Introduction: The Problem with Facilitation Payments
Financial disbursements paid to public officials to expedite administrative processes to generate outcomes which one is already legally entitled, so-called “facilitation payments,” have been regarded as a legitimate exception to anti-bribery rules by many states. The definition, scope, and consistency of application, however, of facilitation payments around the world have long vexed global businesses, ethicists and anti-corruption regulators.
In some countries, the facilitation payment, sometimes referred to as a “grease payment,” is viewed as a regular part and cost of doing business, much like tipping at a restaurant. The rationale is that the usually-nominal payment to expedite or “facilitate” a foreign official to carry out an existing legal administrative or clerical duty – such as issuing a permit, license or approval – will not distort business or competition.
The Organization for Economic Co-operation and Development (OECD) defines the facilitation payment as a device to speed up an administrative process where the outcome is already pre-determined. In other words, it is about influencing the timing of the public action, not the outcome of the public decision. The facilitation payment is not designed to generate or perpetuate the business nor create any improper or unfair advantage. The size of the payment might be technically irrelevant, although the larger the payment, the more interest and suspicion it will arouse with law enforcement. Some jurisdictions require the facilitation payment to be immediately documented and most allow them to be deducted for corporate income tax purposes.
An illegal bribe, on the other hand, is designed to incentivize an official to make or change a decision that would not be made without the payment. It is a crime for which the corporation and its agents who participated in it can be fined and, in the case of the responsible individuals, imprisoned. The United Nations Convention against Corruption (UNCAC) prohibits facilitation payments, as do Germany, the United Kingdom and other countries.
American business has scope to compete with foreign firms by the Foreign Corrupt Practices Act (FCPA) of 1977, which was clarified by the Omnibus Trade and Competitiveness Act of 1988. This legislation carves out a narrow exception for “facilitating or expediting payments” to advance a non-discretionary action. A payment to a foreign official, political party or party official for “routine governmental action”, such as processing papers, issuing permits, and other actions of an official, to facilitate duties of a non-discretionary nature (which they are already bound to perform) is lawful.
Companies loathe facilitation payments because their legality is not easy to discern with precision. Even where it enjoys the status of a technical legislative exception, the facilitation payment is often seen as unethical business. In any event, the facilitation payment inescapably hovers on the fringes of bribery. The line between a legal facilitation payment and an illegal bribe is rarely a bright one in the practice of international investment and business.
Facilitation Payments in Canadian Anti-Corruption Legislation
On October 31, 2017, amendments came into force repealing the facilitation payment exceptions found in sections 3(4) to (5) of Canada’s Corruption of Foreign Public Officials Act (CFPOA). The CFPOA was enacted in 1998 to criminalize and deter bribery of foreign public officials and, at the same time, to ratify and incorporate Canada’s international obligations under the OECD Anti-Bribery Convention into domestic law. The CFPOA treats bribery as a serious crime in section 3(1):
3 (1) Every person commits an offence who, in order to obtain or retain an advantage in the course of business, directly or indirectly gives, offers or agrees to give or offer a loan, reward, advantage or benefit of any kind to a foreign public official or to any person for the benefit of a foreign public official
(a) as consideration for an act or omission by the official in connection with the performance of the official’s duties or functions; or
(b) to induce the official to use his or her position to influence any acts or decisions of the foreign state or public international organization for which the official performs duties or functions
in order “to obtain or retain an advantage in the course of business.”
Prior to the recent amendments, the CFPOA allowed facilitation payments to foreign officials. To escape characterization as an illegal bribe, the facilitation payment was defined as one that was “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.” Payments to obtain or continue business were not proper facilitation payments. The now-repealed section also contained a list of examples of appropriate facilitation payments, which included:
“(a) the issuance of a permit, license or other document to qualify a person to do business;
(b) the processing of official documents, such as visas and work permits;
(c) the provision of service normally offered to the public, such as mail pick-up and delivery, telecommunications services and power and water supply; and
(d) the 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.”
These payments are now illegal under Canadian anti-bribery law.
Rationale of Removing Facilitation Payments Exception
Facilitation payment exceptions in international business transactions have attracted stout criticism in Canada as elsewhere. Opponents say facilitation payments are a type of bribe and should be seen as such. They were rendered illegal in the United Kingdom in 2010 when Parliament tossed them into the same legal category as bribes. The OECD recommended the prohibition of facilitation payments due to their corrosive effect on public trust, sustainable economic development and the Rule of Law. It estimates that over US$1 trillion is paid in bribes each year which would put the cost of corruption at more than 5% of global GDP, an estimated US$2.6 trillion. The World Economic Forum reports that corruption increases the cost of doing business by an average of 10%. The acquiescence to facilitation payments undermines the purpose and effectiveness of anti-bribery legislation and international conventions.
Facilitation payments arguably provide a legal circumvention of anti-bribery legislation by artificially designating transfers of a quid pro quo nature as non-bribes. The practice or corporate culture of making payments on the side to get something done can easily devolve into the business of paying bribes. Similarly, the convoluted and usual conflicting nature of statutory language distinguishing a bribe from a facilitation payment impedes certainty in the law and its enforcement. For example, often it is challenging to accurately define a foreign official’s ordinary scope of duties and “routine governmental actions,” although as the United States has done, the law can emphasize the purpose of the payment rather than the duties of the recipient.
The foreign corporation also must ensure compliance with the anti-corruption laws of its home jurisdiction and the host country, which laws may be contradictory. Indeed, the facilitation payment laws within a country, even at the same level of government in that country, can be inconsistent. The discrepancies can be worse in federal states operating under more than one level of government. An example is Australia, where the criminal law restricts the size of the facilitation payment, but the income tax law does not. To further complicate matters, most Australian states have themselves made facilitation payments illegal.
While some Canadian companies doing business abroad have avoided using facilitation payments altogether, many have not. The implementation of facilitation payment repeal in the CFPOA was delayed over 3 years as both recognition of the widespread use of facilitation payments in international business and a means of allowing Canadian companies with business in foreign states to adjust and adapt their practices. Regardless of past practice, the recent criminalization of facilitation payments to foreign public officials increases the risk of foreign business. It will require Canadian companies doing business abroad to immediately and wholly cease the practice.
Companies in Canada and in other jurisdictions that have banned facilitation payments must amend relevant procedure and policy manuals, inform staff of these changes, and implement training, monitoring and auditing in the field. Canadian companies who are now caught greasing a foreign official can incur a heavy fine and their agents face up to 14 years of imprisonment. In practice, however, supplementary payments to do business overseas can be difficult to detect and prosecute. Even where all payments are considered illegal bribes, law enforcement tends not to prosecute minor, occasional facilitation payments in the regions where they are routinely paid. Prosecutorial discretion is most likely to be exercised in favor of the company that can demonstrate strong anti-corruption and risk management policies and the practical steps taken to curtail such payments.
** Student-at-Law, Canada Department of Justice, Alberta
 Bill S‑14: An Act to amend the Corruption of Foreign Public Officials Act. See Government of Canada News Release: https://www.canada.ca/en/global-affairs/news/2017/10/canada_repeals_facilitationpaymentsexceptionincorruptionofforeig.html
 OECD Convention on Combatting Bribery of Foreign Public Officials in International Business Transactions
 See generally, Peter Bowal and Christopher Bowal, “What is Wrong with Corruption?” (2012) 36:6 LawNow 6 http://www.lawnow.org/what-is-wrong-with-corruption/