Last updated: November 14, 2012 8:39 pm

US government clarifies anti-bribery law

US authorities have formally defined key elements of a foreign bribery law in an unusual move to help companies avoid violations at a time when regulators around the globe are increasingly scrutinising payments.

The US Department of Justice and the Securities and Exchange Commission issued a joint 120-page report on Wednesday, clarifying what kind of payments would be considered illegal under the Foreign Corrupt Practices Act.

Under the guidance, paying for a foreign government official’s taxi fare does not constitute a bribe, while a paid “trip to Italy for eight Iraqi government officials that consisted primarily of sightseeing and included $1,000 in ‘pocket money’ for each official” would be deemed improper.

The definition of a foreign official was also clarified to include employees of companies that are majority owned, or controlled, by a foreign government.

The US guidance follows similar guidance from UK authorities last month and aggressive lobbying by the US Chamber of Commerce, which had sought to rein in US prosecutors. At one congressional hearing on the law last year, the appropriateness of taxi fare payments was hotly debated.

The US Chamber on Wednesday called the document “an important step forward” and the specific examples will probably be welcomed by the business community.

About 965 non-US companies have securities that trade in the US and are also considered by the US authorities to be under their jurisdiction. Few companies choose to contest DoJ investigations because a court battle and criminal conviction can put them out of business.

Business groups have complained that as a result, the US government has taken a broad and largely unchallenged reading of the law, which prohibits paying bribes to foreign officials to win or retain business. In the end companies say they have been forced to spend millions of dollars to investigate allegations in units around the world and millions more to settle with the DoJ and SEC.

The report says that “items of nominal value, such as cab fare, reasonable meals and entertainment expenses, or company promotional items” are unlikely to trigger charges.

The guidance also seeks to clarify what “facilitating payments” are permissible under the FCPA, including expenses for “processing visas, providing police protection or mail service and supplying utilities like phone service, power, and water”.

Some of the earliest foreign bribery cases came to light after companies uncovered problems while doing due diligence on acquisition targets.

The DoJ and SEC said they “have only taken action against successor companies in limited circumstances, generally in cases involving egregious and sustained violations or where the successor company directly participated in the violations or failed to stop the misconduct from continuing after the acquisition”.

The DoJ has brought cases requiring the acquired company to plead guilty, while not charging the new owner.

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