In the past 15 years, international initiatives against corruption, including treaties under the auspices of the Organization for Economic Cooperation and Development (OECD) and the United Nations, have changed the international legal and business environment. Conduct once widely tolerated is increasingly subject to investigation and prosecution in multiple jurisdictions.
Canada was quick to sign the OECD’s 1997 anti-bribery convention and to enact the Corruption of Foreign Public Officials Act (CFPOA) in 1998. But for many years, Canada lagged behind other OECD countries in enforcing its anti-corruption law. That began to change in 2007, when the Canadian government established a dedicated international anti-corruption unit within the Royal Canadian Mounted Police.
The first significant conviction came in 2011, when Niko Resources was fined C$9.5 million (US$9.3 million) for bribing Bangladesh’s then energy minister. More recently, Griffiths Energy International pleaded guilty under the CFPOA on 15 January 2013 to paying a US$2 million bribe in relation to the negotiation of an oil production sharing contract with the government of Chad. Griffiths was fined C$10.35 million, the highest penalty yet imposed under the act.
Shortly after Griffiths’ conviction, on 5 February, the Canadian government announced proposed amendments to strengthen and expand the reach of the CFPOA. The proposals, which parliament is expected to adopt, include the following key elements.
Establishing jurisdiction strictly on the basis of nationality, not territory: Most criminal law enforcement in Canada, including the foreign bribery provisions currently in the CFPOA, is based on territorial jurisdiction. To convict, a court has to find that the offence had a “real and substantial connection” with Canada. The practical effect of nationality jurisdiction will be that Canadian companies and individuals will be subject to Canadian anti-corruption law regardless of where the offence took place.
Eliminating an exception for “facilitation payments”: The CFPOA currently provides an exception for small payments made to a foreign public official to secure the performance of routine administrative acts such as issuing permits, processing documents and providing services through public utilities. This exception will be eliminated after companies have had time to adapt their policies. Canadian law on this point will then be stricter than the US Foreign Corrupt Practices Act, which retains a facilitation payments exception.
Creating a books and records offence: The amendments will establish a new offence of concealing or misrepresenting bribes in a company’s accounts. This offence will potentially expose senior corporate officers to personal criminal liability for conduct independent of the underlying bribery offence. We expect this offence to have a significant deterrent effect.
Increasing penalties for individuals: The maximum penalty for individuals convicted of a bribery offence under the CFPOA will increase from five to 14 years’ imprisonment. This is a clear signal that bribery of foreign public officials is considered to be a serious matter requiring severe sanctions. Canadian authorities can be expected to increasingly prosecute individuals in order to raise the stakes for corporate directors, officers and employees and thereby promote stronger commitments to compliance.
Clarifying the definition of “business” for the purposes of the bribery offence: The CFPOA makes it an offence to offer, promise or pay anything of value to a foreign public official in order to obtain an advantage “in the course of business”. The act defines “business” as “any business, profession, trade, calling, manufacture or undertaking of any kind carried on in Canada or elsewhere for profit”. The amendments will delete the words “for profit”, thus removing any uncertainty as to whether business transactions that do not generate profit will be caught by the CFPOA.
The developments described above reinforce the need for Canadian companies that do business in India and elsewhere to implement robust anti-corruption compliance programmes and other measures to detect and prevent corrupt payments.
An effective compliance programme will require heightened screening where employees or third parties acting on behalf of the company interact with foreign public officials. Compliance programmes should be customized to the needs of each company, but will generally include the following elements: (a) senior management and board commitment to compliance; (b) clearly articulated rules and procedures based on a thorough risk assessment of the company’s business; (c) a dedicated compliance officer with adequate resources; (d) adequate due diligence with regard to third parties and business partners; (e) ongoing compliance training for employees and third party agents and representatives; and (f) periodic audits and monitoring.
Matthew Kronby and Milos Barutciski are partners at Bennett Jones LLP, a law firm with offices in Calgary, Edmonton, Ottawa, Toronto, Dubai, Abu Dhabi, Doha, Washington DC, and Beijing.
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