Canada establishes ban on payments for “facilitation” to foreign officials

Canada has amended the Corruption of Foreign Public Officials Act to make payments for “facilitation payments” illegal.

The Act, which implements the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, makes it an offense to give, offer, or agree to give or offer credit, gratuity, advantage or benefit directly or indirectly to any foreign official or person acting in his interest in order to obtain or retain an advantage in the conduct of business. It carries a penalty of up to 14 years in prison.

Previously, since 2013, there was an exception to this general prohibition – payments for “facilitating formalities” were not a crime. Such payments, according to the law, are used for the purpose of expediting or securing the performance by a foreign official of certain acts within their official duties, including:

The issuance of permits, licenses, and other documents certifying a person’s (organization’s) right to do business;
processing of official documents such as visas and work permits;
Providing services normally provided to the public, such as mail collection and delivery, telecommunications services, electricity, and water
providing services required on an as-needed basis, such as police protection, loading and unloading cargo, protecting perishable products or goods from deterioration, or scheduling inspections related to the execution of contracts or the transit of goods.

Now, according to an official statement from Foreign Affairs Canada, there are no longer exceptions for grease payments. The changes went into effect on October 31, 2017, but the October 25 version of the law is posted on the official legislative portal, so the changes are not currently reflected in the published version.

The criminalization of payments to foreign officials for “facilitating formalities” itself is consistent with the OECD recommendations, as well as with the provisions of the current UK Bribery Act. However, as noted by experts, the amendments may lead to inconsistencies with the laws of other countries that prohibit unfair practices when dealing with foreign officials. For example, in the USA the Foreign Corrupt Practices Act (FCPA) still provides an exception for payments for “simplification of formalities”.

At the same time, it appears that the innovations of Canadian legislation will lead to increased government oversight of actions taken by Canadian companies to minimize corruption risks in their operations in foreign markets. Given the possibility of Deferred Prosecution Agreements (DPAs) being discussed in Canada, the role of organizations in preventing corruption offences and developing and implementing compliance programs may increase significantly.