The FCPA Advisory Opinion Process
DOJ’s FCPA OPR process allows issuers and domestic concerns, as defined in the FCPA, to request an opinion from DOJ as to whether “certain specified, prospective – not hypothetical – conduct” conforms with DOJ’s enforcement policy regarding the anti-bribery provisions of the FCPA. The process affords companies the opportunity to ask DOJ whether their proposed activity would violate the FCPA and trigger an enforcement action. In our experience representing companies in the process, the OPR process can be lengthy (many months-long), requires the disclosure of detailed facts and often involves a back-and-forth dialogue with the government before an opinion is issued. DOJ has recently sought to encourage companies to use the process when potential corruption issues are discovered during transactional due diligence. Doing so is often impractical for companies because the pace of business moves faster than the DOJ process. OPR 22-01 is particularly notable, however, because here, DOJ issued a preliminary opinion within a day of the request’s submission, and released a full-length opinion in less than 60 days.
In October 2021, according to the OPR, a vessel was traveling to Country B to undergo required maintenance. Shortly before arriving, the captain and crew received a message: All Country B ports were fully occupied. The vessel would need to anchor outside of Country B for two weeks. The shipping agent relayed incorrect anchoring coordinates to the captain, and the vessel ended up in Country A’s waters.
At this point, the situation turned treacherous. County A’s Navy intercepted the vessel and directed it into Country A’s harbor. The Navy confiscated the vessel’s logbook and the crew’s documents. An incident report issued by the Navy noted that the vessel was in Country A’s waters in violation of various laws and treaties. The captain was detained and jailed onshore without being questioned or given any documentation authorizing his detention. The crew remained detained onboard. The OPR noted that the conditions of the captain’s detention, “including the lack of medical treatment and medical equipment necessary to manage the captain’s serious medical condition” created “a serious and imminent threat to his health, safety, and well-being.”
Shortly after the captain’s detention, a third-party intermediary, holding itself out to be a representative of Country A’s Navy, contacted the Company and stated that in order to obtain the release of the vessel, the captain, and the crew, the Company needed to make a $175,000 payment in cash to the third-party intermediary imminently. The intermediary threatened that the alternative was a longer period of detention for the captain and crew, and the vessel would be seized.
The Company retained the services of an agent with which it had worked previously and conducted due diligence, to engage with the third party intermediary. The intermediary insisted that the payment was an official payment to the government of Country A, but refused to produce any formal basis for the payment such as an invoice or other documentation indicating charges or fines against the Company. The Company also sought assistance from various U.S. agencies and requested that such agencies contact the relevant authorities in the detaining country, but those efforts were unsuccessful in securing the release of the captain, crew or vessel. The Company was concerned about the nature of the demand and manner of payment requested, and sought an opinion on whether DOJ would bring an enforcement action if payment were made under these circumstances.
The OPR states that the nature and matter of the demand suggested that the requested cash payment was intended to benefit one or more of Country A’s government officials, although it does not detail what facts lead to this conclusion. Despite the likelihood that the payment would benefit one or more government officials, the OPR stated that such a payment would not satisfy the elements of an FCPA violation for three reasons:
First, there was no evidence of corrupt intent on the part of the Company. Rather, the Company appeared “primarily” motivated by a sincere desire to protect the captain – who suffered from a serious medical condition requiring treatment – from imminent harm or death, as well as to protect the crew. As the OPR notes, the Company, in making the opinion request, “described the conditions of the captain’s detention, including the lack of medical treatment and medical equipment necessary to manage the captain’s serious medical condition.” Quoting the Second Circuit Court of Appeals’ decision in U.S. v. Kozeny, DOJ reiterated that “an individual who is forced to make payment on threat of injury or death would not be liable under the FCPA.” 582 F. Supp. 2d 535, 540 n.31 (S.D.N.Y. 2008).
Second, the “business purpose” test of the FCPA was not met under these circumstances because the Company “has no ongoing or anticipated business with Country A, and the entire episode appears to be the result of an error, emanating from the incorrect advice [the Company] received[.]” DOJ acknowledged that the Company may have been in violation of Country A’s laws, but noted that any such violation was clearly inadvertent. DOJ also took care to distinguish this factual scenario, involving the risk of imminent physical harm, from a situation involving merely economic harm, such as instances where an official demands payment “as a price for gaining entry into a market or to obtain a contract[.]”
Third, DOJ emphasized that the Company promptly brought the demand to the attention of U.S. government authorities, in accordance with recommendations in the FCPA guide, and that the Company considered making such payment only after all other avenues were unsuccessful. The OPR stressed that the Company also sought to obtain proper documentation of the payment as a fine: “Rather than conceal the payment demand, Requestor engaged with various U.S. government personnel and requested proper documentation from the Country A government setting forth the alleged violation and appropriate fine.”
Accordingly, DOJ concluded it would not bring an enforcement action under the FCPA’s anti-bribery provisions against the Company if it made such payment.
The OPR and the striking circumstances from which it arose is notable. Nevertheless, exactly how far its logic extends remains to be seen. To cite just a few of the many potential open questions: Although the OPR notes that the fact that the payment was first proposed by the recipient “does not alter the corrupt purpose on the part of the person paying the bribe,” would the DOJ treat similarly a scenario in which the Company proactively engaged government officials offering money to secure its employees’ health or safety rather than the other way around? How would a payment be viewed in a country in which the company had significant ongoing, business operations? And bringing to mind a DOJ prosecution in the mid-2000s involving payments to Colombian guerilla and paramilitary groups, would the DOJ treat a payment the same way that was made under duress to protect employees from threatened future harm?
The DOJ’s turnaround time in this case is also notable, reflecting a willingness and desire to allow for a highly-expedited process in this context, at least under the (admittedly extreme and unusual) circumstances here. More generally, though, the issuance of two opinions in the last several years—following more than a half-decade of inactivity—suggests that companies facing challenging factual scenarios might consider, should the circumstances warrant it, availing themselves of this process in an effort to obtain guidance in areas where the law and enforcement trends otherwise provide little clarity.
Authored by Peter Spivack, Matthew Sullivan, Rupinder Garcha, and Melissa Giangrande.