When it comes to the Foreign Corrupt Practices Act’s prohibition on bribing a foreign official, just who, pray tell, does the U.S. government consider a foreign official? It’s a question that’s seldom come before the courts, but now, for the first time, is being considered at the appellate level — prompting the U.S. Department of Justice to weigh in on the definition through a response brief.

The key word at the heart of the appeal before the U.S. Court of Appeals for the 11th Circuit is “instrumentality.” In the language of the FCPA, a “foreign official” constitutes an “officer or employee of a foreign government or any department, agency, or instrumentality thereof.”

Last year, two former executives of Terra Telecommunications were convicted of taking part in a plan to bribe officials at the state-owned telecommunications company Haiti Teleco. As Texas Lawyer sibling publication The AmLaw Litigation Daily recently summed up:

Prosecutors had successfully argued that Haiti Teleco was an “instrumentality” of the Haitian government, thereby making its employees “foreign officials.” Joel Esquenazi, the former president of Terra, was given a 15-year sentence by Miami federal district judge Jose Martinez — the longest sentence in FCPA history, while Carlos Rodriguez, Terra’s former vice-president, got seven years.

In May, Esquenazi and Rodriguez filed appellate briefs, arguing that the Justice Department’s application of “instrumentality” was too broad, and that employees of certain state-owned enterprises shouldn’t be considered foreign officials under the FCPA.

There’s a lot riding on how the term is defined, according to Southern Illinois University law professor Mike Koehler — of FCPA Professor blog fame — who is advising the defense of Esquenazi and Rodriguez.

By Koehler’s calculations, he says that since 2009, 50 percent to 60 percent of the Securities and Exchange Commission “and DOJ enforcement actions in whole or in part are based on the enforcement theory that state-owned or state-controlled enterprises are instrumentalities of a foreign government.”

However, Koehler argues that Congress never intended the instrumentality label to apply to state-owned or state-controlled enterprises. A previous declaration he wrote on the issue forms the basis for arguments in Rodriguez’s appellate brief.

The Justice Department has responded in kind. Its brief states:

The district court’s instructions on the meaning of ‘instrumentality of a foreign government’ were correct. The instructions stated that an instrumentality must perform a governmental function and provided a nonexhaustive list of relevant factors for the jury to consider in deciding whether Teleco was an instrumentality of the government of Haiti. Courts have used similar tests to determine whether an entity is an instrumentality in other contexts and relied on many of the same factors.

Compliance Week’s breakdown of the brief extracts some nice takeaways on how Justice views an instrumentality, including these factors:

• Whether the foreign state-owned enterprise provides services to the citizens and inhabitants of that country.

• Whether its key officers and directors are government officials or are appointed by government officials.

• The extent of the government’s ownership of foreign state-owned enterprise, including whether the government owns a majority of its shares or provides financial support such as subsidies, special tax treatment, loans or revenue from government-mandated fees.

Clearly, though, it’s an issue Koehler believes deserves its day in court. “Many people view the foreign official issue as being already decided, because three trial court judges at the motion-to-dismiss stage have issued rulings,” he says, adding that “you now have a situation where Esquenazi and Rodriguez, for the first time in the 35 year history of the FCPA, are bringing this issue to the attention of a circuit court.”

Getting to a government-approved definition of a “foreign official” is no small matter for U.S. companies doing business around the world. When companies are working to make good-faith efforts at FCPA compliance, having the company and the enforcement agency back home agreeing on what those two words mean can be the difference between bribery and compliance.