Schuttauf: Repeal Anti-Bribery Legislation?

SCHUTTAUF FINAL (DO NOT DELETE)
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Repeal Anti-Bribery Legislation?

A Defense of Laws Promoting Clean
Business and Transparent Governments
NIKOLAUS SCHUTTAUF*
ABSTRACT
Mohamed Bouazizi was a twenty-six-year-old Tunisian peasant who

made his living selling produce from a cart. Because Bouazizi could not
afford to pay bribes to the government, the local police beat him and took
his cart as punishment. His death two weeks later sparked riots that led to
the overthrow of the Tunisian government. The outcry for government
transparency spread across the Middle East during the Arab Spring,
encompassing three other countries infamously corrupt: Egypt, Yemen,
and Algeria. While the backlash against corrupt regimes has reached a
fever pitch, critics of anti-bribery legislation lobby Congress to reduce or
repeal American anti-bribery laws.
These conclusions are entirely incorrect. First, foreign direct investment
is not the single, accurate gauge of the growth of a developing nation.
Second, FDI is not influenced by anti-bribery legislation alone. FDI is a
complex phenomenon, and there are several factorsof equal or greater
importance than anti-bribery lawsthat influence FDI. Third, increased
FDI will not promote true progress in developing nations until these
nations governments become more transparent. This Note exposes the
economic flaws in critics positions, argues against a reduction in current
anti-bribery legislation, and advocates for human development as a
solution to the problems confronting the citizens of developing nations.
* Candidate for Juris Doctor, New England Law | Boston (2012). Dual B.A., English
Literature and Philosophy, Stonehill College (2009). My thanks to Professor Elizabeth Spahn
for providing me with the idea for this Note, to my family and friends for their support and
encouragement during three years of law school, and to my fellow Law Review members for
their help publishing this Note.
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Corruption has its own motivations, and one has to thoroughly

study that phenomenon and eliminate the foundations that allow
corruption to exist.1
INTRODUCTION
Corruption is traditionally defined as the misuse or the abuse of
public office for private gain.2 The worldwide outcry against corruption
and for government transparency3 has reached a fever pitch.4 The World
Bank maintains that corruption is the single greatest obstacle to economic
and social development around the world and that it distorts markets,
stifles economic growth, debases democracy and undermines the rule of
law.5 But [a]bstract arguments about harm to society as a whole are
generally not effective in motivating people to change . . . .6 The Arab
Spring7the chain of uprisings against corrupt regimes in the Middle
East during the spring of 20118humanizes the World Banks statement by
illustrating the harmful effects government corruption has on innocent
citizens and emphasizing the importance of continued efforts to strengthen
anti-bribery laws.9
1 William Dorotinski & Shilpa Pradhan, Exploring Corruption in Public Financial
Management, in THE MANY FACES OF CORRUPTION: TRACKING VULNERABILITIES AT THE SECTOR
LEVEL 267, 267 (J. Edgardo Campos & Sanjay Pradhan eds., 2007) (quoting Eduard
Shevardnadze, Former President of Georgia).
2 Jenny Balboa & Erlinda M. Medalla, Anti-Corruption and Governance: The Philippine
Experience, ASIA-PAC. ECON. COOPERATION 3 (May 23-24, 2006), http://www.apec.org.au/
docs/06ASCC_HCMC/06_9_1_Balboa.pdf.
3 Transparency is defined as the extent to which there is publicly available clear, accurate
information . . . covering accepted practices related to capital markets, including the legal and
judicial system, the governments macroeconomic and fiscal policies, accounting norms and
practices (including corporate governance and the release of information), ethics, corruption,
and regulations, customs and habits . . . . Carla C. J. M. Millar et al., Corporate Governance and
Institutional Transparency in Emerging Markets, 59 J. BUS. ETHICS 163, 166 (2005).
4
See Michael Slackman, Reign of Egypts Mubarak Marked by Poverty, Corruption, Despair,
SEATTLE TIMES (Jan. 28, 2011, 10:02 PM), http://seattletimes.nwsource.com/html/nationworld/
2014070735_egyptmubarak29.html; Liz Sly, Across Arab World, a Sense of Possibility, WASH.
POST, Feb. 12, 2011, at A9.
5 Clean Business Is Good Business: The Business Case Against Corruption, WORLD BANK,
http://info.worldbank.org/etools/antic/docs/Business%20Case/TheBusinessCaseAgainstCurrpt
ion.pdf (last visited Mar. 27, 2012).
6 Elizabeth Spahn, Nobody Gets Hurt?, 41 GEO. J. INTL L. 861, 892 (2010).
7 See Garry Blight et al., Arab Spring: An Interactive Timeline of Middle East Protests, THE
GUARDIAN (Jan. 5, 2012, 10:45 AM), http://www.guardian.co.uk/world/interactive/2011
/mar/22/middle-east-protest-interactive-timeline.
8 See id.
9 See Karly Curcio, Now Egypt? There Goes the Neighborhood, TASK FORCE ON FIN. INTEGRITY
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619
Mohamed Bouazizi was a twenty-six-year-old Tunisian peasant who

made his living selling produce from a cart. 10 Because Bouazizi could not
afford to pay bribes to the government, the local police beat him and took
his food cart as punishment. 11 In despair, Bouazizi covered himself with
accelerant and lit himself on fire.12 Two weeks later he died from his
injuries, and his death sparked the riots that led to the overthrow of the
Tunisian Government.13 This backlash spread to Egypt, where Hosni
Mubaraks regime was called an embodiment of corruption.14 Now the
citizens of Yemen and Algeria continue the push for democracy and
transparency in their own countries.15 The call for transparency was
recently echoed in China as well, where a research poll asked Chinese
citizens what was the greatest inhibition to their personal success.16 Sixty
percent of respondents answered that, because of Chinas [r]ampant
corruption, not knowing the right people was the greatest inhibition to
their success.17 The study concluded the [Chinese] people detest
corruption . . . .18
While the call to end corruption and to promote government
transparency gains momentum globally, there are critics of anti-bribery
laws here in the United States.19 The United States was the first country to
& ECON. DEV. (Jan. 26, 2011, 7:13 PM), http://www.financialtaskforce.org/2011/ 01/26/nowegpyt-there-goes-the-neighborhood/; Corruption Perceptions Index 2010 Results, TRANSPARENCY
INTL, http://www.transparency.org/policy_research/surveys_indices/cpi/ 2010/results (last
visited Mar. 1, 2012).
10 Eric Pooley & Philip Revzin, Hungry for a Solution, BLOOMBERG BUSINESSWEEK, Feb. 2127, 2011, at 7, 7 [hereinafter Pooley].
11 Id.
12 Id.
13 See id.
14 See Deposed Egyptian President Hosni Mubarak Leaves Corrupt Legacy, CATHOLIC ONLINE
(Feb. 13, 2011), http://www.catholic.org/international/international_story.php?id=40342
(quoting a 2006 report naming Mubarak-family companies tied to the Egyptian Government).
In Transparency Internationals 2010 corruption report, in which countries are ranked from
least corrupt to most corrupt, Egypt received poor scores, ranking 98 out of 178. Corruption
Perceptions Index 2010 Result, supra note 9.
15
See Pooley, supra note 10, at 7.

See Dexter Roberts, The Ruling Party Vows to Fix the Ruling Party, BLOOMBERG
BUSINESSWEEK, Mar. 14-21, 2011, at 13-14.
17 Id. (quoting Chinas Premier Wen Jiabaos opening review of the government work
report, Chinas version of the State of the Union address, and a recent survey by Horizon
Research Consultancy Group).
16
18
Id. at 14 (quoting Xia Jien, a congressional deputy for Chinas National Peoples
Congress).
19 See Andrew Brady Spalding, Unwitting Sanctions: Understanding Anti-Bribery Legislation
as Economic Sanctions Against Emerging Markets, 62 FLA. L. REV. 351, 354 (2010); Joe Palazzolo,
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make significant efforts to combat corruption when it enacted the Foreign

Corrupt Practices Act (FCPA) in 1977.20 The Organisation for Economic
Co-operation and Development (OECD) ratified its own anti-bribery
legislation in 1997, which, for the most part, modeled the FCPA. 21 Critics
want anti-bribery laws repealed entirely or drastically narrowed in scope.22
More disturbingly, these critics are recruiting pricey hired guns to argue
for reduction in anti-bribery laws before Congress at hearings on the
effectiveness of the FCPA.23 Critics generally make three broad conclusions:
(1) low levels of foreign direct investment (FDI) in developing countries
are bad per se and high levels of FDI are good per se; (2) the only reason
FDI is low in corrupt countries is due to the current anti-bribery laws; and
(3) increased FDI from America and OECD Member Nations is the solution
to the issues preventing corrupt developing nations from fully
industrializing.24
Congress to Look at FCPA Enforcement, WALL STREET J. BLOG (Nov. 18, 2010, 3:58 PM),
http://blogs.wsj.com/corruption-currents/2010/11/18/congress-to-look-at-fcpa-enforcement/
(The witness list is out, and by the looks of it, theres going to be lots of FCPA-bashing.).
20 See U.S. DEPT OF JUSTICE, LAY PERSONS GUIDE TO THE FOREIGN CORRUPT PRACTICES ACT
1-2 [hereinafter FCPA GUIDE], available at http://www.justice.gov/criminal/fraud/fcpa/
docs/lay-persons-guide.pdf.
21 Philippa Webb, The United Nations Convention Against Corruption: Global Achievement or
Missed Opportunity?, 8 J. INT'L ECON. L. 191, 195-96 (2005).
22 See Spalding, supra note 19, at 355-56. In 2011, the U.S. Chamber of Commerce lobbied
the U.S. House of Representatives for a complete statutory defense based on corporate
compliance policies, rather than individual company results assessed by prosecutors and
judges in specific cases. See ANDREW WEISSMANN & ALIXANDRA SMITH, U.S. CHAMBER
INSTITUTE FOR LEGAL REFORM, RESTORING BALANCE: PROPOSED AMENDMENTS TO THE FOREIGN
CORRUPT PRACTICES ACT 11-14 (2010), available at http://www.instituteforlegalreform.com/
doc/restoring-balance-proposed-amendments-to-the-foreign-corrupt-practices-act; see also
Mike Koehler, House Hearing - Overview and Observations, FCPA PROFESSOR (June 14, 2011, 4:42
PM),
http://fcpaprofessor.blogspot.com/2011/06/house-hearing-overview-and-observations.
html; Michael Volkov, House Judiciary Committee to Hold FCPA Oversight Hearing, FCPA BLOG
(May 24, 2011, 12:28 PM), http://fcpablog.squarespace.com/blog/2011/5/24/ house-judiciarycommittee-to-hold-fcpa-oversight-hearing.html; If the FCPA Is Sick, Judicial Review Is
the Medicine, FCPA BLOG (June 15, 2011, 5:36 AM), http://fcpablog.squarespace.com
/blog/2011/6/15/if-the-fcpa-is-sick-judicial-review-is-the-medicine.html; Mukasey Calls on
Congress to Fix the FCPA, FCPA BLOG (June 14, 2011, 3:16 PM), http://www.fcpablog.com/
blog/2011/6/14/mukasey-calls-on-congress-to-fix-the-fcpa.html.
23 See, e.g., David Ingram, Chamber Hires Mukasey to Push for FCPA Changes, THE BLT: THE
BLOG OF LEGALTIMES (Mar. 15, 2011, 12:42 PM), http://legaltimes.typepad.com/blt/
2011/03/chamber-hires-michael-mukasey-to-push-fcpa-changes.html (reporting that the U.S.
Chamber of Commerce hired former U.S. Attorney General Michael Mukasey to lobby for
changes that will weaken the FCPA); Palazzolo, supra note 19.
24
See Spalding, supra note 19, at 357-58.
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However, these conclusions are unsupported by an overwhelming

