Debate: Getting real about foreign bribery

Foreign bribery is widely prohibited, and even more widely practiced. It’s also big business – some estimates put the value of corporate bribery at more than $1 trillion annually.

Origins of the ban on foreign bribery

After Watergate-era investigations in the 1970s revealed hundreds of American firms were engaging in foreign bribery, the United States acted to prohibit this conduct in 1977 with the Foreign Corrupt Practices Act (FCPA).

The rationale for the FCPA had little to do with economics, and less to do with American “moral leadership” – it was enacted for US foreign policy reasons. After hundreds of American multinationals admitted to bribing officials from friendly and allied states, these disclosures provoked severe foreign policy problems for the United States.

Senior officials and heads of state in Japan, South Korea, Italy, the Netherlands, and Honduras were ousted, and some jailed.

The FCPA goes abroad: a campaign is born

After the end of the Cold War, the 1990s ushered in the apogee of American power, with Fukuyama’s End of History providing the ideological narrative for an American-led neoliberal world order. In 1993, President Clinton was eager to increase US exports, and his Secretary of State, Warren Christopher, argued that American firms were losing out to their international rivals who bribed freely. Christopher pushed to internationalise the FCPA at the OECD.

When the big exporters objected to American proposals, US officials leaked embarrassing information. When they delayed, the US trade representative promised sanctions. When they resisted, US diplomats coerced them with threats to expose alleged domestic corruption.

After several years of heavy-handed American diplomacy, the OECD Anti-Bribery Convention was ratified in 1997. It was a big victory for the United States – it had “levelled the playing field”. But while a superpower may successfully persuade weaker states into signing a treaty, implementation is another thing.

Even America’s most loyal friends, the British, mocked them by retaining absurd, Victorian-era anti-corruption laws. France, America’s oldest ally, was as uninterested in prosecuting foreign bribery as it was in following the US into Iraq in 2003. Germany did little to prevent the country’s firms from engaging in massive foreign bribery.

The United States anticipated this risk, and expanded the FCPA to capture more foreign firms. If others wouldn’t play by the “rules of the road”, the US would act as the global cop. US authorities have issued more than $20 billion of sanctions for FCPA violations, much of this against non-US firms. Top executives are next, the DOJ has threatened.

In 2017, a senior executive from France’s Alstom was sentenced to 30 months in prison for FCPA offenses. Tellingly, the judge noted:

“[US] efforts to install and nurture democracy in these countries is thwarted if international businesspeople take the view that you can’t compete without bribes.”

Along the way, the FCPA had been transformed from a tool to prevent American firms from undermining US foreign policy into an instrument of neoliberal hegemony. But the limits of this campaign are fast coming into view as American power fades, as multi-polarity re-emerges, and as states return to their realist roots.

The primacy of national interests

Why don’t states enforce robustly laws against foreign bribery? In short, national interests. Card-carrying liberals may not appreciate how their “anti-bribery values” can come up against a state’s countervailing national interests, and lose. Realists have no such problem; examples abound.

In 2003, American oil consultant James Giffen was accused of funnelling more than $84 million from several American oil firms to bank accounts benefitting Kazakhstan President Nazarbayev and associates. This case began with a bang as “the biggest FCPA case ever”, but ended with a whimper. It turns out that vital US foreign policy interests were at stake.

Giffen’s lawyers argued several US agencies knew about and approved of their client’s activities. The case fell apart. Giffen pleaded guilty to a misdemeanour tax charge and paid a penalty of $25; the judge remarked that Giffen was a Cold War hero “whose service to American national interests deserved to be acknowledged”.

When the jewel in the UK’s industrial crown, BAE, was caught bribing Saudi Royals as part of its £43 billion “biggest defence deal ever”, how did the UK respond? It investigated. Then the Saudi government sent a menacing letter to UK officials, warning that they would cut off intelligence sharing if the investigation continued. Attorney-General Lord Goldsmith promptly shut down the probe, and the biggest bribery scandal ever simply disappeared.

Even in the US and UK, the neoliberal campaign against foreign bribery was no match against national interests.

Quo vadis?

Today, Mr. Trump appears to be quickening the demise of the neoliberal order. Setting aside his views on the FCPA as a candidate for president, US trade policy statements now omit the common traits of neoliberalism.

Instead, the US now seeks only bilateral agreements, and speaks of relative gains and zero-sum strategies to defend American interests.

In Europe too, France’s President Macron and Germany’s Chancellor Angela Merkel have seen the writing on the wall. Despite their liberal credentials, both leaders are gearing up for strategic and economic contests with the US, China and others. They rely on concepts like “souveraineté économique” and “strategic autonomy” to do the rhetorical work.

It was British international relations theorist E.H. Carr who remarked that Anglo-Saxons are “masters in the art of concealing their selfish national interests in the guise of the general good”. As states return to their realist roots, the US campaign against foreign bribery should be revealed for what it is: an tool of this state’s selfish national interests.