Corporate criminal investigations across borders are increasing. This is no surprise: The worldwide economy is global and many companies conduct their business across borders, so the very nature of their enterprise will implicate the laws, including the criminal laws, of more than one country. Some criminal laws specifically focus on conduct abroad. The Foreign Corrupt Practices Act, adopted in 1977, by its terms applies to corrupt payments made to recipients outside the United States; since the adoption of the OECD Anti-Bribery Convention in 1997,1 similar prohibitions to those contained in the FCPA are now found in the legislation of many countries around the world. Potential violations of antitrust laws, such as through offshore cartels, have long been the focus of criminal investigations;2 concern about evasion of the tax laws by use of offshore “fiscal paradises” has spurred cross-border activity designed in particular to pierce veils of confidentiality.3
Trans-border criminal investigations can pose different kinds of problems depending on whether there is a single investigating authority (often the U.S. Department of Justice), or if the investigating authorities in more than one country are simultaneously involved. Even the relatively straightforward “one prosecutor” situation may pose vexing problems relating to finding and assembling the relevant evidence and information when such evidence is located outside of the United States; much more complicated are situations when not only the Department of Justice but investigating authorities in other countries are also involved. The purpose of this article is to provide a preliminary and basic checklist to identify the key variables in both situations necessary to develop an effective strategy.
Step One: Identify Interested Countries
The first step is to preliminarily identify the countries that may be involved, either because potentially relevant evidence is found there or because its prosecuting authorities might get involved. It is critical to make this high-level evaluation quickly and early, even before organizing a possible internal investigation: Because local laws may well have impact on both the execution and the use of an internal investigation, it is important to identify the relevant countries before commencing one.
Identifying countries where relevant evidence might be found is generally straightforward, but nonetheless may have some complexities. For example, specifying the physical location of different kinds of information has become complex, as much data is now stored in the “cloud” or on servers that span continents; the classic physical “file cabinet” in which documents could be found is often non-existent. The location of witnesses—and the places where potential interviews might take place—is sometimes complex in situations where individuals may regularly travel or have offices in more than one place. Some employees located in one country may believe that they have rights under the laws of a different country, either the country of their nationality or the country where they were hired.
In any event, a relatively simple preliminary review should permit a company to develop a prioritized map where critical information must be sought. Identifying which countries’ prosecutorial authorities may become involved, however, is more nuanced and complex.
One problem is that countries’ criminal laws may have different “jurisdictional hooks,” that is, their laws may have different means of defining the territorial and extra-territorial application of their criminal laws. The FCPA, for example, applies to U.S. nationals (including companies incorporated in the United States); to companies whose shares are listed on a U.S. exchange; and to acts that took place, even in part, on the territory of the United States. While this should generally be clear, the Department of Justice has aggressively applied the FCPA to a broad range of conduct including activities of dependent or subsidiary corporations and activities of which took place only in small part in the United States.4 Other countries may have different principles of territorial application of their criminal laws and may interpret them less aggressively; many complain about what they perceive to be overreaching by American authorities in applying its laws, and in some instances have, for example, filed briefs as amici curiae in the Supreme Court urging a limited application of U.S. laws overseas.5 And principles of extraterritorial application of criminal laws may evolve. Just recently, for example, the U.S. Court of Appeals for the Second Circuit concluded, in the context of a federal securities prosecution, that the Supreme Court’s decision in Morrison,6 which essentially did away with the “effects test” and limited civil application of the federal securities laws to American-issued securities or to fraudulent acts that take place on U.S. territory, also applies to criminal securities claims, rejecting broader claims by the prosecutor. United States v. Vilar, No. 10-521-CR, No. 10-580-CR, No. 10-4639-CR, slip op. at 4 (2d Cir. Aug. 30, 2013). The Vilar decision, however, left open many important questions as to exactly how the courts will apply the “purchased or sold within the United States” test and, in particular, how courts will determine under what circumstances an act, portions of which took place inside and outside U.S. borders, must be found to have occurred in the United States. It is also very much open to further elaboration whether the Vilar reasoning—assuming it is not disturbed by the Supreme Court—applies to other criminal activity such as cartels.
By far the most important component of the first step evaluation is to prioritize the relative probability and aggressiveness of prosecutorial activity in those countries that may be competent to investigate. The periodic reports issued by the OECD evaluating the anti-corruption efforts of the various countries signatory to the OECD Convention provide some indication of the level of prosecutorial activity and priorities in those countries in the area of foreign corruption.7 But to be effective, such an evaluation requires knowledgeable local counsel who can provide current advice on prosecutorial policy, and who know the relevant personnel.
