Facilitation Payments Declared Illegal Under Canadian International Corruption Law

Written By Milos Barutciski, Matthew Kronby and Jessica B. Horwitz

The government of Canada announced on October 30 that the exception allowing for facilitation payments under the Corruption of Foreign Public Officials Act (CFPOA) will be eliminated effective October 31, 2017.

The CFPOA was amended in 2013 to strengthen Canada’s international corruption law. Among other things, the 2013 amendments introduced nationality jurisdiction, thus making Canadian companies and citizens liable for corruption anywhere in the world, increased penalties for bribery from a maximum of 5 years imprisonment to 14 years and created a new books and records offence. These and other amendments came into force on June 19, 2013.

The amendments also repealed the exception for facilitation payments in section 3(4) of the CFPOA. However, the amending legislation provided that the repeal of facilitation payments would only come into force on a date to be determined by the federal cabinet to give companies sufficient time to adapt their practices and compliance policies to the amendment. That date has now been set as October 31, 2017. As of today, facilitation payments are no longer legal under Canadian law.

Facilitation payments are payments to a foreign official, generally small, intended to expedite or secure the performance by the official of an act of a routine nature that is part of the official’s duties or functions. Section 3(4) provides a non-exhaustive list of examples that include:

• the issuance of a permit or licence required to qualify a person to do business;
• the processing of official documents such as visas or work permits;
• the provision of services normally offered to the public, such as mail, telecommunications, power or water supply; and
• the provision of other services normally provided, such as police protection, loading or unloading cargo, scheduling inspections and other similar functions.

While previously condoned by Canadian international corruption law, and also condoned by the U.S Foreign Corrupt Practices Act, facilitation payments are nonetheless bribes and may expose payors to penalties in the countries where they occur.

Companies with robust compliance programs have for many years prohibited facilitation payments for the simple reason that they are inconsistent with a corporate culture that prohibits corruption. The exception implicitly invited executives and employees to make technical judgments about whether a payment is or is not illegal under Canadian law, regardless of whether it is illegal under the law of the country where the payment is made. This potentially breeds cynicism about a company’s commitment to preventing corruption and risks errors in judgment leading to potential criminal liability. Companies that are prepared to make facilitation payments also implicitly advertise that “we pay” and thereby invite further bribe solicitation by corrupt officials beyond the narrow space previously allowed by the exception.

Canadian companies would be well-served to review their compliance policies and practices to ensure that they are not caught off-guard by the elimination of the exception for facilitation payments.

Download PDF