In the second of her regular series of articles on bribery and corruption issues, Andrea Bonime-Blanc considers the thorny issue of facilitation payments, how they are used, and if they are acceptable
In the second of her regular series of articles on bribery and corruption issues, Andrea Bonime-Blanc considers the thorny issue of facilitation payments, how they are used, and if they are acceptable
More than thirty years after the inception of the United States Foreign Corrupt Practices Act of 1977 (FCPA), twelve years after the signing of the Organization of Economic Cooperation and Development’s (OECD) Convention on Combating Bribery of 1997, and half a decade since the adoption of the United Nations Convention Against Corruption of 2004, one of the still grey areas in the anti-corruption debate is the topic of whether “facilitation payments” should be made.
Simply put, a facilitation payment is what is more colloquially referred to as a “grease” payment.
Some jurisdictions allow them, others forbid them and yet others don’t allow them but provide exceptions because of their intrinsically extortionate nature.
Indeed, the United Kingdom, still in the midst of debating the final form of its new anti-corruption law (expected to be adopted in mid 2010), is yet to have settled the issue.
On International Anti-Corruption Day, December 9, 2009, the OECD announced an expansion of the efforts of its 30 member countries and additional eight signatory nations with regard to its anti-corruption efforts.
The OECD specifically addressed the issue of facilitation payments by highlighting the fact that it required periodic review and analysis.
While enforcement of anti-corruption laws is uneven around the world, the trend is in the direction of greater enforcement and cooperation and that includes the issue of facilitation payments.
This is clear from the statements of the OECD, the draft U.K. law and recent pronouncements by the U.S. Department of Justice (“DOJ”) criminal division chief, Lanny Breuer, who recently promised heightened FCPA enforcement, prosecutions and individual executive accountability.
What is a “Facilitation Payment”?
In the context of anti-corruption, a facilitation payment is considered to be a usually small payment to a government official to expedite a routine bureaucratic action.
A minority of jurisdictions (Australia, Canada, New Zealand, South Korea and the United States) distinguish mere “facilitating” or expediting payments from bribery payments and allow them as an exception or defense.
Facilitation payments are considered less offensive in these jurisdictions because they are viewed as extortionate where the corporate payer is the victim rather than the transgressor.
Most jurisdictions with extra-territorial anti-bribery laws, however, have adopted a more cut and dried approach that does not recognize the legality of any such payments.
The rationale in these jurisdictions is that any form of bribery – no matter how small or how routine it may be - is damaging to government integrity, corporate fair play and, most importantly, to society, causing undesirable damage and cost to the life of average citizens.
Examples of facilitation payments
As the Australian Government states in its guidance on this topic, facilitation payments entail the following “minor” and “routine” types of action:
• “granting a permit, licence or other official document that qualifies a person to do business in a foreign country or in a part of a foreign country
• processing government papers such as a visa or work permit
• providing police protection or mail collection or delivery
• scheduling inspections associated with contract performance or related to the transit of goods
• providing telecommunications services, power or water
• loading and unloading cargo, and / or
• protecting perishable products, or commodities, from deterioration.”
To make or not to make facilitation payments?
No matter how tough or lenient governments are on the issue of allowing or forbidding facilitation payments, one thing is certain and that is that the reality of such payments is not about to disappear.
In some cultures, the average citizen is completely unable to live a normal life without making small daily bribes for basic human subsistence.
In other cultures (even the most law abiding and progressive), while not endemic, facilitation payments also appear from time to time and in some ways in a more subtle, indirect and arguably insidious way.
Given the veritable minefield of facilitation payment opportunities and the variety of, sometimes contradictory, national legal approaches to this issue, what are global companies to do?
Companies that take the issue of corruption and bribery seriously provide their employees and third parties with guidance to address, vet and resolve corruption concerns generally including how to handle facilitation payments.
Thus, depending on what jurisdiction they are headquartered in and their overall culture (or lack thereof), companies may forbid facilitation payments outright, provide for more detailed guidance or remain silent altogether (the least desirable option).
Companies based in jurisdictions where facilitation payments are allowed may provide for something similar to what Altria and Exxon Mobil do in their code/anti-corruption policies.
In this type of approach, employees are told that facilitation payments may be permissible if certain conditions are present, namely that (a) the legal department provides permission, (b) it is legal in the U.S. and under the laws of the country in question, (c) it is routine and non-discretionary, (d) is request by a government official, and (e) the payment is small and accurately recorded in the company’s books.
Companies that explicitly ban facilitation payments altogether are usually headquartered in countries where facilitation payments are forbidden or come from industries with a complicated history regarding corruption.
The extractive and oil and gas industries come to mind as they have historically been at the bleeding edge of corruption issues globally (see BP and Shell).
Guidance
Beyond the fact of what a company’s code or policy says, the real question is what is the practice in reality – does the company enforce its own policy or is the policy mere corporate wallpaper?
There are two worst case scenarios involving facilitation payments: (1) a company does not have a policy in place and becomes embroiled in a corruption scandal emanating from a facilitation payment situation that could have been contained if an effective policy had been in place or (2) a company has an explicit policy on this issue that it doesn’t follow in practice.
From a business integrity officer’s perspective, the best approach is for a company to have an explicit policy in place that is responsive to its culture and the industry and jurisdictions in which it operates.
This may mean having a complete ban on facilitation payments or having a narrow exception for such payments necessary for the health and welfare of employees.
In both cases it also means that the policy is a living and breathing document within the company that is periodically and repeatedly communicated, used, audited and improved.
Andrea Bonime-Blanc is general counsel, chief compliance officer & corporate secretary at Daylight Forensic & Advisory. abonimeblanc@daylightforensic.com / http://www.daylightforensic.com
For an in-depth feature on the topic and how companies use and view facilitation payments, please take a look at this article:Facilitation payments – The cost of greasing the wheel, from our December/January print edition.