The facilitation payment defence
A facilitation payment is a minor payment made to a foreign public
official for the purpose of speeding up minor routine government action. Such a payment is legislatively recognised in Australia as a complete defence
to the core foreign bribery offence in the Criminal Code Act 1995 (Criminal
Code). However, it can be difficult to differentiate between a facilitation
payment and a bribe.
The 1997 Organisation for Economic Co-operation and Development (OECD)
Convention on Combating Bribery of Foreign Public Officials in International
Business Transactions (OECD Convention) permits facilitation payments as an
exception to member states' anti-bribery legislative frameworks. Though more
recently the OECD's position has shifted, and since 2009 it has consistently recommended
that states review the facilitation payment defence and encourage private
enterprises to prohibit, or discourage, facilitation payments in internal
Many submissions to this inquiry noted that the defence is
'highly contested' and has been subjected to 'wide criticism' from a range of
sectors and bodies. This chapter explores the facilitation payment defence in Australia, scrutinises
its prevalence internationally, and examines arguments to retain or abolish the
defence within Australia's anti-bribery legislative framework.
Current position in Australia
Under section 70.2 of the Criminal Code, foreign bribery is
punishable by up to 10 years imprisonment and a fine of up to 10,000 penalty
units ($2.1 million). However, under section 70.4, a person is not guilty if they can prove that the
bribe was a 'facilitation payment'.
A facilitation payment for the purposes of section 70.4 is a
payment of minor value, provided in return for a routine government action.
Section 70.4 is a complete defence to a charge of foreign bribery. It provides
- A person is not guilty
of an offence against section 70.2 if:
- the value of the
benefit was of a minor nature; and
- 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
- as soon as
practicable after the conduct occurred, the person made a record of the conduct
that complies with subsection (3); and
- any of the following
- the person has retained that record at all relevant times;
- that record has been lost or destroyed because of the actions of another
person over whom the first‑mentioned person had no control, or because of
a non‑human act or event over which the first‑mentioned person had
no control, and the first‑mentioned person could not reasonably be
expected to have guarded against the bringing about of that loss or that
- a prosecution for the offence is instituted more than 7 years after the
Subsection (2) provides further guidance on the meaning of
'routine government action'. It explains that 'routine government action' is an
action of a foreign public official that:
- is ordinarily
and commonly performed by the official; and
- is covered by any of
the following subparagraphs:
- granting a permit, licence or other official document that qualifies a
person to do business in a foreign country or in a part of a foreign country;
- processing government papers such as a visa or work permit;
- providing police protection or mail collection or delivery;
- scheduling inspections associated with contract performance or related
to the transit of goods;
- providing telecommunications services, power or water;
- loading and unloading cargo;
perishable products, or commodities, from deterioration;
- any other
action of a similar nature; and
- does not involve
a decision about:
- whether to award new business; or
- whether to continue existing business with a particular person; or
- the terms of new business or existing business; and
- does not involve
encouraging a decision about:
- whether to award new business; or
- whether to continue existing business with a particular person; or
- the terms of new business or existing business.
Notwithstanding this statutory definition, many submissions to
this inquiry indicated that businesses and regulators struggle to determine
whether a particular payment does satisfy, or would satisfy, the requirements
of section 70.4. In particular, King & Wood Mallesons contended that it 'is
one of the more conceptually complex [issues] arising from Australia's
anti-bribery legislation'. Further, as the defence has never been raised before an Australian court, the
absence of judicial commentary has heightened the complexity of interpreting
International move towards abolishing the facilitation payment defence
In examining whether Australia should abolish the facilitation
payment defence, it is useful to look at other comparative countries—many of
whom, in recent years, have eliminated the defence entirely. Indeed, Australian
companies operating internationally or with subsidiaries domiciled in overseas
jurisdictions are also increasingly acting on their own by choosing to prohibit
such payments in their internal company policies.
Diminishing acceptance by
As stated above, the OECD Convention does not prevent member
countries from allowing a defence for facilitation payments. The Commentary on the
Convention which was issued in November 1997 notes that 'small
"facilitation" payments do not constitute payments "made to
obtain or retain business or other improper advantage"' and are therefore
not within the meaning of article 1's prohibition on bribery. The Commentary
notes further that while OECD member states 'can and should' address the
'corrosive phenomenon' of facilitation payments, 'criminalisation...does not seem
a practical or effective...action'.
However some 12 years later, in 2009, the OECD Council adopted another
set of recommendations for further combating bribery of foreign public
officials in international business transactions. These included a recommendation
to encourage the private sector and their public officials to discourage the
use and acceptance of facilitation payments, with the aim of eliminating it
entirely. The relevant section of the recommendation of the OECD reads as
RECOMMENDS, in view of the corrosive effect of small
facilitation payments, particularly on sustainable economic development and the
rule of law that Member countries should:
undertake to periodically review their policies and approach
on small facilitation payments in order to effectively combat the phenomenon;
encourage companies to prohibit or discourage the use of
small facilitation payments in internal company controls, ethics and compliance
programmes or measures, recognising that such payments are generally illegal in
the countries where they are made, and must in all cases be accurately accounted
for in such companies' books and financial records....
URGES all countries to raise awareness of their public
officials on their domestic bribery and solicitation laws with a view to
stopping the solicitation and acceptance of small facilitation payments. 
