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Clinton Blasts Facilitating Payments

All bribes — even grease payments to customs officials — hurt economic growth, Secretary of State Hillary Clinton told her audience at last week’s African Growth and Opportunity Forum in Zambia.

Inviting African leaders into “a very frank conversation about corruption,” she said even common payments take a real toll.

“Every bribe paid to a customs official represents a hidden tax on the cost of doing business and a drag on economic growth,” she said.

The FCPA contains an exception that allows bribes for “routine governmental action . . . which is ordinarily and commonly performed by a foreign official.” See 15 U.S.C. §§78dd-1 (b) and (f) (3) [Section 30A of the Securities & Exchange Act of 1934].

But claiming a bribe is really a facilitating payment has always been risky. Prosecutors say that anyone relying on the exception should be prepared to defend it — that is, the burden of proof is always on the one asserting the exception as a defense to an FCPA violation.

Last year, global logistics firm Panalpina and six of its oil-and-gas services customers paid $236.5 million to resolve FCPA-related charges based in part on payments to customs officials in Africa.

The new U.K. Bribery Act starts on July 1 and doesn’t allow facilitating payments.

Clinton said corruption costs Africa about $150 billion a year. “It scares away investment, stifles innovation, and slows trade,” she told the Africa forum last year.

“Every time an entrepreneur is forced to pay a bribe to start a business or ship goods across a border or open a new facility,” she said, “economic progress shudders. As President Obama has said, Africa does not need strong men; it needs strong institutions. We have seen all over the world how vital the rule of law is to maintaining a successful market, attracting investment, and promoting sustainable development.”

The FCPA allows grease payments for: obtaining permits, licenses, or other official documents to qualify a person to do business in a foreign country; processing governmental papers, such as visas and work orders; providing police protection, mail pick-up and delivery, or scheduling inspections associated with contract performance or related to transit of goods across country; providing phone service, power and water supply; loading and unloading cargo, or protecting perishable products or commodities from deterioration; or the catch-all “actions of a similar nature.” See § 78dd-2 (H)(4) et seq.

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1 Comment

  1. It's incorrect to imply that, from July 2011, facilitation payments will be prohibited under English law.

    The Bribery Act does not change the existing position on facilitation payments under English. Facilitation payments are currently considered a bribe and that does not change on July 1. There was the usual debate about excluding them (as there was in 2001 when the last significant amendment was made to the English law on bribery) but, in the end, no substantive change was made to the existing position.

    The only change is that this fact is becoming more widely known.

    If you are currently making facilitation payments, you might bear in mind the old legal maxim: Ignorantia juris non excusat*. The principal difference from July 1 will perhaps be that there is a greater prospect of the law being enforced, particularly if you fall into the category of a small to medium sized English company whom the SFO are said to see as ideal for an easy, early scalp.

    *"ignorance of the law excuses no one"

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