On August 14, 2020, the U.S. Department of Justice (DOJ or Department) issued its first Foreign Corrupt Practices Act (FCPA) advisory opinion in nearly six years. The advisory opinion is in response to an inquiry from a multinational U.S. investment advisor that manages private funds serving institutional investors. The request seeks guidance on a proposed payment to a wholly owned subsidiary of a foreign investment bank that, in turn, is indirectly majority owned by a foreign government. The resulting opinion comes roughly a month after DOJ and the U.S. Securities and Exchange Commission (SEC) published the second edition of their joint FCPA Resource Guide, which was initially released in 2012 and has been revised only once in the past five years.
The FCPA Opinion Procedure
The DOJ's FCPA "opinion procedure" allows issuers and domestic concerns to request an opinion from the attorney general as to whether certain "specified, prospective – not hypothetical – conduct" conforms with the Department's present enforcement policy regarding the antibribery provisions of the FCPA. FCPA advisory opinions were first released in 1980. They are issued in response to inquiries from companies seeking DOJ guidance on whether proposed activity would trigger an FCPA investigation or enforcement action. Historically such companies, referred to as "Requestors" in the opinions, sought opinions regarding a number of topics that frequently arise in the anti-corruption space. Topics of past opinions include, among others, foreign governments requiring the hiring of intermediaries or payments to third parties; joint ventures and mergers and acquisitions; successor liability; the use of third-party agents; due diligence efforts; and contractual certifications and controls. The opinions provide companies with valuable insight when crafting anti-corruption policies and provide guidance on how to conduct business with foreign persons.
The August 14 Advisory Opinion
The August 14 advisory opinion addresses the investment advisory firm's request to pay a 0.5% commission – about $237,500 – to the foreign investment bank's subsidiary. The payment is to compensate the bank for certain tasks it had performed. The details in the opinion are consistent with prior DOJ guidance and do not signal a significant shift in departmental policy. It confirms that payment to a foreign government instrumentality, not a foreign official (an individual), does not run afoul of the FCPA when there is no corrupt intent to influence a foreign official. The opinion notes that the investment advisor "sought and received specific, legitimate services" from the foreign bank, whose Chief Compliance Officer certified that the intended payment is "commensurate with the services" and "is commercially reasonable."
Does the Opinion Signal a New Trend?
While the opinion is the first released since November 2014, and it comes shortly after the DOJ and SEC released their revised FCPA Resource Guide, the intersection of these two events may be purely coincidental. The request for the opinion was made back in November 2019, and the requestor provided supplemental information in January, February, June, and July. DOJ is supposed to issue an opinion within 30 days; however, a request for supplemental information restarts the clock. Accordingly, it is important to weigh the benefits of enforcement certainty against the potential for delay when considering whether to seek an opinion in the context of a corporate merger and acquisition. There has been an uptick in FCPA enforcement actions since the last opinion and an increase in activities by U.S. regulators in other contexts, such as the sanctions administered by the Office of Foreign Assets Control (OFAC) of the U.S. Department of the Treasury. Likely here, the investment advisor had concerns about the foreign bank, which the advisor believes justified any potential delay in exchange for enforcement certainty. That said, it remains to be seen whether the August 14 advisory opinion will herald a return to widespread use of the FCPA advisory opinion.
Those doing business with foreign persons should be sure to monitor this space and consider utilizing such opinions prior to engaging in activity. Those with questions should contact one of Venable's experienced FCPA attorneys.