majority of studies.25 When the studies on FDI are combined into one
cohesive analysis, three conclusions are clear: (1) high levels of FDI are not
necessarily good for a developing nations industries; (2) anti-bribery laws
are not the single, major determinate of FDI in developing nations; and (3)
anti-bribery legislation is necessary for true growth to occur in developing
nations.26
First, while there are many benefits associated with FDI, it is not
always good for developing nations. There are times when FDI creates
intense competition between local and foreign companies, squeezing out
local business and hindering the growth of domestic industries.27 Second,
anti-bribery laws are not the single most important factor determining FDI
in developing nations.28 In fact, there are several factors of equal or greater
importance influencing FDI.29
Third, increased FDI in corrupt developing nations will not help the
people until these governments become more transparent.30 In corrupt
countries, to borrow a common clich, the rich get richer31: the increased
wealth from FDI would simply flow straight into the pockets of the
corrupt, with nothing reaching the poor and needy citizens.32 Therefore, a
repeal or reduction in anti-bribery laws would inhibit citizens
25 See infra Parts III-IV. There are many studies that focus on individual elements of FDI.
See infra Part III.B. This Note seeks to combine these studies to provide a comprehensive
analysis of FDI. See infra Part III.B.
26 See infra Parts III-IV.
27 See infra Part III.A.
28 See infra Part III.
29 See infra Part III.B.
30 See infra Part IV.
31 See Jack A. Goldstone, Understanding the Revolutions of 2011: Weakness and Resilience in
Middle Eastern Autocracies, FOREIGN AFF., May-June 2011, at 8, 11-12 (explaining that in corrupt
nations the majority of the wealth remains in the hands of a few well connected individuals
despite economic growth).
The revolutions unfolding across the Middle East represent the

breakdown of increasingly corrupt sultanistic regimes. Although
economies across the region have grown in recent years, the gains have
bypassed the majority of the population, being amassed instead by a
wealthy few. Mubarak and his family reportedly built up a fortune of
between $40 billion and $70 billion, and 39 officials and businessmen
close to Mubaraks son Gamal are alleged to have made fortunes
averaging more than $1 billion each.
Id. at 11.
32
See infra Part IV.
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development in corrupt developing nations. 33

Part I of this Note provides a brief background on the current antibribery laws. Part II supplies a background on FDI. Part III.A explores the
circumstances in which FDI can be beneficial or detrimental. Part III.B
identifies several important factors that determine FDI levels. Part IV
makes clear why increased FDIwithout government transparency
would not benefit the people of developing nations.
I.
Current Anti-Bribery Laws: A Concerted Effort to End Corruption

and Promote Transparency
Current anti-bribery laws focus on the supply side of corruption.34 In

other words, anti-bribery laws punish companies within their jurisdiction
(anti-bribery law companies or ABLCs) for offering bribes.35 The
theory is that if ABLCs are punished for offering bribes, they will no longer
do so.36 Because a majority of companies that invest in developing nations
are subject to anti-bribery laws, bribe offers are no longer available for
corrupt government officials to accept. 37 The lack of bribes forces corrupt
governments to conduct clean, transparent business.38
A. Clean Business and Good Diplomacy
The FCPA imposes criminal and civil penalties upon American
companies and citizens who bribe, or attempt to bribe, foreign officials.39
The FCPA is expansive in scope,40 due in part to historical events that
transpired shortly before Congress wrote the statute. 41 This section will
look at the events leading up to the creation of the FCPA and then at the
statute itself.42
33
34
35
36
37
38
See infra Part IV.

See Spahn, supra note 6, at 864.
See infra Part I.A-B.
39
DON ZARIN, DOING BUSINESS UNDER THE FOREIGN CORRUPT PRACTICES ACT 1-2 (1995); see
also 15 U.S.C. 78dd-1 (2006).
40 ALEXANDRA ADDISON WRAGE, BRIBERY AND EXTORTION: UNDERMINING BUSINESS,
GOVERNMENTS, AND SECURITY 20 (2007).
41
42
See infra Part I.A.

See infra Part I.A.1-3.
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1.
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Learning from an International Faux Pas
The FCPA developed as a result of the Watergate Scandal. 43 The special

investigation of the Nixon campaign turned up numerous instances of
illegal campaign contributions, of laundering of such money through
foreign countries and of the use of campaign funds to bribe foreign
officials.44 The Securities and Exchange Commission (SEC) further
investigated the illegal foreign payments made by U.S. companies to
foreign officials.45 Over the next three years, 400 U.S. companies, 177 of
which ranked in the Fortune 500, admitted to the SEC that they had paid
$300 million in bribes to foreign officials.46
The most damaging SEC discovery was that Lockheed Aircraft
Corporation, the largest defense contractor in the United States in the mid1970s, paid bribes to: Giovanni Leone, the President of Italy; Tanaka
Kakuei, the Prime Minister of Japan; and Prince Bernhard of the
Netherlands to obtain favorable contracts within those three countries.47
The House of Representatives Report summarized the damaging effects
associated with the revelation of these bribes:
[T]he Lockheed scandal shook the Government of Japan to its
political foundation and gave opponents of close ties between the
United States and Japan an effective weapon with which to drive
a wedge between the two nations. In another instance, Prince
Bernhardt [sic] of the Netherlands was forced to resign from his
official position as a result of an inquiry into allegations that he
received $1 million in pay-offs from Lockheed. In Italy, alleged
payments by Lockheed, Exxon, Mobil Oil, and other corporations
to officials of the Italian Government eroded public support for
that Government and jeopardized U.S. foreign policy, not only
43 ZARIN, supra note 39, at 1-1. Watergate is the name given to the scandals involving
President Richard M. Nixon, members of his administration, and operatives working for
Nixons 1972 reelection organization. WATERGATE SCANDAL, ENCYCLOPEDIA BRITANNICA
ACADEMIC EDITION, available at http://www.britannica.com/EBchecked/topic/637431/
Watergate-Scandal (last visited Mar. 27, 2012). The name comes from the Watergate apartment
and hotel complex in Washington, D.C., which in 1972 was the location of the Democratic
National Committee (DNC). See id. On June 17, 1972, several burglars were caught breaking
into DNC headquarters. Id. The break-in and the subsequent cover-up by Nixon and his aides
culminated two years later in the Presidents resignation. Id.
44 Peter W. Schroth, The United States and the International Bribery Conventions, 50 AM. J.
COMP. L. 593, 595 (Supp. 2002).
45 ZARIN, supra note 39, at 1-1. See generally Theodore C. Sorensen, Improper Payments
Abroad: Perspectives and Proposals, 54 FOREIGN AFF. 719, 720-23 (1976) (discussing the enactment
of the FCPA and the prevailing view regarding its appropriateness).
46 H. COMM. ON INTERSTATE & FOREIGN COMMERCE, UNLAWFUL CORPORATE PAYMENTS ACT
OF 1977, H.R. REP. NO. 95-640, at 4 (1977).
47
Schroth, supra note 44, at 595.
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with respect to Italy and the Mediterranean area, but with respect
to the entire NATO alliance as well.48
Congress concluded that the best way to balance good morals with good
diplomacy was to punish the party that offered the bribe, rather than the
foreign official who accepted it.49 Congress believed that punishing only
the bribe-maker, while keeping the bribe-taker anonymous, would
simultaneously reduce bribery and prevent another foreign relations
disaster.50
2.
Elements of a Statutory Offense
The FCPA creates criminal and civil penalties. 51 A bribe need not be in
cash and can be anything of value.52 Also, it is a crime just to offer a bribe
even if it is never paid.53
The statutes anti-bribery provisions apply to three different classes of
persons: issuers,54 domestic concerns,55 and persons other than issuers or
domestic concerns.56 [A]ny issuer that has a class of securities registered
under 12 of the Exchange Act or . . . is required to file reports under
15(d) of that act is subject to the anti-bribery provisions.57 This prohibition
applies to any officer, director, employee, or agent of such issuer or any
stockholder thereof acting on behalf of such issuer.58 A domestic concern
is any individual who is a citizen, national, or resident of the United
States.59 The statute also applies to commercial entities including any
corporation, partnership, association, joint-stock company, business trust,
unincorporated organization, or sole proprietorship which has its principal
place of business in the United States, or which is organized under the
laws of a U.S. state, territory, possession, or commonwealth. 60 The third
48
H.R. REP. NO. 95-640, at 5.