Since 2009, the OECD has continued to focus on alternative
mechanisms other than criminalisation. For example, in its update to the Guidelines
for Multinational Enterprises issued in 2011, the Council urges businesses to
'prohibit or discourage' the use of small facilitation payments 'in internal
company controls, ethics and compliance programmes or measures'. However, recognising
that such facilitation payments will continue to be made, the Guidelines note
that where and when such payments are made, businesses should 'accurately
record these in books and financial records'.
The Asia Pacific Economic Cooperation (APEC) Code of Conduct for
Business follows the OECD approach. Rather than recommending states criminalise
facilitation payments, the Code urges businesses to eliminate them. Although the OECD and APEC do not require the criminalisation of facilitation
payments, other international instruments and organisations do have stronger
positions on facilitation payments. For example, the United Nations Convention
against Corruption (UNCAC), a multilateral treaty Australia has ratified,
prohibits facilitation payments. Australia's obligations under UNCAC are discussed in detail in Chapter 2.
Evidence presented to the committee during the course of the
inquiry drew attention to the many countries, including OECD member states, that
have, or are making moves to, eliminate the facilitation payments defence.
For example, facilitation payments are prohibited in the United
Kingdom (UK). The Bribery Act 2011 (UK) does not allow the use of facilitation
payments, and the 'defence has never been recognised as a legitimate excuse in
anti-corruption or bribery legislation'. The UK Serious Fraud Office is unequivocal; having stated that such a payment
'is a type of bribe and should be seen as such'. Associate Professor Cindy Davids of Deakin University noted that similar
prohibitions are also in force
in France and Japan.
Additionally, Canada 'moved to abolish its facilitation payments
defence', through the Fighting Corruption Act 2013 (Bill S-14). Interestingly, Bill S-14 provided for the provision eliminating the exception
for facilitation payments to come into force on a date to be fixed by an order
of the federal Cabinet. The delayed implementation of this aspect of Bill S-14
was intended to allow businesses adequate time to amend their practices and
procedures, and as of 31 October 2017, facilitation payments are no
longer permitted under Canadian law, regardless of whether the payment occurred
in Canada or abroad.
Conversely, the United States (US) and New Zealand (NZ) currently
retain the facilitation payment defence, albeit narrow in scope.
In the US, the Foreign Corrupt Practices Act of 1977 (FCPA)
permits payment to foreign officials 'to expedite or to secure the performance
of routine government action'. The FCPA provides the same examples of 'routine government action' as under subection
70.4(2) of the Criminal Code—that is, 'an action which is ordinarily and
commonly performed by a foreign official', including:
- obtaining permits, licenses, or other official documents to qualify a
person to do business in a foreign country;
- processing governmental papers, such as visas and work orders;
- providing police protection, mail pick-up and delivery, or scheduling
inspections associated with contract performance or inspections related to
transit of goods across country;
- providing phone service, power and water supply, loading and unloading
cargo, or protecting perishable products or commodities from deterioration; or
- actions of a similar nature.
Nevertheless, the International Bar Association Anti-Corruption
Committee, (IBAACC) explained to the committee that in the US the facilitation
payments defence has 'been increasingly criticised', and, as Simon Bronitt, Nikos Passas, Wendy Pei and Chloe Widmaier note, 'over
the years, the scope of the defence has become narrower'. Bronitt et al explain the narrowing of the defence by reference to United
States v Kay, a federal circuit court decision concerning allegations of
bribery of officials in Haiti:
In this case, the definition was narrowed to exclude acts
'that are within an official's discretion or would constitute misuse of an
official's office.' As nearly every
country formally prohibits its officials from taking bribes or payments as a
form of misuse of public office, this change in the definition has essentially
'killed off' the defence.
Further, the IBAACC noted that it understands that the Department
of Justice and the Securities Exchange Commission now take the position that
only the most minor and inconsequential payments can properly be characterised
as facilitating or expediting payments. Perhaps responding to the narrowing exception, or anticipating its eventual
demise, many companies within the US have begun to prohibit facilitation
payments in their own policies and procedures.
As noted above, the US is not the only country that provides an
exception for facilitation payments—NZ also currently retains this defence.
However, as the IBAACC noted, the NZ Parliament recently considered a bill that
'significantly cut back the scope of the defence', and indeed, the Opposition attempted
to amend the bill to abolish the defence altogether. The Organised Crime and Anti-Corruption Legislation Bill passed into law in NZ
in November 2015 by way of 15 amendment Acts. As such, the facilitation
payments exception in NZ now excludes any action that provides an undue
material benefit to a person who makes a payment or an undue material
disadvantage to any other person.
Facilitation payment defence in Australia
In November 2011 the Australian Government released a public
consultation paper seeking views on Australia's foreign bribery laws, and in
particular the treatment of 'facilitation payments' under Australian law. As noted by the IBAACC in its submission to this inquiry in 2015:
The Government only allowed a period of approximately 30 days
for submissions –that is until December 2011. Since December 2011, a period of
3 years and almost 8 months, there has been silence from Canberra on this
Some submissions to the 2011 consultation argued strongly for the
retention of the defence. However, many argued for its removal, emphasising the inconsistencies between
both the defence and Australia's international treaty obligations, and
Australia's domestic bribery laws and the domestic laws of comparative
countries (which are some of Australia's major trading partners). These submitters also observed the difficulties faced in drawing a distinction
between a bribe and a facilitation payment; and considered how the defence
would assist in creating a strong culture of compliance.
In October 2012 the Phase 3 OECD Report on Australia's
implementation of the OECD Convention was released. In relation to the
application and awareness of the facilitation payment defence it noted that:
...facilitation payments appear to be frequently equated with
any bribes of small value...There is a perception that Australian companies may
be making facilitation payments, and that the practice may be prevalent, at
least in certain regions.
