The temporary suspension of the Foreign Corrupt Practices Act (FCPA) enforcement by the previous U.S. administration has created an opening for states to potentially step in and investigate bribery allegations involving foreign officials. Among those seizing this opportunity is California Attorney General Rob Bonta. He aims to utilize California’s Unfair Competition Law to pursue civil actions related to FCPA violations in state courts. This approach, however, is fraught with challenges that may limit its efficacy.
In a recent announcement, Attorney General Bonta underscored that despite the suspension, the FCPA remains binding federal law. His strategy pivots on the premise that California’s Unfair Competition Law, designed to preserve fair business competition and protect consumers, could be a vehicle for enforcing FCPA violations at the state level.
The legal framework presents certain complexities. For instance, while California’s Unfair Competition Law is broad—proscribing “any unlawful, unfair, or fraudulent business act”—there is no clear legal precedent to unequivocally support state-level actions predicated on FCPA breaches. Although cases like Korea Supply Co. v. Lockheed Martin Corp. have recognized the viability of such actions, the California Supreme Court has not definitively endorsed them due to unresolved preemption concerns. Federal authorities might intervene on the grounds that state enforcement interferes with federal prerogatives in foreign policy.
Further, Bonta’s strategy confronts logistical challenges. Unlike the FCPA, which has extraterritorial reach, California’s law requires a direct impact on state residents or businesses. Yet, how this will be applied to foreign bribery remains ambiguous. This issue was left unaddressed in cases like Rose v. Bank of America, N.A. (dealing with UCL applications under another federal statute), where conduct clearly impacted California residents.
The resource-intensive nature of FCPA enforcement presents another barrier. These cases often demand significant investigative efforts, which state attorneys general, including California’s, may not be currently prepared for, despite efforts to bolster enforcement capacity. As a result, private plaintiffs are less likely to pursue these actions due to limited remedies outside of restitution or injunctive relief.
The Department of Justice recently demonstrated its continued vigor in FCPA enforcement by moving to dismiss United States v. Coburn with prejudice but expressed its intention to proceed in several other cases, showing that federal interest is still robust despite the Trump-era executive order.
Given these dynamics, companies with Californian connections should remain vigilant as the contours of anti-bribery enforcement continue to evolve. Despite the uncertainties surrounding state-level enforcement of FCPA-like cases, the illegality of such conduct is undisputed, urging companies to maintain compliance as new legal theories are tested in the courts.
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