In 2009 there are six major international anti-bribery conventions, and new or updated laws criminalizing the bribery of domestic and foreign public officials are sprouting up everywhere. It sounds like we should be nearing the mythical “level playing field,” but while uneven and erratic enforcement remains the greatest obstacle, another dilemma lies buried in the globalization of anti-bribery laws. All the laws are different. Maybe not dramatically different, but they’re different enough – both in text and application – to create unexpected challenges to counsel trying to clear a path for their companies while operating, often, in over a hundred countries.
Let’s start with travel and lodging provided to government officials so they can travel to company headquarters to tour facilities. Like businesses, governments often want to conduct due diligence before entering into significant contracts. Many countries have no budget for this. Some countries permit their officials to accept this sort of payment (or reimbursement), but many others don’t. Of those that don’t, their regulations are often opaque. They may have vague prohibitions about abuse of office or self-enrichment that each supervisor applies as he sees fit.
Even assuming that you can track down and decipher the local laws, there’s still the question of “reasonableness.” Like the U.S. Foreign Corrupt Practices Act (FCPA), many laws require the value of the travel and lodging to be “reasonable.” Reasonable where and to whom? U.S. government officials are pretty accustomed to traveling Economy class. Not so with Russian officials. Most Europeans are content with taxis or minibuses for local transportation. Saudi officials prefer limos.
Facilitating payments are a clear example of laws bumping into laws. The FCPA doesn’t prohibit payments to expedite or secure the performance of routine governmental action by a foreign official, such as mail delivery, police protection, phone service, loading and unloading cargo (Canada, Australia, New Zealand and South Korea have similar exceptions to their anti-bribery laws). On the other hand, the countries in which these payments are made (including, of course, the United States, Canada, Australia, New Zealand and South Korea), prohibit their officials from accepting them. So, a U.S. company is not prohibited by the FCPA from making these grease payments, but they are nevertheless illegal. If an employee makes these payments in-country and accounts for them accurately, he documents a violation of local law. If he accounts for them inaccurately, of course, he violates the books and records provision of most anti-bribery laws. Multinationals hire employees of all citizenships. The likelihood of an inadvertent violation increases with the size of a company. A British employee is not permitted to make a facilitating payment. If the British employee works for a U.S. company that allows them, he must be made to understand that, while these payments are permitted under U.S. law, British law applies to him and doesn’t permit them.
Companies often enter foreign markets by using third party intermediaries to represent them. These intermediaries play an important role in sales strategy and bring local business and linguistic expertise to the table. They may also bring risk. Companies must know who they’re working with and so they must investigate the professional and financial backgrounds and family and government ties of each. These background reports are often conducted in one place and then sent to in-house counsel in another and finally stored in a third for safekeeping. This has become a central part of every well-run company’s compliance program. It sounds straightforward, but this process bumps into local laws. Many countries have rigorous data privacy regulations that control how sensitive information is collected, transmitted and stored – particularly across borders. The need for transparency and the need to protect sensitive information are often in conflict.
In addition to these laws, which are generally published and accessible, regulations often pose additional risks. In many countries, companies are not permitted access to the procurement regulations that govern the conduct of the military. Companies keen to avoid providing travel or other benefits exceeding those permitted by local regulations aren’t able to see the actual regulations. Similarly, in some Asian countries, revolving door regulations governing the transition of military officers to the private sector are not available to companies seeking to comply with local law when hiring.
Some companies conclude that it is sufficient to stay on the right side of the enforcement agencies in the country in which they’re headquartered. Others conclude that the U.S. Department of Justice and Securities & Exchange Commission are the most active internationally, so they work to comply with the U.S. legal framework. Still others take a leap of faith and announce to the world through their corporate policies that they comply with the laws of all countries in which they operate.
Many companies are doing their best in this respect. They know that non-compliance with any laws, anywhere, is likely to have an adverse impact on their company’s reputation. Should things go wrong, a pattern of local law violations – whether because of travel for government officials deemed excessive under local law or collecting data on third parties without consent or other safeguards – could be cast as evidence of shoddy internal controls. A company’s compliance program may itself permit or require the violation of some laws, somewhere, and there may be no way around it.
Most companies try to make the best of things. Knowing their intermediaries’ ties to foreign governments may simply be more important than staying within the strict boundaries of data privacy protection. Risking first class travel for visiting government officials and winning the business may make more sense than restricting the budget and losing the business. These are difficult decisions and they’re made more difficult as each new country comes on-line with its own anti-bribery law. Setting a single high standard and following it everywhere has long been thought to be a reasonable approach and it probably still is. For companies that want to drill down, there are excellent international law firms that can provide this advice as needed, although the expense multiplies with the number of countries.
The TRACE Resource Center summarizes anti-bribery laws and regulations for 95 countries (gifts and hospitality, working with third party intermediaries, etc.), and this database continues to expand. Developing a company’s internal resources can be the most cost-effective approach. Increasingly, companies are identifying regional compliance experts who can help their colleagues steer through the undergrowth. This can result in a better trained compliance team and more timely and cost-effective advice. It can also ensure that, even when laws appear to conflict, the company chooses the best path it can toward the ultimate destination of a transparent and bribe-free business model.
