On June 24, 2011, Niko Resources Ltd., a Calgary-based oil and gas exploration and production company, entered a guilty plea under Canada's Corruption of Foreign Public Officials Act (CFPOA) with respect to charges of bribing a public official in Bangladesh. Niko, which operates in a number of countries around the world, had been notified by Canadian authorities in January 2009 that it was being investigated over allegations that it had provided the Energy Minister of Bangladesh with a $190,000 vehicle for personal use as well as with trips to Calgary and New York. These gifts had been made at the time when the Minister was assessing how much compensation was owed to Bangladeshi villagers for water contamination and other environmental concerns caused by explosions at a Niko operation.
Niko's sentence included a $9.5 million fine and a three-year probation order that requires the company to implement a detailed compliance program subject to review by an independent auditor. Prior to Niko's conviction, only one Canadian company had been convicted of foreign bribery under the CFPOA in the past decade. The $25,000 fine issued by the court in that case, known as R. v. Hydro Kleen Services Inc., was less than the bribe involved.
The Niko prosecution is a signal that Canada is serious about ramping up enforcement of the CFPOA. The guilty plea comes shortly after Canada was criticized by two international organizations for ineffective enforcement of anti-bribery legislation. In May 2011, Transparency International, a group that monitors global corruption, issued a report that criticized Canada for failing to enforce its foreign bribery laws, noting that the Canadian legal system and courts "do not handle complex 'white collar' criminal cases very well." This followed a similar report by the OECD Working Group on Bribery, published in March 2011, which found that "Canada's regime for enforcement of the Corruption of Foreign Public Officials Act remains problematic in important areas."
Canada's foreign bribery legislation
The CFPOA was enacted in 1999 and brought Canada into compliance with the 1997 OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions.
The CFPOA prohibits giving or offering to give a benefit of any kind to a foreign public official, or any other person for the benefit of the foreign public official, where the ultimate purpose is to obtain or retain a business advantage. It is applicable both to individuals and corporations, whether acting directly or through an agent or third party. An individual need not be Canadian to be charged. The extraterritorial reach of the CFPOA means that a Canadian business could be liable in Canada and elsewhere: double jeopardy does not apply.
Violation of the CFPOA is an extraditable offense punishable, in the case of an individual, by imprisonment for up to 5 years. A company can receive an unlimited fine for failing to prevent bribery. There is no limitation period for indictable offenses. Because sanctions under the CFPOA are solely criminal, proof "beyond a reasonable doubt" is required.
Unlike parallel enactments in most other OECD countries, whose jurisdiction is based on the nationality of the accused, the CFPOA only applies when the bribery has a "real and substantial" connection to Canada (i.e., presence, action or effect in Canada). However, the involvement of a Canadian parent or subsidiary may be sufficient to trigger its application. In 2009, the Minister of Justice introduced legislation (Bill C-31) that would have added provisions to the CFPOA based on the nationality principle so that, in certain cases, offences committed outside Canada would be deemed to have been committed in Canada. However, it died on the order paper with the prorogation of Parliament in December 2010 and has not since been reintroduced.
Anti-Bribery in the United States and the United Kingdom
The United States (Foreign Corrupt Practices Act) and the United Kingdom ( Bribery Act) also have legislation that prohibits the bribery of public officials and makes it a crime at home to bribe foreign officials or fail to maintain appropriate accounting records that would reveal such corruption. Canadian and American anti-bribery offenses are similar, making compliance less complex for corporations that fall within both jurisdictions. The UK's Bribery Act, enacted on July 1, 2011, is in some respects stricter than its Canadian and U.S. equivalents. For example, rather than dealing only with bribery of government officials, the Bribery Act also covers corruption between commercial entities.
The limited number of convictions under Canada's anti-bribery legislation contrasts with the situation in the United States, which has dramatically increased its enforcement in recent years. Significant fines – frequently in excess of US$100 million and ranging as high as US$800 million – have been levied on companies under the Foreign Corrupt Practices Act.
Canada's Corruption of Foreign Public Officials Act: No Longer a Paper Tiger
The Niko case indicates that Canada is stepping up its enforcement of the CFPOA. The RCMP has indicated that its International Anti-Corruption Unit, established in 2008 with offices in Ottawa and Calgary, is currently conducting over 20 investigations of Canadian companies allegedly involved in overseas bribery. There is also a pending case involving an individual accused of bribing an Indian government official in connection with a contract for the supply of a security system.
In light of the above, Canadian companies with business activities overseas (especially in countries with high levels of corruption) would be well advised to review their processes and to implement adequate corporate compliance programs, which should include the following key elements:
- proportionate procedures, including regular and comprehensive auditing, as well procedures for the reporting of potential violations;
- top-level commitment: identification of an authoritative officer within the company who is responsible and accountable for anti-bribery compliance;
- risk assessment of business projects involving business with other countries;
- extensive due diligence of business projects involving business with other countries;
- communication strategy (including training programs for employees and officers); and
- monitoring and review of relationships with foreign government and business partners to establish and document compliance with anti-bribery legislation.
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