Title
To what extent are American and English regulatory regimes on foreign corrupt practices in multinational companies effective in terms of extraterritorial reach? A comparative analysis.
Literature Review
The MNEs’ separate legal identity (SLI) and corporate veil (“CV”) have been extensively analysed by academics as basis for it escaping accountability and regulation by home and host states. The parent corporation and its management that directly or indirectly controls the complex, large corporate groups are the main target for regulation. Muchlinski has analysed in various instances and works the problem of regulation of MNEs from human rights and other perspectives. The ability of MNEs to be subject of international law and have legal personality that is operable across jurisdictions has been subject of contested academic treatment. The duty of states to exercise its extraterritorial jurisdiction to regulate legal persons in its jurisdiction operating abroad has been asserted by Artacho and Mar.
The ability of MNEs to engage in corrupt practices, bribery, money laundering, and such corporate crimes has been analysed by various authors. Some authors have shown the corrupt influence of MNEs incorporated and run from the Western world as source of inequality, exploitation, human rights abuses, and environmental degradation. Others have explored how these undermine human rights through transnational corporate structures. The ability to corrupt foreign public officials can lead to violation of various human rights and denial of provision of public goods and interests to public at large of host states, often developing poor states with weak governance and judicial enforcement system. Some have argued for imposing strict duties of due diligence on management of parent corporation to prevent such corrupt practices to happen in MNE’s subsidiaries and supply chain globally.
US Foreign Corrupt Practices Act (“FCPA”) has been subject of extensive academic treatment. Sanseverino analysed the impact of foreign laws on US firms in terms of anti-corruption policies and regulations. Sartor and Beamish have explored how FCPA promotes sustainability and SDGs and reduce risks of foreign corporate corrupt practices. Others have explored how corporate compliance has been influenced by US FCPA compared to UK’s anti-bribery and corruption laws. Hail and others explored how extraterritoriality of laws and specific offences to corporate crimes abroad seek to change corporate culture and reduce risks of scandals while empowering regulators to close gap between ideal outcomes and real world scenarios. The collective action for effective implementation of anti-corruption and bribery laws have been explored by Hock. Various mechanisms to enforce anti-corruption laws have been analysed by authors such as Islam. Reyes and Haechler explored integration of anti-corruption laws with investment treaty arbitration – to extend the international legal personality conferred by international investment law to MNEs to hold it accountable for corporate crimes. The ability of corporate governance tools – such as due diligence and disclosure – to complement Bribery Act and such laws have been examined others. Wells explored the transnationalisation of corporate criminal accountability system under anti-corruption laws and treaty system, focusing on US, UK, and European regulatory approach. The goal should be to extend regulatory and court jurisdiction to global value chain of an MNE. The individual offences are highly important to be legally certain, predictable, and implementable by regulators and courts.
Contribution
The study contextualises the two statutory regimes from the peculiar problem of extraterritorial jurisdiction of courts and regulators to regulate conduct of MNEs. The MNEs present particular problem of extraterritoriality which shields that from accountability for any contractual, tort, or other liabilities, such as under environmental and human rights laws. The corporate group structure and SLI and CV works in its favour in escaping liabilities of subsidiaries operating abroad. The extraterritoriality has been examined mainly as an obstacle in human rights enforcement in home states where judicial system is strong.
While English courts are using open-textured nature of tort law to hold parent corporations liable to victims of foreign subsidiaries, the Bribery Act 2010 and other emerging laws and proposals seek to widen the scope of investigators, regulators, and courts to minimize risk of foreign corrupt practices and not to allow MNEs to escape this liability. FCPA seeks similar objectives. However, the study explores how courts have expanded its extraterritorial jurisdiction to properly implement anti-corruption laws and to what extent. The institutional and regulatory system supporting the anti-corruption laws also need to be explored in a comprehensive manner. The central theme is extraterritoriality and how it is best suited to hold MNEs’ foreign criminal conduct accountable, and how this solves the perennial problem of regulation of MNEs. The ability of these laws to be replicated in other domains and areas will also be explored.
Methodology
The study utilizes qualitative secondary research methodologies. It focuses on doctrinal, analytical, and legal research methods to analyse the content, scope, and application of statutory laws and case laws. It is black letter of law and desk-based research utilizing primary and secondary sources found online and offline. The various soruces will be examined based on offline and online materials. Primary sources will be accessed from statute books and law reports, as well as online websites. Secondary sources will be accessed from offline libraries and online databases such as LexisNexis, HeinOnline, JStor, and WestLaw.
References
Peter Muchlinski, ‘The Impact of the UN Guiding Principles on Business Attitudes to Observing Human Rights’ (2021) Vol 6 Issue 2 Business and Human Rights Journal 212, 215
Andrew Clapham, ‘Non-State Actors’ in International Human Rights Law (2d ed. OUP 2014) 531
C Artacho and E del Mar, ‘The Extraterritorial Dimension of the State Duty to Protect Human Rights in Relation to Business Activities’ (THE IMPLEMENTATION OF THE UN GUIDING PRINCIPLES ON BUSINESS AND HUMAN RIGHTS IN SPAIN (SEVILLE, 4-6 NOVEMBER 2013) https://media.business-humanrights.org/media/documents/c2a7ed5599d263b1431f962d4381e08bab72bda0.pdf
JS Collins, ‘The Corporate Responsibility to Respect Human Rights’ (2014) 108 ASIL 8,
CM O’Brien, ‘The Home State Duty to Regulate the Human Rights Impacts of Transnational Corporations Abroad: A Case of Extraterritorial Overreach?’ (2018) 3(1) BHRJ 47
C Benninger-Budel, Due Diligence and Its Application to Protect Women from Violence (Brill 2009)
Adapted from O.C. Ferrell, John Fraedrich, and Linda Ferrell, Business Ethics: Ethical Decision Making and Cases, forthcoming 9th ed. (Mason, OH: South-Western Cengage Learning, 2013).
A Sanseverino, ‘sansThe impact of foreign laws on U.S. firms: evidence from the U.K. Bribery Act’ (2024) 29 RAS 3369, 3372
MA Sartor and PW Beamish, ‘Private Sector Corruption, Public Sector Corruption and the Organizational Structure of Foreign Subsidiaries’ (2020) 167 JBE 725, 726
H Harris and L Campbell, ‘Analysing the impact of the failure to prevent Bribery offence on corporate compliance reporting in the United Kingdom – towards a better model of corporate accountability?’ (2024) 22(1) GLR 445, 449
LA Hail, A Tahoun, and C. Wang. ‘Corporate Scandals and Regulation’ (2018) 56 Journal of Accounting Research 617, 620
B Hock, Extraterritoriality and International Bribery: A Collective Action Perspective (Routledge 2019)
A Reyes and T Haechler, ‘Anti-Corruption Laws and Investment Treaty Arbitration: An Asian Perspective’ in Corruption and Illegality in Asia Investment Arbitration (Springer 2024) 90
MA Islam and H Semeen, ‘Corporate disclosures on curbing bribery and the UK Bribery Act 2010: evidence from UK companies’ (22021) 34(8) AAAJ 1851, 1852
C Wells, ‘Enforcing Anti-Bribery Laws against Transnational Corporations — A UK Perspective’ in Debates of Corruption and Integrity (Springer 2023) 69
N Kochan and R Goodyear, ‘The UK Bribery Act — Britain’s New Legal Landscape’ in Corruption (Springer 2022) 74