Absolution under the FCPA: Keys to getting a declination

Two years ago, declinations as a means of resolution under the US Foreign Corrupt Practices Act (FCPA) were unprecedented. Declination, being the cleanest and most coveted outcome for an entity under investigation, it is crucial to understand the principal considerations involved in securing this favourable outcome.

Under the FCPA, in certain cases where an investigation does not necessitate a trial, the enforcement agencies may decide to resolve the matter through a negotiated resolution agreement, a deferred prosecution agreement, a non-prosecution agreement or a declination.

A declination may be understood as an instance where, although there exists adequate evidence to initiate a trial, the enforcement agency decides not to pursue the action due to certain “mitigating factors”. In determining whether to bring or decline to bring an action under the FCPA, the US Department of Justice (DOJ) and the Securities and Exchange Commission (SEC) are guided by the principles laid down in the Principles of Federal Prosecution and the Enforcement Manual respectively. Considerations while making such a decision include the nature and seriousness of the offence, antecedents of the entity, strength of the evidence, deterrent effect of the prosecution, potential violations, etc. The enforcement agencies also place heavy reliance on the overall conduct of the entity under investigation. Although declinations have been seen in only a handful of cases, a review of the precedents reveals certain conclusive determinants that are taken into account while granting a declination.

Kunal Gupta is a partner and the head of white collar investigations at Cyril Amarchand Mangaldas. Pankhuri Bhatnagar, an associate, assisted in preparing this article.