Small "Facilitation Payments" Are Higher Risk Now, Due to OECD Recommendation
The Organisation for Economic Co-operation and Development (OECD) recently adopted a Recommendation intended to extend the enforcement of the OECD's Anti-Bribery Convention. The Recommendation urges the 38 countries (including the United States) who have ratified the Convention to beef up enforcement through a variety of measures, including:
- reviewing policies and legislation (such as the United States' Foreign Corrupt Practices Act) that allow small facilitation payments, in order to combat their use and to encourage companies to prohibit or discourage their use, "recognizing that such payments are generally illegal in the countries where they are made;"
- explicitly disallowing tax deductions for bribes;
- ensuring companies cannot avoid sanctions by making payments through intermediaries;
- creating readily accessible means to report bribes;
- creating whistleblower protections;
- establishing more stringent accounting standards to avoid the concealment of payments of bribes;
- suspending from competition for public contracts enterprises that have bribed public officials; and
- engaging in more effective monitoring and law enforcement to prevent and punish bribery.
The Recommendation, which the OECD adopted on November 26, grew out of a review of the progress made in the decade since the Convention was adopted, and comments on the resulting Consultation Paper by the OECD Working Group on Bribery in International Business Transactions.
The Anti-Bribery Convention was adopted by the OECD in November 1997. It prohibits bribery of foreign officials and requires the OECD member countries to: (1) adopt criminal laws combating bribery; (2) adopt accounting standards designed to make the concealment of bribery more difficult; and (3) render each other mutual legal assistance in enforcing anti-bribery measures, including extradition. The Convention was adopted by the 30 OECD member nations, which include the United States, Canada, Mexico, Japan, Korea, and most of the European Union member countries, but not China or India. Eight other countries also adopted the Convention, including Argentina, Brazil, and South Africa. The Commentaries on the Convention, which were adopted at the same time as the Convention, carve out small "facilitation payments" from the definition of an offense, but note that these payments are generally illegal in the countries where they are paid.
Currently, the U.S.'s Foreign Corrupt Practices Act (FCPA) allows small "facilitation payments" to foreign officials to get certain routine governmental actions of a non-discretionary nature done in a timely manner (i.e., the actions that the official is already required to perform, so that the payment is not to influence the outcome of the official's action, only its timing). Facilitation payments might apply to actions such as issuing permits or processing applications. However, the line between a facilitation payment and a bribe may be rather difficult to discern in some circumstances. The United States is one of only a small number of countries that allow these payments (the United Kingdom, for example, does not).
Secretary of State Hillary Clinton has declared, "The United States fully supports the OECD's anti-corruption agenda." The U.S. Department of Justice has already begun more aggressive enforcement of the FCPA - against both companies and individuals. Companies that make facilitation payments should make sure that they exercise strict controls over when these payments are made and how they are recorded.
This entry was written by Margaret Hart Edwards.
http://www.globalemploymentlaw.com/mtc/mt-tb.cgi/606