The FIFA Bribery Scandal and the Applicability of the United States’ RICO Act Abroad: Possible Implications for Private Global Governance Bodies

The governance of the global sport industry has thus far remained in private hands. Practically all major sport events including the Olympics have been regulated by private associations registered under domestic law (Swiss law being the most accommodating). Fearing the adverse consequences of intervention, governments refrained from attempting to discipline that industry, despite continuing accusations of mismanagement, corruption, and infringements of the rights of athletes – a classic example of a collective action failure.

But persistent allegations of corruption at the Fédération Internationale de Football Association (FIFA) ultimately provoked states’ reaction.

In December 2014, the Swiss Parliament passed a law that strengthened the oversight of over 60 global sports associations based in Switzerland, including FIFA and the International Olympic Committee. The so-called ‘Lex FIFA’ designates the top officials of the sports associations residing in Switzerland as ‘Politically Exposed Persons’, who, according to the rules of the Financial Action Task Force (FATF) could be subjected to corruption investigations (on this law see here).

But the most decisive reaction thus far came on 20 May 2015 with the indictment of 14 FIFA officials for “racketeering, wire fraud and money laundering conspiracies, among other offenses, in connection with the defendants’ participation in a 24-year scheme to enrich themselves through the corruption of international soccer.”

While the indictment emphasizes the links to the United States, in an effort to establish jurisdiction to adjudicate the criminal case, the thrust of the accusation is not the harm caused to US interests. Rather, the indictment emphasizes the damage FIFA officials inflicted on FIFA and its related organizations, and the theory behind the indictment is the need to protect FIFA (and indirectly, to protect the interests of the global community of soccer players and fans) from FIFA’s corrupt officials. FIFA is seen as an “enterprise” whose interests are protected under the Racketeer Influenced and Corrupt Organizations Act (RICO Act). As the indictment states,

“73. The damage inflicted by the defendants and their co-conspirators was far-reaching. By conspiring to enrich themselves through bribery and kickback schemes relating to media and marketing rights, among other schemes, the defendants deprived FIFA, the confederations, and their constituent organizations – and, therefore, the national member associations, national teams, youth leagues, and development programs that rely on financial support from their parent organizations – of the full value of those rights. In addition, the schemes had powerful anti-competitive effects, distorting the market for the commercial rights associated with soccer and undermining the ability of other sports marketing companies to compete for such rights on terms more favorable to the rights­ holders. Finally, the schemes deprived FIFA, the confederations, and their constituent organizations of their right to the honest and loyal services of the soccer officials involved. Over time, and in the aggregate, such deprivations inflicted significant reputational harm on the victimized institutions, damaging their prospects for attracting conscientious members and leaders and limiting their ability to operate effectively and carry out their core missions.”

Although the Russian President Putin was quick to allege a “blatant attempt to extend US jurisdiction to other countries,” there is probably no infringement of either US law or international law, at least not in this particular case (see here, here, and below). Indeed, the Swiss government, where FIFA is based, has joined forces with the US in this quest. On the same day that Swiss police arrested several FIFA officials based on the US request for extradition, Switzerland’s Attorney General made public the decision to probe into how Russia and Qatar had won the right to host the World Cups of 2018 and 2022, respectively.

The Potential Impact of Extending RICO Globally

Arguably, beyond the immediate FIFA scandal, the most significant outcome of the US Attorney General’s invocation of the RICO Act is its potential extension to cover criminal activities of officials of the various private global governance bodies that just like FIFA regulate global activities in numerous spheres of life.

These private associations have become in recent years increasingly responsible for setting and enforcing global standards on financial markets, emissions, natural resource management, labour conditions, food safety and more. As private actors acting informally, they evaded regulation by states. Regarding them as “enterprises” protected by RICO seems compatible with the definition endorsed in United States v. Turkette 452 US 576, 583 (1981) (“a group of persons associated together for a common purpose of engaging in a course of conduct”).

The implication is that officials and other participants in such “enterprises” can theoretically be subjected to prosecution for crimes – as defined by RICO – that they committed against the association if the activity occurred in the United States. To offer one illustration: officials of a standard setting body who take bribes for issuing certification of sustainable farming, may, under this theory, be subjected to US RICO charges – both criminal and civil – if they happen to wire the illicit proceeds through US banks.

In fact, just a month before filing the indictment against the FIFA officials, on 13 April, 2015, the US Court of Appeals for the Second Circuit endorsed the interpretation that RICO could have an extraterritorial reach. The majority found that: “Congress has clearly communicated its intention that RICO apply to extraterritorial conduct to the extent that extraterritorial violations of those statutes serve as the basis for RICO liability” (European Community v. RJR Nabisco Inc et al, 2nd US Circuit Court of Appeals, No. 11-2475 (2d Cir. 2015)).

The dissenting judges noted that the decision “will have a significant and long-term adverse impact on activities abroad that we have heretofore assumed were governed primarily by the laws of the territories where those activities occurred.” They warned that if “this decision remains undisturbed, the prevailing plaintiffs here, the European Community and its member states, will have achieved a pyrrhic victory, and one that the Community’s constituents will have cause to regret in the years ahead. Why? Because its citizens, natural and corporate, are among the likely targets of future RICO actions under the panel’s interpretation of the statute.”

Of interest is the position of the United States. In an amicus brief it stated that “the district court [had] adopted too narrow a test for ascertaining the territorial application of” RICO. That error was “of serious concern to the United States.” According to the brief, “a RICO claim is territorial either if the enterprise is located or operating in the United States or if a pattern of racketeering activity occurs within the United States.”

A separate question, not discussed in the judgment or the US brief, was whether in a RICO civil suit, a private party must assert an injury in the United States for a RICO claim to be considered territorial.

Obviously, these and several other questions concerning the extraterritorial applicability of the RICO Act are far from settled. Moreover, a criminal statute such as RICO is not sufficiently nuanced to impose basic standards of accountability, transparency, etc. on private global governance bodies. The unilateral application of national criminal law is in itself a source of concern. But in retrospect, the indictment of the FIFA officials may eventually prove to have been the turning point in the hitherto deferential attitude of governments toward private global actors.