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Rare US FCPA advisory opinion sheds light on duress payments

United States Publication February 11, 2022

On January 21, 2022, the US Department of Justice (DOJ) issued a rare Foreign Corrupt Practices Act (FCPA) Opinion Procedure Release (OPR) at the request of a US-based company (requestor), stating that it would not bring charges because of an imminent threat to an individual’s life and well-being and a lack of corrupt intent. Pursuant to 28 C.F.R. § 80.1, companies may request an OPR regarding “whether certain specified, prospective — not hypothetical — conduct conforms with the Department’s present enforcement policy regarding the antibribery provision of the [FCPA].” This is only the second OPR since 2014.

Unusual circumstances

In October 2021, the requestor’s cargo ship, captain and crew were detained by a foreign country’s (Country A) naval forces for allegedly being in Country A’s waters in violation of various laws and treaties. The requestor’s vessel was en route to a different country’s port for required repairs but appears to have been mistakenly routed into Country A’s waters. Country A’s Navy detained the vessel and its crew, confiscated the vessel’s logbook and placed the captain in jail without being provided any documentation authorizing his arrest or detention. The captain apparently suffered from a serious medical condition and the requestor was concerned that his life and well-being were at serious risk given the conditions of his confinement.  

Meanwhile, a third party claiming to be acting on behalf of Country A’s Navy demanded the requestor pay US$175,000 cash to release the captain, crew and vessel. Despite the requestor’s appeals, the third party refused to provide a formal basis for the payment, such as an invoice or official documentation setting forth the fine amount. Based on this, the requestor was concerned the payment would be given to Country A’s government officials in violation of the FCPA. After consulting with various US regulators, the requestor sought an opinion from DOJ as to whether it would bring an enforcement action if the requestor made the payment. Citing “the highly unusual and exigent circumstances identified in the Request,” DOJ issued a preliminary opinion approximately one day later, stating that it would not bring such an action. The DOJ reasoned that the payment was not made (i) corruptly or (ii) to obtain or retain business.

Lack of a corrupt intent

The FCPA prohibits making corrupt payments to foreign officials to obtain or retain business. A party acts corruptly when they act with an intent to improperly influence a government official. While economic coercion is not a defense to FCPA liability, extortion and duress are. Being subjected to imminent threats to health and safety eliminates a person’s ability to refuse to make the payment.

Here, DOJ agreed that the primary reason for the requestor’s payment was due to duress, noting the captain’s health and that detention would likely exacerbate the condition creating a potentially life-threatening situation. DOJ observed that “an individual who is forced to make payment on threat of injury or death would not be liable under the FCPA. Federal criminal law provides that actions taken under duress do not ordinarily constitute crimes.” United States v. Kozeny 582 F. Supp. 2d 535, 540 n.31 (S.D.N.Y. 2008). 

Lack of a business purpose

Whether a payment is made to obtain or retain business is known as the “business purpose test” and has traditionally enjoyed broad application. For example, companies have been sanctioned for making payments to secure the waiver of a legal requirement (e.g., asking an official to overlook the lack of appropriate paperwork). Here, DOJ found the payment was not motivated by any intent to obtain or retain business because the requestor was unintentionally in Country A and did not have any ongoing or anticipated business there. Additionally, DOJ noted the requestor’s efforts to identify the legitimacy of the payment by seeking documentation from the agent and to find an alternative resolution by contacting other US agencies. These attempts to avoid making the payment, according to DOJ, displayed a lack of sufficient business purpose associated with the payment and a lack of corrupt intent. Interestingly, DOJ’s OPR does not address the fact that the payment was not made simply to release the captain but to release the vessel and crew from Country A, presumably to be able to continue to conduct business in other locations.

Notable observations

While notably unusual with respect to the underlying factual scenario, there are a few notable takeaways for multinational corporations. First, the OPR is a good reminder that economic coercion is insufficient to escape FCPA liability and that even when faced with potential extortion or duress, corporations should make every effort to avoid a potential FCPA violation. Second, DOJ acted with extraordinary swiftness in responding to the requestor’s inquiry, presumably because of the potentially life-threatening circumstance. Companies should not expect that such quick response time will become the norm. Since 2000, DOJ has taken an average of 115 days from the initial request to issue an OPR (this number excludes OPRs for which the requested date is unknown). Companies would be better served in ensuring that their anti-corruption programs are up-to-date and are sufficiently robust to address scenarios that allow their employees and agents to make the distinctions between economic coercion and duress in real time and more importantly report and seek the appropriate corporate guidance if a payment was required to ensure the safety and well-being of an employee. Companies should provide training and guidance on these issues to employees working in areas where there are risks to physical safety.  

Special thanks to Kelly Lin for her assistance in the preparation of this content. 

 


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