Id. at 4-6.
50 See id. at 6.
51 15 U.S.C. 78dd-2 to -3 (2006); ZARIN, supra note 39, at 1-2.
52 WRAGE, supra note 40, at 20 (Enforcement actions have described purchases of office
furniture, upgrades to first class travel, jewelry, speed boats, gift certificates, expensive wine,
political contributions, and contributions to an officials favorite charity as evidence of alleged
FCPA violations. (footnotes omitted)).
49
53
54
55
56
57
58
59
60
Id.
15 U.S.C. 78dd-1(a).
Id. 78dd-2(a).
Id. 78dd-3(a).
Spalding, supra note 19, at 361.
15 U.S.C. 78dd-1(a).
Id. 78dd-2(h)(1)(A).
Id. 78dd-2(h)(1)(B).
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category, any person, holds any foreign corporationseven if

subsidiaries of a United States corporationas well as the employees of
such corporations liable for bribery. 61
The illegal conduct has three elements: the payment, the recipient, and
the purpose.62 A payment can be an offer, payment, promise to pay, or
authorization of the payment of any money, or offer, gift, promise to give,
or authorization of the giving of anything of value.63 Payment cannot be
made to a foreign official, who is any officer or employee of a foreign
government or any department, agency, or instrumentality thereof;64
payment also cannot be made to any foreign political party or official
thereof or any candidate for foreign political office.65 The third group
consists of any person who makes a payment knowing that all or a
portion of such money or thing of value will be offered, given, or
promised, directly or indirectly, to any foreign official, political party, or
political candidate.66 The purpose of the payment can be to directly or
indirectly influence any of the recipients.67 The payment can influence any
act or decision of the bribe recipient;68 induce the recipient to do or omit to
do any act;69 or secure any improper advantage. 70
The FCPA is also expansive in its reach. It provides for jurisdiction
when any means or instrumentality of interstate commerce was used to
pay the bribe.71 In addition, the statute covers any corrupt act committed
outside the United States by any issuer, domestic concern, officer, director,
employee, or agent who is a United States person.72
The statute makes an exception for facilitating payments made to
expedite or secure the performance of a routine governmental action by
any of the targeted parties. 73 It also provides for good-faith defenses when
61 DON ZARIN, DOING BUSINESS UNDER THE FOREIGN CORRUPT PRACTICES ACT 13:2.2, at
13-3 (2011).
62
Spalding, supra note 19, at 363.

15 U.S.C. 78dd-1(a).
64 Id. 78dd-1(f)(1)(A).
65 Id. 78dd-1(a)(2).
66 Id. 78dd-1(a)(3).
67 Spalding, supra note 19, at 363.
68 15 U.S.C. 78dd-1(a)(3)(A)(i).
69 Id. 78dd-1(a)(3)(A)(ii).
70 Id. 78dd-1(a)(3)(A)(iii).
71 Id. 78dd-1(a).
72 Id. 78dd-1(g)(1). A United States person is defined as any national of the United
States . . . or any corporation, partnership, association, joint-stock company, business trust,
unincorporated organization, or sole proprietorship organized under the laws of the United
States . . . . Id. 78dd-1(g)(2).
63
73
15 U.S.C. 78dd-1(b); see, e.g., WRAGE, supra note 40, at 21 (*I+f an employee of a state-
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the payment was authorized under foreign law74 or when the payment was
an actual, reasonable, business expense. 75
3.
Imposing Costs that Outweigh the Benefits of Corruption
Businesses or individuals who violate the FCPA are subject to harsh

penalties.76 Currently only the SEC and the Department of Justice (DOJ)
can bring FCPA suits, but the creation of a private right of action may soon
permit individuals and companies to bring suit as well.77 Businesses are
subject to criminal fines of up to $2,000,000.78 Individual directors, officers,
stockholders, employees, or agents who violate the FCPA are subject to
$100,000 fines and imprisonment for up to five years. 79 Under the
Alternative Fines Act, these fines may be much higher, equaling double the
amount of the benefit the violator sought to obtain by offering the bribe. 80
Civil fines for individual directors, officers, stockholders, employees,
or agents who violate the anti-bribery provisions can reach $10,000.81 The
court may impose additional fines not to exceed the greater of either the
gross amount of the monetary gain to the defendant as a result of the
violation or a specified dollar limitation.82 The dollar limitations are based
on the severity of the violation and range from $5000 to $100,000 for an
individual and $50,000 to $500,000 for a corporation.83 The U.S. Attorney
General or SEC may also bring a civil action to bar any act or practice of a
firm whenever it is apparent that the firmor an individual within the
firmis, or is about to be, in violation of the FCPAs anti-bribery
provisions.84
owned telephone company in Moscow offers to install your new phone system early 2012,
you may choose instead to pay him US$50 to get the system up and running that afternoon.).
74
15 U.S.C. 78dd-1(c)(1).
Id. 78dd-1(c)(2).
76 FCPA GUIDE, supra note 20.
77 See Spahn, supra note 6, at 900-01 (noting that Europe allows a private right of action and
advocating for the United States to adopt the same policy).
78 FCPA GUIDE, supra note 20. Companies that bribe can also be subject to suit from
disadvantaged competitors. See, e.g., W.S. Kirkpatrick & Co. v. Envtl. Tectonics Corp., Intl,
493 U.S. 400, 401-02 (1990); Pilkington v. Cardinal Health, Inc. (In re Syncor ERISA Litigation),
516 F.3d 1095, 1097-98 (9th Cir. 2008).
79 Alvaro Cuervo-Cazurra, The Effectiveness of Laws Against Bribery Abroad, 39 J. INTL BUS.
STUD. 634, 636 (2008) [hereinafter Cuervo-Cazurra I].
75
80
81
82
83
84
18 U.S.C. 3571(d) (2006).

FCPA GUIDE, supra note 20.
Id.
Id.
Id.
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627
In addition to criminal and civil offenses, the government can bar any
company or person who violated the FCPA from doing any business with
the federal government.85 Just being indicted for a potential violation is
enough for a company or individual to be barred from procuring any
government contracts.86 The government can also rescind a companys
export license.87 If a company or person violated the FCPA, the SEC can
also prohibit the violator from doing any trading in securities, futures, and
options markets.88 In short, FCPA penalties are harsh, as they are designed
to ensure that potential benefits of corrupt activity will be outweighed by
penalties.89 These penalties compel compliance from any risk-averse
company or individual.90
B. The Organisation of Economic Co-operation and Developments
Anti-Bribery Legislation
The OECD Convention on Combating Bribery of Foreign Public
Officials in International Business Transactions became effective on
February 15, 1999.91 Thirty-eight countries have now ratified the OECDs
anti-bribery legislation.92 The OECDs member nations93 represent 70% of
85 Id.; see also Enforcement Report for Q1 10, FCPA BLOG (Apr. 1, 2011, 8:28 AM),
http://www.fcpablog.com/blog/2010/4/1/enforcement-report-for-q1-10.html (listing all the
companies and individuals who were punished for violating the FCPA in the first three
months of 2010).
86
FCPA GUIDE, supra note 20.

Id.
88 Id.
89 For a good example of litigation involving the FCPA, see United States v. Kay (Kay I),
513 F.3d 432 (5th Cir. 2007) and United States v. Kay (Kay II), 513 F.3d 461 (5th Cir. 2008). In
these cases, the court adopted an expansive reading of the FCPA. See Kay I, 513 F.3d at 453.
The cases resulted in two rice company executives being heavily sanctioned for bribing
Haitian officials to reduce their import delays and tax burden. WRAGE, supra note 40 at 27-28.
90 See Kay I, 513 F.3d at 453; Kay II, 513 F.3d at 466.
91 U. S. DEPT OF JUSTICE, STEPS TAKEN TO IMPLEMENT AND ENFORCE THE OECD
CONVENTION ON COMBATING BRIBERY OF FOREIGN PUBLIC OFFICIALS IN INTERNATIONAL
BUSINESS TRANSACTIONS 1 (2010), available at http://www.justice.gov/criminal/fraud/fcpa/docs/
05-28-10oecd-convention.pdf.
92 See ORG. FOR ECON. CO-OPERATION & DEV., OECD Convention on Combating Bribery of
Foreign Public Officials in International Business Transactions: Ratification Status as of March 2009,
available at http://www.oecd.org/dataoecd/59/13/40272933.pdf (last visited Mar. 27, 2012).
Russia will become the thirty-ninth country to ratify the OECD on April 17, 2012. See Russia
Joins OECD Anti-Bribery Convention, OECD (Feb. 17, 2012), http://www.oecd.org/
document/37/0,3746,en_21571361_44315115_49695141_1_1_1_1,00.html.
87
93
The original member countries of the OECD are Austria, Belgium, Canada, Denmark,
France, Germany, Greece, Iceland, Ireland, Italy, Luxembourg, the Netherlands, Norway,
Portugal, Spain, Sweden, Switzerland, Turkey, the United Kingdom, and the United States.
628
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v. 46 | 617
world exports, 90% of FDI, and are home to over 75% of multinational
corporations.94
The OECD requires countries to proscribe the bribery of foreign
public officials in the same way that countries prohibit the bribery of their
domestic officials.95 Accordingly, the OECDs anti-bribery laws require
that parties enact national laws criminalizing the bribery of foreign public
officials with the focus on the supplier of [bribes], rather than punishing
the official who takes the bribe.96
The OECDs anti-bribery laws are largely based on the FCPA.97
However, unlike the FCPA there is no exception for facilitating payments.98
The OECD requires each member nation to implement the laws necessary
to ensure that a bribe and the proceeds obtained as a result of bribing a
foreign public official are subject to seizure, or that monetary sanctions are
of comparable effect in order to negate any benefit associated with
bribing a foreign official.99 It encourages mutual legal assistance in . . .
investigations, and allows for extraditions.100 The laws define proceeds
broadly: the profits or other benefits derived by the briber from the
transaction or other improper advantage.101 Also, the OECD encourages
ORG. FOR ECON. CO-OPERATION & DEV., OECD BENCHMARK DEFINITION OF FOREIGN DIRECT
INVESTMENT 2 (3d ed. 1999) [hereinafter OECD BENCHMARK], available at http://www.oecd.org/
dataoecd/10/16/2090148.pdf. The following countries became members subsequently on the
following dates: Japan (Apr. 28, 1964); Finland (Jan. 28, 1969); Australia (June 7, 1971); New
Zealand (May 29, 1973); Mexico (May 18, 1994); the Czech Republic (Dec. 21, 1995); Hungary
(May 7, 1996); Poland (Nov. 22, 1996); and Korea (Dec. 12, 1996). Id.
94
Webb, supra note 21, at 195.

