Royalty Is Not Always a Foreign Official

I’m not quite sure how royalty works in various parts of the world. From the latest FCPA Opinion release, the parties to a business deal also did not fully understand. The proposed business relationship has some serious red flags so I’m not surprised the parties requested the opinion. According to the release, submission for a release was part of the contract.

The requestor was going to make payments to a member of the country’s royal family. (Red flag – But a key issue is whether he is Foreign Official.) The Royal Family Member was going to lobby his home country’s embassy to engage the requestor as the country’s lobbyist in the United States. (Lobbying the government = another red flag) The Royal Family Member would be working on a commission for 20% of what requestor receives for business. (red flag) The Royal Family Member can also identify other opportunities for the Requestor in the foreign country subject to a separate engagement. (red flag)

The whole opinion hinges on the definition of “Foreign Official” under the FCPA and whether the Royal Member falls under that definition. The FCPA defines a “foreign official” as

any officer or employee of a foreign government or any department, agency, or instrumentality thereof, . . . or any person acting in an official capacity for or on behalf of any such government or department, agency, or instrumentality . . . .

15 U.S.C. § 78dd-2(h)(2)(A)

The Department of Justice looks to FCPA Opinion Release 10-03 and United States v. Carson, et al., No. 09-cr-00077 (C.D. Cal. 2011) and distills the factors in those sources to three factors to determine whether a member of a royal family is a “foreign official”:

(i) how much control or influence the individual has over the levers of governmental power, execution, administration, finances, and the like;

(ii) whether a foreign government characterizes an individual or entity as having governmental power; and

(iii) whether and under what circumstances an individual (or entity) may act on behalf of, or bind, a government.

This royal family member:

has no official or unofficial title or role in the Foreign Country’s government
has no official or unofficial power over any aspect of the Foreign Country’s governmental decision-making process, executive function, administration, finance
has no direct or indirect power to award the business the Requestor seeks
cannot, by virtue of his membership in the royal family, ascend to a governmental position
has no benefits or privileges because of his status as a Royal Family Member
has no relationship—personal, professional, or familial—with the decision-makers in the Foreign Country’s Embassy and the Foreign Country’s government who will decide whether to award the business

As the FCPA Professor Mike Koehler points out, this opinion procedure release creates more uncertainty in the definition of a foreign official. Past advice has focused on the purpose of the payments and not just the mere status of the official. The Carson decision looks to the entity to determine if it is a government organization.

The facts and circumstances about the royal family member sound unique to me. (Again, pointing out that I don’t understand how the various royal family members related to their home countries.) We don’t know the foreign country based on the opinion release. It would seem based on points 4 and 5 that the royal family is largely ceremonial in the country and not in a position of power in the government. Otherwise, the royal family itself would be foreign government instrumentality.

There is new guidance expected this month from the DOJ and SEC that is meant to consolidate the advice given on the FCPA. Perhaps that will help clear up some of the confusion over who is a foreign official.

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