Facilitation payments no longer permissible under Canadian anti-corruption law

by DLA Piper
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Canada's repeal of the "facilitation payments" exception in its foreign anti-corruption law widens the rift between the United States, which permits such payments, and the majority of other countries, which prohibit them.

On October 30, 2017, the Canadian government repealed its facilitation payments exception for bribery offenses under the Canadian Corruption of Foreign Public Officials Act (CFPOA), an anticorruption statute with extraterritorial reach that had permitted such payments since its implementation in 1999. The long-anticipated move followed the February 2013 introduction of Bill S-14 (An Act to amend the Corruption of Foreign Public Officials Act), which provided for the elimination of the facilitation payments exception at a future date.

The delayed implementation of the facilitation payments repeal was intended to allow businesses adequate time to prepare for the legislative change. Facilitation payments are now prohibited under Canadian law, whether the payments occur in Canada or abroad.

What are facilitation payments?

Section 3(4) of the CFPOA previously defined "facilitation payments" as payments "made to expedite or secure the performance by a foreign public official of any act of a routine nature that is part of the foreign public official's duties or functions." Examples of facilitation payments – which are occasionally referred to as "grease" or "expediting" payments – include payments for:

  • issuance of government permits, licenses, or other documents to qualify entities/individuals to conduct business
  • processing of official documents, such as visas and work permits
  • provision of services normally offered to the public, such as mail pickup and delivery, telecommunication services, and power and water supply and
  • provision of services normally provided as required, such as police protection, loading and unloading of cargo, the protection of perishable products or commodities from deterioration or the scheduling of inspections related to contract performance or transit of goods.

The CFPOA's facilitation payment exception did not extend to payments related to "decision[s] to award new business or to continue business with a particular party," including "decision[s] on the terms of that business, or encouraging another person to make any such decision[s]."

The CFPOA contains a "local law" defense that may exempt some facilitation payments from prosecution. The defense provides that payments are permissible where they are "permitted or required under the laws of the foreign state or public international organization for which the foreign public official performs duties or functions." So, for example, some governments offer Canadian citizens a two-track option for requesting foreign visas, normal and expedited, with the prices published in a government-issued fee schedule. There is no question that a higher payment made for the quicker processing time is intended to "expedite . . . the performance by a foreign public official of any act of a routine nature that is part of the foreign public official's duties," and involves the "processing of official documents," but such payment would not run afoul the CFPOA's anti-bribery provisions if it is "permitted or required under the laws of the foreign state."

How do other countries treat facilitation payments?

While the UK Bribery Act 2010 (Bribery Act) does not address facilitation payments in its statutory text, the UK Serious Fraud Office (SFO) has issued guidance unequivocally prohibiting such payments: "A facilitation payment is a type of bribe and should be seen as such. . . .  Facilitation payments were illegal before the Bribery Act came into force and they are illegal under the Bribery Act, regardless of their size or frequency." Prior to initiating an enforcement action for a facilitation payment, SFO prosecutors must apply the Full Code Test, which states that "[p]rosecutors must be satisfied that there is sufficient evidence to provide a realistic prospect of conviction against each suspect on each charge" and believe that the "prosecution is required in the public interest."

The US Foreign Corruption Practices Act (FCPA), in contrast to the Bribery Act and recently-amended CFPOA, exempts from its bribery offenses offers or payments provided in exchange for routine government actions. The FCPA states that its anti-bribery prohibition "shall not apply to any facilitating or expediting payment to a foreign official, political party, or party official the purpose of which is to expedite or to secure the performance of a routine governmental action." While the exception "focuses on the purpose of the payment rather than its value," regulators have cautioned that the size of the payment “can be telling, as a large payment is more suggestive of corrupt intent to influence a non-routine governmental action."

The United States is in the minority of countries that tolerate facilitation payments in their international anti-corruption laws. Most countries have embraced the recommendations of the Organization for Economic Co-operation and Development (OECD), which describe facilitation payments as "corrosive" and recommend that member-countries "encourage companies to prohibit or discourage the use of small facilitation payments."

What are the implications for companies?

Companies subject to the CFPOA which have compliance policies or practices that previously allowed employees or third-party agents to make facilitation payments, or whose compliance policies are silent on the subject, should take immediate action to revise those policies, prohibit facilitation payments and educate relevant personnel about the changes. This may require a review of the companies' interactions with foreign governments and an understanding of the extent to which any payments for governmental services are required under the foreign law.

Under the Canadian Criminal Code, violations of the CFPOA are punishable by both fines and imprisonment.

[View source.]

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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