Open Doors: Hospitality vs. Bribery in the Hotel Industry
By Mark Robertson Partner, Sutherland Asbill & Brennan LLP | October 21, 2012
You don't need a lawyer to tell you that bribery is illegal. But defining what exactly "bribery" means is often not as simple as it seems. Under the US Foreign Corrupt Practices Act, bribery is the act of influencing a foreign official for the purpose of obtaining or retaining business by offering anything of value to gain an improper advantage. Other laws and other countries have different definitions. Understanding these differences can be the difference between doing business legally and costly legal battles, fines and even jail time.
The first step towards determining whether offering a benefit may be considered a bribe is understanding which anti-corruption laws you have to follow. In the United States, the FCPA is the main law covering bribery of officials in other countries. But in addition to the US law, many countries also have anti-corruption laws that you must follow if you do business in those countries. One law that is particularly notable for its broad application is the UK Bribery Act, which applies extraterritorially to any company that does business in the UK in any way. So if a hotel company is based in the United States, but has hotels around the world, including in the UK, then that hotel company could be liable under the FCPA and the UK Bribery Act for all of its operations worldwide, as well as under Indian laws for operations in India, Chinese laws for operations in China, and so forth. It is important to understand which laws apply because different countries often have very different laws regarding bribery and corruption.
It is also important to be aware of what exactly terms like "corruption" mean. The FCPA criminalizes payments made to gain an "improper advantage," but what exactly makes an advantage "improper"? According to the FCPA, "improper" means that without the payment, that advantage wouldn't be available to you. It also means that an advantage is not available to your competition, but is available to you, because of a payment or gift. This applies even if the advantage you gain is very small. Under the FCPA, "corrupt" means that the payment is intended to make the official who receives it misuse their position.
The definition of "foreign official" can also differ. Under the FCPA, "foreign official" means any employee of a foreign government or international organization (such as the UN or the World Bank) as well as any foreign political party or candidate. This means that if you give something to an employee of another company or an individual, that individual also holds a position in a foreign government, and the gift is intended to gain an improper advantage, then you can be liable for violating the FCPA.
For example, there have been reports recently regarding Las Vegas Sands business dealings in Macau with an outside lawyer who is also a government employee. The size and purpose of payments for legal fees have been called into question. Hiring a foreign government official can raises a red flag in and of itself, although it may not be illegal under local law, the FCPA or related laws, but any unusual payments or benefits could be seen as illegal bribes.
The FCPA also includes employees of an entity with commercial functions in which a foreign government exercises control or maintains ownership interest, even if it performs business-related functions. The employee receiving the benefit may not be an employee of the foreign government, but the payment could raise a FCPA question, because the company itself is owned or controlled by a foreign government. This can be a significant problem in countries like China or Russia where many businesses have ties to the government.