Settling on an Interpretation of “Instrumentality” in the FCPA

Tuesday, January 14th, 2014 at 1:16 pm by Justin Epner

Justin Epner, Settling on an Interpretation of “Instrumentality” in the FCPA, 2013 Colum. Bus. L. Rev. 854 (2013).

Despite––or perhaps because of––the explosion in government enforcement of the Foreign Corrupt Practices Act (“FCPA”) since 2005, one of its key terms is shrouded in mystery.  Terrified at the prospect of going to trial, major corporations usually settle FCPA charges away from the watchful eyes of federal district court judges.  Thus, largely unencumbered by judicial oversight, the government has enforced the FCPA increasingly aggressively.

The statute outlaws bribes paid to any employee of any foreign government “instrumentality.”  But what is a foreign government “instrumentality” in the first place?  This crucial question is mostly ignored by the academy and often inaccessible to the judiciary.  In particular, under what circumstances is a corporation an “instrumentality” of a foreign state?  If a government holds a minority equity stake, can the corporation be an instrumentality of that state?

The history and purpose of the FCPA indicate that a broad interpretation of the term “instrumentality” is in order.  In addition, global trends suggest that the government will remain aggressive in its own interpretation and enforcement.  FCPA exposure takes a major toll on transnational businesses; therefore, it behooves them to consider the outermost extremes of what entities qualify as an “instrumentality” of a foreign state.  This Note contends that the prevailing interpretations of “instrumentality” are muddled and misguided.  Instead, a relatively low government equity stake – well below fifty percent – should be sufficient to qualify a corporation as an instrumentality of that state.

Introduction

Author Information

J.D. Candidate 2014, Columbia Law School; B.A. 2008, Amherst College.