Even before considering whether—and how—to conduct an internal investigation, it is critical to have a preliminary idea of the potential use an investigated company may make of one. In the United States, that may be clear: Once an investigation has been completed, a company should be in a position to evaluate its risks and the strength of its defenses, and can make a determination whether or not to “self report” to the Department of Justice or the Securities and Exchange Commission. In other countries, however, the procedural end games are far less clear, and thus the ultimate purpose of an investigation is open to debate. In France, for example, there is currently no procedural basis on which to “self report” to a prosecutor or other investigating authority, nor any basis to enter into a “deferred prosecution agreement” or other non-criminal outcome.8 A decision regarding whether, how, and when to self-report may be similarly nuanced and complex in other countries as well. As a result, a company that does an internal investigation with the view of ultimately making the decision of whether to share it with a prosecuting authority of the United States may be surprised to find that, once revealed to the Department of Justice, the report may get into the hands of the authorities of another country that will neither recognize any deal that was cut with the Department of Justice nor provide a predictable path to defer or avoid prosecution.
Step Two: Conducting an Investigation
Once the ultimate goals have been identified to as great a degree as possible, as well as the location of the target information, counsel can devise a strategically sound strategy for conducting an investigation. This must involve evaluating an array of local issues that may include the following.
Blocking Statutes. A number of countries limit—and in some cases criminalize—the conduct of foreign investigations on their soil. The so-called French “blocking statute,”9 for example, makes it a criminal offense—which has been brought to bear against a Franco-American lawyer who conducted an investigation in France and was convicted under the statute—to request, provide, or obtain economic or financial information “for use in a foreign [i.e., non-French] administrative or judicial proceeding.” The latter phrase would appear to exclude purely private internal information gathering, and thus a company that is simply informing itself of the extent of its activities in France should not encounter a problem under the statute. If, however, an internal investigation is done at the request of or in coordination with a non-French authority such as the Department of Justice, it would appear that such an activity would violate the blocking statute and therefore must be avoided.
Privacy and data-based laws. European laws mandate that European Union member states must adopt privacy laws that, generally speaking, are far more specific and protective than those in the United States.10 Separately, France has enacted extensive regulation of the maintenance of any kind of database—irrespective of the kind of information stored in it—and has set up a national commission called CNIL (Commission Nationale d’Informatique et des Libertés) to enforce these rules. Taken together, these rules—or similar ones in other countries around the world—may make it illegal to obtain and use certain kinds of information, or to send it outside the country. Often there is a means to address this issue through negotiation with local authorities, which must be done in close consultation with local specialists.11
Maintenance of confidentiality. Companies in the United States doing internal investigations generally maintain control of the process by using counsel whose efforts are protected under the American attorney-client or the work product privilege; this permits protection of gathered information until a point when the company can make a decision whether or not to share some or all of the work product with the authorities. Non-American professional rules must be consulted to avoid two sets of problems. First, in many countries in Europe and elsewhere, the attorney-client privilege does not apply to or protect communications with in-house counsel, who may not be considered “attorneys” irrespective of their training or function. Separately, in France, the rough equivalent of the attorney-client privilege, called le secret professionnel, strictly applies to all communications with a member of a French bar, but the privilege cannot necessarily be waived by the client. Therefore, interviews conducted by a French attorney may not directly be shared with the prosecuting authorities or be used in court. For this reason, there is significant resistance in a number of the European countries to allowing attorneys to participate in U.S.-style internal investigations.
Workplace rules. Many countries have laws and cultures that make it very sensitive to conduct business interviews, particularly by corporate counsel from another country. Workers’ councils may demand to be consulted, absent which they may create labor or employment tensions. Providing the equivalent of “Upjohn warnings,” emphasizing the role of a corporation’s attorney as mandated by Upjohn v. United States12 and its progeny, will often lead to misunderstandings.
After Gathering Information, What Strategy?
By far the most vexing problem that a multi-national company can face is how to deal with multiple prosecutors at the same time. France may well offer the most difficult challenge because its criminal procedures and its enforcement traditions differ so markedly from those in the United States; a strategy that may be perfectly appropriate in the United States may be counter-productive, or even suicidal, in France. The principal reason for this is that there exists no procedure for a company to self-report, nor any practical procedure for negotiating a non-criminal outcome such as deferred prosecution. Most large criminal investigations in France are conferred to a judge known as an investigating magistrate (juge d’instruction), whose functions are quite different from either a U.S. prosecutor or a U.S. judge. The formal mandate of an investigating magistrate is to determine “what happened,” and in particular what is “the truth.”13 The magistrate—not the prosecutor—makes a determination as to whether the person or company should be handed over for trial. There is thus little opportunity to engage in fruitful discussions with a prosecutor; not only is the French prosecutor not accustomed to having discussions that in any way amount to a “negotiation,” but his/her views are not determinative—an investigating magistrate formally can, and sometimes does, proceed to bind the defendant over to trial even under circumstances where the public prosecutor urges non-pursuit. Such investigating magistrates simply have no experience or clear procedural ability to defer or avoid prosecution in exchange for cooperation, compliance initiatives, or monitoring agreements, and do not normally welcome a discussion on such topics.14
As a result, there simply does not exist in France—or in varying degrees in other countries—any tradition or set of practices that permit discussions that may lead to a non-criminal outcome. This imbalance was vividly demonstrated earlier this year in the deferred prosecution agreement (DPA) signed by French oil giant Total with the Department of Justice. Even as recited in the DPA, very little of the corrupt activities alleged against Total had anything to do with the United States. Nonetheless, the DPA is, in essence, really only effective in the United States; on payment of a large fine and implementation of a compliance package supervised by a monitor for three years, Total will succeed in avoiding any criminal judgment in the United States.15 But notwithstanding explicit reference to “cooperation” between the Department of Justice and the French authorities, the DPA provides Total with no protection with respect to an investigation of its activities in France, which are presently being pursued by an investigating magistrate.