Lucinda A. Low et al., Enforcement of the FCPA in the United States: Trends and Effects of
International Standards, in THE FOREIGN CORRUPT PRACTICES ACT 2008: COPING WITH
HEIGHTENED ENFORCEMENT RISKS 711, 731 (2008). The Organisation for European Economic
Cooperation (OEEC) was established in 1947 to run the US-financed Marshall Plan for
reconstruction of a continent ravaged by war. History, OECD, http://www.oecd.org/pages/
0,3417,en_36734052_36761863_1_1_1_1_1,00.html (last visited Mar. 27, 2012). The OEEC
expanded into the OECD in 1961 when the United States and Canada joined. Id. Today, it has
forty member nations. Id.
95
96
Low et al., supra note 95, at 731.

The OECD was ratified under heavy pressure from U.S. companies to extend the FCPA
to the international marketplace. Webb, supra note 21, at 195-96. Before the OECD was ratified,
only the United States had anti-bribery laws, and many U.S. corporations felt as if they were
at a disadvantage when compared with their international competitors. Id. Therefore, the
similarity between the FCPA and the OECD is no coincidence. See id.
98 Low et al., supra note 95, at 732.
99 Id.
100 Cuervo-Cazurra I, supra note 79, at 637.
101 Commentaries on the Convention on Combating Bribery of Foreign Public Officials in
International Business Transactions, Nov. 21, 1997, 37 I.L.M. 8, 21.
97
2012
3/31/2012 11:37 AM
629
each member nation to consider the imposition of additional civil or

administrative sanctions, including exclusion from entitlement to public
benefits or aid; temporary or permanent disqualification from participation
in public procurement or from the practice of other commercial activities;
placing under judicial supervision; and a judicial winding-up order.102
II. Why Foreign Direct Investment Is Important
It is a generally accepted principle that FDI plays an integral role in
economic growth in developing nations. 103 FDI involves a company
investing in facilities, equipment, employees, and local organizations. 104
This type of investment is viewed as a company making a firm
commitment to the developing nation because a company would not be
able to leave quickly, having purchased facilities and invested in training
local employees.105 In contrast, some companies only invest money in local
companies, and such funding is viewed as unstable because funds can
quickly be cut off at the first sign of trouble and the will of the company. 106
In addition, there are many benefits associated with sustained FDI:
increased domestic savings and investment; spillovers that pertain to the
transfer of technology from the developed nations to developing nations;
increased competition in the host countrys domestic market to lower
prices; and increased exports from the developing nation.107
Developing nations view FDI as a catalyst for economic expansion and
rejuvenation, income growth, and increased employment. 108 Many have
begun to promote policies aimed at attracting FDI. 109 The numbers reflect
the growing importance investors and host nations place upon outside
investment: FDI is three times higher now than it was in the mid-nineties,
totaling 14,190 development projects valued at $1.01 trillion in 2009. 110
102
Id. 24.
Shiva S. Makki & Agapi Somwaru, Impact of Foreign Direct Investment and Trade on
Economic Growth: Evidence from Developing Countries, 86 AM. J. AGRIC. ECON. 795, 795 (2004).
103
104
See Jason Lewis, Factors Influencing Foreign Direct Investment in Lesser Developed
Countries, 8 PARK PLACE ECONOMIST 99, 100 (2000). For a full length and technical analysis of
what constitutes FDI, see OECD BENCHMARK, supra note 93.
105 See Lewis, supra note 104, at 100.
106 See id.
107 Rati Ram & Kevin Honglin Zhang, Foreign Direct Investment and Economic Growth:
Evidence from Cross-Country Data for the 1990s, 51 ECON. DEV. & CULTURAL CHANGE 205, 205
(2002) [hereinafter Ram].
108
Foreign Direct Investment for Development: Maximising Benefits, Minimising Costs, ORG.
ECON. CO-OPERATION & DEV. 3, 5 (2002) [hereinafter Investment for Development],
http://www.oecd.org/dataoecd/47/51/1959815.pdf.
FOR
109
110
Id.
See NEIL PATTERSON ET AL., INTL MONETARY FUND, FOREIGN DIRECT INVESTMENT:
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However, the OECD recognized that the benefits of FDI do not accrue
automatically and evenly across countries, sectors and local
communities.111 In certain developing nations, FDI creates intense
competition with local companies.112 Since advanced multinational
companies from the United States and Western Europe often possess
superior technology, foreign companies crowd out local competition,
hindering the development of local business.113
ANALYSIS
After reviewing the majority of studies completed in this area, three
conclusions become clear.114 First, FDI is not the single, accurate gauge of
the strength of a developing nations growth.115 Increased FDI in a
developing nation does not necessitate increased growth, as studies show
that FDI can be beneficial or detrimental depending on how advanced the
nations local industries are at the time when FDI first occurs.116 Second,
FDI is not influenced by anti-bribery legislation alone.117 FDI is a complex
phenomenon, and there are several factorsof equal or greater importance
than anti-bribery lawsthat influence FDI.118 Third, increased FDI will not
promote true progress in developing nations until these nations
governments become more transparent.119 While a repeal of anti-bribery
legislation may increase investment in certain corrupt, developing
countries, the economic benefit of these investments would remain in the
hands of a select group of well-connected individuals and fail to improve
TRENDS, DATA AVAILABILITY, CONCEPTS, AND RECORDING PRACTICES 5 (2004), available at
http://www.imf.org/external/pubs/ft/fdi/2004/fditda.pdf; Spencer Anderson, FDI Figures for
2010 to Fall Short of 2009 Total, FDI INTELLIGENCE (Sept. 12, 2010, 3:36 PM),
https://www.fdiintelligence.com/Trend-Tracker/FDI-figures-for-2010-to-fall-short-of-2009total. FDi Intelligence provides highly detailed analysis of aggregate FDI and FDI in specific
sectors. See About Us, FDI INTELLIGENCE, http://www.fdiintelligence.com/Info/About-Us (last
visited Mar. 27, 2012).
111
Investment for Development, supra note 108, at 3.

See PETER NUNNENKAMP, FOREIGN DIRECT INVESTMENT IN DEVELOPING COUNTRIES:
WHAT POLICYMAKERS SHOULD NOT DO AND WHAT ECONOMISTS DONT KNOW 16-17 (2001),
available at http://www.cuts-international.org/FDI%20in%20Developing%20Countries-NP.pdf.
113 See Klaus E. Meyer & Evis Sinani, When and Where Does Foreign Direct Investment
Generate Positive Spillovers? A Meta-Analysis, 40 J. INTL BUS. STUD. 1075, 1079-80 (2009)
[hereinafter Meyer]; Ram, supra note 107, at 205.
112
114
115
116
117
118
119
See infra Parts III-IV.

See infra Part III.A.
See infra Part III.
See infra Part III.
See infra Part III.B.
See infra Part IV.
2012
3/31/2012 11:37 AM
631
the health, education, and quality of life of a majority of a nations

citizens.120
III. Putting Foreign Direct Investment in Perspective
FDI has varied effects on local industries, as studies indicate the
presence of ABLCs can either stifle or ignite development of local
industries.121 Also, anti-bribery legislation is not the sole influence on
ABLCs investment decisions.122
A. U-Shaped Benefits
Although FDI was traditionally thought of as always good for
developing nations, recent studies suggest FDIs benefit is U-shaped.123
This means FDI is beneficial when developing nations have markets that
are either just beginning to grow, or are just on the verge of being fully
developed.124
When a nation has just begun to grow, FDI can introduce the nation to
new industries and technologies.125 In this scenario, FDI provides all the
traditional benefits: the developing nation is exposed to new technologies;
workers gain new knowledge and training; and the developing nation is
able to close the gap in development between it and the rest of the global
economy at a much faster rate. 126 Also, foreign companies from developed
countries do not compete with local businesses because at this nascent
stage of development there are practically no domestic businesses capable
of competing.127 Foreign companies have superior technology while
producing more complex goods that are intended for wealthier consumers;
local companies have less technology but produce basic items for mass
local consumption.128
120
See infra Part IV.

