The Disappearing Exception For Facilitating Payments: Agencies Take Narrow View Of This FCPA Defense

The Department of Justice and the Securities and Exchange Commission jointly issued a 120-page "resource guide" to the Foreign Corrupt Practices Act (FCPA) in November 2012 (the Guide). Although the Guide breaks little new ground, it confirms the DOJ's and the SEC's narrow view of several key defenses under the FCPA. This article examines the evolution of the "facilitating payments" (also known as "grease payments") exception, the Guide's treatment of that exception, and the extent to which such payments remain permissible under the FCPA.

Origin of the Exception

Facilitating payments are typically small payments made to foreign government officials to expedite or secure a non-discretionary routine government action. The original version of the FCPA in 1977 created an exception for facilitating payments by excluding individuals "whose duties are essentially ministerial or clerical" from the statutory definition of "foreign official":

The language of the bill is deliberately cast in terms which differentiate between [prohibited] payments and facilitating payments, sometimes called "grease payments." In using the word "corruptly," the committee intends to distinguish between payments which cause an official to exercise other than his free will in acting or deciding or influencing an act or decision and those payments which merely move a particular matter toward an eventual act or decision or which do not involve any discretionary action. In defining "foreign official," the committee emphasizes this crucial distinction by excluding from the definition of "foreign official" government employees whose duties are essentially ministerial or clerical.1

Notwithstanding that exception, Congress expressed its general disdain of such payments: "While payments made to assure or to speed the proper performance of a foreign official's duties may be reprehensible in the United States, the committee recognizes that they are not necessarily so viewed elsewhere in the world and that it is not feasible for the United States to attempt unilaterally to eradicate all such payments."2

Congress subsequently amended the FCPA in 1988, creating, among other things, an express exception for facilitating payments meant to secure the performance of non-discretionary "routine government action," defining the exception in terms of the "purpose of the payment," rather than the "duties of the recipient."3 The FCPA defines "routine government action" to include such things as, 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; and other similar ministerial or clerical acts. However, "routine government action" does not include "any decision by a foreign official whether, or on what terms, to award new business to or to continue business with a particular party."4

Chipping Away at the Exception

The DOJ and the SEC have taken a dim view of the facilitating payments exception. Despite the fact that the FCPA explicitly permits facilitating payments, the DOJ and the SEC have construed the exception so narrowly...