other things, “demands by foreign officials for bribes from . . . [U.S. entities], and the efforts of foreign governments to prosecute such cases,” diplomatic efforts to protect U.S. business from foreign bribery, and “major actions taken” under FEPA.²⁵

There are substantial similarities between the FCPA and FEPA. Like the FCPA, FEPA requires the demand be part of a quid pro quo. Like the FCPA, the constitutional basis for the statute is the requirement that the offense be committed “by making use of the mails or any means or instrumentality of interstate commerce.”²⁶ Like the FCPA as well, a jurisdictional nexus to the United States is established by requiring the demand be directed to a U.S. issuer or domestic concern or that it takes place in the United States. Lest there be any doubt, FEPA makes clear its extraterritorial application.²⁷

Yet, there are important differences between the two statutes. Though criminalizing the flip side of the FCPA, FEPA amends the federal bribery statute in Title 18 and not the FCPA, which is codified as part of the Securities Exchange Act in Title 15.²⁸ Because FEPA does not target issuers, the statute does not replicate the FCPA's conferral of jurisdiction on the Securities and Exchange Commission for civil enforcement actions. FEPA does not incorporate the FCPA's routine governmental action exception²⁹ or its affirmative defenses for bona fide expenditures and legality under foreign law.³⁰ FEPA expands the FCPA's definition of “foreign official” to include “any senior foreign political figure”³¹ and “any person acting in an official capacity for or on behalf of [a]” government or public international organization.³² FEPA also expands the subject of the prohibited exchange to include “conferring any improper advantage.”³³ FEPA establishes more severe penalties than those for natural persons under the FCPA.³⁴ FEPA is thus broader in scope and more punitive than the FCPA.

Prosecuting FEPA cases will be challenging. Foreign officials operate primarily outside of the United States, and thus they must come (or be brought) to the United States to face charges. It is possible that, due to a sealed indictment, a charged official might travel to the United States unwittingly (or, in the case of a diplomat or international organization official who works in the United States, not seek to flee), but even under those circumstances proceeding against the official might not be possible if they have immunity and that immunity has not been waived. If abroad, the official might be extradited, either from their home country or from another country where they are located. If the official is politically protected, the possibility of extradition from their own country might not be great. Extradition from another country, if found there, might be more likely, though the requirements of the applicable extradition treaty, such as double criminality, would need to be satisfied. In addition to these impediments to obtaining the defendant, there will also be hurdles to gathering evidence when the alleged act took place abroad since that will likely be where many documents and witnesses are located. Some evidentiary problems may be mitigated if the government requires the cooperation of an FCPA defendant, as a condition to the resolution of its case, in any related FEPA prosecution. The Department of Justice's incentivization of self-disclosure and whistleblowing may also lead to the identification of foreign officials who are demanding or taking bribes and to the provision of evidence.³⁵

A FEPA investigation and prosecution could also disturb relations between the United States and the foreign official's country. Already the FCPA creates diplomatic challenges since any charge requires reference to the foreign official to whom the bribe was offered. Even if that official's name is anonymized (as is the Justice Department's typical practice), indictments are public documents, and the official is often easily identifiable. The suggestion that a foreign official is on the receiving end of a bribe in an FCPA case—and indeed may have solicited it—can upset bilateral relations, particularly if it is a high-ranking official. Under FEPA, this issue will be exacerbated because the official will be named as a defendant and because the evidence that supports an indictment and prosecution will describe corrupt operations within the foreign government, including possibly the alleged acts of others who are not charged. Diplomatic challenges may arise if the foreign government's support is needed for the success of a diplomatic initiative, an important negotiation, or a military operation, or when that state's vote is critical to the outcome of a contested decision in an international organization.

These complications and sensitivities may lead the Justice Department in some cases to decide not to pursue FEPA charges. Instead, it may encourage foreign prosecutors to proceed against the foreign official, provided that the foreign jurisdiction has criminalized the alleged act and there is good trust and cooperation between the Department and foreign law enforcement authorities.³⁶ Such collaborations, already pursued before FEPA's enactment, may incentivize foreign prosecutors to act against their own officials, bolstering global anti-corruption enforcement and facilitating U.S. prosecutions of those subject to the FCPA.