As previously reported, the growth in cross-border transactions has been significant in 2017 thus far. This, coupled with the growing importance of anti-corruption and anti-bribery legislation on an international level, serves as a reminder to companies that laws surrounding the governance of foreign bribery and corruption are still evolving.

The Corruption of Foreign Public Officials Act (CFPOA) is of particular importance to Canadian businesses, as it applies to all businesses (including not-for-profit organizations) formed under the laws of Canada or any of its provinces or territories. In 2013, the Canadian government amended the CFPOA in an attempt to address criticisms from international institutions and strengthen its stance against bribery and corruption. Included in these amendments was the commitment to phase out the “facilitation payment” exemption at a date that has yet to be determined.

What is a facilitation payment?

A facilitation payment is a payment made to a public official in order to expedite or secure the performance of routine non-discretionary government actions. While currently permissible, businesses should bear in mind that these payments will be in contravention of the CFPOA if the exemption is repealed. While some countries have already begun prohibiting facilitation payments (for example, the United Kingdom, China, India and Brazil), there is no uniform treatment of such payments. Facilitation payments are still permissible in the United States, and Canada has yet to take any clear steps towards instituting a ban.

The future of facilitation payments in Canada

While it remains uncertain if and when a prohibition on facilitation payments will materialize in Canada, bribery offences under the CFPOA carry high maximum penalties. These types of offences carry a maximum penalty of 14 years imprisonment, and there is no upper limit on the fines that can be charged under the CFPOA. In addition, unwanted press coverage of a bribery or corruption scandal can cause serious reputational damage. Facilitation payments may eventually carry such negative consequences, and while not mandatory under the CFPOA, it is important to consider compliance policies that align with this change. While your business may have policies in place that prohibit facilitation payments, this approach may not be shared by a business with which you seek an international partnership. Taking a proactive approach with respect to compliance programs can help a company reduce the risk of contravening both domestic and foreign anti-corruption legislation.

Stay informed on M&A developments and subscribe to our blog today.