In the build up to the release of the Ministry of Justice’s Guidance there was a great deal of speculation about the position the Government would take on facilitation payments. Would the Government take the same approach as under the US FCPA and make an exception for facilitation payments?
The Guidance was duly released and the Government confirmed that under the Bribery Act, as under the previous legislation, facilitation payments are bribes and are therefore illegal and subject to prosecution:
Facilitation payments, which are payments to induce officials to perform routine functions they are otherwise obligated to perform, are bribes. There was no exemption for such payments under the previous law nor is there under the Bribery Act.
As was the case under the old law, prosecutors will carefully consider all the facts and surrounding circumstances of cases which come to their attention to assess whether a payment amounts to a bribe and, if so, whether a prosecution is in the public interest.
You can continue to pay for legally required administrative fees or fast-track services. These are not facilitation payments.
(Quick Start Guide, page 7)
Small, one off payments are, on their own, unlikely to attract the attention of the SFO. While there is no de minimis limit in the Bribery Act and therefore no guarantees with respect to low value payments, the fact remains that small infractions will not justify the time and cost involved in prosecuting. However, for those organisations that routinely make facilitation payments (even though each payment might itself only be small), there is a risk that continuing to make such payments will result in prosecution under the Bribery Act.
The common plea in relation to facilitation payments made to foreign public officials: “that is how business is done there!”, will not be a defence under the Bribery Act unless it can be proven that the public official was either permitted or required by the written law applicable to that official to be influenced by the payment, which as you can imagine is likely to be an extremely rare circumstance.
The different approach taken between the US and the UK in relation to facilitation payments will put some organisations in a real dilemma: keep paying and run the risk of prosecution or refuse to pay and risk adverse consequences for the business. For some organisations the Bribery Act will make no difference to their operations in respect of facilitation payments as despite the allowance under the FCPA, they already prohibit employees (and third parties) from making such payments because it is too difficult to judge in many cases where the line is i.e. whether the action you are paying for you would get if you did not make the payment. If this is the case, what are you making the payment for in the first place?
Assessing the risk of prosecution
The joint prosecution guidance of the Director of the SFO and the Director of Public Prosecutions issued on 30 March 2011, suggests that the following factors would tend in favour of prosecution:
- Large or repeated payments, which are likely to attract a significant sentence;
- Facilitation payments that are planned for or accepted as part of a standard way of conducting business (which may indicate the offence was premeditated);
- Payments that indicate an element of active corruption of the official in the way the offence was committed;
- Where a commercial organisation has a clear and appropriate policy setting out procedures an individual should follow if facilitation payments are requested and these have not been correctly followed.
The following factors are likely to tend against prosecution:
- A single small payment likely to result in only a nominal penalty;
- The payment(s) came to light as a result of a genuinely proactive approach involving self-reporting and remedial action;
- Where a commercial organisation has a clear and appropriate policy setting out procedures an individual should follow if facilitation payments are requested and these have been correctly followed;
- The payer was in a vulnerable position arising from the circumstances in which the payment was demanded.
Make your organisation immune to payment requests
Aside from the risk of prosecution, it makes good business sense to cut out facilitation payments as they add a layer of additional cost to your operations, which has to be absorbed either by you or your customers.
Here are some ideas for your consideration:
- Plan ahead and amend your operations to ensure you can absorb expected delays without having to make payments.
- Know the laws of the jurisdiction you are in and use your knowledge to refuse the request for payment.
- Use industry groups to apply pressure at senior levels of government.
- Give employees and third parties (such as agents and contractors) clear guidance on how to recognise improper requests for payments and how to resist such requests.
It remains to be seen how active the UK prosecutors will be at prosecuting organisations that make facilitation payments. While it is tempting for some organisations to carry on making payments as usual, there are other risks in addition to prosecution and inflated business costs that are worth considering. Given the exposure to prosecution through associated persons, organisations with whom you are associated may force you to comply with their anti-corruption policies and procedures (including a prohibition on facilitation payments) in order to do business with you.
So, to pay or not to pay: how will your organisation answer the question?