[Senate Report 105-277]
[From the U.S. Government Publishing Office]
Calendar No. 510
105th Congress Report
SENATE
2d Session 105-277
_______________________________________________________________________
THE INTERNATIONAL ANTI-BRIBERY ACT OF 1998
_______
July 30, 1998.--Ordered to be printed
_______________________________________________________________________
Mr. D'Amato, from the Committee on Banking, Housing, and Urban Affairs,
submitted the following
R E P O R T
Introduction
On June 25, 1998, the Committee on Banking, Housing, and
Urban Affairs, reported an original bill, S. 2375 the
``International Anti-Bribery Act of 1998,'' to amend the
Foreign Corrupt Practices Act of 1977 (``FCPA'') to implement
the Organization for Economic Cooperation and Development
(``OECD'') Convention on Combating Bribery of Foreign Public
Officials in International Business Transactions. The Committee
voted 18-0 to report the legislation to the Senate.
History of the Legislation
In the wake of the Watergate scandals, the Securities and
Exchange Commission discovered that many public companies were
maintaining cash ``slush funds'' from which illegal campaign
contributions were being made in the United States and illegal
bribes were being paid to foreign officials. Subsequently,
scandals involving payments by U.S. companies to public
officials in Japan, Italy, and Mexico led to political
repercussions within those countries and severely sullied the
reputation of American companies throughout the world.
In response, Congress passed the Foreign Corrupt Practices
Act of 1977 (the ``FCPA''). Through this Act, the United States
declared its policy that American companies should act
ethically in bidding for foreign contracts and should act in
accordance with the U.S. policy of encouraging the development
of democratic institutions and honest, transparent business
practices. The FCPA amended the Securities Exchange Act of 1934
to require issuers covered under that Act to maintain
transparent books and records and provided for civil and
criminal penalties. In addition, the FCPA required both issuers
and all other U.S. nationals and companies (defined as
``domestic concerns'') to refrain from making any unlawful
payments to public officials, political parties, party
officials, or candidates for public office, directly or through
others, for the purpose of causing that person to make a
decision or take an action, or refrain from taking an action,
for the purpose of obtaining or retaining business.
Since the passage of the FCPA, American businesses have
operated at a disadvantage relative to foreign competitors who
have continued to pay bribes without fear of penalty. Such
bribery is estimated to affect overseas procurements valued in
the billions of dollars each year. Indeed, some of our trading
partners have explicitly encouraged such bribes by permitting
businesses to claim them as tax-deductible business expenses.
It is impossible to calculate with certainty the losses
suffered by U.S. businesses due to bribery by our foreign
competitors. The Commerce Department has stated that it has
learned of significant allegations of bribery by foreign firms
in approximately 180 international commercial contracts since
mid-1994, contracts that were valued at nearly $80 billion.
This legislation, coupled with implementation of the OECD
Convention by our major trading partners, will go a long way
towards leveling the playing field for U.S. businesses in
international contracts.
In 1988, Congress directed the Executive Branch actively to
seek to level the playing field by encouraging our trading
partners to enact legislation similar to the FCPA. These
efforts eventually culminated in the Organization for Economic
Cooperation and Development Convention on Combating Bribery of
Foreign Public Officials in International Business Transactions
(the ``OECD Convention''). Thirty-three countries, comprising
most of the significant trading countries in the world, signed
this Convention in Paris in December 1997. This Convention was
forwarded by the President to the Senate on May 1, 1998.
The OECD Convention calls on all parties to make it a
criminal offense ``for any person intentionally to offer,
promise or give any undue pecuniary or other advantage, whether
directly or through intermediaries, to a foreign public
official, for that official or for a third party, in order that
the official act or refrain from acting in relation to the
performance of official duties, in order to obtain or retain
business or other improper advantage in the conduct of
international business.'' It further calls on all parties to
assert territorial jurisdiction broadly and, where consistent
with national legal and constitutional principles, to assert
nationality jurisdiction.
This Act amends the FCPA to conform it to the requirements
of and to implement the OECD Convention. First, the FCPA
currently criminalizes payments made to influence any decision
of a foreign official or to induce him to do or omit to do any
act. The Act expands the FCPA's scope to include payments made
to secure ``any improper advantage,'' the language used in the
OECD Convention.
