Companies expanding in foreign countries often engage consultants to assist in marketing to and negotiating with foreign officials. In recent years, they have become increasingly careful to consider whether payments for such services may implicate concerns under the Foreign Corrupt Practices Act (FCPA). On September 1, 2010, the DOJ released its third FCPA Opinion Procedure Release of 2010, which should help clarify steps to consider in deciding whether and on what terms to engage a consultant to lobby foreign government officials.
The company that requested the DOJ opinion (“the Requestor”) is engaged in the “development of natural resources trading and infrastructure” and “is pursuing an initiative with a foreign government regarding a novel approach to particular natural resource infrastructure development.” The Requestor intends to engage a consultant (“the Consultant”) to assist with the business opportunity. The Consultant is a registered agent under the Foreign Agents Registration Act, and “has previously and currently holds contracts to represent the foreign government and act on its behalf, including performing marketing on behalf of the Ministry of Finance, and lobbying efforts in the United States.” Despite the Consultant’s contacts with the foreign government, DOJ determined that the consultant was not a “foreign official” under the FCPA and that it would not “take any enforcement action with regard to payments made to the Consultant under the proposed consultancy arrangement.”
While a consultant can be a “foreign official” for purposes of the FCPA, in this instance DOJ was satisfied that the Requestor had taken the necessary steps to ensure that the “Consultant and its owner are not acting on behalf of the foreign government and therefore are not foreign officials.” In making its decision, DOJ considered several representations of the Requestor, including:
- Neither Consultant nor its owner have any “decision-making authority on behalf of the foreign government;”
- Under local law, the Consultant and its owners are not employees or officials of the foreign government (confirmed by a local law opinion secured by the Requestor); and
- The arrangement will be disclosed to the Ministry of Finance of the foreign government.
The Requestor also implemented several safeguards to prevent a FCPA violation, which were designed to prevent any finding that the Consultant was acting on behalf of the foreign government in performing the consulting contract. These safeguards included, among others:
- The owner of the Consultant would personally cease to lobby on behalf of the foreign government;
- The Consultant would establish a wall between employees lobbying the foreign government and employees representing the Requestors;
- The Consultant would not represent the foreign government beyond the current contractual arrangements; and
- None of the Consultant’s employees or affiliates is or would become a foreign official under local law.
While FCPA Opinion Releases are only binding with respect to the party requesting the opinion, this release demonstrates that payments to consultants who have long-standing relationships with a foreign government are not per se prohibited by the FCPA. Companies considering such consultancy arrangements should exercise proper due diligence before engaging the consultant, implement appropriate safeguards to prevent improper payments and other conflicts of interest, and closely monitor the relationship during the pendency of the consultancy arrangement.