In light of the above, the Phase 3 OECD Report recommended that:
Australia continue to raise awareness of the distinction
between bribes and facilitation payments, and encourage companies to prohibit
or discourage the use of small facilitation payments in internal company
controls, ethics and compliance programmes or measures, recognising that such
payments must in all cases be accurately accounted for in such companies’ books
and financial records.
In March 2015 the Australian Government proposed amendments to
Australia's foreign bribery laws, as detailed in the Crimes Legislation
Amendment (Powers, Offences and Other Measures) Bill 2015. However, no
reference was made in the bill to the facilitation payment defence. This bill passed both houses on 10 November 2015.
As discussed in Chapter 2, the Attorney-General's Department (AGD)
released draft legislation and a public consultation paper outlining proposed
amendments to the foreign bribery offence in the Criminal Code in April 2017
(2017 consultation paper). However, the 2017 consultation paper noted that:
It is not proposed that the existing facilitation payment
defence be amended. This defence has not presented as an issue in the
enforcement of the foreign bribery offence.
As such, it is not surprising that the proposed amendments to
Australia's foreign bribery laws, as detailed in the Crimes Legislation
Amendment (Combatting Corporate Crime) Bill 2017 (CCC bill), introduced to the
Parliament in December 2017, also make no reference to the facilitation
However, of note is the December 2017 Phase 4 OECD Report which
observed that despite the extensive awareness-raising initiatives and
consultation processes on the use of the facilitation payment defence:
...there remains significant dissatisfaction with the existence
of the [facilitation payment] defence among Australia's public and private
sectors and civil society representatives... 
The Report also went on to recommend that the Working Group on
Bribery in International Business Transactions:
...closely follow-up the Australian Government’s ongoing review
and monitoring of the defence. In particular, the WGB [Working Group on Bribery
in International Business Transactions] should follow-up on any recommendations
on facilitation payments that come out of the ongoing Senate Inquiry into
Mr Tom Sharp of the AGD, provided evidence to the committee about
the previous consultation on the repeal of the facilitation payment defence.
However, Mr Sharp stated that:
There are some parts of business, operating in particular
sectors and in particular parts of the world, which believe that facilitation
payments are necessary and argue for retention of the defence. Essentially,
it's a matter for government as to whether they retain the defence.
The committee questioned representatives from the AGD as to why
the recent 2017 consultation paper had not included a proposal to reform the
facilitation payment defence. Ms Kelly Williams of the AGD, stated:
No reform was proposed in the recent consultation paper...because
our advice was that the defence hasn't proposed a barrier to prosecution. In
line with our obligations under the OECD convention, obviously, Australia
actively discourages individuals and businesses from making those payments.
Mr Shane Kirne of the CDPP confirmed this stance, while highlighting
to the committee that:
In the limited number of matters that we've seen come
through—bearing in mind we only see what's being investigated—facilitation
defence is not likely to be an issue that raises its head in the matters that
we're currently looking at.
Mr Kirne further explained that this is because of the scale of
the matter involved and other factors, including:
...the clandestine nature of what's gone on and the scale of
the payments, and there's no record in the company records that would meet the
defence, because it has to be recorded in a particular way and signed off by
the relevant persons... the defence would not normally be made out, because the
books and records wouldn't be recorded appropriately... I suspect many entities
that are engaging in foreign bribery are not recording them in the appropriate
way. They're not likely to put 'bribe to foreign official' in the expenses
Businesses taking action to enhance
Despite the lack of legislative action in this area, it appears
that Australian businesses are taking matters into their own hands and
increasingly restricting, or prohibiting, facilitation payments.
The Australia Institute and Jubilee Australia commissioned
research from CAER (a privately owned company which provides independent
research and services) on the governance arrangements concerning bribery and
facilitation payments across ASX100 companies. CAER's research indicated that many ASX100-listed companies are increasingly
taking seriously the issues of bribery
and facilitation payments, and the changing nature of governance arrangements
around facilitation payments compared to gifts or bribery. Specifically, their
evidence showed that governance arrangements restricting facilitation payments had
become far more common over the decade before 2015 for ASX100-listed companies,
increasing from 24 per cent in 2006 to 65 per cent in 2015. However, as the
Australia Institute and Jubilee Australia noted, 'this leaves a third of
Australia's major companies without such arrangements'.
The IBAACC also noted this change, and explained that in their
...many corporations operating out of Australia and a
significant number of multi-national corporations with subsidiaries in
Australia and many high risk jurisdictions, all ban facilitation payments in
their internal codes of conduct and business policies.
This is the committee's understanding as well. For example, BHP
informed the committee that their code 'prohibits all forms of corruption and
bribery, including expressly prohibiting facilitation payments'.
Arguments for the retention of the
A number of submissions argued in favour of retaining the
facilitation payment defence. These submissions generally adopted
justifications consistent with the typology provided by Associate Professor
Davids, who argued that the defence should be abolished. Associate Professor
Davids explained that 'several justifications are often put forward to defend
facilitation payments', including that:
payments do not involve the exercise of discretion by the foreign public official
and therefore do not result in the same
- because a facilitation fee is one routinely required by
the foreign public official, there is less moral culpability than in those
situations in which larger bribes are paid voluntarily in order to influence
the exercise of official discretion in specific cases;
- it is not
practically possible to do business in some countries without making
facilitation payments; and
a ban would unduly disadvantage Australian companies.