See infra Part IV.A.
122 See infra Part IV.B.
123 Meyer, supra note 113, at 1076.
124 Id. at 1078.
125 See Beata Smarzynska Javorcik, Does Foreign Direct Investment Increase the Productivity of
Domestic Firms? In Search of Spillovers Through Backward Linkages, 94 AM. ECON. REV. 605, 60711 (2004).
126 See Meyer, supra note 113, at 1079; Ram, supra note 107, at 205.
127 Ted London & Stuart L. Hart, Reinventing Strategies for Emerging Markets: Beyond the
Transnational Model, 35 J. INTL BUS. STUD. 350, 350-54 (2004) [hereinafter London]; see generally
Jennifer W. Spencer, The Impact of Multinational Enterprise Strategy on Indigenous Enterprises:
Horizontal Spillovers and Crowding Out in Developing Countries, 33 ACAD. MGMT. REV. 341, 343
(2008).
121
128
London, supra note 127, at 350-54; Spencer, supra note 127, at 353.
632
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v. 46 | 617
On the other side of the U, when the developing nation is near the
later stages of development, the developing nations local industry is
strong enough to compete with new foreign investors.129 The competition
between new foreign investors and local industry drives down prices,
ultimately benefiting consumers.130 This also results in spillover, that is,
when the entry or presence of multinational corporations increases the
productivity of domestic firms in a host country.131 Local companies
become more productive by copying the techniques used by foreign
companies and hiring former employees of foreign companies. 132 Also,
these firms become more efficient in order to compete with foreign
companies.133 Accordingly, these improvements to local companies benefit
the developing nation as a whole.134
For example, Indonesia deregulated many of its industries beginning
in the 1980s, triggering an increase in FDI from large, multinational
companies.135 A study traced the interaction between multinational
companies and domestic companies from 1980-1991 to determine if FDI
was beneficial to Indonesia.136 In 1980, Indonesias three strongest
industriesfood, textiles, and tobaccoproduced 45% of all goods made
(total output) in Indonesia; multinational companies accounted for 19.7%
of total output.137 By 1991, Indonesias three strongest industriesthen
food, textiles, and woodaccounted for only 37% of total output, and
multinational companies only accounted for 13.8% of total output. 138 The
numbers demonstrate the positive benefits of FDI: (1) new industries
developed and Indonesias economy grew (demonstrated by woods
growth to replace tobacco as one of the top three industries and by the
decrease in Indonesias three strongest industries as percent of total output
from 45% to 37%), and (2) Indonesian companies became more efficient
(evinced by the drop in multinationals total output from 19.7% to
13.8%).139
129
See Javorcik, supra note 125, at 607.

See Meyer, supra note 113, at 1080.
131 Javorcik, supra note 125, at 607.
132 Id.
133 See id.
134 See id.; see generally Meyer, supra note 113, at 1076-80.
135 See Fredrik Sjholm, Technology Gap, Competition and Spillovers from Direct Foreign
Investment: Evidence from Establishment Data, 36 J. DEV. STUD. 53, 56-57 (1999).
136 See id. at 56-60.
137 Id. at 56-57.
138 Id.
139 See id.
130
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633
However, when developing nations are at the mid-point of

development, FDI from foreign companies kills local growth. 140 Foreign
companies enter the same market as local companies in developing
nations.141 Because foreign companies have more technology and are more
efficient, local companies are unable to compete. 142 The result is that foreign
companies push out local companies from the market.143 Accordingly, none
of the traditional benefits associated with FDI are present: local companies
fold, rather than develop, because of exposure to advanced competition.144
For example, Lithuania opened itself up to more FDI in the period
between 1996 and 2000.145 Due to an influx in FDI, 41% of Lithuanian
businesses faced new competition from multinationals. 146 Because
multinationals were more advanced, Lithuanian companies were unable to
compete, and 29% lost market share as a result.147
Therefore, while FDI can often be an indicator of growth, it is a mistake
for critics of anti-bribery legislation to assume per se that low FDI
necessitates poor domestic growth in developing industries. 148 Rather,
empirical studies suggest that FDI will have mixed effects on growth of
domestic markets depending on the stage of development the local
companies are in, and whether local and foreign companies are competing
in the same markets.149
B. The Pieces of the Puzzle: Analyzing the Factors that Influence
Foreign Direct Investment
Admittedly, anti-bribery legislation is one factor that influences FDI in
developing nations.150 However, anti-bribery legislation is only one factor
affecting FDI, and the stability of a developing nation, as well as the health
of its workforce, appear to be of equal or greater importance. 151
140
See Meyer, supra note 113, at 1079-80.

Id.
142 See id.
143 Javorcik, supra note 125, at 625 (finding no intra-industry benefits of FDI when foreign
and local companies compete).
144 See Ram, supra note 107, at 205.
145 Javorcik, supra note 125, at 607, 609.
146 Id. at 608.
147 Id.
148 See supra notes 114-147 and accompanying text.
149 See supra notes 114-147 and accompanying text.
150 See Cuervo-Cazurra I, supra note 79, at 634-36; Alvaro Cuervo-Cazurra, Who Cares About
Corruption?, 37 J. INTL BUS. STUD. 807-08 (2006) [hereinafter Cuervo-Cazurra II].
141
151
See infra text accompanying notes 152-231.
634
1.
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Lacking Infrastructure
Institutions is a term [that] typically refers to a wide range of

structures that affect economic outcomes: contract enforcement, property
rights, investor protection, the political system, and the like.152
[I]nstitutions matter a great deal for economic performance because
quality institutions create stability in developing nations.153 A nation has
quality institutions when its framework supports private property
rights, the law of contract and a strong but limited government.154 Indeed,
ABLCs appear to be more sensitive to quality institutions than
corruption.155 One study found that although a small increase in corruption
leads to an 11% decrease in FDI, an equally small improvement in quality
institutions leads to a 29% increase in FDI, overcoming the effects of the
corruption increase.156 Another study found that attempts by developing
nations to attract FDI failedeven when these nations offer high corporate
tax breaksdue to poor quality institutions.157 This leads to the conclusion
that many developing nations are so lacking in stability, tax breaks are
insufficient to compensate ABLCs for the risk involved with doing
business in these nations.158
Examining certain aspects of quality institutions helps illustrate why
they play such an important part in determining FDI levels. 159 In short,
ABLCs value stability and will not invest in a country where contracts can
be voided without recourse or where a dictatoror some form of militant
leadercan seize private property without any consequences. 160 The
following sections identify two predominant factors in quality institutions:
political risk and the rule of law.161
152 Andrei A. Levchenko, Institutional Quality and International Trade, 74 REV. ECON. STUD.
791, 791 (2007).
153
Id.
Tajul Ariffin Masron & Hussin Abdullah, Institutional Quality as a Determinant for FDI
Inflows: Evidence from ASEAN, 2 WORLD J. MGMT. 115, 117 (2010) [hereinafter Masron].
154
155
156
Ali Al-Sadig, The Effects of Corruption on FDI Inflows, 29 CATO J. 267, 286-87 (2009).
Id. at 268.
157 See Matthias Busse & Jos Luis Groizard, Foreign Direct Investment, Regulations and
Growth, in PROCEEDINGS OF THE GERMAN DEVELOPMENT ECONOMICS CONFERENCE, BERLIN
2006, at 1, 25 (Verein fr Socialpolitik, Res. Comm. Dev. Econ., No. 6, 2008), available at http://
www.uib.es/depart/deaweb/webpersonal/jlgroizard/archivos/fdi.pdf [hereinafter Busse].
158
159
160
161
Id.
See discussion infra Part III.B.1.a-b.
See Masron, supra note 154, at 117.
See discussion infra Part III.B.1.a-b.
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3/31/2012 11:37 AM
a.
635
The Need for Stability
Studies show strong support for the existence of the negative

relationship between FDI inflows and political risk. 162 For example, a
democratic country receives about 10% higher FDI inflows than an
autocratic country.163 Several earlier studies confirm this trend, finding that
a country with a stable government, democracy, and quality bureaucrats
has demonstrably higher and more lasting FDI inflows than countries that
lack those characteristics.164
A country that has more reliable institutions is more stable: countries
with quality institutions have a significantly lower threat of civil wars,
political violence, trade sanctions, or an all-out war.165 This is significant
because civil wars are becoming progressively more disruptive. In 1947,
civil wars lasted an average of two years; in 1999, civil wars lasted an
average of fifteen years.166 Such prolonged fighting becomes highly
disruptive and presents serious business risks to ABLCs.167 In addition,
39% of countries that experience a civil war return to fighting within five
years.168 The reason countries that present these risks have lower FDI is
because companies do not want to spend money building a factory that
could be destroyed during fighting or training workers who may be killed
162
Al-Sadig, supra note 155, at 286.

Id. at 287.
164 See Busse, supra note 157, at 5, 25 (discussing how institutions are likely to be more
deeply invested in countries with regulations that promote business); Philipp Harms &
Heinrich W. Ursprung, Do Civil and Political Repression Really Boost Foreign Direct Investment?,
40 ECON. INQUIRY 651, 660-61 (2002); Nathan M. Jensen, Democratic Governance and
Multinational Corporations: Political Regimes and Inflows of Foreign Direct Investment, 57 INTL
ORG. 587, 600-02 (2003) (There is an obvious linear positive relationship between democracy
and a countrys ability to attract FDI.).
163
165 See James D. Fearon & David D. Laitin, Ethnicity, Insurgency, and Civil War, 97 AM. POL.
SCI. REV. 75, 88 (2003).
The conditions that favor insurgencyin particular, state weakness

marked by poverty, a large population, and instabilityare better
predictors of which countries are at risk for civil war than are indicators
of ethnic and religious diversity or measures of grievances such as
economic inequality, lack of democracy or civil liberties, or state
discrimination against minority religions or languages.
Id.
166
Id. at 78.
See Alberto Alesina et al., Fractionalization, 8 J. ECON. GROWTH 155, 179-82 (2003)
(finding that constant conflict inhibits economic growth).
168 See Stephan Haggard et al., The Rule of Law and Economic Development, 11 ANN. REV. POL.
SCI. 205, 210 (2008).
167
636
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v. 46 | 617
due to war.169
Also, political risk has a negative impact on the local workforce. 170
When a government is unstable and constantly fighting to stay in power,
government funds are spent on the military, reducing government
investment in education and healthcare of the local population. 171
Therefore, developing countries with higher political risk often have a lesseducated population.172 This limits the types of ABLCs that invest in these
nations because certain companies need workers who, at the very least,
have enough education to be trained for more complex jobs. 173
Therefore, political risk has a negative impact on FDI because the
increased chance of civil war or other domestic uncertaintywhich
increases the chances that facilities will be destroyed and decreases the
value of local workerspresent risks ABLCs are unwilling to assume. 174
b.
Give Me Shelter
Quality institutions are characterized by a strong rule of law. 175 A

country with a strong rule of law has reliable laws, recognized private
property rights, enforceable contracts, and an effective judiciary.176
Addressing the United States Chamber of Commerce in 1999, former
United Nations Secretary-General Kofi Annan underscored the importance
of the rule of law when he observed that without rules governing
contracts and property rights; without confidence based on the rule of law;
without trust and transparencythere could be no well-functioning
markets.177
Countries with quality institutions and, by extension, strong rule of
law, have strong intellectual-property rights.178 Companies, seeking to
maximize profits on their products desire intellectual-property protection
because a smaller risk of imitation leads to greater potential that a product
169
See id. at 209.

