In the article "Dollar Racket" I spoke about the adoption in recent years in the United States of a large number of laws that are extraterritorial in nature. These laws establish the responsibility of individuals and legal entities for engaging in any kind of illegal activity. Responsibility for these laws may arise not only among residents of the United States, but also among non-residents - companies, banks, citizens of other countries.
The United States, more than any other state, has the ability to punish non-residents. Or keep them in check.
First, foreign individuals and legal entities have deposits in the American banks, which amount to trillions of dollars. According to Zbigniew Brzezinski, for example, only Russian citizens hold about 500 billion dollars in American banks.
Secondly, the lion's share of all international payments is carried out in US currency; transactions go through correspondent accounts opened by banks from around the world in American banks.
Thirdly, many foreign companies and banks are listed on the New York Stock Exchange (NYSE); their stocks, bonds, and American IOUs (ADRs) are traded on the US stock market. New York Stock Exchange - the world's leading trading platform. On the eve of the last financial crisis, its total capitalization amounted to 21 trillion. Doll.; 447 securities of foreign companies from 47 countries with a total market capitalization of 7,5 trillion were traded on the stock exchange. Doll.
Fourth, many foreign companies and banks acquire shares in the capital of American joint-stock companies, open representative offices, branches, create subsidiaries. In other words, foreign business has very impressive assets in the American economy. So, 20% of assets of the US banking sector belongs to foreign banks.
Thus, the US authorities have the opportunity to impose fines on non-US lawbreakers, block their international dollar payments, arrest various assets, freeze funds in bank accounts, etc. We are no longer talking about such possibilities of the American authorities as pressure on other states through the International Monetary Fund, the World Bank, the Bank for International Settlements, other international financial and economic organizations, where the US has a “controlling interest”.
Lawyers identify the following areas in which the extraterritoriality of US law is particularly pronounced: the fight against corruption; the fight against terrorism; combating money laundering; violation of an individual's rights; protection of competition (the fight against monopolism); protection of intellectual property rights; securities market regulation; the fight against tax evasion; preventing the spread of nuclear weapons. Extraterritorial laws actually allow the United States to interfere in the internal life of other states, gradually putting them under their control. Such laws are also used as a weapon of intimidation against citizens, politicians, heads of companies and banks of other countries. One of the latest examples of such laws is the Magnitsky Act.
The laws on sanctions against Cuba, the DPRK and Iran, adopted in different years in the USA, have a pronounced extraterritorial character. In total, the United States today announced sanctions against 14 states ... And it must be emphasized that the US laws on sanctions against individual states were perhaps the only category of laws that were extraterritorial in nature several decades ago. So, back in the 70 of the twentieth century, the United States tried to disrupt the gas-pipe deal (the “deal of the century”) between the Soviet Union and Western European companies. Then contracts were signed for the supply of pipes, compressors, and special pipeline valves to the USSR. Washington used various levers of influence on European suppliers, although, ultimately, the “deal of the century” took place. Today, the United States is so carried away by sanctions against undesirable states and companies cooperating with “rogue” states that the corresponding extraterritorial laws are adopted not only at the federal level, but already at the level of individual states. State laws prohibit the procurement of goods and services from foreign companies, seen in cooperation with states listed on the US government’s black lists.
A sharp increase in the extraterritorial nature of US law occurred after the events of September 11 2001. At that time, a law was passed in the United States, commonly called the Patriot Act, which, under the pretext of fighting international terrorism, gave American government agencies, special services and courts greater authority to intervene in the affairs of other states. Some American laws, adopted quite a long time ago, are only now beginning to reveal their extraterritorial potential.
