LEE.DOCX (DO NOT DELETE) 8/20/2019 1:39 PM TOWARD AN INTEREST GROUP THEORY OF FOREIGN ANTI-CORRUPTION LAWS Sean J. Griffith* Thomas H. Lee** Foreign anti-corruption laws—laws that prohibit businesses from paying bribes abroad— present a puzzle. Why would the government of one country care to prevent corruption in other countries, especially when such laws harm domestic businesses? Unregulated foreign competitors can con- tinue to pay bribes and win contracts while domestic companies suffer. Yet foreign anti-corruption laws now span the globe. We offer an interest-group account of the spread of foreign anti-cor- ruption laws. Our account is bottom-up and focused on private interest groups, rather than top-down and focused on state institutions. We look at domestic political interests in the United States and abroad to explain both the enactment and the enforcement of foreign anti-corruption laws. Our principal focus is on each country’s business lobby. Our account explains observed patterns of enactment and enforce- ment of foreign anti-corruption laws and generates predictions concerning the efficacy of such laws based on the extraterritorial operations of multi- national businesses. It also suggests a limitation on the spread of such laws into countries with few or no multinational corporations and, therefore, no realistic extraterritorial enforcement risk. The essential features of our ac- count are: (1) after the Foreign Corrupt Practices Act (“FCPA”) was en- acted in 1977, U.S. businesses pressured the government to urge foreign governments to ratify multilateral anti-corruption treaties to bind foreign companies to similar anti-bribery restrictions; (2) these treaties required all signatory nations to enact foreign anti-corruption laws, which, in the United States, led to statutory amendments to the FCPA that enabled gov- ernment agencies to apply the FCPA to foreign companies doing business in the United States; (3) as foreign companies operating in the United * T. J. Maloney Chair and Professor of Law, Fordham Law School. ** Leitner Family Professor of International Law, Fordham Law School. Thanks to Afra Afsharipour, Rachel Brewster, Kevin Davis, Branislav Hock, Mike Koehler, Susan Rose-Ackerman, Nicola Sharpe, and Andy Spalding for their comments on earlier drafts. We are also grateful for comments and suggestions received after presentations at Brooklyn Law School, Fordham Law School, the University of Illinois College of Law, and at the 2015 American Society of International Law: Anti-Corruption Interest Group Workshop. Thanks to Amith Arcot, Alissa Black-Dorward, Steffanie Keim, and Vera Korzun for research assistance. The viewpoints and any errors expressed herein are the authors’ alone. 1227 LEE.DOCX (DO NOT DELETE) 8/20/2019 1:39 PM 1228 UNIVERSITY OF ILLINOIS LAW REVIEW [Vol. 2019 States were subject to FCPA enforcement, they supported or acquiesced in home-country enforcement of foreign anti-corruption laws to “level the playing field” against companies that did not face FCPA enforcement risk; and (4) going forward, the proliferation of enforcement of foreign anti-cor- ruption laws among a dominant, hegemonic group of capital-exporting countries (a “k-group”) may result in the global establishment of an anti- corruption norm, with China potentially playing the role of counter- hegemon. TABLE OF CONTENTS I. INTRODUCTION ..................................................................................... 1228 II. WHY DO WE CARE ABOUT FOREIGN CORRUPTION? ............................ 1234 III. A HISTORY OF THE ENACTMENT AND ENFORCEMENT OF FOREIGN ANTI-CORRUPTION LAWS ..................................................................... 1236 A. Foreign Policy and the Genesis of the FCPA ............................... 1236 B. Business Interests Intervene ......................................................... 1240 C. Multilateral Treaties and Ensuing Domestic Enactments ............ 1244 D. A New Era of FCPA Enforcement ................................................ 1246 IV. CONTENDING THEORIES OF FOREIGN ANTI-CORRUPTION LAWS .......... 1248 A. Rights-Based Accounts ................................................................. 1250 B. Realist Accounts ........................................................................... 1250 C. Institutional Accounts ................................................................... 1251 D. Our Interest-Group Model ........................................................... 1252 1. Hegemony to K-Group Theory .............................................. 1252 2. Two-Level Games .................................................................. 1254 3. Putting it All Together ........................................................... 