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Facilitating Payments (De)mystified (Conclusion)

In two prior posts we observed an awkward equivocation on the question of facilitation payments, both within the OECD generally and among the convention signatories. For a discussion of the OECD Convention’s strangely evasive verbiage, see here; for variations among individual signatories, see here.  

We then wondered whether the organization’s views, or the signatories’, seem to have evolved in the 15 years since the convention’s adoption. And my answer, for both, is this: kind of, a little bit, maybe.

With thanks again to my excellent research assistant at the University of Richmond School of Law, Tim Archer, as well as one reader’s helpful comment, we discovered the following. In 2009, the OECD published its “Recommendation for Further Combating Bribery of Foreign Public Officials in International Business Transactions,” available in pdf here. It provides, in relevant part, that given “the corrosive effect of small facilitation payments,” parties should “undertake to periodically review their policies” and “encourage companies to prohibit or discourage the use of small facilitation payments.” It further “urges . . . all countries to raise awareness of their public officials on their domestic bribery and solicitation laws with a view to stopping the solicitation and acceptance of small facilitation payments.”  This language is slightly stronger than in the 1997 convention (link to Part I), but not by much.  The 2009 report discourages the payments with perhaps more force, but stops far short of recommending criminalization.

We observe a similar trend in signatory countries’ implementing legislation. Thirty-four countries originally signed and implemented the convention. Of those, 10 adopted a facilitating payments exception, and 24 rejected it. In other words, about 30% adopted, and 70% rejected. Since 1997, five additional countries have joined the convention. Of those, one has adopted the exception and four have rejected it. That’s 20% for, and 80% against. Sure, that’s a difference of 10%, but in a data set of five, one ought not make too much of it.

Among individual signatories, the breakdown is as follows.

Original signatories adopting the exception: Australia, Austria, Canada, Greece, Korea, New Zealand, Slovak Republic, Spain, Switzerland, United States. 

Original signatories declining the exception: Argentina, Belgium, Brazil, Bulgaria, Chile, Czech Republic, Denmark, Finland, France, Germany, Hungary, Iceland, Ireland, Italy, Japan, Luxembourg, Mexico, Netherlands, Norway, Poland, Portugal, Sweden, Turkey, United Kingdom. 

Subsequent signatories adopting the exception: South Africa. 

Subsequent signatories declining the exception: Estonia, Israel, Russia, Slovenia.

So is global opinion shifting on the merits of a facilitating payments exception? Prior to doing this research, I would have strongly answered in the affirmative. Now, I’m not so sure.

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Andy Spalding is the senior editor of the FCPA Blog. A former Fulbright Senior Research Scholar in Asia, he’s Assistant Professor at the University of Richmond School of Law.

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1 Comment

  1. Thanks for the thought-provoking research, which begs the question of how many OECD signatories actually live up to the new 2009 Recommendation to 'discourage or prohibit' facilitation payments. Leaving rhetorical discouragement to one side and looking for real painful discouragement, we find one signatory that clearly exempts facilitation payments, the US, imposing multi-million dollar fines for poorly executed facilitation payments under the books & records and internal control provisions of the FCPA (e.g. Lucent, Con-Way, Veraz Networks, Helmerich & Payne, etc). What does this mean?

    Maybe it means we should stop worrying about the formal legal status of facilitation payments and turn back to the 2009 Recommendation says about their practical dangers – "recognising that such payments are generally illegal in the countries where they are made, and must in all cases be accurately accounted for in such companies’ books and financial records". Doesn't this suggest that the real trend is of facilitation payments being edged out by increasing compliance standards rather than by criminalisation?


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