These justifications can be classed into two broad
categories—principled and pragmatic. The first two reasons are principled
attempts to reject the notion that facilitation payments are bribes, while the
second two explanations ignore this moral question and focus instead on the
'practical realities' of doing business.
The Australia–Africa Mining Industry Group (AAMIG) provided the
strongest defence of facilitation payments and relied on both principled and
pragmatic justifications. This section explores this, and other, concerns.
A facilitation payment is distinct
from a bribe
On a principled approach, AAMIG explained to the committee the
distinctions between facilitation payments and bribes. AAMIG noted that
facilitation payments are 'small payments made to public officials to ensure
the timely delivery of routine government services to which there is a legal
entitlement'. In contrast, 'when the intent of such payments is to influence a
public official with regard to the awarding or retention of business, it
crosses the line and becomes an act of bribery'.
Diaspora Legal also drew a fine distinction between facilitation
payments and bribes, explaining that facilitation payments are 'generally
payments to obtain something lawful, in a lawful manner'. However, these arguments appear to presuppose the legality of a facilitation
payment, by contending that their use is 'lawful'.
In any case, where the distinction between a facilitation payment
and a bribe centres on 'intent' or 'purpose', it may be difficult to
differentiate between the two. For many submitters the complexity of the
statutory provision has resulted in an inadequate awareness of the distinction
between a facilitation payment and a bribe.
Diaspora Legal shared this concern and complained that some
Australian agencies, such as Austrade, 'mischaracterise' facilitation payments
as bribes. In some cases, this is so prevalent that 'prudent legal advice' recommends
that Australian entities 'should not engage with Austrade in their
international dealings lest they be exposed to a misguided prosecution for
conduct which is lawful'. As a consequence, investment and economic activity may possibly be reduced.
Diaspora Legal called upon the committee to recommend appropriate
training for all Australian agencies, 'so that they may understand clearly the difference between a
facilitation payment and a bribe and be able to articulate that a facilitation
payment is lawful under Australian law and a bribe is not'. However this can go both ways. Mr Neville Tiffen, a specialist
consultant on business integrity, corporate governance and compliance, noted
that, 'what many people loosely call "facilitation payments" are in
fact small bribes that would not fit the definition'.
King & Wood Mallesons and the Law Society of South Australia echoed
the concerns of Diaspora Legal, explaining that greater guidance for businesses
seeking to rely on the defence is sorely needed. The Law Society of South
Australia suggested that:
It would be beneficial to obtain greater guidance,
particularly as to what payments may be characterised as permissible facilitation
payments, and what payments and conduct would amount to conduct giving rise to
King & Wood Mallesons clarified that:
While the elements of the defence are set out in the Criminal
Code, there is no case law on how to satisfy the elements. In the
absence of guidance from government, businesses have been left to rely on very
conservative legal advice.
King & Wood Mallesons also noted some of the conceptual
difficulties facing companies seeking to rely on the defence. For example,
under paragraphs 70.4(1)(a) and 70.4(1)(b) of the Criminal Code, the value of
the benefit offered and the routine government action that the benefit was
intended to secure, must be of a 'minor nature'. However, 'there is no clear
guidance about what this phrase means'. King & Wood Mallesons acknowledged that it may not be possible to set a specific
dollar amount, particularly because of currency fluctuations or differences in
purchasing power in different countries. Nevertheless, the absence of
government or judicial guidance causes difficulties for businesses that may
have several questions: 'One such question is whether the value of a benefit can
be assessed relative to the size of the
transaction, or the relative wealth of the recipient'. To illustrate this uncertainty, King & Wood Mallesons provided the
A payment by a large multinational corporation of what it
considers to be of a minor nature could be characterised very differently if
the same payment is made by a small family business.
A payment of $10,000 might, generally speaking, be considered
significant; however, it may be perceived as relatively minor if millions of
dollars were at stake if the routine governmental action were not secured.
Payments considered to be of a minor nature in a
corporation's home country may be viewed differently in the recipient's country
depending on typical living standards, incomes and variations in cultural and
Payments may need to be made to a number of officials to
achieve routine government action. The payments may be small when considered
individually but may be substantial once aggregated.
King & Wood Mallesons argued that 'formal guidance from the
Australian government' on how and when the facilitation payments defence
applies 'would provide the corporate sector with much needed support'. It would also provide clarity to the Australian community about the line of
difference between facilitation payments and bribes.
A pre-clearance process
In seeking formal guidance on what is classified as a
facilitation payment, King & Wood Mallesons contended that a pre-clearance
process could be beneficial. They explained that such a process is utilised in
United States companies considering a prospective payment to
foreign public officials may apply to the Attorney-General for an opinion on
whether the conduct would violate the FCPA. A consequent opinion must be issued
within 30 days and be published online. There is a rebuttable presumption that
a company which has acted in accordance with an opinion of the U.S.
Attorney-General has complied with the FCPA. Advance clearance of prospective
transactions provides legal certainty to companies and the security to proceed
without concern for the risk of potential criminal prosecution.
While acknowledging that some commentators have criticised this
system as particularistic, reactive and of limited use, King & Wood Mallesons suggested that adopting a pre-clearance process or an
opinion procedure in Australia would be beneficial by:
- demonstrating the Australian government's commitment to enforcing
of the Criminal Code;
the voluntary disclosure of potential bribery issues by corporate Australia;
- providing valuable guidance to the corporate sector; and
- providing legal certainty.
Australian companies will be
placed at a competitive disadvantage
Some submissions contended that abolishing the facilitation
payment defence would place Australian companies at a competitive disadvantage.
