Doing Business with Non-U.S. Officials

The FCPA does not expressly prohibit doing business with individual non-U.S. officials or their private business interests, and such business may be legally acceptable so long as the business is arms-length, transparent, and based on fair market value. However, this is an area that presents risk under the FCPA, and great care should be taken before entering into business with a non-U.S. official or a company in which a non-U.S. official has an interest. For example, granting a contract on highly favourable terms to a company in which a non-U.S. official holds significant financial or other beneficial interest could be viewed as a payment prohibited by the FCPA. Therefore it is always wise to analyze any prospective business relationship with a government official carefully in advance to determine that it is in compliance with the FCPA and local law and that this can be demonstrated.

Doing business with an official or a related person or company includes the full range of business activities, such as entering into a contract or joint venture, hiring as an employee, consultant or representative, awarding a contract or subcontract for goods or services, making in-kind contributions, granting investment opportunities, or simply paying a fee for services. In each instance, something of value is being provided.

Doing Business with Government Entities

The FCPA permits doing business with non-U.S. governments, departments, agencies, and government-owned or government-controlled companies. Indeed, LXGlobal's business requires entering into contracts with host governments and having frequent direct dealings with government entities and officials acting in their official capacities. Those dealings may be in the form of sales to government-owned companies, joint ventures with government-owned or government-controlled companies, and other relationships.

Travel and Lodging

The FCPA does not prohibit aggressive, creative marketing activities. In fact, the FCPA expressly allows a company to pay the reasonable and legitimate expenses of a non-U.S. official, such as transportation, lodging, and meals, so long as the purpose of the trip is for:

The promotion, demonstration, or explanation of products or services; or
The execution or performance of a contract with the host government.

This defense under the FCPA is very specific. A general "business purpose" for a trip or an event may not be sufficient to justify payment of expenses on behalf of a government official for purposes of the FCPA.

Gifts, Meals, and Entertainment

Under certain circumstances, customary gifts made to non-U.S. officials and reasonable expenses for meals and entertainment for non-U.S. officials are permitted under the FCPA. For example, customary gifts at holidays, logo gifts, and routine business meals and entertainment often are permissible.

Good judgment must be exercised in each case, taking into account pertinent circumstances, including the character of the gift, meal or entertainment; its purpose; its appearance; the positions of the persons involved; the business context; reciprocity; and applicable laws and social norms.

Local Law

The laws of a non-U.S. official's country will, in most cases, contain provisions that govern the payment or reimbursement of expenses incurred by the official. Even where the local laws permit LXGlobal to pay an official's expenses, there may be legal requirements applicable to the handling, accounting, and reporting of such payments. Those local laws must be considered when planning Company-paid official travel, gifts, or entertainment.

That gifts, meals, or entertainment are consistent with normal social or business customs and practices in the official's country does not necessarily mean that they are permitted under the FCPA. However, the cost should remain at or below that permitted by local law as locally interpreted and administered.

Political Party and Candidate Contributions

Contributions, whether cash or in-kind, to political parties, party officials, and candidates are prohibited by the FCPA to the same extent as payments to government officials. Please refer to the Political Activities Policy for further guidance on LXGlobal's policy with regard to political contributions.

Facilitating Payments

In some circumstances, a payment to a non-U.S. official may qualify under a narrow FCPA exception for payments made to secure routine governmental actions. Such facilitating payments include, for example, payments made to expedite or facilitate:

  • Obtaining routine, nondiscretionary business permits;
  • Processing nondiscretionary governmental papers such as visas;
  • Obtaining police protection or mail service;
  • Obtaining inspections associated with contract performance or the shipment of goods;
  • Obtaining telephone, power, or water service;
  • Loading and unloading cargo; or
  • Similar activities that are ordinarily and commonly performed by an official.

As these examples show, facilitating or grease payments merely expedite actions that should be performed in any event and in that sense do not involve discretionary action by a government official. Facilitating payments are not payments made to induce a government official or employee to ignore his or her lawful duty. Official decisions whether to award new business or continue business with a particular party and discretionary decisions regarding compliance with building codes or health and safety requirements will never be considered routine governmental action. In addition, facilitating payments are typically small – the larger the payment, the less likely it will be defensible as a facilitating payment.

Because of the many legal and business issues posed by facilitating payments, LXGlobal strongly discourages their use. Moreover, even if a payment is permitted under the FCPA, it will not necessarily be permitted under applicable laws of the host country or other countries, as locally interpreted and administered. It is important that all facilitating payments be properly and accurately recorded in the Company's books and records.

In summary, an employee may make a facilitating payment if it is properly authorized under the LXGlobal Guidelines for Interactions with Non-U.S. Officials and meets all of the following conditions:

  • Does not violate U.S. law, as interpreted and administered;
  • Is made to expedite or secure routine government action to which LXGlobal is legally entitled;
  • Is lawful under applicable foreign law, as locally interpreted and administered;
  • Is customary in the country where the payment is made;
  • Is small; and
  • Is properly booked.