US Foreign Corruption Act
Such a law, in particular, is the Foreign Corrupt Practices Act (FCPA) of the United States, which entered into force in the 1977 year. It is considered the first law in the world to ban the bribery of foreign officials, but until the middle of the last decade it was used quite rarely. The impetus for the adoption of this law was the scandal that erupted in 1977 year. At the center of the scandal was the American aircraft manufacturing company Lockheed and the Japanese government. It turned out that Lockheed had systematically practiced the distribution of bribes to high-ranking Japanese officials to receive orders in the “Land of the Rising Sun”. Ended this история the fact that the Japanese government resigned, and the US Congress urgently prepared and adopted a law on corruption abroad. At that time, the cutting edge of the law was directed at American companies; rather harsh punishments were imposed on individuals and legal entities of the United States, seen in bribing foreign officials. The law had mixed consequences for the United States. On the one hand, he raised the reputation of America, which declared an uncompromising fight against corruption at home and abroad. On the other hand, this law put the American business at a disadvantage compared to foreign companies that practiced bribes to obtain lucrative contracts. The laws of other countries could prosecute corrupt officials only by using bribes within their own countries, but not outside of them. Moreover, the laws of some European countries even encouraged this practice. For example, German law permits the inclusion of expenses for bribes abroad in production costs — they are classified as “overheads” and qualify as expenses that promote the promotion of German goods on world markets. Attempts by the US ruling circles to force other countries to adopt laws similar to the FCPA did not succeed. In October, 1995, the US Department of Commerce, with the assistance of the CIA and other intelligence agencies, prepared a closed report for Congress and a short open source for the public about the use of bribes by foreign competitors of American business. According to the authors of the report, for the period from January 1994 to September 1995, American firms lost overseas contracts worth about $ 45 billion due to the unfair competition of foreign companies that used illegal making.
Only twenty years after the adoption of the FCPA, Washington managed to achieve a breakthrough in getting other countries involved in the fight against foreign corruption. In December, the Convention on Combating Bribery of Foreign Government Officials in International Transactions was adopted by the OECD 1997 in the framework of the OECD. The Convention obliges signatories to enact domestic laws criminalizing the bribery of foreign officials. The OECD Convention was ratified by the United States in the middle of 1998, and since February 1999, it entered into force. In January 1999, the Council of Europe adopted the Criminal Law Convention on Corruption. In November 1999, the Council of Europe adopts another document - the Civil Law Convention on Corruption. Finally, on October 31 of 2003, the UN Convention against Corruption was adopted. Today it is signed by 140 countries. The United States and Russia signed and ratified the convention. Countries that have signed and ratified this convention are obliged to provide in their domestic legislation criminalization for all offenses established in accordance with this convention. The Convention has created certain prerequisites for the application of the national anti-corruption legislation of one country in the territory of other countries.
The problem of corruption has always been acute for any state, but today the external economic aspect of corruption is becoming more and more significant. International competition for markets for high-tech products and services, obtaining concessions and licenses for the development of natural resources, the acquisition of assets under privatization programs, etc., is intensifying. According to very conservative estimates of OECD experts, about 100 billion are paid annually in the form of bribes worldwide, including 30% of this amount is used by companies to promote their commercial projects abroad. Many European countries have adopted their own anti-corruption laws after joining the above conventions (or made amendments and additions to previously existing ones). They do not have such a pronounced extraterritorial nature, as the American FCPA law. Perhaps, with the exception of the UK Bribery Act (The UK Bribery Act - UKBA), adopted by the British Parliament in April 2010 and entered into force on July 1 2011.
FCPA: sleeping law begins to work
In 2007-2008 in the United States, there was a sharp increase in the number of cases pending on suspicion of committing acts of corruption within the FCPA. If in the previous three decades, on average, the number of simultaneous investigations did not exceed ten, in 2008, the number of such cases exceeded 100. It is noteworthy that the number of non-resident companies involved in these cases already exceeded the number of US companies. The grounds for investigations into non-resident companies were such formal moments as the presence of foreign companies of part of the assets and business in the economic territory of the United States, participation in the capital of foreign companies by American investors (individuals and legal entities), the listing of companies on the New York Stock Exchange . Even such moments as the passage of funds of foreign companies through correspondent accounts in American banks were taken into account. That is, an investigation against a foreign company could have been launched even if no commercial operations were performed by a company in the United States. In this case, the transfer of money (bribes) could be carried out by a person who does not have American citizenship or even permission to reside in the United States. Investigations were carried out (and continue) by the Department of Justice and the US Securities and Exchange Commission.
