Which means the application of the law isn’t necessarily black and white. And that’s why, more than 30 years after the FCPA’s enactment, people still want to know — When is it OK to pay a foreign official? Let’s take a look.
First, it’s OK to pay under the three exclusions written into the FCPA:
Local Law. Payments that are otherwise prohibited are permitted if the “payment, gift, offer, or promise of anything of value that was made, was lawful under the written laws and regulations of the foreign official’s” country. 15 U.S.C. §§ 78dd-1(c)(1), 78dd-2(c)(1) and 78dd-3(c)(1). The local-law defense was added to the FCPA in 1988. But it only works if the payment is legal under the written laws of the country in question. The absence of a law against the payment isn’t enough; there has to be a written law allowing the payment. Really? That’s right. And that’s why this affirmative defense has very low mileage.
Promotional Expenses. The FCPA allows payments to foreign officials for expenses related directly to “the promotion, demonstration, or explanation of products or services” that are “reasonable and bona fide.” 15 U.S.C. §§ 78dd-1(c)(2)(A) and 78dd-2(c)(2)(A). This defense, however, is notoriously hard to use (and easy to abuse), mainly because no one is quite sure what reasonable and bona fide really means. More of the recent DOJ Releases deal with this topic than any other.
Grease Payments. It’s OK to make facilitating payments for “routine governmental action . . . which is ordinarily and commonly performed by a foreign official.” 15 U.S.C. §§78dd-1 (b) and (f) (3). The examples in the law show how narrow it really is — obtaining permits and licenses, processing visas, getting police protection, mail and phone service, scheduling inspections, connecting power and water, loading and unloading cargo, and protecting perishable goods. This exception is a lot less useful than many people hope.
Something more? Are there any other ways to make legal payments to foreign officials? There are — but they’re always loaded with risk. Here’s why:
Once again, the FCPA doesn’t ban all payments to foreign officials. What it bans (subject to the exclusions above) are corrupt payments made in order to obtain or retain business for or with, or to direct business to, any person. See 15 U.S.C. § 78dd-2(a). That means some payments that don’t fit within the exclusions might still be OK. But what are they?
Since enactment of the FCPA, companies and their lawyers have spent a lot of time trying to figure that out. Most of the early Justice Department FCPA Releases and many later ones tell the story of companies struggling to understand which payments to foreign officials might be permitted. For example,
- The first Release, No. 80-01 from 1980, allowed an American law firm to provide about $10,000 in annual support to two adopted children of a government official in a country where the firm wanted to do business.
- The DOJ’s next Release, No. 80-02, allowed Castle & Cooke to continue to employ — and pay — a member of the local legislature.
- Another Release from 1980, No. 80-04, allowed Lockheed to retain Suliman Olayan as an agent, even though he was also a director of the state-owned airline, Saudia.
Releases that followed on the same topic included 84-01, 86-01,94-01 and 95-02. All of them, by the way, set out strict conditions for the payments — usually limiting very specifically the scope of the relationship with the foreign official.
Even with all that precedent, proposed payments to foreign officials under any circumstances are still enormously risky. The burden to show that a payment isn’t corrupt or made with a quid pro quo in mind weighs a ton. No one should ever feel cocky in concluding that a payment to a foreign official is OK under the FCPA. The words of the law and the way the DOJ and the courts have interpreted it give some guidance — but very little comfort.