See id. at 208-10.
171 See id.
172 See id. (describing how war diverts resources from public goods such as education).
173 See id. For a discussion on human capital, see infra Part III.B.2.
174 See supra Part III.B.
175 Masron, supra note 154, at 117.
176 David Silverstein & Daniel C. Hohler, A Rule-of-Law Metric for Quantifying and Assessing
the Changing Legal Environment of Business, 47 AM. BUS. L.J. 795, 797 (2010).
170
177
O. Lee Reed, Law, the Rule of Law, and Property: A Foundation for the Private Market and
Business Study, 38 AM. BUS. L.J. 441, 442 (2001) (internal quotation marks omitted).
178 See Carlos A. Primo Braga & Carsten Fink, The Relationship Between Intellectual Property
Rights and Foreign Direct Investment, 9 DUKE J. COMP. & INT'L L. 163, 165 (1998).
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637
will be unique, and its demand will be high. 179 This is especially true of
companies that produce easy-to-imitate products.180 Drug-research
companies, for example, are very sensitive to protection of intellectualproperty rights because they do not want to develop the next wonder
drug only to see potential profits vanish when a competitor copies their
methods and issues its own version.181 Therefore, a country with weak
intellectual-property rights will have lower FDI because companies do not
want to risk having their original products copied by a competitor.182
Countries with a strong rule of law also enforce private contracts.183
Nobel Laureate Douglass North asserts that the inability of societies to
develop effective, low-cost enforcement of contracts is the most important
source of both historical stagnation and contemporary underdevelopment
in [developing nations].184 If a developing nations government is unable
to enforce contracts between ABLCs and local parties, they will suffer from
low FDI.185 This is because investment in developing nations is complex.186
When ABLCs begin operations in a developing nation, they purchase or
construct new facilities, hire and train new workers, and establish business
relationships with local companies.187 ABLCs therefore enter into a large
179
See id.
See, e.g., Edwin Mansfield, Intellectual Property Protection, Foreign Direct Investment, and
Technology Transfer: Germany, Japan, and the United States, 12 (Intl Fin. Corp. Discussion Paper
No. 27, 1995), available at http://www.bvindecopi.gob.pe/colec/emansfield.pdf (noting that
research-intensive U.S. firms with easy-to-imitate products will not make substantial
investments in countries with weak intellectual-property-rights protection).
181 See id. at 11-12.
182 See supra text accompanying notes 175-181.
183 See Masron, supra note 154, at 117.
184
DOUGLASS C. NORTH, INSTITUTIONS, INSTITUTIONAL CHANGE, AND ECONOMIC
PERFORMANCE 54 (1990).
180
185
See Michael Trebilcock & Jing Leng, The Role of Formal Contract Law and Enforcement in
Economic Development, 92 VA. L. REV. 1517, 1528-29 (2006) [hereinafter Trebilcock].
186 See Thorsten Beck & Ross Levine, Legal Institutions and Financial Development, in
HANDBOOK OF NEW INSTITUTIONAL ECON. 251, 254 (Claude Mnard & Mary M. Shirley eds.,
2008) [hereinafter Beck].
Effective legal institutions allow knowledgeable and experienced

financial market participants to design a vast array of sophisticated
private contracts to ameliorate complex agency problems. For this to
work effectively, however, courts must enforce private contracts
impartially and have both the ability and willingness to read complex
contracts and verify technically intricate clauses that trigger specific
actions.
Id. (internal citation omitted).
187
See Trebilcock, supra note 185, at 1528.
638
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v. 46 | 617
amount of contracts, many of which are of considerable value. 188 If the

government is unable to enforce these contracts, ABLCs stand to lose a
great deal of value on their investment. 189 Accordingly, ABLCs require
stable and predictable contract laws which provide them recourse against
parties that violate an agreement.190
Governments in developing nations influence how stable and
predictable these contract rights are.191 Fledgling democracies in unstable
areas are unable to maintain a stable environment for private contract
laws.192 The inability to secure private contract rights reduces FDI in these
developing nations.193 More stable governmentswhether autocratic or
established democraciesare much better at ensuring private contracts are
enforced.194 Not surprisingly, these nations have higher levels of FDI
because they provide ABLCs with stability.195
To enforce these contracts, ABLCs turn to courts and judges. 196 There is
a positive correlation [connecting] a strong and effective judiciary, acting
as an important formal contract enforcement institution [with] economic
development.197 The World Bank attributes the favorable economic
outcomes to the fact that [b]etter courts reduce the risks firms face, and so
increase the firms willingness to invest more.198 On the other hand,
ABLCs have problems enforcing their contracts when dealing with
ineffective and low-quality courts.199 These problems have real economic
consequences.200 First, judicial deficiency acts like a tax on companies who
have lost resources through breached contracts: while court proceedings
linger on, companies are unable to either collect interest on unrecovered
resources that could be put into savings or to put these resources to
productive uses.201 Another consequence of ineffective courts is that banks
188
See Beck, supra note 186, at 254.

190 See Beck, supra note 186, at 254.
191 See NORTH, supra note 184, at 54.
192 Christopher Clague et al., Contract-Intensive Money: Contract Enforcement, Property
Rights, and Economic Performance, 4 J. ECON. GROWTH 185, 196 (1999).
189
193
See Al-Sadig, supra note 155, at 286-87.

Clague, supra note 192, at 196.
195 See Al-Sadig, supra note 155, at 286-87.
196 See Trebilcock, supra note 185, at 1528-29.
197 See id. at 1528.
198 See THE WORLD BANK, WORLD DEVELOPMENT REPORT 2005: A BETTER INVESTMENT
CLIMATE FOR EVERYONE 86 (2004), available at http://go.worldbank.org/BUQQ5FCY80.
199 See Trebilcock, supra note 185, at 1529.
200 See Katharina Pistor et al., Law and Finance in Transition Economies, 8 ECON. TRANSITION
325, 356 (2000).
194
201
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are forced to lend at extremely high interest rates because they are unable
to foreclose on debts.202 Therefore, weak or ineffective judicial systems in
developing countries contribute to low FDI.203
This explains, in part, why FDI in corrupt countries with quality
institutions has not dropped significantly since the anti-bribery laws were
enacted: [T]he results should not be interpreted as evidence that the
corruption levels in the host country do not reduce the amount of FDI it
receives. Rather, the results should be seen as an indication of the
importance of the quality of institutions.204
2.
Human Capital
Holding stock in a corporation or having a printing press for a

newspaper company are two examples of capital because they both are
assets that generate revenue.205 An employees training is also considered a
form of capital because job skills are an asset from which an individual
derives revenue.206 In fact, an old proverb appears to be the first reflection
on how a persons job skills provide him perpetual benefit207: Give a man
a fish and you feed him for a day. Teach a man to fish and you feed him for
a lifetime.208 From the time this old proverb was first uttered, the concept
was refined into human capital theory, which posits that education or
training raises the productivity of workers by imparting useful knowledge
and skills.209 Basically, when a country has high human capital, it has an
educated and productive workforce capable of taking on new employment
opportunities that lead to increased economic development and output. 210
Human capital has a direct influence on FDI because ABLCs need a
productive workforce.211 Therefore, another reason developing nations
202
See id.
See supra text accompanying notes 193-202.
204 Al-Sadig, supra note 155, at 289.
205 See Gary S. Becker, Human Capital, CONCISE ENCYCLOPEDIA OF ECON., http://
www.econlib.org/library/Enc/HumanCapital.html (last visited Mar. 27, 2012).
203
206
See Chandra Shekhar Kumar, Human Capital and Growth Empirics, 40 J. DEV. AREAS 153,
153-55 (2006); see also Becker, supra note 205.
207
See Becker, supra note 205.

Quotation Details, QUOTATIONS PAGE, http://www.quotationspage.com/quote/ 2279.html
(last visited Mar. 27, 2012).
209 Jin Xiao, Determinants of Salary Growth in Shenzhen, China: An Analysis of Formal
Education, On-the-Job Training, and Adult Education with a Three-Level Model, 21 ECON. EDUC.
REV. 557, 557 (2002).
208
210
See Gustav Ranis, Human Development and Economic Growth 5-6 (Yale Econ. Growth Ctr.,
Discussion Paper No. 887, 2004), available at http://www.econ.yale.edu/growth_pdf/
cdp887.pdf.
211
See id. at 6-7.
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have low FDI is because of low human capital.212 The two predominant
reasons developing nations have low human capital are because the
workforce is unhealthy and uneducated. 213 Education and health raise
productivity, thereby raising human capital.214
In low- and middle-income countries, FDI is positively influenced by
population health.215
A countrys FDI inflows increase by 9% when its citizens life
expectancy is raised by one year.216 ABLCs thus appear responsive to the
health of local workers as they are to corruption, as studies demonstrate
that incremental changes in life expectancy have a similar effect on FDI
when compared to the effect of incremental changes in corruption.217
Health has a direct effect on the productivity of workers. 218 A healthy
workforce has higher productivity rates, works for more years, and
requires less sick time than an unhealthy workforce, which constantly
battles disease and has lower life expectancy. 219
Health can also affect economic performance through indirect
mechanisms. Improved health can increase the return on education and
worker experience.220 Healthier children have enhanced cognitive function
and higher school attendance, allowing them to become better educated,
higher earning adults.221 Healthier adults miss less time from work and
gain more experience, thus allowing them to be eligible for promotions and
other jobs.222
Health also is attractive to companies because it can lower costs of
doing business in the host country. 223 From the perspective of a
multinational company, a healthy workforce means that it will have to
spend less time training new employees due to lower turnover from death
212 See Marcella Alsan et al., The Effect of Population Health on Foreign Direct Investment
Inflows to Low- and Middle-Income Countries, 34 WORLD DEV. 613, 613-15 (2006).
213 See id. at 615; Stephen Kosack & Jennifer Tobin, Funding Self-Sustaining Development: The
Role of Aid, FDI and Government in Economic Success, 60 INTL ORG. 205, 207 (2006) [hereinafter
Kosack].
214
See Ranis, supra note 210, at 5-10.

