CANADA STRENGTHENS ITS LAWS AGAINST BRIBERY OF FOREIGN PUBLIC OFFICIALS
| Jurisdiction | United States |
CANADA STRENGTHENS ITS LAWS AGAINST BRIBERY OF FOREIGN PUBLIC OFFICIALS
Partner
Dentons Canada LLP
Vancouver, British Columbia, Canada
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I. Introduction and Background
The Corruption of Foreign Public Officials Act (CFPOA)1 was enacted in 1999 and made it an offence in Canada to bribe a foreign public official in order to obtain or retain an advantage in the course of business. To date, three companies have pleaded guilty and been convicted of offences under the CFPOA, the latter two resulting in fines of approximately $10 million each.
On August 15, 2013, the first trial was conducted under the CFPOA, which resulted in the first individual, Nazir Karigar, being convicted by the Ontario Superior Court of bribing a foreign public official. Mr. Karigar has not yet been sentenced.
On June 19, 2013, the CFPOA was amended (2013 Amendments) to expand the offences and increase the punishments under the Act, broaden the extra-territorial reach of the Act, and extend the ambit of the Act to include not only for-profit businesses but also charities and other nonprofit organizations.2
The United States was the first country to enact legislation against bribery of foreign officials with the implementation of the Foreign Corrupt Practices Act of 1977 (FCPA).3 However, on implementing the FCPA, many argued that the United States was placed at a competitive disadvantage compared to other international trading states in bidding for third-party business, and American businesses complained that complying with the FCPA's strict provisions resulted in lost business opportunities.4 As a result, the United States encouraged other states through the United Nations and other international bodies to also institute anti-corruption
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initiatives so that American businesses would no longer be at a disadvantage.
The impetus for the CFPOA in Canada was the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (Convention) adopted by the negotiating conference of the Organization for Economic Co-operation and Development (OECD) in 1997 and brought into force in February 1999.5 Signatories to the Convention now include the 34 OECD members (including Canada, the United States, and the United Kingdom6 ), as well as Argentina, Brazil, Bulgaria, Colombia, Russia, and South Africa, which are not members of the OECD.
The preamble to the Convention noted that it was addressing bribery because it "is a widespread phenomenon in international business transactions, including trade and investment, which raises serious moral and political concerns, undermines good governance and economic development, and distorts international competitive conditions."
The Convention appears to have recognized the United States' experience that companies who refuse to bribe or to respond to solicitations of bribes when dealing with foreign public officials could be at a competitive disadvantage if competitors from other countries are willing to engage in such behaviour. As a result, it is ideal if industrialized nations can all implement similar laws prohibiting bribery in foreign nations. It is also understood that perhaps the most effective way to combat bribery is not within the nations themselves that permit, acquiesce to, or encourage acts of bribery, but rather to prohibit organizations based in industrialized nations from bribing public officials in such developing nations.
Recently, the 2013 Amendments strengthened the CFPOA in the following respects:
• the offence of bribing a foreign public official was expanded beyond business carried on "for a profit" to include business activities not carried on for profit, such as charities and other non-profit organizations;
• the maximum period of imprisonment for bribing a foreign public official has been increased from 5 years to 14 years;
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• instead of requiring a "real and substantial connection" between Canada and the location where acts of bribery occur, the CFPOA now applies to acts of bribery anywhere in the world where such acts are conducted by Canadian citizens, permanent residents present in Canada, Canadian corporations, or other entities created under the laws of Canada or a province;
• "facilitation payments" (generally, payments to a public official to expedite a routine governmental act that is part of the official's duties, and not to obtain or retain business or any other undue advantage), which are currently an exception to the offence of bribing a foreign public official, will become illegal at a future date to be set by the Governor in Council;
• a new offence of manipulation or falsification of accounting records to conceal bribery has been created (the "books and records" offence), which attracts a maximum sentence of 14 years in prison; and
• whereas previously many different categories of peace officers that exist in Canada were empowered to enforce the CFPOA, the Royal Canadian Mounted Police (RCMP) have been given exclusive jurisdiction to charge persons for offences under the CFPOA.
The CFPOA is most relevant to individuals and companies that conduct business in developing nations where bribery is typically more prevalent. In many developing nations, which are often poor, bribery is not criminalized but rather is accepted, or at least ignored. Lower-level government functionaries may routinely require "facilitation payments" to supplement their meagre salaries.
The extractive industries tend to be highly regulated, requiring frequent interactions with governments in order to obtain necessary concessions, licences, permits, and other authorizations to explore and exploit natural resources. Such frequent interactions with public officials increase the opportunities for bribery in such countries. As a result of the CFPOA and recent high-profile convictions under it, many resource companies in Canada that operate in developing nations have been implementing anti-bribery and anti-corruption policies and procedures.
II. Corruption of Foreign Public Officials Act (Canada)
The CFPOA entered into force on February 14, 1999, and was amended in 2001 and in 2013. The CFPOA makes it an offence in Canada to bribe a foreign public official in order to obtain or retain an advantage in the course of business.
Section 3 of the CFPOA sets out the offence of bribery of a foreign public official as follows:
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(1) Every person commits an offence who, in order to obtain or retain an advantage in the course of business, directly or indirectly gives, offers or agrees to give or offer a loan, reward, advantage or benefit of any kind to a foreign public official or to any person for the benefit of a foreign public official
( a) as consideration for an act or omission by the official in connection with the performance of the official's duties or functions; or
( b) to induce the official to use his or her position to influence any acts or decisions of the foreign state or public international organization for which the official performs duties or functions.
(2) Every person who contravenes subsection (1) is guilty of an indictable offence and liable to imprisonment for a term of not more than 14 years.
"Every person" who is capable of committing the offence under subsection 3(1) includes not only individuals but also public bodies, corporations, firms, partnerships, trade unions, municipalities, or other associations of persons.
A "foreign public official" is defined as:
( a) a person who holds a legislative, administrative or judicial position of a foreign state;
( b) a person who performs public duties or functions for a foreign state, including a person employed by a board, commission, corporation or other body or authority that is established to perform a duty or function on behalf of the foreign state, or is performing such a duty or function; and
( c) an official or agent of a public international organization that is formed by two or more states or governments, or by two or more such public international organizations. 7
A "foreign public official" would include, for example, an elected representative or a government official of a foreign state, as well as an official or agent of a public international organization, such as the United Nations. The official may work at any level of government, from national to local. This prohibition applies not only to conduct internationally, but also to the bribing of foreign public officials who are situate within Canada (for example, bribing a foreign public official while such official is in Canada in order to obtain a construction contract to build an embassy in Canada).
To constitute an offence, a person must have given, offered, or agreed to give or offer a benefit to a foreign public official "in order to obtain or retain an advantage in the course of business."8 The CFPOA defines "business" as "any business, profession, trade, calling, manufacture or undertaking of any kind carried on in Canada or elsewhere."9
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As a result of the 2013 Amendments, the prohibition against bribery applies not only to for-profit companies but also to charities, non-governmental organizations and other not-for-profit organizations, provided that they are conducting "business" at the relevant time. The courts have not yet considered what constitutes activities "in the course of business" under the CFPOA. It is likely that selling products, such as medicine or homes, in a foreign country for a price that does not exceed the cost of such products (i.e., generating revenue but not profit) would be conducting "business," but it is less clear whether the provision of products or services for free, such as the provision of humanitarian aid, will be considered...
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