The East India Company was a dominate multinational corporation in the 1600 – 1800’s.
And it apparently engaged in lots of bribery.
This article is about an East India Company merchant who “compiled notes about the practicalities of trade in various ports and settlements of the Indian Ocean in the 18th century. Among lists of prices, exchange rates, and goods are advice and instructions for enterprising traders looking to maximise their profits through bribery and tax dodging.”
As stated in the article:
“Gift-giving is mentioned in the description of many ports. At Atcheen (Aceh, Indonesia), Pybus bluntly states that a visiting merchant must “visit the King and make him a Present”. For the Spanish colonial port of Manila, he helpfully includes a list of individuals “whom it is proper to get acquainted with” and whose goodwill was required to conduct business successfully at the port.
The propriety of these “gifts” seems questionable, at least in the case of the authorities at Manila. While a trader was instructed to prioritise visiting the Governor of Manila to present him with a token of gratitude, this “must be done… without any witness, for should any body be by, he will not accept it”.
Payments could also be used to avoid paying dues on merchandise when the Spanish authorities came to measure a ship and assess its cargo. First, it was important to greet the inspectors warmly – “you must have a very handsome entertainment for them which is very acceptable to them…I would advise to have at least, a dozen dishes of victuals, with what variety you can of Europe pickles and likewise of wines.”
If this did not make a sufficiently good impression, the money-conscious captain was to emphasise that “you are no stranger to the customs of the port, and that you intend to be gratefull for all favours”. Finally, a direct approach was taken to secure favourable treatment from the man tasked with measuring the ship. When a Spanish official was sent below decks to take measurements, “send a man down with 10 or 12 dollars, to slip into the officer’s hand (unseen)… it will turn to good account”.
When the U.S. Congress held hearings in the mid 1970’s regarding – what was often called – the foreign corporate payments problem, Congress was not reacting to the world of international commerce in the 17th and 18th centuries, but the mid-1970’s.
Yet, Congress was made aware of some of the same issues documented by the East India Company merchant.
For instance, a relevant House Report stated:
“[A] gratuity paid to a customs official to speed the processing of a customs document would not be reached by the [what would become the FCPA]. 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 by performed in any event. While 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 not 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.”
A Senate Report likewise stated:
“[The bill] would not reach a small gratuity paid to expedite shipment through Customs or the placement of a trans-Atlantic telephone call, to secure required permits, or to ensure that a corporation’s warehouses were not put to the torch. In other words, payments made to expedite the proper performance of duties may be reprehensible, but it does not appear feasible for the United States to attempt unilaterally to eradicate all such payments.”
Given what Congress learned, and because of the primary foreign policy objectives in enacting the FCPA, Congress exempted so-called facilitating payments from the FCPA’s anti-bribery provisions and this statutory exemption remains today.