Alsan et al., supra note 212, at 613-15.
216 Id. at 613.
217 Compare id. at 613-14 (reporting a 9% jump in FDI when life expectancy improves by
one year), with Al-Sadig, supra note 155, at 268 (finding FDI decreased 11% when corruption
increased by 1%).
215
218
219
220
221
222
223
See Ranis, supra note 210, at 7.

See id.
See id.
Alsan et al., supra note 212, at 615 (citation omitted).
Id.
See id.
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641
and debilitating disease.224 In countries where the healthcare system is

lacking, companies must either develop or contribute significant amounts
to a healthcare system for employees.225 Also, companies do not like to
invest in countries with widespread disease. 226 This is especially true of
American and Western European companies reluctance to invest in Africa,
a continent with many diseases to which Americans and Europeans have
no immunity.227
3.
Fear of Punishment
Anti-bribery laws reduce FDI in corrupt countries.228 While critics of

anti-bribery legislation point to studies of its effect on FDI as a reason to
repeal the legislation, the studies themselves praise the effectiveness of
laws against bribery.229 Indeed, Alvaro Cuervo-Cazurra questioned the
effectiveness of anti-bribery laws and was pleasantly surprised with how
well they worked in deterring the payment of bribes: [I]nvestors from
countries that implemented the [anti-bribery laws] have become more
sensitive to host country corruption and reduced their investments . . . .
Despite the criticisms raised against [anti-bribery laws], it appears [they
have] been effective.230 Although critics try to use Cuervo-Cazurras study
to support a repeal or reduction in anti-bribery laws, the study supports
the opposite conclusion. Cuervo-Cazurra believes: [W]e have started
turning the page on viewing corruption abroad as an acceptable or
necessary way of doing business and instead fighting it. Coordinated
efforts to reduce corruption can bear fruit.231 He certainly does not sound
like a scholar who thinks anti-bribery laws are a detriment to economic
development.232
224
225
226
227
228
229
230
231
232
Id. at 615-16.
Id. at 615.
See id. at 616.
Alsan et al., supra note 212, at 615-16.
Cuervo-Cazurra II, supra note 150, at 808.
See Cuervo-Cazurra I, supra note 79, at 648.
See id. at 644, 647-48.
Id. at 648.
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IV. The Consequences of Corruption: Distorted Government Spending

as an Impediment to Human Development
A. Quality Over Quantity: Distinguishing Between Human
Development and Economic Growth
To ensure the arguments in this section are clear, an important
distinction must be made between the terms growth and human
development.233 Growth occurs when the improvement in the capacity
and efficiency of local industries generate additional revenue to private
and public institutions.234 Human development, a concept first
recognized by the United Nations, encompasses notions of greater access
to knowledge, better nutrition and health services, more secure livelihoods,
security against crime and physical violence, satisfying leisure hours,
political and cultural freedoms and a sense of participation in community
activities.235 Growth and human development do not go hand in hand236: a
country can grow financially, but if the country is corrupt and chooses not
to invest in its people, then no human development will occur. 237 Indeed,
Harvard economist Amartya Sen recognizes that a countrys growth is of
no benefit to the local people when the proceeds of growth are hoarded or
misappropriated by corrupt leaders:
It is as important to recognize the crucial role of wealth in
determining living conditions and quality of life as it is to
understand the qualified and contingent nature of this
relationship. An adequate conception of development must go
much beyond the accumulation of wealth and the growth of
gross national product and other income-related variables.238
Essentially, critics of anti-bribery legislation make the mistake of

assuming that all FDI, which in most instances contribute to growth, will
also contribute to human development.239 This faulty assumption is captured
by one critics remark that anti-bribery legislation stymies economic
development, and thus reducing poverty and reducing corruption are to
some degree competing goals.240 To approach growth and human
development as correlated is a critically flawed assumption given the
233 Compare Kosack, supra note 213, at 207, with About Human Development, UNITED
NATIONS DEV. PROGRAMME, http://hdr.undp.org/en/humandev/ (last visited Mar. 27, 2012).
234
235
236
237
238
239
240
See Kosack, supra note 213, at 207.

About Human Development, supra note 233.
See AMARTYA SEN, DEVELOPMENT AS FREEDOM 14 (1999); Kosack, supra note 213, at 207.
SEN, supra note 236, at 14.
See Spalding, supra note 19, at 399.
Id. (emphasis added).
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643
wealth of studies that find corruption, regardless of the growth it

produced, inhibits human development. 241
The problem facing most citizens of corrupt nations stems from a lack
of human development.242 Most countries with high levels of corruption
had populations that tended to:
(1) be relatively rural, (2) have smaller percentages of citizens age
15-64, (3) have fewer citizens either employed or seeking
employment, (4) have larger households, (5) have higher fertility
rates, (6) have shorter life expectancies, (7) have larger
percentages of national consumption attributable to the
wealthiest citizens, and (8) accept economic aid from other
countries.243
Therefore, when government spending encourages growth alonegrowth

that mainly benefits a select few within the nationthe level of human
development remains low to the detriment of society.244
B. White Elephants and Cathedrals in the Desert245: How
Corruption Distorts Government Spending
Bribes distort a governments entire decision-making process
connected with public investments. 246 Corrupt government officials care
more about receiving lucrative bribes than whether the investment project
they are induced to commence is beneficial to the country. 247 When
corruption plays a large role in the selection of projects and contractors, the
result of this process is a capital budget that is highly distorted[:] White
elephants and cathedrals in the desert are produced.248
241
See Goldstone, supra note 31, at 11-13; Spahn, supra note 6, at 866-90.
See S. Douglas Beets, Understanding the Demand-Side Issues of International Corruption, 57
J. BUS. ETHICS 65, 78 (1995).
242
243
Id.
245 White Elephants and Cathedrals in the Desert refer to government officials
selecting projects based upon bribes, rather than what might benefit the country as a whole.
Spahn, supra note 6, at 869-70; see also Vito Tanzi & Hamid Davoodi, Corruption, Public
Investment, and Growth 8 (Intl Monetary Fund, Working Paper No. WP/97/139, 1997)
[hereinafter Tanzi], available at http://www.imf.org/external/pubs/ft/wp/wp97139.pdf. These
projects are generally wasteful and do not benefit the people; a government purchase of fifty
new, million-dollar tanks does not help a starving citizen. Spahn, supra note 6, at 869-70.
244
246
See Tanzi, supra note 245, at 8.

See JOHANN GRAF LAMBSDORFF, THE INSTITUTIONAL ECONOMICS OF CORRUPTION AND
REFORM: THEORY, EVIDENCE, AND POLICY 68-69 (2007).
247
248
Tanzi, supra note 245, at 8; see also Shantayan Devarajan et al., The Composition of Public
Expenditure and Economic Growth, 37 J. MONETARY ECON. 313, 315 (1996) (asserting that
governments in developing countries misallocate funds in favor of capital expenditures at
644
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For example, English-based defense contractor BAE Systems recently

agreed to pay $450 million in fines when English and United States
authorities discovered that BAE paid approximately 1 billion in bribes to
Prince Bandar of Saudi Arabia. 249 By bribing the Saudi Prince, BAE secured
a 43 billion arms deal.250 Rather than invest 43 billion on developing
infrastructure, government money was diverted to excessive military
spending, which provided little additional securityor benefitto the
Saudi people.251
While critics in favor of repealing or drastically reducing the scope of
the anti-bribery laws argue that increased FDI would help developing
nations grow, this approach appears to be the worst possible solution.252
When government officials are bribed projects are complete but never
used. Some are much larger and complex than necessary. Some are of such
low quality that they will need continuous repairs and their output
capacity will be . . . below initial expectations. [Therefore], it is not
surprising that capital spending does not generate . . . growth . . . .253
In addition, studies show that many corrupt countries do not lack the
funds to make meaningful improvements to promote human
development.254 Rather, like the 43 billion Saudi Arabia spent on arms,
corrupt spending diverts these funds to less beneficial projects.255 Due to
corruption, government funds are diverted away from human
development and wasted on projects that do nothing to benefit the local
the expense of current expenditures).

249
David Leigh & Rob Evans, BAE Accused of Secretly Paying 1bn to Saudi Prince,
GUARDIAN, June 7, 2007, http://www.guardian.co.uk/world/2007/jun/07/bae1/print; Mike
Musgrove, BAE Systems Pays $450 Million to Settle Bribery Scandal Charges, WASH. POST, Feb. 6,
2010, at A14.
250
Leigh & Evans, supra note 249.

