President Trump’s recent Executive Order (EO), which seeks to reduce enforcement of the anti-bribery and anti-corruption provisions of the Foreign Corrupt Practices Act (“FCPA”), may be perceived as a declaration of an expected reduction in enforcement measures against American companies suspected of making unlawful payments to foreign parties in order to gain business advantages. However, according to our assessment, we may see an opposite trend – specifically in international markets – which prioritizes FCPA enforcement measures against foreign companies that cause damage to American businesses.
The EO’s objective: to strengthen American companies’ competitive advantage
This EO is part of President Trump’s sweeping policy of reducing regulation and boosting American companies’ economic competitiveness in international markets. This does not mean that the US will halt its anti-bribery and anti-corruption efforts in general, but rather, that the enforcement measures may focus on protecting American business interests.
Policy shift: from general enforcement to a focus on protection of American companies
Until present, FCPA enforcement focused primarily on anti-corruption measures against American companies operating in foreign markets. With this new EO, we may see a policy shift, whereby US enforcement authorities – particularly the DOJ and the SEC – will focus their resources on investigating foreign companies whose corrupt activities caused direct damage to American companies.
Therefore, international companies with ties to the United States, such as companies that are also traded on US stock exchanges (e.g., dual-listed companies traded in Israel and in the United States), may find themselves targets of investigations if it becomes evident that their conduct gave them an unfair competitive advantage at the expense of American competitors. For example, if an Israeli or European company wins a government contract in a foreign country as a result of payment of a bribe – when an American competitor also bid for that same contract – it is quite possible that we will see US authorities launching tougher investigations and issuing heavy penalties for FCPA violations.
Key takeaways for dual-listed companies and companies with ties to the US
Companies engaging in business activities in the US or companies traded on US stock exchanges will now need to be particularly diligent about maintaining and monitoring their compliance. Even if enforcement against US companies is being reduced, enforcement agencies may still be pressured to take action against foreign companies perceived to be engaging in corruption in order to undermine American businesses’ economic competitiveness.
Furthermore, since the FCPA also applies to third-parties employed by or operating on behalf of American companies, enforcement might focus on instances when foreign parties paid unlawful payments in order to undermine American bids and win contracts.
Israeli law also prohibits bribery of foreign public officials
It is important to keep in mind that many governments, especially leading economies, have strict anti-bribery and anti-corruption laws and Israel is no exception. According to the Israeli Penal Law, bribery of foreign public servants is a criminal offense punishable by heavy penalties and/or incarceration.
Furthermore, Israel is a signatory on the OECD Anti-Bribery Convention, one of the key agreements forging international cooperation in combating bribery of public officials in international transactions by criminalizing bribery and, as a member of the OECD, Israel is obligated to comply with the convention’s strict standards. According to the OECD, preventing bribery is not merely a matter of law enforcement – it is essential in order to maintain fair trade and transparency in the international economic arena. Therefore, enforcement trends on the part of Israeli authorities are not expected to be affected by President Trump’s EO.
The EO represents a shift in focus and not general leniency – compliance is essential
Despite any initial impressions of the EO, it would be incorrect to conclude that FCPA enforcement in the US is about to become lax across the board. Instead, we may see a shift in focus – fewer investigations against American companies and ramped-up investigations of foreign companies that undermine fair competition against American companies.
Consequently, companies operating in an international market (especially if they have a presence in the United States or if their shares are traded on US stock exchanges) should review their compliance policy and ensure that they are not exposing themselves to US investigations of suspected violations of the anti-corruption laws – and not only due to concerns about convictions, but also considering the risk of damage to their business and financial reputations.
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