In particular, AAMIG argued that abolishing the defence would
disproportionately impact small and mid-tier mining companies. AAMIG explained
that it is 'simply unrealistic' to expect that smaller companies, which do not
have the 'financial resources to withstand being delayed for extended periods
of time', or the 'political capital to influence
host-country Government officials to carry out their duties in a timely
fashion' to 'carry the responsibility for changing the behaviour of public
officials adversely influenced by poverty, or influence government resourcing'.
The Export Council of Australia agreed, explaining that small and
medium enterprises are at a 'specific disadvantage' and abolition of the facilitation
payment defence would have a 'disproportionately adverse effect' on them and
their service providers 'when called upon to make such facilitation payments'. With specific reference to service providers to exporters, such as licenced
customs brokers and freight forwarders, the Export Council Australia explained:
In many cases those service providers make payments or adopt
procedures based on direction from government agencies or from parties without
whose consent services cannot be provided. For example, such service providers
are regularly requested by local Customs' authorities or other parties to
undertake separate procedures and pay additional amounts to shipping lines,
airlines or port authorities to ensure that "space" is provided at
times of peak demand for the passage of freight. In those circumstances, both
the relevant service provider and the SME [small to medium-sized enterprises]
are subjected to significant pressure in circumstances in which recourse to
external assistance cannot be secured at short notice. If a relevant service
provider undertakes action in accordance with those directions and makes the
best effort possible to ensure that the payments are validly made or other
procedures are followed as directed, then both the SME and the service provider
should not be subject to further adverse action by the authorities.
Diaspora Legal was also concerned about the competitive
disadvantage that abolishing the facilitation payments defence might place on
Australian businesses. However, it explained that it considered that Australian
businesses already suffer a significant disadvantage compared to international
competitors as Australian law exceeds OECD requirements. Therefore removing the
facilitation payments defence would place further undue and unequal pressures
on Australian businesses forced to operate on a different playing field.
While acknowledging that Australian law as-written does not
exceed OECD requirements, Diaspora Legal contended (as mentioned above) that Australian
agencies, 'such as Austrade' miscategorise facilitation payments as bribes, and
then implement 'a policy of reporting everything they have classified as bribes
for investigation and prosecution'. Diaspora Legal therefore considered that, in practice, Australian law surpasses
However, Mr Kane Preston-Stanley, a
former lead legal and policy officer on Australia's anti-corruption program, also
supported the idea of debarment. However,
Mr Preston-Stanley emphasised explained that the scope of the facilitation
payments defence generally does not cover making companies more competitive.
Mr Preston-Stanley noted that 'routine government action' is quite limited
and 'does not involve a decision about whether to award new business; or
whether to continue existing business with a particular person; or the terms
of new business or existing business', thus:
Any benefit to obtain or retain business is therefore a
bribe, regardless of any competitive factors, perceived entitlement as the
"best" bidder, or perceived threat of business not
continuing...Australian law has never accepted that any benefits are acceptable
in competing for business or in ensuring that one continues to do business.
Prohibition will not eliminate
AAMIG adopted another pragmatic justification for the retention
of the facilitation payments defence—that removing the defence will have no
effect on the prevalence of bribery or corruption. As will be examined in the following section, a common reason given by
proponents for eradicating the defence centred on its very existence as helping
to maintain an environment in which corruption can flourish. For these
submitters, the removal of the defence would help to make clear that all forms of bribery
or corruption are wrong.
However, AAMIG argued that the causes of bribery and corruption
are 'very complex', and removing the defence would be a 'blunt instrument
approach' which 'will not have the desired effect of helping to eliminate
bribery across the African continent'. AAMIG explained that 'poverty is the root cause of host government officials
pushing for facilitation payments' and therefore behavioural change is unlikely
to occur until:
industrial development has occurred (largely through continued flows of Direct Foreign
collect reasonable levels of taxes from newly established industry and
individuals who are gainfully employed; and
governments have the financial resources and governance structures to ensure
their officials are reasonably well paid and provided with the essential tools
to do their jobs effectively.
AAMIG explained further that while their members would 'like to
be able to conduct business in Africa without the need for facilitation
payments', such a situation 'will not materialise overnight', nor in response
to legislative changes 'imposed by Ottawa, London or Canberra'. AAMIG
continued, noting that it is 'simply unrealistic to expect practical progress
of this scope and nature to occur overnight', because prohibiting such payments does not take into account the 'practical
realities of doing business' in some countries in Africa. In fact, according to AAMIG, banning facilitation payments will be
counterproductive 'and result in driving such payments underground'.
Prohibition will hurt people most
Relatedly, AAMIG also contended that facilitation payments should
be understood in a different light—that is, rather than an exception to the
anti-bribery regime, facilitation payments can have a positive effect on the
receiving society. AAMIG explained:
...the governments of many impoverished host countries in
Africa lack the resources to pay some public servants adequately, or sometimes
at all, particularly in those countries recently emerging from conflict. This
has led to a tendency for public officials to often need some additional modest
support to satisfactorily complete their work, hence the facilitation payment,
e.g. a public official may need petrol for his government vehicle, to enable
him to carry out on-site inspections (notwithstanding he may have already been
given a small but inadequate allowance for this purpose).
Lack of empirical evidence
Associate Professor Davids acknowledged
that there are 'undoubted complexities' for businesses that operate in high
risk parts of the world and in high risk sectors, but considered that
greater transparency over the use of facilitation payments by businesses would
be beneficial and would allow an informed debate over their advantages.
