Agency: A New Frontier for FCPA Jurisdiction

There are two primary legal concepts U.S. companies operating overseas need to understand with respect to agency and its relevance to the FCPA. First, the text of the statute makes the "agents" of U.S. issuers and U.S.-based companies liable. As the government has interpreted it, this means that the foreign subsidiaries (and employees or other third parties acting for those subsidiaries) of a U.S. company can be charged under the statute where the parent entity exercises sufficient control over their conduct, even if they would be otherwise outside the jurisdiction of U.S. law. Second, the related common-law doctrine of respondeat superior makes companies liable for the acts of their agents, if those acts are taken in the scope of their agency and for the benefit of the principal. As the government has applied the doctrine in this context, if a foreign subsidiary of a U.S. company has violated the FCPA, and if the subsidiary is deemed the "agent" of the company, the U.S. company may be charged directly as well, even if U.S. personnel had no knowledge of or involvement in the misconduct. Despite the profound effect that these two concepts — agency and respondeat superior — can have on the scope of FCPA jurisdiction, the courts have just begun to grapple with their application and limits.

In brief, the FCPA forbids bribe payments to foreign government officials. To limit interference with foreign jurisdictions arising from its extraterritorial application, and to provide fair notice to potential defendants, Congress delineated specific categories of individuals and entities subject to FCPA jurisdiction. The FCPA subjects the following to penalties for wrongful conduct under the statute: 1) foreign persons who have committed violations while in the United States; 2) U.S. citizens, nationals, and residents; 3) companies that have issued publicly traded securities in the United States or have reporting obligations under the Securities Exchange Act; and 4) companies organized under the laws of, or with their principal place of business in, the United States. For these latter two categories, jurisdiction extends to a U.S. company's officers, directors, employees, agents and stockholders acting on the company's behalf, regardless of whether violations occur in the United States or abroad. 15 U.S.C. §§78dd-1, 778d-2.