On 14 December 2023, as part of the National Defense Authorization Act for Fiscal Year 2024 (NDAA), Congress enacted the Foreign Extortion Prevention Act (FEPA). On 22 December 2023, President Biden signed the NDAA into law. The FEPA bill has been on the legislative agenda for several years,1 and was passed with bipartisan support. In essence, FEPA creates criminal liability for foreign public officials who solicit or accept bribes from certain categories of US persons and companies.
As emphasized by FEPA's congressional sponsors, the primary motivation behind FEPA was to level the playing field for companies conducting business outside of the US Multinational corporations are prohibited from bribing foreign officials (i.e., the supply side of bribery) under the Foreign Corrupt Practices Act (FCPA), and FEPA criminalizes soliciting or accepting bribes by foreign officials (i.e., the demand side of bribery). This provides companies with an opportunity to respond to foreign officials' corrupt demands by emphasizing that, as a result FEPA, both the company and the government official can face criminal exposure for the bribe. US Senator Sheldon Whitehouse (D-RI), a co-sponsor of the bill, stated that "[t]he enactment of the Foreign Extortion Prevention Act is a big win for the rule of law in the clash of civilizations against international kleptocrats and criminals. Demanding a bribe from American companies will come with consequences." Consequently, while it does not amend the FCPA but instead amends the US domestic bribery statute (18 USC § 201), FEPA mirrors the FCPA statutory language in a number of respects.
First, akin to the FCPA, jurisdiction under the FEPA is triggered when the bribe or bribe solicitation involves a US issuer, US domestic concern, or any person while in the territory of the US Second, FEPA's definition of a "foreign official" is generally in line with the FCPA's broad range of categories of "public officials." The minor distinctions are limited to the exclusion of "political candidates" and inclusion of "senior political figures" and individuals acting in an unofficial capacity on behalf of foreign governments under FEPA. Third, the conduct criminalized in FEPA is a mirror image of the prosecutable conduct under the FCPA. FEPA prohibits foreign officials from corruptly demanding, seeking, receiving, accepting, or agreeing to accept, directly or indirectly, anything of value. Finally, just like the FCPA, FEPA requires a quid pro quo, i.e., the corrupt demand by a foreign official must be in exchange for an improper benefit. Specifically, FEPA applies to officials that demand or accept bribes in exchange for (1) "being influenced in the performance of any official act"; (2) "being induced to do or omit to do any act in violation of the official duty of such foreign official or person"; or (3) "conferring any improper advantage, in connection with obtaining or retaining business for or with, or directing business to, any person." However, by virtue of being placed under the federal domestic bribery statute (18 USC § 201), FEPA has a more stringent quid pro quo standard that requires prosecutors to prove that a bribe was paid in exchange for a specific "official act." See McDonnell v. United States, 579 U.S. 550 (2016). The Second Circuit refused to extend this standard to FCPA prosecutions in United States v. Ng Lap Seng, No. 18-1725 (2d Cir. 2019).
FEPA violations carry a potential penalty of (1) a fine up to USD 250,000 or three times the monetary equivalent of the thing of value (whereas the FCPA caps the penalty at two times the monetary gain obtained or loss incurred by another person); and/or (2) imprisonment of up to 15 years (whereas the FCPA statutory maximum is up to five years imprisonment). FEPA also requires the US Attorney General to publish a yearly report summarizing the US Department of Justice's (DOJ) major enforcement actions under the law. As part of 18 USC § 201, FEPA can also serve as a predicate offense for money laundering charges.
FEPA reinforces the Biden Administration's policy emphasis on tackling corruption as part of the broader US national security strategy. It also aligns US law with international anti-corruption conventions which frequently encourage state parties to address both sides of bribery through their national legislation. For example, Article 16 of the United Nations Convention Against Corruption (UNCAC) states that "[e]ach State Party shall consider adopting such legislative and other measures as may be necessary to establish as a criminal offense when committed intentionally, the solicitation or acceptance by a foreign public official or an official of a public international organization, directly or indirectly, of an undue advantage, for the official himself or herself or another person or entity, in order that the official act or refrain from acting in the exercise of his or her official duties." Consistent with these general precepts, a number of countries including the United Kingdom, France, Switzerland, Malaysia, and others have all imposed criminal liability for the recipients of bribes.
While it remains to be seen how DOJ will enforce FEPA and the types of cases it will prioritize, FEPA will facilitate US prosecutors' continued focus on tackling foreign corruption. FEPA enforcement could also potentially lead to an uptick in FCPA investigations because while investigating FEPA violations, FCPA investigations are likely to be uncovered. It is conceivable that US prosecutors could pursue companies and individuals on a theory of aiding and abetting or conspiracy to pay bribes under the FEPA. In addition, companies that form joint ventures or other partnerships with foreign state-owned companies should be mindful that their employees could be considered "foreign officials" under FEPA, rendering them potentially implicated under this new law in an individual capacity (i.e., the employer seems unlikely to be held liable in this scenario). Note that FEPA specifically states that it shall not be construed to encompass conduct that would violate the FCPA whether pursuant to a theory of direct liability, conspiracy, complicity, or otherwise.
The designation of FEPA as a domestic bribery statute also creates the potential for uncertainty and inconsistency, as these cases may be brought by prosecutors within the 94 US Attorneys' Offices, while FCPA cases are prosecuted and overseen centrally within the Fraud Division of the US Justice Department headquarters.
From a policy perspective, there also remains the uncertainty around how the US government will take into account its foreign policy priorities in FEPA enforcement as well as how non-US governments that do not yet criminalize the demand side of foreign bribery may respond to this legislation, and whether they may view this as an opportunity for scrutinizing the conduct of US government officials. As with all newly enacted statutes, only time will tell whether the enforcement authorities will fulfill the aspirations of the legislators.
In conclusion, the enactment of FEPA reinforces the need for strong corporate compliance programs. Not only can strong compliance programs help to detect misconduct before it occurs, but also serve as a useful defense for purposes of positioning companies to reduce or avoid corporate criminal liability.
1 Along with key anti-corruption NGOs and other industry leaders, Baker McKenzie Senior Associate Maria Piontkovska consulted on the initial drafts of the FEPA bill.