NOT SO INNOCENT ABROAD: ELIMINATING THE FACILITATION PAYMENTS EXCEPTION IN AUSTRALIA AND THE UNITED STATES' FOREIGN BRIBERY PROVISIONS.

• Author: O'neil, Daniel

I INTRODUCTION

In Tegucigalpa, an American fruit firm strikes a deal with the President of Honduras to transfer millions of dollars to certain Swiss bank accounts in return for favourable tax treatment for bananas exported to the United States. (2) Meanwhile, in Port Moresby, an Australian businessman passes an envelope with PGK100 to a customs officer who has made it clear that he will detain a shipment of coffee beans on spurious grounds until he receives an off-the-books 'sweetener'. In no jurisdiction on earth would the Honduran payment be regarded today as anything other than grotesquely and unambiguously corrupt, and those involved would be prosecuted accordingly. The legal consequences of the Papua New Guinean payment--a purely 'facilitative' transfer of funds made to secure an ordinary administrative service legitimately due to the unlucky Australian--are, however, rather less clear.

In the teeth of 'a growing distaste for facilitation payments... internationally', (3) and particularly since the passage of the Bribery Act 2010 (UK), (4) Australia and the United States have retained the rather dubious distinction of being two of the only jurisdictions in the world (along with New Zealand) (5) that permit 'facilitation payments' of the type seen in the Port Moresby scenario above. It is the contention of this article that the retention in foreign bribery laws of exceptions for such payments is, firstly, morally indefensible (in that facilitation payments wreak the same social harm as so-called 'grand' corruption), corrosive to commerce (in that such payments degrade the socio-political ecosystems in which foreign firms do business and, moreover, serve to initiate cycles of extortion that simply generate demands for payment), and legally incoherent (in that the purported exception often in fact provides no protection at all: even if the exception is made out, firms will often find that making such payments renders them liable to prosecution under other statutes). Accordingly, it is argued that facilitation payment exceptions ('FPEs') ought to be abolished, a legislative move that would be in the ultimate interest of firms operating in markets where such payments are frequently solicited. However, in reaching this conclusion, other possible reforms of US-Australian foreign bribery laws--specific dollar thresholds, an expanded defence of duress, an 'opinion procedure' and a private right of action--are also considered.

II THE LEGISLATION

1. Bribery at Home and Abroad

   Any form of bribery of public officials is an offence in every Australian jurisdiction, (6) and across the United States such bribery is a federal (7) and state (8) offence. However, in certain circumstances, Australian and United States citizens are permitted to make payments overseas that would be unambiguously illegal if made at home.

2. Australia

   When foreign bribery offences were introduced into the Criminal Code in 1999, the Commonwealth Attorney-General presented the relevant amendments as Australia's implementation of its commitments under the OECD Convention on Combating Bribery of Foreign Officials!' and, further, as legislation founded on 'good business sense, as much as morality' (10)--legislation that would 'ensure that [commercial] decisions are made on the basis of the merits of the product or service' rather than favour curried by corrupt payments. (11) The prohibition on payments to foreign officials, however, was not absolute: an FPE was built into the statute. Under the Criminal Code Act 1995 (Cth), a person is not liable for the offence of '[b]ribing a foreign public official' (12) provided that:

   (a) the value of the benefit was of a minor nature; and

   (b) the person's conduct was engaged in for the sole or dominant purpose of expediting or securing the performance of a routine government action of a minor nature; and

   (c) as soon as practicable after the conduct occurred, the person made a record of the conduct. (13)