Associate Professor Davids indicated that she 'would like to see a preparedness
by industry sectors subject to particular risk in these areas to open the door
to researchers', so that:
...we can have an informed debate around the ostensible need
for and use of facilitation payments. It may be the case that an evidence‐based argument can be
made for the retention of facilitation payments, based on a nuanced micro
analysis. We simply don’t know.
Associate Professor Davids told the committee that accurate
research on the actual use of facilitation payments remains scarce. Associate
Professor Davids explained:
Proponents arguing in favour of the retention of a facilitation
payments defence rarely cite surveys or empirical evidence detailing the specific
circumstances and frequency of use surrounding payments...However, beyond the
formal definitions provided for in the Australian framework, there is a lot of
guesswork around the varying notions of what people on the ground regard as
Dr Zirnsak, Justice and International Mission, Synod of Victoria
and Tasmania, Uniting Church in Australia, explained that:
We tried to track this down. We spoke to the Australian
Taxation Office about if companies declare their facilitation payments in their
tax returns. The answer was 'No'. Effectively, it will be hidden in their other
costs. Again, you have no sense of how many of these are being paid or what
size they are.
Without this information
it is unclear whether the arguments in favour of the retention of the
facilitation payment defence are justified.
Arguments in favour of abolishing the facilitation payment defence
A majority of submissions argued in favour of abolishing the
facilitation payments defence. Generally speaking, the justifications offered fell into the following
categories—that, facilitation payments:
- are no
different to bribery;
- help to maintain
an environment in which bribery can take root and flourish;
- are already
publically discouraged by the Australian government (and the OECD); and
prohibited by many comparative countries, meaning that retaining the defence
actually places Australia at a competitive disadvantage.
Many of these arguments directly contradict those of the
submitters who contended the defence should be retained and can also be divided
into principled and pragmatic justifications.
Mr Mark Pulvirenti, Partner, Control Risks stated:
I am unequivocal in my position—that the defence of
facilitation payments should be removed from the Criminal Code. We see
facilitation payments as bribes, period.
In evidence before the committee, Mr Pulvirenti went on to
...we just consider that the government sends a very mixed
message, to say to the community that facilitation payments are
okay—effectively saying, 'You can bribe someone as long as it's a small
amount,' which really sends a very mixed message, and one that I don't think is
a proper one.
Mr Robert Wyld, the Past Co-Chair of the IBAACC agreed, and expressed
an opinion that facilitation payments should be banned with 'no exceptions'.
In speaking to the committee about the retention of the
facilitation payment defence, Mr Tiffen stated:
I think that's very disappointing. I think it's an archaic
defence. I know it still exists in the US. The UK has clearly removed it. It
was already not a defence in the UK, even before the Bribery Act, but they have
clearly continued that. Canada has recently removed the exemption. It is a
nonsensical exemption because facilitation payments are bribes and they are
illegal in the country in which they are paid, and most companies or
organisations, in their code of conduct, make the statement, 'We comply with
the laws wherever we operate.' As soon as a company says, 'We will allow
facilitation payments,' it is saying to its staff, 'There are some laws we
don't think you need to comply with,' and that's just a crazy message to be
sending to staff members.
Facilitation payments are no
different to bribery
principled front, many submissions simply did not see a distinction
between facilitation payments and bribery—contending that such payments are
'nothing more than small institutionalised bribes' or 'not qualitatively different to bribery'. Significantly, a case was
made by Transparency International Australia that while facilitation payments
may be customary in certain parts of the world, it is likely that it is illegal
for them to be offered or received under local law. As such, if a facilitation
payment is not materially different from a small bribe there is no reason for a
defence to exist as an exception to Australia's anti-bribery legislative
The IBAACC also argued that facilitation payments are no different to bribery. The IBAACC
quoted an address by Justice Terence Cole AO that emphasised the
importance of consistency in rooting out all instances of bribery and
Once the seed of sin and corruption is planted, and society
has determined that it is morally, ethically and legally wrong, the seed must
be sought and rooted out. The alternative is to accept corruption, and that our
society has determined not to do. Rejecting corruption means rejecting all corruption.
One cannot allow just a little bit of ethically or morally wrong conduct
because if one does it becomes impossible to draw the bright line which
permissible conduct must not cross.
Under our law business is permitted to make what are
euphemistically called 'facilitation payments' and, worse, are entitled to
claim such payments as tax deductions. Only sophistry enables one to distinguish
a facilitation payment—which is a small bribe—from the notion of a corrupt
Facilitation payments constitute a departure from the
anti-corruption standards which our society has accepted as a basic tenet of
our governmental, economic and organisational life. The laws which permit such
payments and make them tax deductible blur the bright line between permissible
and impermissible conduct.
The IBAACC emphasised
the need for clear lines:
...it is never acceptable for such conduct to occur. Such
payments blur the clear line between a bribe and a facilitation payment to the
point where ethical (and indeed legal decisions) come to depend upon an
individual view on the amount, scale, frequency and for what service the
payment is being made.
KordaMentha likewise identified the need for a clear distinction
between bribery and corruption on the one hand, and ethical conduct on the
other. KordaMentha cited the UK Ministry of Justice's Guidance on the UK Bribery
Act 2010, which explained that an exemption for facilitation payments
...create artificial distinctions that are difficult to
enforce, undermine corporate anti-bribery procedures, confuse anti-bribery
communication with employees and other associated persons, perpetuate an existing
'culture' of bribery and have the potential to be abused.