Second, the OECD Convention calls on parties to cover ``any
person''; the current FCPA covers only issuers with securities
registered under the 1934 Securities Exchange Act and
``domestic concerns.'' The Act, therefore, expands the FCPA's
coverage to include all foreign persons who commit an act in
furtherance of a foreign bribe while in the United States.
Third, the OECD Convention includes officials of public
international organizations within the definition of ``public
official.'' Accordingly, the Act similarly expands the FCPA's
definition of public officials to include officials of such
organizations.
Fourth, the OECD Convention calls on parties to assert
nationality jurisdiction when consistent with national legal
and constitutional principles. Accordingly, the Act amends
theFCPA to provide for jurisdiction over the acts of U.S. businesses
and nationals in furtherance of unlawful payments that take place
wholly outside the United States. This exercise of jurisdiction over
U.S. businesses and nationals for unlawful conduct abroad is consistent
with U.S. legal and constitutional principles and is essential to
protect U.S. interests abroad. It is within the constitutional grant of
power to Congress to ``regulate Commerce with foreign Nations'' and to
``define and punish * * * Offenses against the Law of Nations.'' U.S.
Const. art. 1, Sec. 8, cl. 3 & 10.
Fifth and finally, the Act amends the FCPA to eliminate the
current disparity in penalties applicable to U.S. nationals and
foreign nationals employed by or acting as agents of U.S.
companies. In the current statute, foreign nationals employed
by or acting as agents of U.S. companies are subject only to
civil penalties. The Act eliminates this restriction and
subjects all employees or agents of U.S. businesses to both
civil and criminal penalties.
Section-By-Section
Section 1. Short title.
Section 2. Amendments relating to issuers of securities.
Section 2(a) implements the OECD Convention by amending
Sec. 30A of the Securities Exchange Act of 1934 to prohibit any
payments made to foreign officials, foreign political parties,
party officials, and candidates, directly or through other
persons, for the purpose of securing ``any improper
advantage.'' See OECD Convention, Art. 1, para. 1.
Section 2(b) implements the OECD Convention by amending
Sec. 30A(f)(1) to expand the definition of ``foreign official''
to include an official of a public international organization.
See OECD Convention, Art. 1, para. 4(a). Public international
organizations are then defined by reference to those
organizations designated by Executive Order pursuant to the
International Organizations Immunities Act (22 U.S.C.
Sec. 288).
Section 2(c) implements the OECD Convention by creating a
new additional basis for jurisdiction over foreign bribery by
U.S. issuers and U.S. persons that are officers, directors,
employees, or agents, or stockholders or such issuers. See OECD
Convention, Art. 4, para. 2. This section extends coverage for
acts outside the United States to U.S. issuers that are
organized under the laws of the United States or of a State,
territory, or commonwealth, or a political subdivision thereof
and U.S. persons acting on such issuers' behalf.
Under the new Sec. 30A(f), U.S. issuers or U.S. persons
acting on a U.S. issuers' behalf violate the FCPA if they make
any of the payments prohibited under the existing statute
outside of the United States, irrespective of whether in doing
so they make any use of the mails or means or instrumentality
of interstate commerce. Although this section limits liability
to U.S. issuers and U.S. persons acting on U.S. issuers'
behalf, it is expected that the established principles of
liability, including principles of vicarious liability, that
apply under the current version of the FCPA shall apply to the
liability of U.S. issuers for acts taken on their behalf by
their officers, directors, employees, agents, or stockholders
outside the territory of the United States, regardless of the
nationality of the officer, director, employee, agent, or
stockholder.
Section 2(c) also inserts references to the new offense in
the provisions of the existing statute governing exceptions and
affirmative defenses.
