What does Andrew Spalding, in his article “Unwitting Sanctions”, argue is problematic about the Foreign Corrupt Practices Act?
The Foreign Corrupt Practices Act 1977 came into force in the face of a culture of corruption that was harming the economy, society, and the democracy of institutions.[1] In his appraisal of the FCPA, Andrew Spalding concludes that whilst the aim of this Act was to encourage investment, the actual outcome has been converse to that which was intended and instead the act now deters such investment.[2]
Spalding is of the opinion that w[3] Spalding argues that is detrimental to the US by reasons of the increased cost involved in doing business within such countries. This would seem to suggest that where bribery is a traditional element of doing business within a particular country it should not be uninterrupted. There are several arguments against bribery; the strongest counter-argument to Spalding’s contention of the increased cost being that bribery is rarely a definitive numerical calculation and therefore, it can add an unpredictable cost to the transactions.[4]
Disadvantages for US Companies
US businesses that operate on a worldwide scale will find that they are competing against businesses within that jurisdiction that benefit from the ability to participate in the act of bribery. Per se, however, as US companies will fear the inherent sanctions of the FCPA, which can themselves be very high, and this can discourage them from wishing to participate in business within this jurisdiction – this is damaging to trade.
The vicarious element of employees is a further problem for US companies in that, as Spalding argues, the fact that an employer can be vicariously liable for an act of bribery committed by one of their employees, even though the organisation itself may have taken all the relevant preventative measures and was not directly involved in the corrupt practice, they will still find themselves liable under the Act.
Disadvantages for Emerging Markets
By providing a disincentive to investment in emerging markets, where bribery is commonplace, emerging markets lose out on valuable investment. In turn, there is also a danger that the companies that will opt to invest in these markets instead of US companies, companies that are effectively free from FCPA-type legislation, will be companies that are open to the bribery culture and this will only work to promote and further enhance the bribery culture within a country. This is assuming that alternative countries will be prepared to invest into emerging markets and will do so one the same scale as the world’s strongest economic power and its involved countries.
Spalding does not mention, however, that the number of prosecutions under the FCPA was relatively low under the introduction of the Sarbanes-Oxley Act in 2002. This act introduced a zero-tolerance approach whereby directors and companies were prosecuted for bribery and illegal conduct anywhere, including abroad.[5] It could therefore be argued that up until the introduction of the Sarbanes-Oxley Act companies’ fears were unlikely to materialise.
[1] Stuart H. Deming, The Foreign Corrupt Practices Act and the New International Norms, (American Bar Association, 2010), xvii.
[2] Andrew Spalding, ‘Unwitting Sanctions: Understanding Anti-Bribery Legislation as Economic Sanctions Against Emerging Markets’ (2010) 62 Florida Law Review 351, 357 & 357.
[3] Ibid, 368.
[4] Raymond Fishman, et al. ‘Are Corruption and Taxation Really Harmful to Growth? Firm Level Evidence’, (2007) 83(1) J.Dev.Econ. 63, 63
[5] Richard L. Cassin, Bribery Abroad: Lessons from the Foreign Corrupt Practices Act, (Lulu, 2008), 21.
Law Tutors Online, Top Law Tutors Online, UK Law Tutor, UK Law Teacher, UK Law Notes, Manchester Law Tutor, Birmingham Law Tutor, Nottingham Law Tutor, Sheffield Law Tutor, Oxford Law Tutor, Oxbridge Law Tutor, Cambridge Law Tutor, Bristol Law Tutor, Liverpool Law Tutor, Edinburgh Law Tutor, Glasgow Law Tutor, Belfast Law Tutor, Dublin Law Tutor, Toronto Law Tutor, Vancouver Law Tutor, Montreal Law Tutor, New York Law Tutor, Sydney Law Tutor, Melbourne Law Tutor, Singapore Law Tutor, Hong Kong Law Tutor, Seoul Law Tutor, Paris Law Tutor, Los Angeles Law Tutor, Dubai Law Tutor, Boston Law Tutor, Chicago Law Tutor, Doha Law Tutor, Riyadh Law Tutor, Kuwait Law Tutor, Law Essay Help, Law Dissertation Help, Law Essay Writer, Law Dissertation Tutor, Law Essay Tutor, UK Law Essay, UK Law Tutors and London Law Tutor are trading names of London Law Tutor Ltd. which is a company registered in England and Wales. Company Registration Number: 08253481. VAT Registration Number: 160291824 Registered Data Controller: ZA236376 Registered office: Berkeley Square House, Berkeley Square, London, UK W1J 6BD. All Rights Reserved. Copyright © 2012-2021.