Daimler and Siemens (Germany), Statoil (Norway), DPC Tianjin (PRC) and Vetco Gray (United Kingdom) are just a few examples of non-US companies prosecuted under the FCPA for bribes paid to non-US officials outside the US . German concern Siemens (2008 year) is still in the first place in terms of the fines imposed. Among major cases, we can also mention the case when, in 2009, two American companies agreed to pay 579 million dollars, charged in the form of sanctions for various FCPA violations in Nigeria. Nonetheless, the bulk of investigations conducted by the Department of Justice and the US SEC concern non-resident companies. And with 2009, the practice of widespread prosecution of violations of US law by individuals — not only US citizens, but also foreigners — began.
Examples of shares in the FCPA: Siemens and Daimler
Until now, the largest within the FCPA investigation remains the business of the German concern Siemens. He was accused of paying bribes in the amount of a total of 1999 billion euros in various countries in the period from 2006 to 1,3. In particular, the concern was found to be related to corruption in Iraq during the UN oil-for-food program, as well as in countries such as Venezuela, Bangladesh, Argentina, France, Nigeria, Turkey, Italy, China, Israel, Vietnam, Russia and Mexico.
At the end of 2008, the US Department of Justice and the US Securities and Exchange Commission financed the German concern 800 millions of dollars in bribes around the world. In addition, for further investigation of violations, Siemens is committed to providing an independent auditor with access to its documentation. It should be noted that even with an amicable settlement and multimillion-dollar compensation, non-US companies that fell under the scope of the FCPA are under the control of a designated independent auditor, usually an American lawyer or judge, for several years. This is another leverage by the US on a foreign company.
Punishment suffered and top managers of Siemens. In August, 2008 was sentenced to the first perpetrator, the former director of the concern who was in charge of the medical equipment trade. He was sentenced to two years in prison on probation and to pay a fine of 108 thousand euros. There was no direct evidence of his guilt, the convict confessed himself. Two former Siemens chairmen, Heinrich von Pierer and Klaus Kleinfeld, denied that they knew about illegal payments. Board members were dismissed - only eight people. Each of them had to partially compensate for the losses of the concern (recoveries from 0,5 to 4 million euros).
No less loud was the scandal with the German automobile concern Daimler that broke out in 2010, initiated by the US Department of Justice in the framework of the FCPA. According to the American ministry, the concern has created in 22 countries a whole system of bribing officials to obtain profitable orders. The total amount of bribes for the period 1998-2008. was estimated at 51 million. In order to avoid further litigation, Daimler agreed to pay the extrajudicial penalty to the US authorities in the amount of 185 million dollars. Corporate control over the implementation of a comprehensive program against Daimler, in particular over its compliance with the Foreign Corruption Act (FCPA), was entrusted to an American judge over the next three years. The court also ordered the concern to take a number of other measures. First, bring all Daimler subsidiaries in line with the governing laws and company codes. Secondly, it was decided that the appointment of local leaders and other employees of Daimler branches should be made solely by decision and with the guidance of the company's central office. Thirdly, the concern has pledged to expand the international Daimler training program, including regular conferences, training seminars, trainings, and the exchange of information. And fourthly, Daimler was demanded to create a special department to supervise compliance with anti-corruption legislation.
The “minimal contact” doctrine of the United States. American phobia
It is noteworthy that many foreign companies were “hooked” by the American authorities on the grounds that these companies were members of the New York Stock Exchange (they were included in the “listing”). The response of a number of non-resident companies to activating the application of the FCPA law was to withdraw from the American stock market. So, in May 2010, the same Daimler announced its intention to withdraw securities from the New York Stock Exchange. Daimler CFO Bodo Webber (Bodo Uebber) explained that this step is aimed at reducing management costs and simplifying reporting. In New York, only a small portion of the group’s shares is listed, approximately 5% of the total (the main trading point for securities is still the stock exchange in Frankfurt am Main). The main reason for leaving the New York Stock Exchange is apparently that after this there will be no need to submit financial statements to the US Securities and Exchange Commission.
In April, 2010, another German company, Deutsche Telekom, also decided to stop placing its securities on the stock exchange in New York. And in February 2011, the Stuttgart Prosecutor’s Office launched an investigation into the concerns of Deutsche Telekom and Volkswagen. Investigators suspect their former managers, who oversaw football sponsorship, of corruption. It seems that Deutsche Telekom took preventive measures in order not to pay fines to the US authorities.