Section 2(d) implements the OECD Convention by amending
Sec. 32(c) of the Securities Exchange Act of 1934 to eliminate
the current disparity in treatment between U.S. nationals that
are employees or agents of issuers and foreign nationals that
are employees or agents of issuers. Presently, foreign
nationals who are employees or agents (as opposed to officers
or directors) are subject only to civil sanctions. Eliminating
this preferential treatment implements the OECD Convention's
requirement that ``[e]ach Party shall take such measures as may
be necessary to establish that it is a criminal offense under
its law for any person to [make unlawful payments].'' In
addition, section 2(d) provides that the same penalties shall
apply to issuers for violation of the new provisions for acts
outside the United States as apply to violations of the
existing statute.
Section 3. Amendments relating to domestic concerns
Section 3(a) implements the OECD Convention by amending
Sec. 104(a) of the FCPA (15 U.S.C. Sec. 78dd-2(a)) to prohibit
any payments made to foreign officials, foreign political
parties, party officials, and candidates, directly or through
other persons, for the purpose of securing ``any improper
advantage.'' See OECD Convention, Art. 1, para. 1.
Section 3(b) implements the OECD Convention by amending
Sec. 104(h)(2) of the FCPA to expand the definition of
``foreign official'' to include an official of a public
international organization. See OECD Convention, Art. 1, para.
4(a). Public international organizations are then defined by
reference to those organizations recognized by Executive Order
pursuant to the International Organizations Immunities Act (22
U.S.C. Sec. 288).
Section 3(c) implements the OECD Convention by creating a
new additional basis for jurisdiction over foreign bribery by
U.S. persons. See OECD Convention, Art. 4, para. 2. This
section limits coverage to businesses organized under the laws
of the United States, a State, territory, possession, or
commonwealth, or a political subdivision thereof, or U.S.
nationals. U.S. nationals are defined by reference to the
Immigration and Nationality Act, 8 U.S.C. Sec. 1101 (22), which
defines a ``national of the United States'' as ``(A) a citizen
of the United States, or (B) a person, who though not a
citizen, owes permanent allegiance to the United States.''
Under the new Sec. 104(h), a U.S. person violates the FCPA if
it makes any of the payments prohibited under the existing
statute outside of the United States, irrespective of whether
in doing so it makes any use of the mails or means or
instrumentality of interstate commerce. Although this section
imposes liability only on U.S. persons, it is expected that the
established principles of liability, including principles of
vicarious liability, that apply under the current version of
the FCPA shall apply to the liability of U.S. businesses for
acts taken on their behalf by their officers, directors,
employees, agents or stockholders outside the United States,
regardless of the nationality of the officer, director,
employee, agent, or stockholder. Section (3)(c) also inserts
references to the new offense in the provisions of the existing
statute governing exceptions, affirmative defenses, and
injunctive relief.
Section 3(d) implements the OECD Convention by eliminating
the current disparity in treatment between U.S. nationals that
are employees or agents of domestic concerns and foreign
nationals that are employees or agents of domestic concerns.
Presently, foreign nationals who are employees or agents (as
opposed to officers or directors) are subject only to civil
sanctions. Eliminating this preferential treatment implements
the OECD Convention's requirement that ``[e]ach Party shall
take such measures as may be necessary to establish that it is
a criminal offense under its law for any person to [make
unlawful payments].'' In addition, section 3(d) provides that
the same penalties shall apply to U.S. persons for violation of
the new Sec. 104(h) for acts outside the United States as apply
to violations of the existing FCPA.
Section 3(e) is a technical amendment to delete unnecessary
language from the definition of 11 routine governmental action.
The term is not used in paragraph (1) of subsection (h) and
this language is not used in the otherwise identical definition
in Sec. 30A(f)(3)(A) (redesignated by this Act as
Sec. 30A(g)(3)(A)).
Section 4. Amendment relating to other persons
Section 4 creates a new section in the FCPA providing for
criminal and civil penalties over persons not covered under the
existing FCPA provisions regarding issuers and domestic
concerns. This section closes the gap left in the original FCPA
and implements the OECD Convention's requirement that Parties
criminalize bribery by ``any person.'' OECD Convention, Art. 1,
para. 1. The prohibited acts are the same as those covered by
Sec. 30A(a) and Sec. 104(a) with two qualifications.
