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Friday
Dec272013

The case for harmonized standards on facilitation payments

Reports that the UK Government is considering reviewing the Bribery Act’s approach to facilitation payments have been the subject of much controversy in the past few months. Beyond the geographical confines of the UK, the project should trigger a bigger discussion on the lack of harmonized standards on facilitation payments among OECD countries.

The OECD Anti-Bribery Convention provides that facilitation payments made to foreign officials do not constitute bribery under the Convention. However, the majority of member countries applies higher standards and prohibits these payments.

The disparity of approaches is comprehensible. Despite a general consensus on the finality of facilitation payments that induce the performance of a routine government action by a government employee, the nature of the advantage granted in exchange for that payment is more ambiguous. For example, a license obtained by a company that submitted all legally required documents and, in order to accelerate the process, paid a commission to the government agent in charge, can be viewed from different angles.

Arguably, the advantage is due to the company because all required documents in support of the license application have been submitted. Yet, from a different perspective, the expedited award of the license can be seen as an unfair advantage over competitors who decided not to pay a commission.

Although both approaches are defendable, it is clear that companies that do not risk facing a foreign bribery charge in their home country when they make facilitation payments have a clear advantage over the ones that do. Therefore, harmonizing standards on facilitation payments at the global level seems indispensable to further the purpose of the OECD Convention and leveling the playing field among companies competing abroad. Whether those payments should be allowed or prohibited is another debate, which lies on policy considerations.

Here again, there are valid arguments on both sides. Efforts by OECD countries to harmonize their legal framework on foreign bribery were originally guided by pragmatic competition concerns and the will to support national companies doing business abroad. Following that approach, allowing facilitation payments would seem coherent, as many believe that in the short term they contribute to reducing red tape and transaction costs.  However, a recent publication by Transparency International on the effects of facilitation payments on governance, citizens and private companies shows that policy makers can no longer ignore the long-term effects of these payments.

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Elisabeth Danon is a legal analyst at the World Bank, where she specializes in public procurement. She holds an LL.M. in International Business and Economic Law from Georgetown University Law Center and a law degree from Université Paris X Nanterre (France). She is admitted to practice law in the state of New York. Prior to joining the World Bank, Elisabeth worked at the Anti-corruption Division of the OECD. She can be contacted here.