S.6 of the Bribery Act 2010 (BA 2010) creates an offence of bribing foreign public officials, which is analogous to the US provisions creating an offence of bribing foreign officials contained in the Foreign and Corrupt Practices Act 1977 (FCPA 1977). Until very recently, neither the UK nor the US courts had defined the parameters of the offence.
The US appeal courts have now provided some assistance. On 16th May 2014, in the case of United States v Esquenazi et al. Case No. 11-15331 (11th Cir. May 16, 2014), the Eleventh Circuit ruled for the first time on the meaning of foreign official for the purpose of the FCPA. This is important as these statutory provisions apply to both US and non-US corporations. In addition, the judgment will undoubtedly also assist UK lawyers when advising corporations in relation to s.6 of the Bribery Act 2010.
The FCPA 1977 and the Bribery Act 2010: foreign officials
“Foreign official is defined in the FCPA 1977, §78dd-2(h)(2)(A) as: any officer or employee of a foreign government or any department, agency, or instrumentality thereof…”
In analogous provisions, s.6(5) of the BA 2010 defines a foreign public official” as follows:
(5) Foreign public official means an individual who:
Whilst there are some obvious individuals who will qualify in this category (e.g. a foreign judge or politician) the offence under the BA 2010 also extends to anyone who is in an administrative” position for any public enterprise”. The peripheries of the offence remain uncertain and the UK courts are yet to consider where the boundaries lie. Unfortunately, the Ministry of Justice’s Guidance to s.9 of the UK Bribery Act 2010 (procedures which relevant commercial organisations can put in place to prevent persons associated with them from bribing) does not sufficiently clarify matters.
In Esquenazi, substantial bribes were paid by the officers of a Florida Company Terra Commnications” (Terra”) to officials of a Haitian company Telecommunications D’Haiti, S.A.M.” (S.A.M.”). The Haitian government granted S.A.M.” significant funding and tax-breaks as well as having other significant involvement in its operations. The issue on appeal was whether employees of S.A.M.” were foreign officials” for the purpose of the FCPA. The appellants contended that the legal direction on instrumentality” was deficient as it caused the jury to convict them simply because S.A.M.” was a government-owned entity that performed a service, without any determination whether the service it performed was a governmental function.
Surprisingly, the US courts have never previously been required to determine the meaning of instrumentality”. It was argued on appeal that this should be narrowly defined. The Eleventh Circuit disagreed and, using the OECD Convention as a platform for its decision, gave the term a broad, inclusive definition:
With this guidance, we define instrumentality as follows. An instrumentality” under section 78dd-2(h)(2)(A) of the FCPA is an entity controlled by the government of a foreign country that performs a function the controlling government treats as its own. Certainly, what constitutes control and what constitutes a function the government treats as its own are fact-bound questions.
For today, we provide a list of some factors that may be relevant to deciding the issue. To decide if the government controls” an entity, courts and juries should look at the foreign government’s formal designation of that entity; whether the government has a majority interest in the entity; the government’s ability to hire and fire the entity’s principals; the extent to which the entity’s profits, if any, go directly into the governmental fisc, and, by the same token, the extent to which the government funds the entity if it fails to break even; an the length of time these indicia have existed.
On analysing the facts, the Eleventh Circuit came to the conclusion that the jury direction was adequate. Similarly, it rejected an appeal based on the contention that the concept of instrumentality” was unconstitutionally vague if it included state-owned enterprises that did not perform a government function – the Eleventh Circuit concluded that this was an essential element of instrumentality” and so the point simply did not arise.
It seems likely that the UK courts will seek to implement the Esquenazi criteria” if asked to clarify the definition of a foreign public official” in the BA 2010.
Blog | 28 May 14