First, the offense created under this section requires that
an act in furtherance of the bribe be taken within the
territory of the United States. The OECD Convention requires
each Party to ``take such measures as may be necessary to
establish its jurisdiction over the bribery of a foreign public
official when the offense is committed in whole or in part in
its territory.'' OECD Convention, Art. 4, para. 1. The new
offense complies with this section by providing for criminal
jurisdiction in this country over bribery by foreign nationals
of foreign officials when the foreign national takes some act
in furtherance of the bribery within the territory of the
United States. It is expected that the established principles
of liability, including principles of vicarious liability, that
apply under the current version of the FCPA shall apply to the
liability of foreign businesses for acts taken on their behalf
by their officers, directors, employees, agents or stockholders
in the territory of the United States, regardless of the
nationality of the officer, director, employee, agent, or
stockholder.
As envisioned by the negotiators, Congress intends that the
``territorial basis for jurisdiction should be interpreted
broadly so that an extensive physical connection to the bribery
act is not required.'' See Commentaries on the Convention on
Combating Bribery of Foreign Public Officials in International
Business Transactions (OECD Commentary) at para. 24. Further,
``territory of the United States'' should be understood to
encompass all areas over which the United States asserts
territorial jurisdiction. See 18 U.S.C. Sec. 5 (``The term
`United States', as used in this title in a territorial sense,
includes all places and waters, continental or insular, subject
to the jurisdiction of the United States, except the Canal
Zone.''); 18 U.S.C. Sec. 7 (special maritime and territorial
jurisdiction of the United States; 49 U.S.C. Sec. 46501(2)
(special aircraft jurisdiction of the United States).
Although this section limits jurisdiction over foreign
nationals and companies to instances in which the foreign
national or company takes some action while physically present
within the territory of the United States, Congress does not
thereby intend to place a similar limit on the exercise of U.S.
criminal jurisdiction over foreign nationals and companies
under any other statute or regulation.
The second difference from the existing FCPA provisions is
that this section expands the commerce nexus to include not
only the use of the mails or any means or instrumentality of
interstate commerce but ``any other act'' within the United
States. It is the view of Congress that any act committed by a
foreign national within the United States that is in
furtherance of a bribe paid to a foreign official falls within
the Congress' power to regulate ``Commerce with foreign
Nations.'' U.S. Const., Art. 1, sec. 8, cl. 3.
Finally, section 4 defines ``covered person'', as used in
this section, to mean any natural person other than a U.S.
national and any business organized under the laws of a foreign
nation or a political subdivision thereof.
Regulatory Impact Statement
This legislation is designed to implement the recently
signed OECD Convention on Combating Bribery of Foreign Public
Officials in International Business Transactions. The United
States has been urging other industrialized countries to
observe principles similar to the provisions of the Foreign
Corrupt Practices Act. Once adopted, the Convention will
establish an international regime of ethical conduct in
business transactions. The Committee believes that this
legislation will have little or no regulatory impact.
Congressional Budget Office Cost Estimate
The Congressional Budget Office estimates that implementing
this legislation would not result in any significant cost to
the federal government. Because enactment of the bill could
affect direct spending and receipts, pay-as-you-go procedures
would apply. However, CBO estimates that any impact on direct
spending and receipts would not be significant.
The legislation is excluded from the application of the
Unfunded Mandates Reform Act (UMRA) under section 4 of that
act, because it would amend the Foreign Corrupt Practices Act
(FCPA) in ways that are necessary to implement the Organization
for Economic Cooperation and Development Convention on
Combating Bribery of Foreign Public Officials in International
Business Transactions. Section 4 of UMRA excludes from the
application of that act any legislative provisions that are
necessary for the ratification or implementation of
international treaty obligations.
changes in existing law
In the opinion of the Committee, it is necessary to
dispense with the requirement of subsection 12 of rule XXVI of
the Standing Rules of the Senate in order to expedite the
business of the Senate.
APPENDIX
----------
U.S. Department of Justice,
Office of Legislative Affairs,
Washington, DC, May 4, 1998.
Hon. Albert Gore, Jr.,
President, U.S. Senate,
Washington, DC.
