Factlet of the Day: Prosecuting Bribery Leads to More Prosecutions for Bribery

| Tue Sep. 4, 2012 11:15 AM EDT

Here's a fascinating little factlet. The New York Times reports today that most big prosecutions under America's anti-bribery law are against foreign companies. Siemens, for example, paid a fine of $800 million even though it's a German company and the bribes in question were paid to Argentinians. Their American presence, however, was big enough to make them liable under U.S. law. American companies argue that this is a matter of leveling the playing field: they're at a disadvantage competing against companies that feel free to pay bribes, so they're eager for the Department of Justice to use its authority to put a stop to it.

But Henry Farrell points to a paper that concludes that these prosecutions also have a knock-on effect:

Holding all other variables constant, the odds of a country enforcing its first case [of bribery] are twenty times greater if a country has experienced extraterritorial application of the FCPA as compared to countries that have not.

"In other words," says Henry, "many countries that have anti-bribery legislation on their books are disinclined to enforce this legislation against their firms, until the US makes an issue of prosecuting their firms for them. This results in a remarkably large rise in the likelihood of subsequent enforcement."

I have no broader point to make about this at the moment. I just thought it was interesting.