What, then, is a company to do if it learns that its activities not only span different countries but may become the object of interest of prosecuting authorities in more than one of them? There is no simple answer, and certainly no “one size fits all” solution. The checklist summarized here should provide a basis for the company to identify its vulnerabilities in each country. To the extent that the facts suggest an interest of prosecuting authorities in the United States, the track record so far, at least, is that U.S. authorities are highly likely to take a dominant role in any multi-national investigation, even if the relative importance of the facts to other countries is greater. In many cases, the strategic goal may be to foster a cooperative relationship between the U.S. investigator and his/her non-U.S. counterpart. Cross-border cooperation may in any event be inevitable, and in fact both the formal means of cooperation (through Mutual Legal Assistance Treaties and Memoranda of Understandings) as well as the pace and effectiveness of practical, everyday contacts, are increasing. It is generally advisable for an investigated company to have good relations and open communications with both investigators, and often to encourage their cooperation in order to arrive at a global understanding.
Whether, how, and when to engage in discussions with non-American prosecuting authorities depends upon identifying the country or countries involved, the likely level of their interest, and the procedures and traditions that will govern their conduct. Ultimately, an effective strategy will require careful efforts to promote a cooperative discussion among U.S. and non-U.S. investigators so that innovative counsel can minimize their client’s risks. More than anything else, finding the right strategy will require careful cooperation among counsel who both know and have the confidence of the investigating authorities in their respective countries.
Frederick T. Davis is of counsel and Antoine F. Kirry is a partner at Debevoise & Plimpton in Paris. Mark P. Goodman is a partner in the New York office. Mr. Davis and Mr. Goodman are both former Assistant U.S. Attorneys in the Southern District of New York, and Mr. Kirry and Mr. Davis are co-authors of the chapter on France in “The International Investigations Review” (3rd ed., 2013).
1. OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, Dec. 17, 1997.
2. Shepard Goldfein & Neal R. Stoll, “Criminal Antitrust Enforcement in the Global Marketplace,” NYLJ, Oct. 11, 2011.
3. Jeremy H. Temkin, “Offshore Banking: the End of the World as we Know It?,” NYLJ, Jan. 14, 2010.
4. See DOJ, “A Resource Guide to the U.S. Foreign Corrupt Practices Act,” November 2012, available at http://www.justice.gov/criminal/fraud/fcpa/guidance/; see also Davis & White, “The Foreign Corrupt Practices Act,” published in Business and Commercial Litigation in Federal Courts (3d ed. 2011), vol. 10 at §115:8.
5. See, e.g., Brief for the Republic of France as Amicus Curiae in Support of Respondents, Morrison v. National Australian Bank, 130 S. Ct. 2869 (2010) (No. 08-1191); Brief of the United Kingdom of Great Britain and Northern Ireland as Amicus Curiae in Support of Respondents, Morrison v. National Australian Bank, 130 S. Ct. 2869 (2010) (No. 08-1191).
6. Morrison v. National Australian Bank, 561 U.S.—, 130 S. Ct. 2869 (2010).
7. The OECD obligates signatories to the Anti-Bribery Convention to participate in biannual reviews of each country’s efforts to fight overseas corruptions. The reports of these reviews are published by the OECD, see http://www.oecd.org/daf/anti-bribery/countryreportsontheimplementationoftheoecdanti-briberyconvention.htm, and often provide useful insight into each country’s prosecutorial policies and priorities.
9. Law No. 80-538 of July 16, 1980, Journal Republique Française, July 17, 1980, p. 1799. See Daniel Schimmel & Emmanuel Rosenfeld, “New Respect for Hague Evidence Convention in Discovery,” NYLJ, May 8, 2008.
10. European Parliament and Council Directive 95/46, 1995, O.J. (L281) (EC).
11. Paul R. Berger, Frederick T. Davis, Erin W. Sheehy & Margot Laporte, Debevoise & Plimpton LLP, FCPA Update, April 2012, available at http://www.globallegalpost.com/global-view/conducting-third-party-fcpa-diligence-in-france-87881254/#.UbCwd9n0SUk.
12. 449 U.S. 383 (1981).
13. Article 81 of the French Code of Criminal Procedure obligates the investigating magistrate to pursue all information “useful in establishing the truth.”
14. See Frederick T. Davis & Antoine F. Kirry, “France” in the “The International Investigations Review” (3d ed., 2013).
15. Deferred Prosecution Agreement, United States v. Total S.A., No. 1:12 CR 239, (E.D.V.A May 29, 2013), available at http://www.justice.gov/opa/pr/2013/May/13-crm-613.html.