Avoid Legal Complications of International Business

By: Jonathan T. Howe

How to steer clear of legal troubles when holding programs and doing business abroad.

Q: We are anticipating holding programs and doing business abroad. Are there legal implications in the United States for doing so?

A: There can be significant legal complications and implications when conducting business abroad. The Foreign Corrupt Practices Act (FCPA), enacted in 1977, consists of two primary parts: Part one deals with the transparency requirements under the Securities Exchange Act of 1934, which most associations do not need to be concerned with, and the second part deals with bribery of foreign officials.

The antibribery provisions of the FCPA prohibit anyone to use mail or "any means or instrumentality of interstate commerce corruptly in furtherance of an offer, payment, promise to pay, or authorization of the payment of any money, or offer, gift, promise to give, or authorization of the giving of anything of value" to any foreign official, foreign political party, or candidate for political office for the purpose of influencing any act of that official in violation of his or her duty or to secure any improper advantage in order to obtain or retain business.

An issue may arise for an association, for example, if it requests a foreign official to speak at a conference, paying him or her an excessive honorarium, and then works with the speaker after the program to seek an outcome on a key association issue in that country.

The term "foreign official" is interpreted broadly. An employee of a government-owned hospital would be considered a foreign official for purposes as the act, as would anyone who works for a government-owned or -managed institution or enterprise. Employees of international organizations, such as the United Nations, also are foreign officials.

Whether it is one dollar or millions of dollars, the amount of money is not an issue; it is the "corrupt intent" to bribe an official to obtain favorable treatment. Even if you are not successful, you are convictable. This also includes knowingly making a payment to a third party to enable a bribe.

For violations, fines up to $2 million can be levied for corporations. Individuals who have willfully violated the antibribery provisions can be fined up to $100,000 and sent to prison for up to five years. This part of the act is enforced by the Justice Department.

There are defenses and permissible payments under the act. A "facilitation" or payment to ease the transaction—or what some might call "grease" payments—may be OK under FCPA but may run afoul of local laws.

The so-called facilitating payments in connection with routine government action provide an affirmative defense against alleged violations. These actions include

  • Issuing permits, licenses, or other official documents;
  • Processing government papers, such as visas and work orders;
  • Providing police protection or mail pickup and delivery;
  • Providing for phone service, power, and water supplies; loading and unloading of cargo; or protecting perishable products;
  • Scheduling inspections associated with contract performance or transfer of goods across the country.

Also, if the local law allows the payment, that also is a defense. There must be corrupt motive or intent to be found guilty.

One way to avoid problems is to get information. Find out who you are dealing with and what the local status of that business is in the community through local references, and utilize the U.S. Embassy and Consulate in that country. There is a procedure to request an advisory opinion from the attorney general, but it takes time to obtain it.

One additional protection is to include in your contracts a representation and warranty that all actions taken by your local vendor are consistent and in compliance with national and local laws and regulations. In all situations, you should seek competent legal advice.

Jonathan T. Howe is senior partner and president of Howe & Hutton, Ltd., in Chicago. Email: [email protected]

Jonathan T. Howe

Jonathan T. Howe is president of Howe & Hutton, Ltd., in Chicago.