The Global Regulatory Enforcement Challenge
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Just the first half of 2010 has been a scary time in global regulatory enforcement, as we have seen new enforcement and compliance challenges for global companies, challenges based on laws or legal theories unheard of only a few years ago. Italian prosecutors indicted, tried, and convicted in absentia, three internet search engine executives for violating the privacy of an individual in a video posted on the web. Greek prosecutors are retrying (having lost a first trial) two UK employees of travel agency Thomas Cook for homicide in connection with the death of two children who died in a fire at a hotel booked through Thomas Cook. Moving away from the risks to individual managers, the amounts being paid by global companies to resolve enforcement challenges have become staggering, often in the billions, and not just in the United States anymore.
Countries around the world are adding challenges in the form of new laws or the renewed enforcement of existing laws. The United Kingdom has enacted new bribery legislation going far beyond the already-expensive and expansive U.S. Foreign Corrupt Practices Act. The SEC and FSA are cooperating in investigations, and cartel investigations and dawn raids have hit a new high. China is enforcing its growing body of anti-corruption and anti-competitive behavior laws against multinational companies to protect local industries.
Adding to the frustration, global acts of compliance can inadvertently result in global violations: merely implementing a global hotline requires compliance with yet another set of detailed, country-by-country governing regulations. Information required to monitor and detect noncompliance can be collected in one country; but is a crime to collect in another.
In addition to the spread of hyper-aggressive and highly local law enforcement, global companies are being held accountable for the actions of, or their failure to prevent the actions of, vendors, consultants, independent marketing representatives, joint venturers, and subsidiary management. The United States still leads the way with wide-ranging overseas regulatory enforcement regimes in bribery, exports, antitrust, and sanctioned countries, as well as interlocking regulatory sanctions that result in an offense in one area creating grounds for action in other areas. An export violation may lead to criminal prosecution, potential debarment from federal and state contracts, and an SEC investigation.
Finally, the spread of technology has made avoiding ultimate detection almost impossible. If a reported Mossad hit team cannot carry out its mission without being filmed, good luck to a rogue employee, business unit, or partner. As a global defense contractor found out even a few years ago when a disgruntled employee posted a virtual self-deposition regarding a contract issue, YouTube awaits us all.
Most global companies are responding with global compliance offices, ethical culture initiatives from the top down, and metric-driven attention to ethical behavior. But the pace of challenge and spread of risk will require them to continue to develop and evolve every day.
Reed Smith formed the Global Regulatory Enforcement Group to help companies respond to these global challenges. The Global Regulatory Enforcement Law Blog will address the emerging challenges across a span of legal regimes, including antitrust and competition, data privacy, environmental law, exports, government contracts, government investigations, and securities, just to name a few. We will address trends and events in enforcement and compliance, and will occasionally try to make sense of it all.
Jim Gallatin
+1 202 414 9274
jgallatin@reedsmith.com
