All governments are concerned with protecting their political and economic interests domestically and internationally, any activity or action, wherever it occurs, that adversely threatens national interests is subject to government control. Leaving the political boundaries of a home country does not exempt a business from home country laws. Regardless of the nation where business is done, a US citizen is subject to certain laws of the United States. What is illegal for an American business at home can also be illegal by US law in foreign jurisdictions for the firm, its subsidiaries and licensees of US technology.
Laws that prohibit taking a bribe, trading with the enemy, participating in a venture that negatively affects the US economy, participating in an unauthorized boycott such as the Arab boycott, or any other activity deemed to be against the best interest of the United States apply to US businesses and their subsidiaries and licensees regardless of where they operate. Thus at any given time a US citizen in a foreign country must look not only at the laws of the host country, but at home law as well.
The question of jurisdiction of US law over acts committed outside e territorial limits of the country has been settled by the courts through application of a long established principle of international law, the objective theory of jurisdiction. This concept holds that even if an act is committed outside the territorial jurisdiction of US courts, those courts can nevertheless have jurisdiction if the act produces effects within the home country. The only possible exception may be the violation is the result of enforced compliance with the local law.
Foreign Corrupt Practices Act:
The Foreign Corrupt Practices Act (FCPA) makes it illegal for companies to pay bribes to foreign officials, candidates, or political parties. Stiff penalties can be assessed against company officials, directors, employees or agents found guilty of paying a bribe or of knowingly participating in or authorizing the payment of a bribe. However, bribery which can range from lubricating to extortion is a common business custom in many countries even though illegal.
The original FCPA lacked clarity and early interpretations were extremely narrow and confusing. Subsequent amendments in the Omnibus Trade and Competitive Act clarified two of the most troubling issues. Corporate officers’ liability as changed from having reason to know that illegal payments were made to knowing of or authorizing illegal payments. In addition, if it is customary in the culture, small (grease or lubrication) payment is made to encourage officials to complete routine government actions such as processing papers, stamping visas, and scheduling inspections are not illegal per se.
The debate continues as to whether the FCPA puts US businesses at a disadvantage. Some argue that US businesses are at a disadvantage in international business transaction in those cases where bribery payments are customary whereas others contend that it has little effect, indeed that it helps companies to just say no. The truth probably lies somewhere in between. The consensus is that most US firms are operating within the law, and several studies indicate that the FCPA has not been as detrimental to MNC interest as originally feared because exports to developed countries continue to be favorable.
US firms seem to be able to compete and survive without resorting to corruption in the most corrupt societies. This does not mean, however, that violations do not occur or that companies are not penalized for violations. For example, a US environmental engineering firm was found to have made corrupt payments to violate the FCPA in the future and agreed to pay a civil fine of $ 400,000 and to reimburse the Department of Justice for the costs of the investigation. Further, the company agreed to establish FCPA compliance procedures and to provide certifications of compliance annually for five years. Other firms have paid even larger fines in recent years, and the justice department has agreed not to prosecute firms with excellent training programs in place.