Canada: Canada Redoubles Efforts At Combating Foreign Bribery And Corruption: Officers And Directors Of Canadian Businesses Warned To "Play By The Rules"

Within days of successfully imposing a fine in the amount of $10.3 million against Griffiths Energy1 pursuant to the Canadian Corruption of Foreign Public Officials Act (CFPOA), the Canadian government announced on February 5, 2013, that it is "redoubling" its fight against bribery and corruption and expects "Canadian business to play by the rules." The government intends to accomplish this by implementing some of the most significant changes to the CFPOA since it first came into force in 1999.

Proposed Amendments

The government's announcement, made by Minister of Foreign Affairs John Baird, lists the following far-reaching amendments to the CFPOA:

  • Increasing the maximum term of imprisonment - The foreign bribery offence is currently punishable in the case of individuals by imprisonment up to a maximum period of five years, and monetary fines against individuals and corporations at the discretion of the judge without regard to a prescribed maximum amount. The government is proposing to increase the maximum term of imprisonment for individuals to 14 years.  As is the case now, the amendments will not change the fact that no limitation period would apply as it is an indictable offence.
  • Nationality jurisdiction – Currently, the Canadian government's prosecutorial jurisdiction is restricted by the legal requirement that there must exist "a real and substantial link between the offence and Canada" (i.e., that a significant portion of the activities constituting the offence of bribing a foreign public official takes place within Canada).2 Canada has been criticized by the Organization for Economic Co-operation and Development (OECD) for applying the "real and substantial link" test rather than a test based on nationality. In its announcement the government has indicated that this amendment will now permit prosecutions under the CFPOA based on nationality, and therefore "will make it easier for Canada to prosecute Canadians or Canadian companies for bribery in other countries, insofar as it will allow the Government of Canada to exercise jurisdiction over all persons or companies that have Canadian nationality, regardless of where the alleged bribery has taken place."  The practical consequence of this amendment is that it will significantly expand the scope of Canadian prosecutorial jurisdiction to cover activities by Canadian nationals (including officers and directors) and Canadian corporations in violation of the CFPOA, regardless of the degree of connection between the illegal activity and Canada.
  • Books and records offence - This amendment adds an accounting books and records provision to the CFPOA.  It will be illegal to falsify records or hide payments related to bribery of foreign public officials. Conviction under this offence can result in 14 years' imprisonment for individuals, and monetary fines against individuals and corporations at the discretion of the judge without regard to a prescribed maximum amount.  Although this offence will be criminal in nature (and therefore require proof of criminal intent) rather than an infraction subject to civil penalties, it nevertheless will substantially increase the risk exposure of Canadian corporations, officers and directors to prosecutions under the CFPOA. 
  • Eventual elimination of facilitation payments - The CFPOA currently allows nominal payments made to expedite or secure the performance by a foreign public official of any act of a routine nature that is part of the foreign public official's duties or functions. This amendment, which is to come into effect at a later date to be set by Cabinet, will eliminate the exception for facilitation payments, making the CFPOA consistent with the recommendation from the OECD that such payments be made illegal. The additional time for the coming into effect of this provision is intended to allow Canadian corporations to phase out any such prevailing practices in their foreign business activities.
  • Clarifying the definition of "business" – By removing the words "for profit" in the definition of business, this amendment eliminates the potential defence that an unprofitable business cannot be charged under the CFPOA. This change reflects the OECD's recommendation that Canada undertake the necessary revision to its implementing legislation to achieve consistency with the text of the OECD Convention.
  • Exclusive ability to lay charges - The Royal Canadian Mounted Police (RCMP) will now be given exclusive authority to lay charges under the CFPOA.  Previously the provincial government law enforcement authorities were permitted to lay charges pursuant to the CFPOA. According to the government's announcement, since 2008 the RCMP has established the International Anti-Corruption Unit dedicated to "raising awareness and enforcing the CFPOA."  The RCMP currently has 34 ongoing investigations under the CFPOA, and this amendment will ensure specialization and centralized decision-making by the RCMP and the federal Public Prosecution Services Canada concerning enforcement under the CFPOA.

Conclusion

There can be no doubt left that the Canadian government has taken seriously the criticisms levied against it by the OECD for not actively enforcing the CFPOA, and now intends to improve its international reputation by actively combating foreign bribery and corrupt activities of Canadian nationals and corporations. The government has also indicated that it "expects that other countries [will] do the same," by stepping up their own enforcement of bribery and anti-corruption laws consistent with their international obligations.

The increased prison terms for Canadian nationals including officers and directors of Canadian corporations, the elimination of territorial jurisdiction test by explicitly providing for a "nationality" test, the increased risk exposure to CFPOA penalties by adding a books and records provision, and the elimination of exceptions and defences such as those for facilitation payments and businesses not earning profits, all point towards continuing vigorous enforcement by the Canadian government of the CFPOA.

Within the last five years, in addition to delegating to the RCMP the enforcement function for the CFPOA, the Canadian government has successfully levied fines against Niko Resources (in 2011 --  $9.5 million fine plus three years probation) and Griffith Energy (in 2013 -- $10.5 million fine).  With the large number of ongoing investigations now being handled by the RCMP, one can expect that the government will continue to strongly sanction Canadians who do not act in a manner consistent with the CFPOA.

The legislation containing the amendments, tabled in the Senate immediately following the government's announcement, is expected to pass quickly through the Canadian Parliament without opposition. Officers and directors of Canadian corporations should strongly consider investing in creating or maintaining an ethical corporate culture, which now more than ever constitutes an imperative for ensuring a viable foreign business and the avoidance of personal sanctions including imprisonment.3

Footnotes

1    Vigorous Canadian Anti-Corruption Enforcement Continues Unabated: Griffiths Energy Fined $10.3 Million Pursuant to the CFPOA, Osler Update, January 29, 2013.

2   http://www.justice.gc.ca/eng/dept-min/pub/cfpoa-lcape/index.html

3    Investing in Ethical Corporate Culture: The Imperative for Instituting an Anti-Corruption Compliance Program for Canadian Businesses Venturing Overseas, Osler Corporate Review, June 2010.

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