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A Focus On Facilitation Payments

This post is all about facilitation payments.

Congress was clear when it passed the FCPA that the statute was not intended to address such payments.  For instance, the relevant House Report (H.R. Rep. No. 95-640 (1977)) stated as follows.  “The language of the bill is deliberately cast in terms which differentiate between [corrupt] payments and facilitating payments, sometimes called ‘grease payments,’ … For example, a gratuity paid to a customs official to speed the processing of a customs document would not be reached by the bill.  Nor would it reach payments made to secure permits, licenses, or the expeditious performance of similar duties of an essentially ministerial or clerical nature which must of necessity be performed in any event.  While such payments made to assure or to speed the proper performance of a foreign official’s duties may be reprehensible in the United States, the committee recognizes that they are no necessarily so viewed elsewhere in the world and that it is not feasible for the United States to attempt unilaterally to eradicate all such payments.  As a result, the committee has not attempted to reach such payments.”

Originally, the FCPA contained an indirect facilitation payments exception through the definition of “foreign official” which excluded from that definition any employee of a foreign government “whose duties are essentially ministerial or clerical.”  Among the FCPA’s 1988 amendments was taking this indirect facilitation payments exception from the definition of “foreign official” and establishing a direct, stand-alone facilitation payment exception currently found in the statute.

With that backdrop, two items to highlight.  First, recent scholarship from an SEC enforcement attorney on facilitation payments.  Second, a Q&A with a member of the Global Steering Team for the recently formed facilitation payment focused anti-corruption industry initiative, Committee to Address Facilitation Payments (C.A.F.P.)

Facilitation Payments Scholarship

Jon Jordan (Senior Investigations Counsel with the FCPA Unit of the SEC) recently published “The OECD’s Call For An End To “Corrosive’ Facilitation Payments And The International Focus On The Facilitation Payments Exception Under The Foreign Corrupt Practices Act” in the University of Pennsylvania Journal of Business Law (see here).

The article gives a basic outline of the FCPA and the facilitation payments exception and explores the history behind the exception.  The article then discusses the U.S. pursuit of an international agreement prohibiting foreign bribery and the resulting OECD Anti-Bribery Convention.  Next, the article focuses on international and domestic disdain over the issue of facilitation payments during the first decade of the Convention.  Then, the article considers the recent OECD Recommendation calling on the prohibition of facilitation payments and the OECD’s recent criticisms of the U.S. with respect to its policies on facilitation payments.  Jordan then gives his prediction that the facilitation payments exception will be eliminated and provides his recommendation that domestic companies prohibit the use of facilitation payments in the current global anti-bribery environment.

Jordan’s article is an informative read and this sentence from the article stood out to me.  “[W]hile the FCPA contains several core provisions that will always withstand the test of time, the facilitation payments exception is out of date in this modern-day era of commerce and sensibility.”

Q&A With Mike Munro

The Committee to Address Facilitation Payments (C.A.F.P.) is a collection of global companies working together to address the potential future demand/risk of facilitation type payments in a thoughtful, proactive and appropriate manner.  It recently released this document and below Mike Munro (Vice President, Associate General Counsel and Chief Compliance Officer, Transocean, and a member of the Global Steering Team for C.A.F.P.) responds to some questions.

Q:  Congress chose to exempt facilitating payments from the reach of the FCPA’s anti-bribery provisions.  Why then is there a need for CAFP to address facilitating payments? 

A:  Regardless of whether facilitation payments are allowed by anyone, I am not aware of any company that believes facilitation type payments are positive to business or economic development.  All companies want to reduce the risk of potential facilitation payments and clearly the best way to do that is through collective action.

Q:  Does CAFP support amending the FCPA to remove the facilitating payments exception? 

A:  C.A.F.P. is not an organization that would take that type of position.  The types of legal changes we are interested in relate to how government processes can be clarified or improved (such as computer automation) to reduce risk or situations that potentially could involve facilitation payments.

Q:  To best eliminate facilitating payments in many countries, cultural changes are necessary.  Can a committee of multinational companies effectuate cultural change? 

A:  Cultural change could be helpful in some countries and situations to reduce the potential risk of facilitation type payments and therefore a significant focus of C.A.F.P. is to engage local people and companies in this effort.

Q:  It would seem that the best forward-looking solution to reducing the demand for facilitating payments is to increase civil servant salaries in many foreign countries.  Do you agree? 

A:  Increasing civil servants pay could potentially have a positive impact but how positive of an impact would be difficult to determine.  Clearly if an individual’s pay is not sufficient to meet daily living requirements, most would agree that there is likely a higher probability of requests or demands, but as indicated above,  other factors such as culture, individual integrity norms, etc. do have an impact.

Q:  If increasing foreign civil service salaries is a good idea, how can it be accomplished?

A:  If a decision was made that increasing civil servant salaries would be helpful, one of the ways to approach that would be to have key companies and industry groups in a particular country approach high level government officials to determine how best to effectuate such a change.  The companies and industry groups could then help coordinate that effort with others in that country who have similar interests and views.

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