The State Department recently released this Investment Climate Statement for the Dominican Republic. It caught my eye not because the Dominican Republic is a prominent market for U.S. business, but rather because information in the statement provides a nice reminder why Congress chose to exempt facilitation payments from the reach of the FCPA’s anti-bribery provisions.
In pertinent part, the statement reads:
“Foreign investors report numerous systemic problems in the Dominican Republic and cite a lack of clear, standardized rules by which to compete and a lack of enforcement of existing rules. Complaints include allegations of widespread corruption; requests for bribes; delays in government payments; weak intellectual property rights enforcement; bureaucratic hurdles; slow and sometimes locally biased judicial and administrative processes, and non-standard procedures in customs valuation and classification of imports. Weak land tenure laws and government expropriations without due compensation continue to be a problem. The public perceives administrative and judicial decision-making to be inconsistent, opaque, and overly time-consuming. Corruption and poor implementation of existing laws are widely discussed as key investor grievances.”
The above statements nicely capture many of the same issues Congress encountered approximately 45 years ago in enacting the FCPA.
The FCPA’s legislative history teaches that in passing the FCPA Congress intended to capture only a narrow category of payments and chose not to capture so-called facilitating payments given the difficult and complex business conditions encountered in many foreign countries. Congressional leaders spearheading enactment of the FCPA were clear as to the scope of the law they envisioned. For instance, Senator Church stated:
“Let us be clear that we are not just talking about a little ‘baksheesh’ to grease the palm of some petty clerk in order to speed needed documents on their way through the bureaucratic labyrinth. What we are talking about is a concerted effort by the petroleum industry to buy favorable tax and energy legislation in a European country in which one U.S. company alone made over $50 million in contributions to the government parties and members of the cabinet over a 9 year period. What we are talking about is an arms industry campaign to flood the Middle East with weapons, in which a U.S. aircraft company paid over $100 million in agents’ fees in one country to sell an airplane which has no competitor.”
Senator Proxmire stated:
“I recognize it is hard [to define a bribe], but we are not concerned so much about the low level grease payments. What we are talking about is the payment, as I say, to make a sale. …. What we are concerned about, as I say, and trying to get at . . . is bribery for the purpose of making sales abroad.”
“[W]e define [a bribe] as a payment to an official of a foreign government for the purpose of inducing him to use his influence to secure business for the issuer or influence legislation or regulations of his government.”
Representatives Murphy and Eckhardt likewise stated during a House hearing:
“This bill is not concerned with so-called grease or facilitating payments, such as may be necessary to some petty clerk to speed documents through a bureaucracy. The bill does not address itself to ‘grease’ or ‘facilitating’ payments made to low-level clerical or ministerial government officials.”
Senate and House Reports evidence the limited scope of the FCPA and how it would not capture all foreign corporate payments Congress learned of during its multi-year investigation.
A Senate Report stated:
“In drafting the bill . . . the Committee deliberately cast the language narrowly, in order to differentiate between such payments [to a foreign official corruptly intended to induce the recipient to use his influence to secure business, influence legislation or regulations] and low-level facilitating payments sometimes called ‘grease payments.’ Thus, [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. However, where the payment is made to influence the placement of government contracts or to influence the formulation of legislation or regulations, such payment is prohibited. …. The Committee fully recognizes that the proposed law will not reach all corrupt payments overseas.”
A House Report likewise stated:
“The scope . . . is limited by the requirement that the offer, promise, authorization, payment, or gift must have as a purpose inducing the recipient to use influence with the foreign government or instrumentality, or to refrain from performing any official responsibilities, so as to direct business to any person, maintain an established business opportunity with any person, divert any business opportunity from any person or influence the enactment or promulgation of legislation or regulations of that government or instrumentality. . . . The bill’s coverage does not extend to so-called grease or facilitating payments. . . . The language of the bill is deliberately cast in terms which differentiate between such payments and facilitating payments, sometimes called ‘grease payments’. In using the word ‘corruptly’, the committee intends to distinguish between payments which cause an official to exercise other than his free will in acting or deciding or influencing an act or decision and those payments which merely move a particular matter toward an eventual act or decision or which do not involve any discretionary action. In defining ‘foreign official’, the committee emphasizes this crucial distinction by excluding from the definition of ‘foreign official’ government employees whose duties are essentially ministerial or clerical. 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 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. However, where the payment is made to influence the passage of law, regulations, the placement of government contracts, the formulation of policy or other discretionary governmental functions, such payments would be prohibited. The committee fully recognizes that the proposed law will not reach all corrupt payments overseas.”
As suggested by the above legislative history, the FCPA originally contained an indirect facilitating payment exception embedded in the “foreign official” element by excluding from the definition of “foreign official” “any employee of a foreign government or any department, agency, or instrumentality thereof whose duties are essentially ministerial or clerical.” In 1988, this indirect exception was removed from the definition of “foreign official” in favor of an express stand-alone exception. The House Report indicated that Congress did not seek to disturb Congress’s original intent and stated:
“The policy adopted by Congress in 1977 remains valid, in terms of both U.S. law enforcement and foreign relations considerations. Any prohibition under U.S. law against this type of petty corruption would be exceedingly difficult to enforce, not only by U.S. prosecutors but by company officials themselves. Thus while such payments should not be condoned, they may appropriately be excluded from the reach of the FCPA. U.S. enforcement resources should be devoted to activities have much greater impact on foreign policy.”
The FCPA facilitation payment exemption states that the anti-bribery provisions “shall not apply to any facilitating or expediting payment to a foreign official … the purpose of which is to expedite or to secure the performance of a routine governmental action by a foreign official …”.
The FCPA defines “routine governmental action” as follows:
“The term “routine governmental action” means only an action which is ordinarily and commonly performed by a foreign official in:
(i) obtaining permits, licenses, or other official documents to qualify a person to do business in a foreign country; (ii) processing governmental papers, such as visas and work orders; (iii) providing police protection, mail pick-up and delivery, or scheduling inspections associated with contract performance or inspections related to transit of goods across country; (iv) providing phone service, power and water supply, loading and unloading cargo, or protecting perishable products or commodities from deterioration; or (v) actions of a similar nature.
The term “routine governmental action” does not include any decision by a foreign official whether, or on what terms, to award new business to or to continue business with a particular party, or any action taken by a foreign official involved in the decision-making process to encourage a decision to award new business to or continue business with a particular party.”
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