1255 V. CASE ANALYSIS OF OUR INTEREST GROUP THEORY ............................. 1257 VI. CONCLUSION ......................................................................................... 1266 I. INTRODUCTION Foreign anti-corruption laws—laws that prohibit businesses from paying bribes abroad—have proliferated around the globe. The United States took the lead in 1977 with the passage of the Foreign Corrupt Practices Act (“FCPA”), which criminalized what many then considered an ordinary cost of doing busi- ness abroad.1 Multilateral international treaties came two decades later, with the Organization for Economic Cooperation and Development (“OECD”) Anti- 1. Foreign Corrupt Practices Act of 1977, Pub. L. No. 95-213, 91 Stat. 1494 (1977), amended by the Omnibus Trade and Competitiveness Act of 1988, Pub. L. No. 100-418, tit. V, §§ 5001–03, 102 Stat. 1415 (1988), and the International Anti Bribery and Fair Competition Act of 1998, Pub. L. No. 105-366 (1998) (codified as amended at 15 U.S.C. §§ 78m, 78dd-1, 78dd-2, 78dd-3, 78ff (2018)). LEE.DOCX (DO NOT DELETE) 8/20/2019 1:39 PM No. 4] TOWARD AN INTEREST GROUP THEORY 1229 Bribery Convention in 1998,2 followed by the United Nations Convention Against Corruption in 2003.3 Individual states’ domestic laws against foreign corruption came next, in large part because the treaties obligated ratifying coun- tries to enact domestic laws penalizing the payment of bribes to foreign officials.4 But enforcement, as we shall see, trailed enactment. Foreign anti-corruption laws present a puzzle. Why would the government of one country care to prevent corruption in another? Laws against domestic cor- ruption are longstanding and easy to justify. Corruption—the abuse of public power for private gain—distorts political decision-making and leads to the mis- allocation of government revenues, the degradation of civil services, and the dis- enfranchisement of the poor. Governments designed for the benefit of their peo- ple thus have a plain interest in preventing corruption at home. The reasons for promulgating laws to curtail foreign corruption, however, are much less appar- ent, especially considering that the principal means a government has at its dis- posal is to regulate the extraterritorial conduct of the domestic businesses paying the bribes to foreign officials. But without the ability to pay bribes abroad, do- mestic businesses may be at a competitive disadvantage vis-à-vis unregulated foreign businesses that will continue to supply bribes in bidding for the same international business contracts. The foreign competitor pays the bribe and wins the business while the domestic company suffers. Imposing pain on domestic business interests, given their lobbying power, is a dangerous political strategy for any government. So why would a government enact and then enforce foreign anti-corruption laws when the principal beneficiaries are the citizens of other countries? And, given the limited impact on the global supply of corruption of any unilateral state action, why even bother? Yet foreign anti-corruption laws exist and are increasingly being enforced across the globe. This Article seeks to solve the puzzle by offering an interest-group account for the spread of foreign anti-corruption laws across the globe. It is important to distinguish at the start between enactment and enforcement of foreign anti-brib- ery laws, because the two trends do not go together. The FCPA, for example, was sparsely enforced for more than two decades after being enacted.5 The bevy of foreign anti-corruption laws passed by countries around the world in the wake 2. Organisation for Economic Cooperation and Development, Convention on Combating Bribery of For- eign Public Officials in International Business Transactions, Nov. 21, 1997, 37 I.L.M. 1. 3. United Nations Convention Against Corruption, opened for signature Dec. 9, 2003, 2349 U.N.T.S. 41 (entered into force Dec. 14, 2005). 4. Article 2 of the OECD Convention provided that “Each Party shall take such measures as may be necessary, in accordance with its legal principles, to establish the liability of legal persons for the bribery of a foreign public official.” Organisation for Economic Co-operation and Development, Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, supra note 2, at 7. Article 16 of the UNCAC mandated that ratifying states “adopt such legislative and other measures as may be necessary to estab- lish as a criminal offence, when committed intentionally . the promise, offering or giving to a foreign public official . directly or indirectly, of an undue advantage” to “act or refrain from acting in the exercise of his or her official duties” related to international business. United Nations Convention Against