A slippery slope to bribery
Many submissions argued that retaining the facilitation payments
defence is inconsistent with Australia's wider anti-bribery efforts.
Woodside Petroleum considered that the permissibility of
facilitation payments 'helps to maintain an environment in which bribery can
take root and flourish', and therefore, it 'will be difficult, if not impossible, to comprehensively
stamp out bribery of foreign public officials whilst Australian laws continue
to condone the making of facilitation payments'.
Control Risks agreed, explaining that the 'legislative aim should
be to eradicate corruption', and that facilitation payments make this impossible.
Transparency International Australia concurred, arguing that
'removing the facilitation payments defence will reinforce the notion of zero
tolerance towards all forms of bribery by a company'.
These submissions also highlighted the importance of consistency
in Australia's anti-bribery framework. Emphasising these points was the
submission from Bronitt et al which argued that abolishing the facilitation
payments defence will convey a 'strong and consistent policy message that
corporations should not stimulate markets for bribes, irrespective of size and
whether or not such payments to foreign public officials are considered to be
FTI Consulting agreed with this position, making a strong case that
'legislation should be unequivocal about prohibiting facilitation payments'.
The Australia Institute and Jubilee Australia made a similar
point. In surveying the trend towards private enterprises prohibiting
facilitation payments internally, they noted:
Prohibition of facilitation payments has become an accepted
policy approach for an increasing number of Australian corporations, in line
with international policy. Action by one country has led to improvements in
corporate governance in others. An Australian policy to prohibit facilitation
payments would therefore contribute to efforts to stamp out the practice well
beyond our borders.
A number of submissions also took issue with the claim by
proponents of retaining the defence that facilitation payments are benign.
KordaMentha explained that allowing facilitation payments 'muddies the waters'
and 'may lead to a culture of expediency to achieve results'. Associate Professor Davids noted that while facilitation payments were
previously considered 'harmless', they are now recognised to be 'harmful' as
they are often 'funnelled up through the system and help nurture and sustain corrupt
bureaucracies, political parties and governments'.
Dr Zirnsak, Justice and International Mission, Synod of Victoria
and Tasmania, Uniting Church in Australia, explained that:
Our concern here is not primarily that a small bribe might be
paid. The issue we found with this is the wider impact. We have had
conversations with people who have worked in companies where small bribes are
paid, and they indicated that it quickly escalated. The issue is: once you
start paying bribes to low-level officials, it's hard to see how you then
resist demands for bribes from those further up the chain.
Indeed, Regnan explained that facilitation payments have 'wider
corrosive effects', including:
potential for regulatory or bureaucratic capture by businesses when officials and public sector wage
structures come to depend on such payments and entrenchment of other forms of
corruption (e.g. nepotism) when opportunities for disproportionate gains are
OECD discourages the use of
Some submissions noted that the Australian government appears
ambivalent about the efficacy or value of the defence, and, in fact, actively
discourages the use of facilitation payments. The cross-agency submission led by the AGD's explained that 'Australian
agencies strongly discourage businesses from making facilitation payments',
because while such payments are permissible under Australian law, they 'may
still constitute a criminal offence in the jurisdiction they are made'. Woodside Petroleum noted that this suggests that government already understands
the broader adverse consequences to which facilitation payments can give rise. Dr Zirnsak, Justice and International Mission, Synod of Victoria and Tasmania,
Uniting Church in Australia, agreed, stating that:
At the very minimum it should be illegal to pay bribes in
places where it is illegal for the bribe to be paid. Australia should not be
facilitating the breaking of other people's laws. What [sic] would be the logic
also accords with the OECD's 2009 recommendations for further combating
bribery of foreign public officials in international business transactions. As
noted above, the OECD has recommended that member states should encourage companies to 'prohibit or
discourage the use of small facilitation payments in internal company controls'. As research from CAER cited above demonstrated, many ASX-100 listed companies
already prohibit facilitation payments and a trend, particularly post the 2009
OECD recommendations, is clearly identifiable. In light of this, some
submissions noted that Australia's current position is increasingly isolated.
Removing the defence will level the
contrast to AAMIG and Diaspora Legal, some submissions argued that removing the
facilitation payment defence will actually better position Australian companies
in the international market.
As the previous section noted, there is a growing trend
internationally towards eradicating the distinction between facilitation
payments and ordinary bribery. As such, many
Australian businesses that operate internationally may already be subject to
such laws, either as a subsidiary or through operating in different
jurisdictions. Control Risks noted that these Australian corporations are
therefore 'currently subject
to a "high water mark" of legislative requirements, effectively
prohibiting the payment of facilitation payments, notwithstanding the current
legality of these payments under Australian legislation'.
Petroleum, one company subject to these dual regimes, considered that removing
the defence will 'support a level playing field', by ensuring that all
Australian businesses are subject to the same regulatory framework.
agreed. BHP explained that they do not believe that removing the defence would
adversely impact the competitiveness of Australian companies because:
payments are prohibited in the current foreign bribery legislation with
extraterritorial application, such as the UK Bribery Act;
- such payments
are also not permitted by 'local law' in most countries and therefore,
companies should not be making the payment in any event; and
- the defence
as it currently stands is limited in scope, applying only to payments of a
minor nature to expedite routine government action and where the payments are
recorded in a company's books and records.
Removing the defence would bring Australia into line with
international comparator countries and mean that multinational companies will
face the same regulatory burden across jurisdictions.