It is no longer necessary to say that many European companies are trying to get rid of shareholders of American origin. After all, if in a company the share of American individuals and legal entities exceeds 10% in capital, then such a company will have to be held fully liable under the FCPA law. European banks are equally wary of their customers. If they are persons of American origin, they may be denied the opening of a deposit account. However, in this case, the European bank has concerns to fall under the “cap” of another American law - FATCA (The Foreign Account Tax Compliance Act). This is the law on taxation of foreign accounts, adopted in the 2010 year and having all the signs of an extraterritorial act. In fact, the US tax administration plans to turn all banks outside the US into its tax agents and punish non-US banks for improperly performing agency functions. A non-US bank may be in a situation where it will have to be jointly and severally liable for non-payment of taxes by the American client to the treasury of the USA. And at the same time to get into some unpleasant story related to corruption under the FCPA law.
Lawyers call this the “minimal contact” doctrine. Its essence is that even the smallest contact between a non-US company and a legal or natural person of the United States can result in a non-US company acquiring the status of person of the United States. This is not a legal or natural person of the United States, but already such a person who is legally responsible under American law. Such as FATCA or FCPA.
FCPA: the role of American intelligence
The main organizations responsible for implementing the FCPA are the US Department of Justice and the Securities and Exchange Commission. A prerequisite for the successful implementation of the FCPA is that these organizations obtain information confirming the facts of bribing foreign officials by US citizens and companies or non-residents directly or indirectly related to US business and the US. Or, at the very least, obtaining information that arouses suspicion that corruption has taken place. Or the information that there were intentions to enter into a corrupt relationship (the FCPA also punishes intent!). Even an investigation into the German concern Siemens showed that sometimes direct evidence is clearly not enough to accuse of corruption. Part of this problem, the US authorities tried to solve at the beginning of this century, when the US Department of Commerce announced the opening of a “hot line” on the Internet so that any private individual and any company could report corruption or violation of the FCPA law. After the last financial crisis in the United States, the Dodd-Frank Act was passed (signed by the US President in 2010, entered into force in 2011). Its full name is the Wall Street Reform and Consumer Protection Act. This law is very voluminous (more than 2300 pages of text). Let's turn only to one innovation laid in it - the institute of financial informing. The law provides for employees of companies, both American and non-American, who have the status of person of the United States, the opportunity to report violations of US laws to various US organizations and agencies (the Tax Administration, the Securities Commission, the Ministry of Finance, the Ministry of Justice and etc.) Including violations of the FCPA. In the event of confirmation of the violation and charging the violating company to a fine, the voluntary agent-informer has the right to expect to receive remuneration in the amount of on average from 10 to 30% of the charged fine.
Obviously, in order for the FCPA law to work effectively, all of the above is necessary, but not enough. Information is required using special tools and methods. Simply put, you need to connect the special services. Almost from the very beginning of the law, the US Federal Bureau of Investigation (FBI) was involved in its implementation, in which a special unit responsible for the FCPA was even created. However, from time to time in the media in connection with the FCPA, and other US intelligence agencies are mentioned - the CIA, the NSA, the financial intelligence of the US Treasury and some others.
When the cold war ended and the American special services were out of work, so to speak, there was a threat that their staff and budget would be reduced. However, the special services lobbyists succeeded in reprofiling their activities in the new environment. The main focus of their activities outside the United States has become economic intelligence, and the priority task within economic intelligence is obtaining information on corruption cases, which are considered as a violation of the FCPA law and as a threat to US interests in the world. Thus, the CIA and other US intelligence agencies participated in the preparation of a report by the US Department of Commerce on corruption outside the US, submitted to 1995 in the year of Congress. This report was a bid for the US Special Services to receive an FCPA intelligence mission in the United States and beyond.
The scandal associated with the revelations of Edward Snowden, sharpened the question: what is the purpose of the American intelligence services have developed such a violent activity in Europe, which is considered an ally of the United States? Without claiming to be a complete answer, let us take it all the same to assert: in order, among other things, to monitor violations of American laws that are extraterritorial in nature. Information on such violations is necessary for the US ruling circles to establish effective economic and political control over Europe and the world.