Toward an Interest Group Theory of Foreign Anti-Corruption Laws

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 continue 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-corruption 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 enforcement of foreign anti-corruption laws and generates predictions concerning the efficacy of such laws based on the extraterritorial operations of multinational 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 account are: (1) after the Foreign Corrupt Practices Act (“FCPA”) was enacted 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 government agencies to apply the FCPA to foreign companies doing business in the United States; (3) as foreign companies operating in the United 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-corruption 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