On February 5, 2013 the federal government tabled amendments to the Corruption of Foreign Public Officials Act (CFPOA) which, if passed, would give Canada a much broader reach and pose a more serious threat to Canadians and Canadian businesses who attempt to gain a business advantage through bribery. These amendments are evidence of the Government's tougher approach to enforcement of the CFPOA in recent years, as witnessed already by prosecutions of Niko Resources in 2011 and more recently of Griffiths Energy, both of which pled guilty to offences under the Act (see below for more details). In some ways, the CFPOA will now be tougher than its US counterpart.
Generally speaking, 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.
The amendments propose to make changes which would:
- Entrench the nationality principle as the basis of jurisdiction for offenses
- Broaden the definition of a "business" to which the Act applies
- Eventually eliminate the facilitation payments exception
- Create a books and records offense (similar to that contained in the U.S. Foreign Corrupt Practices Act)
- Provide exclusive authority to the RCMP to lay informations in respect of charges
- Increase the maximum individual penalty from 5 to 14 years imprisonment
Broader Scope of Canada's Corruption Laws
As mentioned in our August 9, 2011 blog post, in 2009, the Minister of Justice introduced legislation (Bill C-31) that would have added provisions to the CFPOA based on the nationality principle; however, it died on the order paper with the prorogation of Parliament in December 2009 and the idea has only now been revived.
The legislation, as it now stands, applies to activities with a "real and substantial" connection to Canada, but the entrenchment of the nationality principle will mean that the CFPOA will cover activities by Canadian nationals and Canadian-based businesses regardless of where the activity took place. Furthermore by removing the words "for profit" from the definition of "business", the amendments ensure that the Act applies to business activities, whether profitable or pursued as a loss-leader.
The amendments also stand to increase the number of activities that fall within the scope of the Act, by eliminating an exception and creating a new offense:
- An exception for facilitation payments will eventually be eliminated. Facilitation payments are made to expedite or secure acts of a routine nature by foreign public officials (e.g., payments to a customs official to clear goods more quickly) and the elimination will come into effect at a later date to be set by Cabinet.
- A new books and records offense similar to that contained in the U.S. Foreign Corrupt Practices Act was introduced. The new offence will capture activities that falsify or hide records and payments related to the bribery of foreign public officials. A key difference, however, is that the new offence will be a criminal offence subject to the "beyond a reasonable doubt" evidentiary threshold. The comparable U.S. provision is enforced civilly and falls under a less onerous civil "balance of probabilities" but does not attract criminal liability for the book-keeping offense.
Charges and Penalties
Currently, charges under the CFPOA may be recommended by any police force in Canada, but the amendments will give exclusive authority to lay an information to the RCMP. According to the Government announcement, in 2008, the RCMP established an International Anti-Corruption Unit, which is dedicated to raising awareness about and enforcing the CFPOA. Giving unique responsibility for enforcement to the RCMP Unit should lead to greater consistency in the enforcement of the law and to a more efficient use of resources.
The amendments will also increase the penalty for individual offenders. The maximum penalty will go from a maximum of five years' imprisonment to a 14 year jail term for individuals. The unlimited fines for individuals and corporations, subject to the discretion of the judge, remains.
Until recently, the CFPOA had been sitting, mostly silent, on the books, but since the formation of the dedicated RCMP unit in 2008 the Government has been stepping up enforcement and has pursued a number of high profile cases.
The Government's announcement issued February 5 mentions that, to date, three companies have been convicted under the Act, two cases are pending and there are 35 ongoing investigations under the CFPOA.
Most recently, on January 22, 2013, Griffiths Energy International Inc. pleaded guilty to a charge under the CFPOA. Griffiths acknowledged making a $2 million cash payment to the wife of the Ambassador from the Republic of Chad, as a consulting fee. Griffiths total penalty under the CFPOA was $10.35 million.
See our previous blog post for details of the Niko Resources case, Canada's second conviction. Niko's sentence included a $9.5 million fine and a three-year probation order that required 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.
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