Wednesday, September 23, 2009

If H.R. 2152 Were to Be Enacted ...

There is little in terms of substantive FCPA case law. Yet this much is clear - there is no private right of action under the FCPA - enforcement of the law is in the hands of the DOJ and the SEC (as to issuers).

However, Representative Ed Perlmutter (D-CO) would like to change that (at least a bit). In April, 2009, Perlumutter introduced H.R. 2152 - the Foreign Business Bribery Prohibition Act of 2009 (see here).

Big picture, under the proposed law, any "foreign concern" (defined to mean any person other than an issuer, domestic concern or U.S. person) that violates the FCPA's anti-bribery provisions would be liable to any issuer, domestic concern or U.S. person for damages caused by the FCPA violation. Under the proposed law, a plaintiff would need to prove that: (i) the "foreign concern" violated the FCPA's anti-bribery provisions; and (ii) the violation prevented the plaintiff from obtaining or retaining business and assisted the foreign concern in obtaining or retaining business.

In other words, if a U.S. company can prove that it lost business because a "foreign concern" gained that same business by violating the FCPA, the U.S. company could bring a lawsuit seeking damages. Under the proposed law, the damages would be the higher of the total amount of the contract or agreement that the "foreign concern" gained in obtaining or retaining the business or the total amount of the contract or agreement that the plaintiff failed to gain. To sweeten the pot, the proposed law requires treble damages along with attorneys fees and costs.

Certainly, lots to think about here.

But alas, with two foreign wars, government bailouts and debates about financial regulation, and now, the health care debate, H.R. 2152 remains buried in Congress. The last reported activity is from June 12, 2009 when the bill was reported to the House Subcommittee on Crime, Terrorism, and Homeland Security.

It's been a few months since I thought about H.R. 2152.

But I was reminded of the law and its potential application last night while reading an interesting front-page article in the New York Times titled "China Spreads Aid in Africa, With a Catch for Recipients" (see here).

The article talks about business activity by Chinese companies around the globe, and how, according to quoted sources, Chinese companies may be securing contracts through improper payments, kickbacks and the like.

A good portion of the article is about Nuctech Company Ltd. (a Beijing-based scanner company) and its questionable activity in Namibia. The article quotes the Vice President of Nuctech's "American rival, Rapiscan Systems."

I trust you are now thinking about the potential application of H.R. 2152 as well?

Let's go through the elements - "foreign concern" check, potential violation of the FCPA check, a domestic concern damaged by the "foreign concern's" violation check.

Before FCPA lawyers start dusting off their copy of the rules of civil procedure and daydreaming about H.R. 2152's promise of treble damages and attorney fees, H.R. 2152 needs to at least get "out of committee."

In any event, for those in favor of H.R. 2152, the article would seem to present a poster-child of sorts.


  1. I know this is just a theoretical exercise now, but if an amendment like HR 2152 were to be passed, how effective do you think it would really be? How often would US courts get personal jurisdiction over foreign companies like Nuctech? And even if there was jurisdiction and a judgement was handed down against the foreing concern, how about getting it enforced?

  2. Good questions. My hunch is that if HR 2152 were to enacted, the FCPA bar would quickly development a "plaintiff component." I think it would be easy in most instances to find sufficient U.S. contacts for a U.S. court to exercise jurisdiction.

    Although the DOJ's exercise of jurisdiction over foreign issuers (under 78dd-1) and foreign non-issuers and foreign nationals (under 78dd-3) has not yet been challenged, its exercise has been very expansive. In recent enforcement actions, DOJ has asserted jurisdiction based on use of U.S. banks accounts, sending e-mails through U.S. servers, etc.

    In the case of Nuctech Company Ltd., the analysis would seem to be easier as the company appears to do business in the U.S. See below link among other sources.