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Abstract:
China's economy remains "red-hot" and U.S. companies continue to view the Chinese market as being critical to achieving revenue targets and growth projections. However, with reward comes risks, and the lure of China profits can bring companies dangerously close to running afoul of the U.S. Foreign Corrupt Practices Act ("FCPA") unless business leaders fully understand and appreciate the many nuances of the broad-reaching statute and the unique FCPA compliance risks of doing business in China.

The FCPA prohibits payment or offering of payment of money or anything of value to a "foreign official" in order to obtain or retain business (the "Anti-Bribery Provisions"). Proof of a U.S. territorial nexus is not required for the FCPA to be implicated against U.S. companies and citizens and FCPA violations can, and often do, occur even if the prohibited activity takes place entirely outside of the U.S. For this reason, business leaders must be knowledgeable about all business activity, including activity that takes place thousands of miles away from corporate headquarters.

FCPA enforcement is at an all-time high and several recent enforcement actions concern business activity in China. The Department of Justice and the Securities and Exchange Commission (the two government agencies with FCPA enforcement authority) interpret the statute broadly such that much more than just a "suitcase full of cash to a government official" type of scenario is actionable. Included in this broad interpretation is the "foreign official" element of an Anti-Bribery violation, a defined term meaning "any officer or employee of a foreign government or any department, agency, or instrumentality thereof." Once a foreign company is deemed an "instrumentality" of a foreign government, every single employee, from the chief executive officer to an administrative assistant, will be considered a "foreign official" for purposes of the FCPA. This is true regardless of how local law may characterize the individual and regardless of whether the foreign company has attributes of a private enterprise such as publicly traded stock.

While the FCPA applies to all of a company's international operations, FCPA compliance in China poses a unique risk and challenge given the prevalence of state-owned or state-controlled enterprises ("SOEs") in that country. As demonstrated by several recent FCPA enforcement actions, Chinese SOE employees will be considered "foreign officials" under the FCPA and a company's interaction with such individuals (individuals who likely are not viewed as a "foreign official" by business leaders and individuals who likely do not even view themselves as a "foreign official") will be subject to close scrutiny under the FCPA by U.S.enforcement agencies. Thus, FCPA compliance in China presents a trap for the unwary of the extent of “foreign officials” in that country, not to mention certain cultural norms and expectations of doing business in China.

Despite the numerous FCPA compliance challenges in China, the FCPA risks of doing business in that country are manageable and can best be attained through effective, comprehensive, and well communicated FCPA compliance policies and procedures. The article concludes with guidance for business leaders to consider in developing such policies and procedures so that a company is able to legally and effectively navigate the lucrative Chinese market and avoid the costly and embarrassing shortcomings of other companies who rushed into China without fully knowing their business and without a full understanding and appreciation for the FCPA.

Foreign Corrupt Practices Act, FCPA, China, state-owned enterprises

Abstract:
How is it that U.S. law can apply to certain Chinese companies and the conduct of Chinese business executives‘ The answer is the Foreign Corrupt Practices Act ("FCPA"), a broad-reaching U.S. law enacted to prohibit bribery as a means of obtaining and retaining business. A common misperception is the business community is that the FCPA applies only to U.S. companies and US citizens. However, under certain circumstances, the FCPA can also apply to the conduct of Chinese companies and Chinese business executives, making FCPA compliance in China crucial.

This article does not aim to show how the actions of Chinese nationals employed by U.S. companies in China can expose their U.S. employer to FCPA liability - even though there have been several examples in recent years of this occuring. Rather, this article discusses how Chinese companies and Chinese business executives can directly be subject to U.S. prosecution for violating the FCPA.

Foreign Corrupt Practices Act, China

Abstract:
Foreign Corrupt Practices Act ("FCPA") enforcement actions against companies for making improper payments to foreign officials in order to obtain or retain business were once thought to entangle only resource extraction companies operating in the third world. However, several recent FCPA enforcement actions and inquiries demonstrate that U.S. enforcement agencies are "casting a wider net" across many different industries in an effort to combat foreign corruption and bribery. These enforcement actions and inquiries also demonstrate that health care companies will not be immune from increased FCPA scrutiny as they continue to expand into overseas markets.

For this reason, any health-care company doing business or seeking to do business in a foreign market must recognize, understand, and appreciate the risk of doing business internationally in terms of FCPA compliance. In fact, FCPA compliance in the health-care industry poses a unique risk and challenge given the number of foreign hospitals, clinics, laboratories, and medical providers that are state-owned or state-controlled. Failure to recognize the unique FCPA risks of doing business or seeking to do business with state-owned or state-controlled entities can expose health-care companies and their personnel to significant criminal and civil liability under U.S. law, as well as harsh collateral sanctions and damage to a company's reputation. Thus, any health-care company with an international presence or seeking to do business in a foreign country should have in place effective, comprehensive, and well-communicated FCPA compliance policies and procedures.

This article explores the unique FCPA risks and challenges for health-care companies doing business or seeking to do business in foreign markets. While the risks and challenges are numerous, they are not unmanageable and the key to FCPA compliance is to adopt effective, comprehensive, and well-communicated FCPA compliance policies and procedures. While such policies and procedures will not guarantee a "clean bill of health," they may well prevent FCPA maladies from occuring in the first place.

Foreign Corrupt Practices Act, FCPA