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City Bar Recommends Reassessment of Foreign Corrupt Practices Act

The New York City Bar Association has issued a report recommending a reassessment of the Foreign Corrupt Practices Act (FCPA) of 1977 on the grounds that it places asymmetric burdens on companies seeking to comply with the Act in the global economy.

“While accepting and fully embracing the ultimate policy goal of the FCPA – the prevention of corruption worldwide,” the report, written by the City Bar’s International Business Transactions Committee, concludes that (1) the United States has pursued a virtually stand-alone approach to deterring foreign corruption (at least in terms of enforcement activity and the significance of fines and other sanctions); (2) this approach places significant costs on companies that are subject to the Act as compared to their competitors that are not; and (3) if these circumstances are unlikely to change, the United States should reevaluate its approach to the problem of foreign corruption.

When the FCPA was enacted in 1977, Congress was worried that “paying bribes abroad would give certain ‘corrupt’ American companies an edge on their more efficient and more ethical American competitors. Foreign competition was not perceived as a meaningful threat in 1977,” states the report, which maintains that the FCPA now has the effect of putting U.S.-regulated companies at a disadvantage in an economy that has become significantly more globalized since the FCPA was enacted.

In the Committee’s view, the FCPA has had the effect of making ordinary and lawful business activity more costly for U.S.-regulated companies and has deterred non-U.S. companies from taking steps that otherwise make sense because they don’t want to come under the purview of the Act. “Companies that are subject to the FCPA—including all U.S. companies and non-U.S. companies that have equity securities listed on a U.S. exchange—have become increasingly wary of purchasing businesses that have not operated under the Act for fear of acquiring very costly liabilities. Similarly, companies that are not subject to the FCPA express substantial reservations about engaging in transactions that would bring them under the Act’s jurisdiction, including listing their equity securities on a U.S. exchange through an IPO or capital raising transaction or by acquiring a U.S. company in a stock-for-stock merger or exchange offer.”

The report is available here: http://bit.ly/urTSrr

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