See id.; Sylvia Hui, Leaked Cable Shows Details of BAE Saudi Arms Deal, WASH. POST, Mar.
13, 2011, http://www.washingtonpost.com/wp-dyn/content/article/2011/03/13/AR2011031301
657_pf.html.
251
252 Compare Spalding, supra note 19, at 355-56 (noting that anti-bribery legislation deters
investment in developing countries), with Tanzi, supra note 245, at 8 (describing how
corruption distorts the whole decision-making process connected with the investment
budget).
253
Tanzi, supra note 245, at 8. See generally William Easterly & Ross Levine, Africas Growth
Tragedy: Policies and Ethnic Divisions, 112 Q.J. ECON. 1203, 1211-12 (1997) (emphasizing the
importance of infrastructure in national development).
254 See Sanjeev Gupta et al., Corruption and the Provision of Health Care and Education Services
5-7 (Intl Monetary Fund, Working Paper No. WP/00/116, 2000), available at http://
www.imf.org/external/pubs/ft/wp/2000/wp00116.pdf.
255
See, e.g., id. at 5 (If teachers accept bribes for providing government-funded books or
for admitting students, it would be more difficult to achieve the objective of a literate
population through universal school enrollment.).
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645
people.256 While funding large but useless government projects may

contribute to growth, this growth does not improve the condition of the
local population.257
Furthermore, bribes beget bribes.258 Greedy government officials create
more regulations and red tape in an effort to line their pockets with higher
amounts of bribe money.259 This is harmful for two reasons. First, the
developing nations market becomes more inefficient as companies
struggle to cut through all the red tape while doing business.260 Second,
small local businesses often fail because shops are unable to pay all the
bribes required to stay in business.261 The numbers of bribes a business
must pay are staggering in some countries:
An entrepreneur starting a new warehouse business in Nigeria
will spend at least 350 days obtaining necessary licenses and
permits, completing required notifications and inspections, and
securing utility connections.
If the business gets off the ground, the entrepreneur will need
to make at least 35 separate tax payments every year, and spend a
staggering 1,120 hours preparing, filing, and paying his or her
annual taxes, compared to 183 hours on average in the OECD . . .
.262
The beating of Bouazizi by the Tunisian police exemplifies the hardship

countless local business people suffer due to corrupt governments. 263
Studies suggest that many benefits of increased FDI have little or no
chance of reaching the indigentthose who would benefit most from
increased FDI if it was spent on human developmentuntil developing
nations become more transparent.264 Accordingly, it appears that most of
the revenue from increased FDI will help growth either by swelling the
already fat purses of the corrupt265 or by being wasted on White
256
See SEN, supra note 236, at 275; Kosack, supra note 213, at 207.
258 See LAMBSDORFF, supra note 247, at 53, 67-68.
259 Spahn, supra note 6, at 865-67.
260 See Richard A. Posner, Theories of Economic Regulation, 5 BELL J. ECON. & MGMT. SCI. 335,
337-39 (1974).
257
261 See RICHARD L. CASSIN, BRIBERY ABROAD: LESSONS FROM THE FOREIGN CORRUPT
PRACTICES ACT 119 (2008).
262
Id.
Pooley, supra note 10, at 7.
264 See THE WORLD BANK, GLOBAL MONITORING REPORT 2006, at 64 (2006) [hereinafter
GLOBAL MONITORING REPORT]; see also Gupta et al., supra note 254, at 25; Kosack, supra note
213, at 207.
263
265
Kosack, supra note 213, at 207.
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Elephants266uses of increased FDI that do not help people of developing

nations.267
C. A Global Impact
Corruption harms innocent citizens around the globe in a variety of
ways.268 Even when funds are allocated for human development,
corruption prevents meaningful improvement from occurring. 269 For
example, consider the negative effects corruption has on a corrupt
countrys healthcare.270 Due to widespread corruption in Ghana, only 20%
of the funds budgeted for public health actually finds its way to the
public.271 Worse, even when medical aid is administered, it is often done
ineffectively because in some countries medical students do not earn their
grades, they buy them.272 Furthermore, the doctors who purchased their
grades compensate for the financial losses by refusing to treat people in
need of care unless they can pay excessively high fees for the doctors
services.273 Critics suggest that African countries are missing many
poverty reduction opportunities because ABLCs refuse to pay bribes and
that it would be better to repeal anti-bribery laws so that African countries
could benefit from increased FDI. 274 It appears that in Ghana, even if there
was increased FDI from FCPA and OECD companies, the people would
recognize little or no benefit from increased FDI inflows until local
corruption ended.275
266
See Tanzi, supra note 245, at 8.

See Beets, supra note 242, at 78.
268 See infra text accompanying notes 269-287.
269 See Kosack, supra note 213, at 207 (arguing that corruption negatively alters a
governments allocation of resources so that only the well-connected, who are already
wealthy, enjoy substantial financial gain, creating significant income inequality); Tanzi, supra
note 245, at 9; Bad Blood Infects 63 Kazakh Kids with HIV, MSNBC.COM (Sept. 28, 2006),
http://www.msnbc.msn.com/id/15049613/ns/health-aids/ [hereinafter Bad Blood].
267
270
See GLOBAL MONITORING REPORT, supra note 264, at 64.

Id.
272 Bad Blood, supra note 269 (*D+octors are graded according to the amount of money they
give professors . . . .).
273 See id.
274 Spalding, supra note 19, at 399.
275 Compare Spalding, supra note 19, at 352, 399 (arguing that reducing bribery *to+ . . .
promote efficiency is problematic in application), with Bad Blood, supra note 269 (stating
that the situation in Kazakhstan will only improve after root*ing+ out corruption), and
GLOBAL MONITORING REPORT, supra note 264, at 64 (stating that money can only address the
issue if the people who manage it are held accountable).
271
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647
The healthcare crisis extends beyond Ghana and to most corrupt

countries.276 Empirical studies show that a high level of corruption has
adverse consequences for a countrys child and infant mortality rates,
percentage of low-birthweight babies, and dropout rates in primary
school.277 Child-mortality rates in corrupt countries are one-third higher
than in countries with low corruption.278 Interestingly, however, studies
show that corrupt countries need not spend more on healthcare but rather,
need to make existing healthcare more transparent for it to be effective. 279
Thus, although critics may argue that corrupt countries need FDI from
ABLCs in order to grow, corruptionand not low FDI from ABLCs or
any lack of fundsseems to be the major impediment to human
development, the true indicator of progress in developing nations. 280
If the foregoing discussion was not enough to catch the readers
attention, corruption also takes its toll on United States citizens.281
Contaminated baby formula and toothpaste are imported from China. 282
Drywall imported from China was so toxic that the homes constructed
with it are uninhabitable.283 Dogs and cats in America died from eating
contaminated pet food.284
Nothing ruins a magical vacation at Disney World quite like finding
out that the Mickey Mouse shirt you bought for your child contains lead
and formaldehyde as well as other toxic chemicals.285 Although nontoxic
materials are available to produce safe clothing, Disneys clothes are
produced in China, where corruption is rampant. 286 Bribes to local quality
inspectors ensure toxins in clothes are not detected and that the
contaminated clothes end up in Disney Stores around the United States.287
As these examples demonstrate, corruption may be closer to home than we
expect.
276
See Gupta et al., supra note 254, at 24.

Id. at 24-25.
278 Id.
279 See id. at 25.
280 Bad Blood, supra note 269.
281 See Spahn, supra note 6, at 897.
282 Id. at 893.
283 Id. at 894.
284 Id. at 893.
285 See HENRIK PEDERSEN & JACOB HARTMANN, GREENPEACE INVESTIGATIONS: TOXIC
TEXTILES BY DISNEY 6-7 (2004) [hereinafter PEDERSEN], available at http://archive.
greenpeace.org/docs/disney.pdf.
277
286
See Roberts, supra note 16, at 14; The Sweatshops That Make Disneys Toys, Books &
Clothing, THEZOO (May 9, 2009), http://tpzoo.wordpress.com/2009/05/09/the-sweatshops-thatmake-disneys-toys-books-clothing/.
287
See PEDERSEN, supra note 286, at 3-7; Spahn, supra note 6, at 883, 893.
648
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CONCLUSION
Nuhu Ribadu, Chairman of the Nigerian Economic and Financial
Crimes Commission, when speaking at the World Bank Annual Meeting,
said:
We know what corruption has cost usit has denied us the value
of our resources, both human and natural. It breeds injustice. It
causes killings, the diseases that ravage us almost everywhere. It
turns us into a country of people who live on the kindness of
others and we are very angry. This is not what we want, and this
is not what we are going to allow to continue. 288
There are multiple factors that have greater or equal importance in

determining ABLCs FDI in corrupt countries. Reducing, or repealing, antibribery legislation will exacerbate the problems associated with developing
countries, stunting human development, and potentially causing
immeasurable harm. Sustained enforcement of the anti-bribery laws, as
well as efforts to promote improvements to the infrastructure in emerging
nations, is the best solution to low FDI.
288 WRAGE, supra note 40, at 102 (quoting Nuhu Ribadus 2006 address at the World Bank
Annual Meeting in Singapore).

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Repeal Anti-Bribery Legislation?

Mohamed Bouazizi was a twenty-six-year-old Tunisian peasant who

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New England Law Review

Corruption has its own motivations, and one has to thoroughly

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Mohamed Bouazizi was a twenty-six-year-old Tunisian peasant who

See Pooley, supra note 10, at 7.

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New England Law Review

make significant efforts to combat corruption when it enacted the Foreign

See Spalding, supra note 19, at 357-58.

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However, these conclusions are unsupported by an overwhelming

The revolutions unfolding across the Middle East represent the

See infra Part IV.

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development in corrupt developing nations. 33

Current Anti-Bribery Laws: A Concerted Effort to End Corruption

Current anti-bribery laws focus on the supply side of corruption.34 In

See infra Part IV.

See infra Part I.A.

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Learning from an International Faux Pas

The FCPA developed as a result of the Watergate Scandal. 43 The special

Schroth, supra note 44, at 595.

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Elements of a Statutory Offense

H.R. REP. NO. 95-640, at 5.

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category, any person, holds any foreign corporationseven if

Spalding, supra note 19, at 363.

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Imposing Costs that Outweigh the Benefits of Corruption

Businesses or individuals who violate the FCPA are subject to harsh

18 U.S.C. 3571(d) (2006).

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FCPA GUIDE, supra note 20.

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Webb, supra note 21, at 195.

Low et al., supra note 95, at 731.

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each member nation to consider the imposition of additional civil or

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Investment for Development, supra note 108, at 3.

See infra Parts III-IV.

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the health, education, and quality of life of a majority of a nations

See infra Part IV.

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