   The practical use of this section is hobbled by some inelegant legislative drafting. 'Minor' (in reference to both the 'benefit' and the 'routine government action' in question), for instance, is undefined,' (4) a failure of legislative precision that generates serious uncertainty for businesses operating abroad. For instance, a AU$10 000 payment may seem, prima facie, to constitute a great deal of money But what of a AU$10 000 payment made in the course of deal worth hundreds of millions of dollars? (1) '' A business could well argue that this represents a trifling--that is to say, 'minor'--sum, (16) and indeed the Australian Wheat Board cast its $AU3 million payments to the Iraqi government in precisely these terms. (17) Moreover, an essential element for making out the FPE is that the impugned payment must not have been made pursuant to 'a decision about... terms of new business or existing business'. (18) On a narrow reading of this element, the Port Moresby payment described earlier was simply made to secure a permit legitimately due to our Australian friend. However, by paying the bribe and having the coffee beans released in better sellable condition than would be the case if no payment had been made, the bribe has given the business an edge over its non-corrupt competitors and thusly advantaged it in retaining business. (19) Indeed, excepting genuine threats to life and limb, such payments are typically made for fear of adverse commercial consequences if, say, coffee beans are detained and begin to rot. The payment is, therefore, very much made in connection with a decision bearing on the 'terms of... business'. (20) For these reasons, OECD investigators found that Australia's retention of the exception generates 'general confusion' amongst Australian businesses, who seem broadly uncertain about precisely what sort of payments will trigger the exception. (21)

3. The United States

   The Foreign Corrupt Practices Act (22) ('FCPA') was enacted in 1977 as a congressional response to a perception that the standard of ethical conduct in public life in the United States had degenerated to an unacceptable degree, a process of moral decay exemplified in contemporary politics by the antics of the Nixon administration and in contemporary business by revelations that Lockheed had spent years paying millions of dollars in bribes to ministers and royals around the world. (23) For the first time, it became a criminal offence to offer material inducements to foreign public officials for the purpose of 'securing any improper advantage', (24) albeit subject to a narrow exception for 'grease' payments to persons of 'ministerial' or 'clerical' status abroad. (25) However, in deference to purported commercial reality, the FCPA was amended in 1988 to incorporate a broader exception for payments made to secure or expedite the performance of a 'routine governmental action' (26)--what one contemporary commentator described as among a 'few fatal lines that killed the [FCPA]' insofar as it greatly expanded the range of permissible payments. (27) Further, the FCPA also incorporates a 'books and records' provision: failure to file adequate accounts of payments--even payments permitted under the FCPA--with the Securities and Exchange Commission ('SEC') constitutes an offence. (28)

   Ill MORALLY AND POLITICALLY INDEFENSIBLE

1. The Evil of Bribery

   We have surveyed the statutory landscape: this article now turns to whether the retention of the FPE can be justified in principle. Much has been (rightly) said about the deleterious social consequences of corruption, and readers will search in vain for the ethical system that does not condemn it in the strongest possible terms. (29) 'Bribery', the Privy Council have thundered, 'is an evil practice which threatens the foundations of any civilised society'. (30) International organisations have been no less scathing: for the World Bank, bribery 'erode[s] the social contract between citizens and the state'; (31) for the Organization of American States, it is a blight on a 'society's moral fiber'. (32)

   A distinction is, however, often drawn between 'grand' and 'petty' corruption. (33) So-called grand corruption, corruption on the model of the Honduran payment in this essay's first paragraph, is the stuff of headlines. But, as a journalist in Bangladesh--one of the most corrupt nations on earth--lamented, '[p]etty corruption does not make wave[s]'. (34) For every Mobutu (who annually appropriated a fifth of Zaire's budget for his personal use), (35) there are legions of 'small-time imitators', (36) and it is in fact the so-called 'petty' corruption of these imitators 'that directly affects the texture of daily life' in many countries and so generates the most frustration amongst ordinary people there. (37) Moreover, there often exists a perception that foreign businesses directly contribute to this blight: for instance, the Chief Justice of Karnataka fulminated that, in India, 'corruption is generally related to the inflow of foreign capital investment'. (38) Myrdal observed that whenever a political order has been violently overthrown, 'a major and often decisive cause has been the prevalence of official misconduct'. (39) Indeed, 'corruption has become the dominant discourse of complaint in the post-colonial world', (40) and much of the political appeal of revolutionary Islamist organisations stems from such groups' presentation (however hypocritical) of themselves as a politically or theologically pure 'alternative' to the corruption of the status quo. (41) As one Afghan put it, '[i]f you have a problem the Taliban solves it... [i]n the government offices there is only corruption and bribery', (42) and Osama bin Laden himself identified the struggle against governments 'characterised by... greed and misappropriation of wealth' as one of al-Qaeda's chief raisons d'etre. (43)

   An analogy from the criminal law may assist in exploding the petty-grand distinction: though the law recognises a...