On January 21, the US Department of Justice (“DOJ”) issued a new Opinion Procedure Release (the “Opinion”) regarding the scope of the Foreign Corrupt Practices Act (“FCPA”).[1] The DOJ’s Opinion, specifically, addressed a non-US government official’s demand that a ship captain’s employer (“Requestor”) pay non-US government officials for release of a lawfully detained captain, crew and vessel in lieu of further detainment, and whether such a payment would constitute an FCPA violation.

The Opinion Fact-Pattern

In the Opinion, a country’s naval forces seized the Requestor’s vessel, captain and crew after the Requestor’s ship mistakenly anchored in the country’s territorial waters. The Requestor’s vessel had been attempting to dock in a neighboring country whose port was fully occupied and was given errant coordinates by the shipping agent for offshore anchoring in the neighboring country’s waters. The neighboring country intercepted the ship, deemed the ship’s presence in its waters as a violation of various laws and treaties, confiscated the ship’s logbook and officer and crew documents, and detained the captain ashore for questioning. During his onshore detention, the captain was not questioned or provided documents authorizing his arrest or detention. The Requestor described in its request that the Captain was suffering from serious medical conditions that would be exacerbated by his detention such that they created a significant risk to his life.

Shortly after the detention, a third party purporting to act on the country’s behalf demanded financial payment to release the captain and permit the crew and ship to leave the country’s waters. To negotiate with the third party, the Requestor engaged an agent in the detaining country that was recently approved via the Requestor’s internal due diligence processes. The Requestor and its agent repeatedly asked for a formal basis for the payment – e.g. an invoice or other documentation setting forth charges or an enumerated fine amount. The third party, however, repeatedly rejected the request. The Requestor also sought help from the US government to end the captain’s detention and permit the crew and ship to leave. However, the Requestor’s efforts were to no avail. The third party, instead, told the agent that to expeditiously resolve the matter, the Requestor needed to make a payment of $175,000 in cash to the third party. If not, the captain and crew would be detained for a longer period of time and the ship would be seized. The third party represented the payment as an official payment to the country’s government, but circumstances surrounding the demand raised concerns that the payment was instead intended for one or more of the country’s government officials.

The DOJ Provides Clarity on the Duress Exception to the FCPA

 The DOJ determined that, under these specific facts, the proposed payment would not trigger an enforcement action under the anti-bribery provisions of the FCPA because the Requestor would not be making the payment “corruptly” or to “obtain or retain business.” The Opinion verified prior DOJ assertions that the corrupt intent required to prove an anti-bribery violation was lacking when the primary reason for the payment would be to avoid imminent and potentially serious harm to the captain and the crew (citing United States v. Kozeny, 582 F. Supp. 535, 540 n.31 (S.D.N.Y. 2008), which stated that “an individual who is forced to make a payment on threat of injury or death would not be liable under the FCPA. Federal criminal law provides that actions taken under duress do not ordinarily constitute crimes”). Here, the Requestor’s objective was to help the captain who might die if the detention continued, which the Opinion described as meeting the duress defense to the FCPA’s mens rea (corrupt intent) element.

But the Opinion Muddies the Waters in Its Business Purpose Analysis

The Opinion described that the payment did not seem to be motivated by an intent to obtain or retain business because “Requestor has no ongoing or anticipated business with Country A, and the entire episode appears to be the result of an error, emanating from the incorrect advice... it is possible that Requestor inadvertently violated Country A, and perhaps other, regulations and laws governing shipping routes and anchoring locations [but] [i]t is this error that triggered the payment demand by the Third-Party Intermediary...” It thus determined that the situation was “readily distinguishable from other situations in which a company is threatened with severe economic or financial consequences in the absence of a payment.” Here, the DOJ seems to be conflating a duress payment and an extortionate bribe payment in focusing on one piece of the bribe result (the Captain’s release) to the exclusion of another (the release of the vessel and cargo).

