Canadian Government’s repeal of the Facilitation Payment defence
On 31st October 2017, the Canadian Government repealed the Facilitation Payment defence in its continuing efforts to strengthen the Corruption of Foreign Public Officials Act (“CFPOA”), its foreign corrupt practices regime.
Canada had previously introduced legislation in June 2013 prohibiting the use of Facilitation Payments, and although the legislation received Royal Assent at the time, the implementing regulations were not put in place in order to allow companies time to adjust their practices.
Under the previous Canadian legislation, Facilitation Payments were defined as small payments which could be made to public officials to ensure the timely delivery of routine government services to which there was a legal entitlement. Prior to the recent change in the Canadian legislation, a Facilitation Payment crossed the line and became an act of bribery when the underlying intent of such a payment was to encourage someone to break the law to your advantage, or if it was with regard to the awarding or the retention of business. Now, Facilitation Payments are illegal under the Canadian legislation.
Defences still available however include the following:
bona fide payments to officials for valid promotional expenses (hospitality, meals, marketing),
expenses related to the execution or performance of a contract with a foreign state (contractually specified service provision), and
payments that are legal in the jurisdiction in which they are made (per diems that are gazetted or specified in local regulations).
The changes to the Canadian legislation bring it into line with parallel legislation in the United Kingdom, however the Facilitation Payment defence still applies in a number of countries including the USA and Australia.
The implications* for companies with connections with Canada include the following:
Companies will need to revise their anti-bribery and corruption compliance policies to ensure it is clear that the use of Facilitation payments is now illegal.
Training programs will need to be revised to ensure the impact of the legislative changes is made clear down through the ranks of companies to the “coal face”.
Canadian companies that are dual-listed or conduct business in jurisdictions which still allow the use of facilitation payments will need to adhere to the more-strict requirements of the Canadian legislation.
Canadian companies engaging consultants, contractors, agents and intermediaries will need to ensure that there is strict adherence to the revised policies and operating guidance in use by the companies.
Directors need to implement measures that are in proportion to the size of their company, the stage of its corporate development, and the nature and complexity of the risks likely to be encountered, as well as ongoing monitoring and review.