So, we have covered the Foreign Corrupt Practices Act’s (“FCPA”) scope, but the FCPA anti-bribery provisions also contain certain exceptions and affirmative defenses. These exceptions and affirmative defenses attempt to carve out legitimate payments to foreign officials, so the FCPA does not unreasonably hamper international business. Be wary, however, because prosecutors narrowly interpret these exceptions and affirmative defenses. Moreover, as most FCPA cases settle, the prosecutor’s perspective will ultimately drive the settlement negotiations and the prosecutor may have a different view of an automotive company’s payments to the foreign officials.
As an important point, these “exceptions and affirmative defenses” are really affirmative defenses. Simply put, if the government accuses a company or individual with violating the FCPA, the burden is on the defendant to prove one of the following exceptions or affirmative defenses apply.
The Waning Facilitating Payments Exception
This exception purports to exculpate business and individuals for making payments to foreign officials to prompt routine government action by a foreign official. The exception attempts to distinguish between payments made to expedite an inevitable process, on the one hand, and payments to influence a decision, on the other hand. But this exception has been interpreted so stringently by prosecutors that it has almost disappeared in practice. Moreover, a corporate policy that permits employees to pay facilitating payments is morally indefensible, as it would be difficult to determine which facilitating payments are “legal.”
Accordingly, companies should prohibit facilitating payments, with one exception. Though not technically facilitating payments, payments made to foreign officials to prevent harm to employees have been acknowledged under this exception.
The Written Local Law Affirmative Defense
If a payment, gift, or promise to pay something of value was “lawful under the written laws and regulations of the foreign official’s” country, then such a payment does not violate the FCPA. For example, the payment of a registration fee, mandated by a municipality’s written regulations, would not violate the FCPA.
But beware, a custom is not the same as written laws and regulations. In other words, no matter how universally routine a payment is, if it is not in the foreign country’s written laws or regulations, this exception will not exculpate a company or individual from FCPA liability. Thus, to avoid FCPA liability under the written local law defense, be sure to request or locate written authority requiring any “mandatory” payment.
The Reasonable & Bona Fide Expenditures Affirmative Defense
Under this exception, “reasonable and bona fide” expenditures do not violate the FCPA anti-bribery provisions if they are directly related to either of the following:
Examples include travel and expenses paid for government officials to visit company facilities, observe demonstrations, receive training, or attend meetings. However, automotive companies should not attempt to use this exception as a way to provide lavish experiences or gifts to influence government officials’ decisions. Instead, this exception exists so companies can facilitate appropriate business relationships with foreign officials in the course of conducting business.
To interpret these exceptions’ application to specific facts, please seek the advice of legal counsel. Still to come: the FCPA’s penalties and specific, common FCPA issues.