The FCPA Resource Guide (the “Guide”)[2] language suggests that an extortion defense requires specific threats. The Guide emphasizes that “true extortion” in a criminal FCPA prosecution involves the imminent threat of physical harm.[3] “Mere economic coercion, however, does not amount to extortion.”[4] Also of note from a report of the Senate Committee on Banking, Housing and Urban Affairs hearings when the FCPA statute was debated were discussions of an extortion defense where one participant in the debate argued that “True extortion situations would not be covered by [the anti-bribery] provision since a payment to an official to keep an oil rig from being dynamited should not be held to be made with the requisite corrupt purposes.”[5]

The new Opinion glosses over a couple of key points in an FCPA extortion analysis, while focusing primarily on only the Captain’s duress. 

• First, the Opinion does not state that the country or its officials acted unlawfully under local or other law in arresting or imprisoning the Captain and seizing the vessel (unlike the scenario where an extortion payment is made to prevent the improper dynamiting of an oil rig). FCPA practitioners and enforcers typically would view a duress claim skeptically when there is a valid arrest and detention under local law, even when the crime does not exist in the US; the punishment in the foreign country is far more significant than it would be in the US; or the jail conditions are dangerous, bad for an individual’s health, or not able to accommodate certain medical conditions with the degree of medical care that might be given in a US detention facility. This Opinion seems to suggest that there may instances where a bribe or extortion payment is okay to avoid continued detention or incarceration, even when that incarceration is lawful – but where that line is drawn remains to be determined.
• Second, and more significant, the Opinion glosses over the fact that if the payment is made, not only will the captain and crew be freed, but the commercial vessel will be freed. Freeing the captain and crew with a duress payment is more easily viewed as having no business purpose to the payment when compared to freeing the vessel and its cargo (which will almost certainly be used in the generation of future commercial gains).

The DOJ distinguished this Opinion from other situations in which a company is threatened with severe economic or financial consequences in the absence of payment. The DOJ stated that the facts here are distinguishable because rather than conceal the payment demand, the Requestor engaged with various United States government agencies and requested proper documentation from the country setting forth the allegations and fine. It was only when the Requestor’s efforts did not bear fruit that the Requestor considered making the payment. Requestor being stuck between a rock and a hard place, that is its attempt to document a legitimate basis for the payment and conducting outreach to various United States government agencies before making its decision to pay the extorted amount may be the greatest reasons for the Opinion’s outcome.

 Key Takeaways

The Opinion tells us that the DOJ is willing to consider narrow duress or extortion exceptions to the FCPA when a company has taken steps to remedy the matter, to no avail, and where there is no corrupt intent or business purpose for the payment. 

However, DOJ Opinion Releases are not binding precedent for anyone but the Requestor and are applicable only to their specific facts. Further, this was an Opinion Release granted in what was described as an emergency where there was a risk of imminent death – it is uncertain whether similar results would be achieved in a different country or in a slightly different set of circumstances. 

Anti-corruption policies that allow for payments under duress only to the extent necessary to avoid imminent physical harm are likely the safer policy course for a general corporate rule. As compliance legal counsel, however, it is important to understand that there may be some grey area in how the DOJ defines duress when you receive the phone call asking if a payment can be made in real life. Here, the Requestor’s repeated attempts to do business the right way - exhaust lawful means to justify the payment, exigent circumstances, use of third-party agents it had approved under its internal due diligence processes, and early involvement of the US government - likely helped arrive at the duress conclusion. 

The Opinion release itself notes that “payments under circumstances that companies may perceive as economically coercive, especially in countries in which they are in historical, pending, ongoing, anticipated or sought after business relationships with government actors may well give rise to liability under the FCPA.” This suggests the Opinion may have come out differently if there was ongoing or sought-after business in the detaining country, which is the far more typical fact pattern.

Even though this scenario would not qualify for prosecution under the anti-bribery provisions of the FCPA, that does not mean that it would not still be deemed a violation of the FCPA’s accounting provisions by the SEC if the payments are inaccurately described in corporate books and records.

[1] US Department of Justice Opinion Procedure Release No. 22-1 (Jan 21, 2022) (available at https://www.justice.gov/criminal-fraud/page/file/1466596/download).

[2]United States. Dept. of Justice. Criminal Division. A Resource Guide to the U.S. Foreign Corrupt Practices Act. U.S. Department of Justice: U.S. Securities and Exchange Commission (2nd Ed.) (July 2020) (available at https://www.justice.gov/criminal-fraud/file/1292051/download).

[3] Id. at 27.

[4] Id.

[5] S. REP. 114, 95th Cong., 1st Sess. (1977) at 11.