Dear Mr. President: Enclosed herewith is a draft bill, the
``International Anti-Bribery Act of 1998,'' which contains
legislative proposals to implement the Organization for
Economic Cooperation and Development (OECD) Convention on
Combating Bribery of Foreign Public Officials in International
Business Transactions (the ``OECD Convention''). This
Convention was forwarded by the President to the Senate on May
1, 1998, for its advice and consent.
Administrations of both parties have long urged our trading
partners to criminalize bribery of foreign public officials by
their nationals, as the United States did in 1977 in the
Foreign Corrupt Practices Act of 1997 (the ``FCPA''). These
bipartisan efforts finally succeeded when thirty-three
countries signed the OECD Convention in Paris in December of
last year. The OECD Convention, when fully implemented by all
parties, will help create the level playing field and
transparent contracting long sought by American businesses as
they compete around the world for public contracts.
The OECD Convention calls on all parties to make it a
criminal offense ``for any person intentionally to offer,
promise or give any undue pecuniary or other advantage, whether
directly or through intermediaries, to a foreign public
official, for that official or for a third party, in order that
the official act or refrain from acting in relation to the
performance of official duties, in order to obtain or retain
business or other improper advantage in the conduct of
international business.'' It further calls on all parties to
exert territorial jurisdiction broadly and, where consistent
with national legal and constitutional principles, nationality
jurisdiction.
The draft bill would amend the FCPA to conform to the
requirements of and to implement the OECD Convention. First,
the FCPA currently criminalizes payments made to influence any
decision of a foreign official or to induce him to do or omit
todo any act in order to obtain or retain business. The bill
would make explicit that payments made to secure ``any improper
advantage,'' the language used in the OECD Convention, are prohibited
by the FCPA.
Second, the OECD Convention calls on parties to cover ``any
person.'' The current FCPA covers only issuers with securities
registered under the 1934 Securities Exchange Act and
``domestic concerns.'' The bill would, therefore, expand
coverage to include all foreign persons who commit an act in
furtherance of a foreign bribe while in the United States.
Third, the OECD Convention includes officials of public
international organizations within the definition of ``public
official.'' Accordingly, the bill similarly expands the FCPA
definition of public officials to include officials of such
organizations.
Fourth, the OECD Convention calls on parties to assert
nationality jurisdiction over offenses committed abroad when
consistent with national legal and constitutional principles.
Accordingly, the bill would provide for jurisdiction over the
acts of U.S. businesses and nationals in furtherance of
unlawful payments that take place wholly outside the United
States.
Fifth and finally, the bill would amend the penalties
applicable to employees and agents of U.S. businesses to
eliminate the current disparity between U.S. nationals and non-
U.S. nationals employed by or acting as agents of U.S.
companies. In the current statute, such non-U.S. nationals are
subject only to civil penalties. The bill would eliminate this
restriction and subject all employees or agents of U.S.
businesses to both civil and criminal penalties.
The International Anti-Bribery Act would affect receipts
(new criminal fines) and direct spending (outlays from the
Crime Victims Fund (CVF)). Therefore, it is subject to the pay-
as-you-go requirement of the Omnibus Budget Reconciliation Act.
Receipts from fines would be deposited into the CVF and could
be spent in the following year. Thus, direct spending from the
CVF would match the deposits into the CVF with a one-year lag.
Our preliminary estimate is that the net effect of the enrolled
bill on the deficit will be less than $500,000 annually. This
proposal should be considered in conjunction with all other
proposals that are subject to the pay-as-you-go requirement.
With respect to potential impacts on the criminal justice
system, the bill imposes new criminal penalties on two classes
of persons: (a) foreign nationals employed by or acting as
agents of U.S. companies, and (b) foreign nationals and foreign
companies that engage in unlawful acts in the U.S. In addition,
the liability of U.S. persons is expanded to the extent that
unlawful acts taken wholly outside the United States will now
result in the small penalties as those taken within the United
States under the existing statute.
It would be appreciated if you would lay this draft bill
before the Senate. An identical proposal has been transmitted
to the Speaker of the House of Representatives.
The Office of Management and Budget has advised that there
is no objection to the presentation of this proposal to the
Congress from the standpoint of the Administration's program.
Sincerely,
Ann M. Harkins,
Acting Assistant Attorney General.