Removing the FCPA Facilitation Payments Exception: Enforcement Tools for a Cleaner Business as Usual

Article excerpt

  I. INTRODUCTION  II. FACILITATION PAYMENTS: THEORY AND PRACTICE      A. Greasing the Wheels of Industry      B. Reasons Why Supplying Facilitation Payments         Has Been Viewed as Necessary      C. Companies Are Leading Governments III. A RECENT TIMELINE OF LEGISLATIVE APPROACHES      A. The FCPA and its Exception Allowing for         Facilitation Payments      B. The OECD and the Global Attitude Shift Against         Facilitation Payments      C. The U.K. Bribery Act 2010  IV. RECOMMENDATIONS FOR AMENDING THE FCPA AND      ENFORCING A PROHIBITION OF FACILITATION      PAYMENTS      A. Lex Non Curat De Minimis      B. A Brief Look at Global Enforcement Philosophies      C. A Practical Framework for Facilitation Payments       Enforcement   V. CONCLUSION 


   Bribery blights lives. Its immediate victims include    firms that lose out unfairly. The wider victims are    government and society, undermined by a weakened    rule of law and damaged social and economic    development. At stake is the principle of free and fair    competition, which stands diminished by each bribe    offered or accepted. (1) 

This statement issued by Kenneth Clarke, the United Kingdom's Secretary of State for Justice, is a good reminder regarding who loses out when corrupt payments are permitted as a part of doing business. (2) We all do. (3)

Bribery of government officials is an issue the United States did not address with legislation until after 1852. (4) Indeed, it wasn't until Theodore Roosevelt's administration started prosecuting a small number of Congressmen for taking bribes and kickbacks that national rancor over government corruption was finally met with action. (5) The increasingly suspicious attitude toward domestic government officials carried forward through the 1970s and Watergate, and eventually culminated in the world's first major piece of international anti-corruption legislation, the Foreign Corrupt Practices Act (FCPA), in 1977. (6) The FCPA was a clear statement of leadership for the United States in the international fight against corrupt payments to government officials. (7) Reflecting back on the passage of the FCPA, Andrew Pincus, General Counsel of the Department of Commerce, testified that:

   [In 1977], the United States Congress passed the    Foreign Corrupt Practices Act, becoming the first    country to make it a crime for its citizens and    companies to bribe the officials of another country. This    was a courageous and farsighted action for our country    to take, and one that reaffirmed our leadership in the    regulation of international business practices. (8) 

Despite the potential of the FCPA, it had "little to no effect in its first twenty-five years of existence." (9) This has changed dramatically, however, in the past decade. (10) FCPA enforcement is rising significantly in terms of prosecutions, magnitude of fines, and number of deferred prosecution agreements (DPAs) entered into. (11)

Even though this is a step in the right direction with regard to prosecuting and preventing high value transactions "influencing any act or decision of a foreign official," "small" or "routine" facilitation payments are still overlooked. 12 This is because an exception in the FCPA expressly allows for these. 13 The United States has lost some of its global anti-corruption leadership status because of this exception, and it is time for an amendment to the FCPA removing it. (14)

Section II of this comment will address and explain facilitation payments and why it is no longer acceptable to regard them as a normal part of doing business. Section III briefly compares the FCPA's facilitation payments exception with the conscious lack thereof in the U.K. Bribery Act 2010. (15) It also reviews how the OECD has played a role in elevating this topic for debate with the Department of Justice and the public in general. (16) Section IV looks at the current practical and theoretical arguments being made for and against allowing facilitation payments under the FCPA and advocates for prohibiting them. …