International economic relations have long been fraught with tensions between sovereign interests and jurisdictional claims. A June 2019 parliamentary report commissioned by the Prime Minister of France epitomizes French concerns regarding U.S. extraterritorial jurisdiction and the allegedly disproportional, targeted U.S. Foreign Corrupt Practices Act (“FCPA”) enforcement actions against European companies. These enforcement actions raised suspicions that the U.S. government was merely serving American business interests and related U.S. foreign policy goals. The report has been widely seen as an important step in framing France’s response. This three-part article puts the report in historical context and outlines its significance for the future of anticorruption policy in the transatlantic region and beyond, including recent, significant coordinated resolutions of international anti-corruption investigations by U.S. and French authorities.
Early French Efforts to Curtail the Long Arm of U.S. Law
In the course of the last fifty years, reactions in France to the vexing question of extraterritorial U.S. jurisdiction progressively evolved from episodic objections to sweeping consternation.
Developments in two areas of U.S. law in the 1960s, antitrust and export control, prompted the first reactions in France. Regarding antitrust, the U.S. House of Representatives proposed legislation to extend U.S. antitrust laws to international shipping conferences, revoking an exemption from antitrust regulation under the 1916 Shipping Act. Under what became the 1961 Bonner Act, the U.S. Federal Maritime Commission (FMC) began to investigate steamship conferences, thus extending its reach into a quintessential international industry.
Regarding export control, in the 1965 Fruehauf Corporation v. Massardy case the Paris Court of Appeals ordered the French subsidiary of a U.S.-owned company to perform a contract with the People’s Republic of China in spite of the fact that performance of the agreement would violate a U.S. Treasury order pursuant to the Trading with the Enemy Act. More broadly, throughout the cold war, U.S. regulation of trade with Communist countries periodically caused diplomatic crises, such as the Soviet Pipeline episode, in which U.S.-imposed sanctions restricted trade between certain Western companies and the USSR.
French concerns were raised that, particularly through the measures intended to protect free competition in the international maritime business, these American actions would infringe the rights of foreign ship owners and by extension, the sovereignty of these States. In an April 1968 report accompanying a French bill to prohibit the communication of documents and information concerning maritime commerce to foreign authorities, Pierre Mauger, a member of the National Assembly, noted that the French State needed to protect its citizens and companies from foreign “hassles and abusive interferences.”
In what would later be dubbed the “Blocking Statute,” the 1968 law was intended to provide a defense to French ship owners facing queries and enforcement actions by the FMC. French law would prohibit them from sharing information with the FMC.
The Blocking Statute did not deter further expansion of U.S. extraterritorial jurisdiction. The deregulation of the American air transportation sector, for example, caused renewed anxiety in France in the late 1970s. Concerned by the indictment of two Air France representatives in the U.S. for antitrust violations, French authorities proposed in 1979 to revise the 1968 law and extend it to air transportation. A member of the French Senate noted in April 1980 that “we certainly witness, under the pretense of deregulation, a proliferation of initiatives by the USA pretending to extend federal laws and regulations abroad.” The major issue remained “the unilateral regulation by the U.S. of an activity [that is] by essence international.”
Amid these tensions, 1980 revisions to the Blocking Statute were envisioned as an instrument of deterrence intended to prevent civil discovery in France for use in U.S. litigation. The revisions to the Blocking Statute essentially forced compliance with the 1970 Convention on the Taking of Evidence Abroad in Civil or Commercial Matters in order to obtain such discovery; it was hoped that the statute’s broadened scope would curtail enforcement and prompt negotiations to resolve the disputed reach of U.S. antitrust law. In his report accompanying the bill, Alain Mayoud noted that the “world was at economic war” and that U.S. discovery represented “wild fishing for intelligence which some view as a proxy for American imperialism.”
The revised Blocking Statute again failed to stem U.S. extraterritorial practice. In the early 2000s, French concerns relating to U.S. extraterritoriality continued to concentrate on international civil litigation, yet these arguably technical legal issues received much less mainstream attention from the political community, arguably because they did not seem to touch on vital national interests. U.S. extraterritorial regulation continued, particularly in the financial services and corporate governance sectors (e.g., Sarbanes–Oxley), but it did not trigger significant political controversies, perhaps because these measures focused on transnational private litigation or SEC jurisdiction over companies already subject to U.S. jurisdiction due to their participation in U.S. markets to a degree sufficient to trigger regulatory oversight.
Modern FCPA and Economic Sanctions Enforcement
The sizes of the fines paid in these cases generated significant political and public resentment in France. The BNP Paribas case, in particular, shocked many in France both because of the size of the penalty (which was higher than the total annual budget of the French Ministry of Justice) and the jurisdictional basis, which many in France saw (incorrectly) as derived only from providing U.S. dollar clearing services. Recognizing the strain that these matters were placing on the relationship between France and the U.S., in February 2016 two members of the National Assembly, Pierre Lelouche and Karine Berger, undertook a bi-partisan review of the extraterritoriality of American legislation for the Foreign Affairs and Finance Committees of the lower house of Parliament (“the Lelouche & Berger Report“).
Searching for a Balance of Regulatory Power: the Lelouche & Berger Report
The Lelouche & Berger Report raised the question of whether U.S. authorities targeted French and European companies, although it could not reach a definite conclusion. Remaining cautious in its assessment, it observed only that the disproportionate representation of European businesses on the list of top FCPA resolutions was legitimately puzzling.
Displeased by the size of fines paid by French companies (many considered national champions) to the U.S. Treasury, the Lelouche & Berger Report nevertheless observed that that French companies that settled bribery investigations, were all “covered issuers” under the U.S. FCPA who were already (or who were at the time of the conduct) subject to regulation by the SEC and that U.S. enforcement authorities follow an objective process to calculate fines.
Implying that extraterritorial laws can infringe a country’s sovereignty without violating international law, the Lelouche & Berger report concluded: “[M]ere cooperation will not solve the problems that have appeared since a few years. A balance of power needs to be instituted . . . .” The report made 14 recommendations to put France on an equal footing with the U.S. in the fight against corruption. These efforts, the Lelouche & Berger Report posited, would eventually induce the U.S. to exercise some self-restraint. The authors were hopeful that the U.S. would be mindful of the limits and risks that a unilateral approach to extraterritoriality could carry. It cited a March 2016 speech by the then-U.S. Treasury Secretary noting that “[i]f foreign jurisdictions and companies feel that we will deploy sanctions without sufficient justification or for inappropriate reasons—secondary sanctions in particular—we should not be surprised if they look for ways to avoid doing business in the United States or in U.S. dollars.”
Building on efforts undertaken in 2014 with the creation of a national prosecutor’s office for complex financial crime (the Parquet National Financier, or PNF), in December 2016 a significant anticorruption reform came into effect in France (referred to as the Sapin II law). Sapin II broadened the scope of French foreign bribery jurisdiction, created the French Anticorruption Agency (Agence française anticorruption, or AFA), introduced mandatory compliance programs, and created a French version of deferred prosecution agreements for companies (Convention judiciaire d’intérêt public, or CJIP). Sapin II implemented many of the recommendations of the Lelouche & Berger Report and seemed to assuage the concerns that it had raised.
For Part II of this post, click here.
For Part III of this post, click here.
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