Jurisdiction - Australia
Reports and Analysis
Australia – Facilitation Payments And Anti-Bribery Laws.

10 November, 2012

 

Legal News & Analysis – Asia Pacific – Australia – Regulatory & Compliance

 

In brief
 
  • Facilitation payments are minor benefits used to secure the performance of a routine government action, and are often distinguished from a “bribe”.
  • Under Australian law, if facilitation payments have been paid, they are a defence to the offence of bribing a foreign public official if certain requirements are satisfied.
  • The facilitation payments defence is narrow in scope, difficult to distinguish from a prohibited bribe and, as a matter of best practice, should not be relied upon.
  • Businesses can take a number of practical steps, including training, risk assessments and ongoing review, to operate effectively without having to rely on facilitation payments as a defence to bribery allegations.
 
If money go before, all ways do lie open…? (Shakespeare “Merry Wives of Windsor”)
 
Facilitation payments, sometimes known as “grease” payments, are often viewed as a necessary means of doing business, particularly in lower-income countries. Subject to satisfaction of certain requirements under Australian law, facilitation payments remain a defence to the offence of bribing a foreign public official. However, recent developments, including the United Kingdom’s Bribery Act 2010
(“Bribery Act”) which came into force on 1 July 2011 and does not distinguish facilitation payments from prohibited bribes, have encouraged the Australian Federal Government to seek public consultation on a proposal to repeal the facilitation payments defence (Assessing the ‘facilitation payments’ defence to the Foreign Bribery offence and other measures – the “Public Consultation Paper”). Now closed, the results of the consultation are yet to be published, though it seems likely that the defence will be removed in the near-future.
 
This article explains why, as a matter of best practice and regardless of the outcome of the consultation process, facilitation payments should not be relied upon. It also provides guidance on the practical steps businesses can take to operate effectively without them.
 
The facilitation payments defence under Australian anti-bribery laws
 
Australian anti-bribery laws prohibit the provision or offer of any benefit to another with the intention of influencing a foreign public official in order to obtain or retain business or an improper business advantage. This prohibition is in similar terms to the anti-bribery laws of other countries which ratified the OECD Convention on Combating Bribery (the “OECD Convention”). However, it provides a limited defence to the offence of foreign bribery in the form of facilitation payments, if:
 
  • the value of the benefit was of a minor nature; and
  • the person’s conduct was engaged in for the sole or dominant purpose of expediting or securing the performance of a routine government action of a minor nature; and
  • as soon as practicable after the conduct occurred, the person made a record of the conduct.
 
Best practice: facilitation payments should not be relied upon
 
The facilitation payments defence is intended to apply to only a very narrow set of circumstances. Even if these circumstances are satisfied, it is unclear where the distinction between a legal facilitation payment and an illegal bribe can be drawn, as what precisely constitutes a “minor benefit” remains undefined.
 
The United States’ Foreign Corrupt Practices Act includes a similar exemption to the offence of foreign bribery for facilitation payments. However, the application of the exemption remains equally narrow in scope, with the authorities increasingly unwilling to tolerate facilitation payments in the absence of exceptional circumstances and strong supporting evidence.
 
The burden of proof for facilitation payments, which rests on those seeking to rely on the exemption, can be difficult to discharge. This is because even if “genuine” facilitation payments are made, it is often the case that they are not recorded. In the Australian context, the evidence is limited regarding the extent to which facilitation payments are made, primarily because there have been no prosecutions of payments where this has been used as a defence. In addition, if facilitation payments have been made, companies are unlikely to record them (as required by Australian law) due to concerns of possible repercussions in the jurisdiction in which they have been paid, where such payments are usually illegal.
 
It should also be taken into account that an increasing number of other countries who are party to the OECD Convention do not distinguish between a facilitation payment  and a bribe. This is of particular concern for multinational corporations, which may be subject to a number of different anti-bribery laws, which may or may not recognise the legality of a facilitation payment.
 
Facilitation payments risk setting a permissive tone for unethical behaviour and corrupt practices by individuals and within businesses. This risk is increasingly recognised throughout the international community. In 2009, the OECD’s Working Group on Bribery in International Business Transactions called for a ban on facilitation payments.
 
In addition, recent summary review findings published by the United Nations (the “UN”) in relation to Australia’s compliance with the UN Convention Against Corruption, recommended that the Australian Federal Government continue to “encourage companies to prohibit or discourage the use of such payments”. Finally, the Asia Pacific Economic Cooperation (“APEC”) Code of Conduct for Business states that as facilitation payments are prohibited under the anti-bribery laws of most countries, businesses should eliminate
 
How businesses can operate effectively without facilitation payments
 
In order to effectively combat demands for bribes, including facilitation payments, appropriate procedures should be incorporated into an organisation’s anti-bribery compliance program. This will help to establish a “corporate culture” of compliance where the making of corrupt payments is not tolerated. 
 
1 Adopt a clear policy
 
Companies should state publicly that they do not pay bribes of any kind, including facilitation payments. A statement prohibiting such payments should be included in a company’s anti-bribery policy. It should be in writing and clearly communicated to all employees. A clear definition of facilitation payments should be provided.
 
In some circumstances though (which the UK Government also acknowledges), some payments may be considered necessary. For example, if they are solicited or extorted under duress, or if there is a medical or safety emergency where services are required urgently. The policy could therefore provide a formal exemption for these circumstances, but ensure that such payments are still accounted for appropriately and reported immediately to senior management, the compliance team and the legal department.
 
2 Risk assessment
 
The business should identify those countries in which it operates and in which facilitation payments are typically demanded. An inventory should be made of any previous payments by the business, as well as by any intermediaries acting on its behalf, to determine compliance with the laws and exposure to risk.
 
3 Training
 
Training on how to respond to demands for payments should be provided to relevant employees and where applicable, intermediaries. This is often most effectively incorporated as part of a company’s anti-bribery compliance training and may include negotiation skills, discussion of experiences and relevant problem solving scenarios and role plays.
 
4 Ongoing review
 
The reality is that the process of removing facilitation payments as a way of business will not happen overnight for Australian businesses. However, a commitment to implement a change in policy will be required. Any facilitation payments made, along with those successfully resisted, should be recorded and reported to management, the compliance team and the legal department. Periodic analysis and review of these incidents will enable the business to continue to develop and refine its policy with respect to facilitation payments. These findings should be included in regular reports to the Board on progress of the company’s anti-bribery program.

 

What you need to do
 
Relying on facilitation payments as a means of conducting business involves considerable risks; particularly if the business is unable to satisfy the criteria for a successful defence, but also in terms of violating local laws and the laws of other jurisdictions which prohibit facilitation payments. Over the long term, such payments are also likely to have a damaging influence on those businesses which use them and the communities in which they are deployed.
 
In light of these factors and indeed regardless of whether there is any change to the law, it is advisable that businesses develop procedures to remove facilitation payments. With sufficient top-level support, detailed planning and relevant training, companies can learn to operate effectively without such payments; ensuring that money need not “go before” for the ways of business to continue to “lie open”.
 
Action points:
 
  • As a matter of best practice, the facilitation payments defence should not be relied upon.
  • Businesses should work towards removing facilitation payments through the implementation of effective training and review procedures.

  

 
For further information, please contact:
 
Jane Ellis, Partner, Ashurst
jane.ellis@ashurst.com
 
Rob Smith, Ashurst
rob.smith@ashurst.com
 

 

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