Many submissions that advocated for the abolition of the
facilitation payments defence contended that this abolition should proceed with
a transition period to allow businesses time to implement the change in its internal
processes and inculcate a culture of compliance amongst its employees. For
example, Control Risks noted:
The Australian position would, in our view, do well to offer
a moratorium period, within which corporations would be required to amend their
business practices, to eventually comply with amended legislation that would
take effect at some later date.
BHP Billiton also agreed with this approach, suggesting that to
mitigate any disruption to Australian businesses, a 'reasonable period of time'
should be granted to allow companies
to introduce systems to minimise the risk of contravention. Mr Tiffen and Transparency International Australia considered that two
years would be a reasonable timeframe for transition.
However, Transparency International Australia and FTI Consulting
argued that Australian businesses should only be able
to rely on this grace period if the company demonstrates 'the steps it is taking to
eradicate such payments within their operations'. Transparency International Australia further suggested a number of steps that could
be considered as part of a commitment to zero tolerance towards facilitation
- the company
issues a clear policy prohibiting facilitation payments;
- the company's
employees and associated persons have access to and are trained on written
guidance on the procedure they should follow if they are asked to make a facilitation
- the company
assesses whether the employees and associated persons are following the
facilitation payments are recorded in the company's books and records; and
- the company
takes proper action (collective or otherwise) to tell the appropriate authorities
in the countries concerned that facilitation payments are being demanded.
Tax deductions for facilitation
Facilitation payments can be claimed as tax deductions under
subsections 26-52(4) and 26-52(5) of the Income Tax Assessment Act 1997 (Income Tax Assessment Act). Submissions that considered that the facilitation
payments defence should be abolished, simultaneously argued that these
provisions in the Income Tax Assessment Act should also be repealed.
The committee agrees with submitters that determining whether a
particular payment does satisfy, or would satisfy, the requirements of section
70.4 of the Criminal Code is extremely difficult. Indeed, the committee
considers facilitation payments are one of the more conceptually complex issues
arising from Australia's anti-bribery legislation, and recognises that this is
heightened by the fact that the defence has never been raised before an Australia
court, and therefore judicial commentary has not been able to shed any light on
this vexed issue.
While the committee acknowledges that the government has
undertaken awareness-raising initiatives on the use of the facilitation
payment defence, the committee is concerned that the OECD's December 2017 Phase
4 OECD Report observed that there remains significant dissatisfaction with the
existence of the facilitation payment defence among Australia's public and
private sectors and civil society representatives.
The committee notes the evidence received during the course of
the inquiry which drew attention to the many comparator countries, including
the UK and Canada, that do not permit facilitation payments. In this context,
the committee believes Australia's position on this issue is increasingly isolated,
and the committee is concerned about the inconsistencies between international
standards and Australia's domestic bribery laws and the domestic laws of
comparative countries (of which some are Australia's major trading partners).
The committee is persuaded by the majority of submissions to both
this inquiry and to the government's 2011 public consultation seeking views on
Australia's foreign bribery laws (including the treatment of facilitation
payments) which argued in favour of abolishing the facilitation payment defence.
The committee notes the government's efforts to strongly
discourage businesses from making facilitation payments on the basis that the
payment may constitute a criminal offence in the jurisdiction where they are
made. The committee further observes that these efforts suggest that the
government already understands the broader adverse consequences to which
facilitation payments can give rise. However, the committee is deeply concerned
and disappointed about the lack of legislative action that the government has
taken in this area, and wishes to recognise the initiatives of Australian
businesses who have taken matters into their own hands by implementing internal
policies prohibiting facilitation payments.
committee notes the government's proposed amendments to Australia's foreign
bribery laws, as detailed in the CCC bill which are currently before the
Parliament. In light of this inquiry and the evidence received, the committee
considers that the CCC bill is deficient as it makes no provision for the
abolishment of the facilitation payment defence. In the committee's view this
exacerbates the perception that Australia is not serious about combatting
foreign bribery (and other forms of corruption), and further isolates Australia
from international norms.
the committee's view a facilitation payment is not materially different from a
small bribe and therefore should not be recognised as a defence to a foreign
bribery offence in Australia. It is apparent to the committee that there is a
need for a clear distinction between bribery and corruption on the one hand,
and ethical conduct on the other. The committee considers that removal of the defence
will make clear that all forms of bribery and corruption are wrong.
committee believes that retaining the facilitation payment defence is
inconsistent with Australia's wider anti-bribery efforts and accepts that
allowing facilitation payments muddies the waters and risks encouraging a
culture of expediency to achieve results. In the committee's opinion,
abolishing the facilitation payments defence will convey a strong and
consistent policy message that corporations should not stimulate markets for
bribery, irrespective of their size, and whether or not such payments to
foreign public officials are considered to be mandatory. In this context, it is
apparent to the committee that removing the facilitation payment defence will
better position Australian companies in the international market.
on the evidence presented during the course of the inquiry, the committee is
persuaded that abolition of the facilitation payment defence should proceed with
a transition period to allow businesses time to implement the changes to their
internal processes and to inculcate a culture of compliance amongst its employees.
In conjunction with this change, the committee also suggests that subsections
26-52(4) and 26-52(5) of the Income Tax Assessment Act, which allow
facilitation payments to be claimed as tax deductions, be repealed.
The committee recommends that the facilitation payment defence
currently provided for in section 70.4 of the Criminal Code Act 1995 (and the associated subsections 26-52(4) and 26-52(5) of the Income Tax
Assessment Act 1997) be abolished over a transition period, to enable
companies and individuals to adjust their business practices and procedures to
comply with the law as amended.
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