As of October 31, 2017, “Facilitation Payments” are no longer a permissible category of payment under the Corruption of Foreign Public Officials Act, SC 1998, c 34 (the “CFOPA”). The removal of the exemption from the CFOPA does not come as a surprise, as the platform was laid in 2013 by Bill S-14: An Act to amend the Corruption of Foreign Public Officials Act, which also made several other amendments to the CFOPA. However, the specific provision of Bill S-14 effecting removal of the facilitation payments exception required an Order in Council to take effect, which some four years later, has finally arrived.
Facilitation payments are essentially small payments made to a public official to expedite or secure the performance of routine, non-discretionary actions, which fall within the relevant official’s duties. The treatment of such payments under applicable anti-corruption laws differs from jurisdiction to jurisdiction, and the topic in not without controversy. The OECD has specifically noted the “corrosive effect” of facilitation payments and has encouraged their prohibition1, while the US has so far chosen to maintain the exemption for facilitation payments within the US Foreign Corrupt Practices Act (the “FCPA”). Conversely, the UK Bribery Act contains no exemption for facilitation payments. Now, Canada has made its position clear: facilitation payments are not permissible under its regime.
While the change is certainly significant from a legal perspective, its practical impact may be less dramatic as many companies already prohibited their employees or agents from paying any facilitation payments, notwithstanding the existence of exceptions under the US FCPA and, until now, the Canadian CFPOA. This essentially voluntary stance was driven largely by the astute recognition that the line between a facilitation payment and a bribe is not always a bright one, and many facilitation payments would in any event be illegal under the local law of the jurisdiction in which they are paid. Accordingly, many companies have recognized that permitting their employees and agents to make facilitation payments gives rise to a significant practical risk, and creates a carve out from policies and procedures that is in reality difficult to police.
However, there will be other companies captured by the CFPOA who, up to now, have allowed employees or agents to make facilitation payments, or who have remained silent on the issue in their policies and procedures. These companies would be well-advised to amend and enhance their anti-corruption policies and procedures as a matter of urgency, and to swiftly communicate the change to employees and agents through appropriate training. The risks of failing to act are severe: contravention of the CFOPA is an indictable offence in Canada and can lead to potentially vast corporate fines, as well as the imprisonment of complicit executives and employees for up to 14 years.