Europe Braces for Freeze of US Foreign Corruption Practices Act

(Bloomberg) — In recent years, Glencore Plc, Airbus SE and Credit Suisse have collectively paid more than $5.5 billion in fines for their roles in sprawling corruption cases. While law enforcement in France and the UK took the lead, the involvement of their US counterparts was crucial in securing the settlements.

Now, to the shock of anti-corruption officials across Europe, that era of collaboration may be over.

Earlier this month, President Donald Trump ordered his new attorney general, Pam Bondi, to cease enforcing the Foreign Corrupt Practices Act, effectively hitting pause on US involvement in transnational bribery cases. Trump called the 1977 law, a pillar of global anti-corruption legislation, a “disaster,” saying “nobody wants to do business” with American companies. 

It’s too early to say how exactly this might play out — the FCPA has a five-year statute of limitations, meaning that companies could still be held liable for any violations committed during that period if the act is enforced — but authorities across Europe are nevertheless grappling with what the fight against corruption will look like without the world’s most powerful prosecutors by their side.

They’re also wondering whether Trump will export his “America First” agenda by halting investigations into American firms — or even targeting their foreign competitors.

“There may be a sense of one law for US companies and one law for everyone else,” said Peter Binning, who leads the Corker Binning law firm in London. “It seems, from the new presidential rhetoric, that the Department of Justice might be expected to advance US interests.”

In Europe and the UK, agencies have long relied on the US to share leads and bring some of their biggest cases to fruition. “No one else in the enforcement world has that kind of footprint,” said David Rybicki, a former senior official in the criminal division of the DOJ.

The US has powerful tools at its disposal. It can claim jurisdiction to pursue a case simply because a suspicious transaction was conducted in dollars. The threat of stiff sentences — sometimes far longer than those permitted in Europe — and the strategy of turning potential suspects into cooperating witnesses have also been crucial to white-collar cases.

Testimonies of former employees played a major role in securing a $700 million guilty plea from Glencore Plc for conspiring to violate the FCPA and a $475 million penalty from Credit Suisse for bribing Mozambican officials, a key event in the bank’s downfall. A DOJ investigation into kickbacks in international football culminated in 2015 in the unprecedented sight of Swiss police marching into five-star hotels in Zurich to arrest top regional FIFA officials.

Such crackdowns have also shaped how national authorities approach corruption. In France, the US-led prosecution of Alstom — which resulted in a guilty plea and a $772 million penalty in 2014 — prompted French officials to strengthen their own measures, said Isabelle Jégouzo, head of the national anti-corruption agency, known as AFA. The fact that “not a single French company is being prosecuted in the United States to our knowledge” is evidence that the effort has been largely successful, she said.

Cooperation between European and US law enforcement tightened in 2006, when prosecutors in Munich raided Siemens’s headquarters and discovered signs of an international bribery network. Because the company was listed on the New York Stock Exchange, US officials joined the probe, which resulted in a $1.6 billion settlement two years later. Under that deal, Siemens pleaded guilty, paying €596 million in Germany and $800 million in the U.S. for falsely recording $1.36 billion in bribes and questionable payments.

The case became a model for prosecuting transnational bribery, creating new areas of expertise for European law enforcement officials and corporate lawyers. It also signaled to companies that they had to be mindful of US authorities in addition to domestic anti-corruption agencies.

Perhaps because of “intensive cooperation in the fight against corruption,” there have been fewer major international cases in recent decades, said Hildegard Bäumler-Hösl, the Munich prosecutor who led the probe into Siemens.

While Trump’s order to freeze the FCPA came as a shock to many, the legislation has been in the president’s crosshairs since his first term in office. In 2012, he called it a “horrible law” and accused it of disadvantaging American companies.

Yet the FCPA freeze may not mean that the US is walking away from the fight against global corruption entirely, noted Clare Nida, a partner at Latham Watkins in London who spent a year at the bribery division of the UK’s Serious Fraud Office. “I do wonder if there’s going to be some level of corruption enforcement,” Nida said, “but of non-US companies.”

The suggestion that non-American companies should be especially cautious was echoed by the AFA’s Jégouzo. “Those in sectors that are strategic for American foreign policy interests or those that compete with American economic operators should take particular care to put measures in place to protect themselves,” she said.

For now, prosecutors in Europe are adapting to the new circumstances.

“Of course, the Americans will be missed here,” said Simone Kämpfer, head of Freshfields’ White Collar Central European defense practice. “But I don’t believe that the Europeans will just sit back and stop tackling these cases.”

–With assistance from Gaspard Sebag, Sabrina Willmer and Lucca De Paoli.

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