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FCPA Decision Narrows Local-Law Defense

Melissa Klein Aguilar | December 2, 2008

Bad news for anyone worried about violations of the Foreign Corrupt Practices Act: An already tough-to-sell affirmative defense under the law is now even harder to use, thanks to a recent court ruling.

A federal district court judge in New York ruled last month that the FCPA’s local-law defense—where payment to a foreign official is permitted because it is “lawful under the written laws and regulations” of the official’s country—applies primarily to the payment, not the person doing the paying. That distinction narrows the scope of the defense, and leaves U.S. corporations with even fewer options should they find themselves on the wrong end of an FCPA probe.

The ruling, U.S. v. Kozeny, came down from Judge Shira Scheindlin on Oct. 21. Defense lawyers say it is one of the first decisions on how the local-law defense should be interpreted.