PROACTIVE COMPLIANCE: BUILDING AND IMPLEMENTING AN ANTI-BRIBERY COMPLIANCE PROGRAM

• Jurisdiction: Derecho Internacional

International Mining and Oil & Gas Law, Development, and Investment (April 2017)
CHAPTER 21A
PROACTIVE COMPLIANCE: BUILDING AND IMPLEMENTING AN ANTI-BRIBERY COMPLIANCE PROGRAM
Michael Dixon
Liam Kelley
Blake, Cassels & Graydon LLP
Calgary

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MICHAEL DIXON, Partner, Blake, Cassels & Graydon LLP, Calgary. Mr. Dixon's practice involves all aspects of corporate/commercial litigation and arbitration, with a focus on oil and gas law, contract disputes, royalty disputes, fraud claims and insurance matters. He regularly advises Canadian and multinational corporate clients on compliance with domestic and international anti-bribery and corruption legislation. He has conducted internal investigations in response to corruption allegations. He also assists clients with implementing and improving anti-corruption compliance programs and with anti-corruption diligence during mergers, financings and other commercial transactions. Mr. Dixon also advises on compliance with a variety of other criminal and regulatory legislation and has defended clients charged under a variety of criminal and regulatory statutes. He also advises clients on search and seizure issues. In 2014 he was recognized as a leading investigations specialist by Global Investigations Review's 40 Under 40. Mr. Dixon received his LL.B. from the University of Victoria and is a member of the Calgary and Canadian Bar Associations.

Introduction

Anti-corruption compliance has become a top priority in the global business community over the last few years, and for good reason. Leaving aside the socio-economic effects of corruption on developing nations, the expansion of anti-corruption enforcement regimes around the world has potentially devastating consequences for companies that do business in high risk jurisdictions without appropriate compliance systems.

This risk is particularly acute in resource extraction industries, where companies are increasingly multinational and some of the best exploration opportunities are in emerging or transitional markets. Corruption statistics for extractive industries illustrate this; for example, in the gold mining sector, seven of the 10 highest-producing countries in 2016 ranked between 21 and 45 on Transparency International's Corruption Perceptions Index (on a scale of 0-100, with 0 being "highly corrupt" and 100 being "very clean").¹ Extractive companies routinely operate in jurisdictions where the playing field is not always level, and account for the greatest number of foreign bribery investigations and enforcement actions worldwide by a significant margin.²

Enforcement activity is also on the rise. In 2016 alone, an unprecedented amount of approximately USD $2.48 billion was paid by companies to resolve cases under the United States Foreign Corrupt Practices Act³ (the "FCPA"), including USD $420 million by companies in resource industries.⁴

While the anti-corruption regimes of the US, Canada and the UK count among the most robust in the world, governments in traditionally high-risk areas are also ramping up enforcement efforts. Brazil, for example, has been increasingly aggressive in combating corruption within its borders. Despite historic struggles with the issue, Brazil has a relatively comprehensive legislative framework in place regarding anti-corruption, consisting of criminal, civil and administrative offences that impose consequences on public officials and parties that engage in corrupt practices with public officials. In addition to enacting the new anti-corruption Law 12.846, often referred to as the "Clean Companies Act," Brazilian enforcement authorities have undertaken a number

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of high profile investigations in recent years. The most significant involved employees of Brazilian state-owned oil company Petróleo Brasileiro S. A. ("Petrobras"), which was accused of awarding alleged artificially inflated contracts to certain construction contractors, who kicked back a portion of the windfalls to Petrobras executives, politicians and political parties, sometimes in the form of campaign donations.

As an increasing number of other nations seek to curb corruption at home, companies risk being caught in the crossfire between criminal legislation in multiple jurisdictions. In this environment, it is critical that resource companies take proactive steps to mitigate corruption-related risks, as failure to do so can result in severe consequences. Violations of anti-corruption legislation may result in multi-million dollar fines, court imposed monitors, imprisonment of directors or officers involved in the conduct at issue, debarment and broader considerations of reputational damage, barriers to accessing capital and financing, and potential cancellation of agreements or expropriation of assets.

Fighting corruption is now truly a global effort, with information sharing between governments and non-governmental organizations such as the World Bank becoming increasingly commonplace. Organizations such as Transparency International are also stepping up monitoring and reporting efforts, and are collecting and disseminating an increasing amount of information into the public realm. In many ways, extractive sector companies have been put on the front lines of the fight against corruption, and need to take proactive compliance measures from both a corporate ethics standpoint and to mitigate exposure to corruption and bribery-related risks. This paper will outline the legal and regulatory backdrop in the anti-corruption field, discuss the components of a robust compliance program, and provide practical advice regarding issues that may be encountered when implementing such a program.

Anti-Bribery Legislation

Canadian CFPOA

While Canada has been historically less active than its southern neighbor in fighting corruption abroad, Canadian enforcement efforts have been steadily on the rise for several years. Although it still lags behind other jurisdictions in many respects, as discussed further below, the Canadian Corruption of Foreign Public Officials Act⁵ (the "CFPOA") is significantly more draconian. Unlike its US and UK counterparts, the Canadian system is a strictly criminal regime, with no option for civil resolution. This makes it imperative for resource companies with a connection to Canada to have their finger on the pulse of CFPOA developments.

The CFPOA was amended significantly in June 2013, primarily to close a jurisdictional loophole and add a books and records offence. As a result of the amendments, Canadian authorities can

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now prosecute any Canadian company or individual for a bribe occurring in a foreign country, even if the transaction occurs entirely outside of Canada.⁶ Foreign individuals and companies may also be caught by the CFPOA where there is a nexus to Canada.

The centrepiece of the CFPOA is Section 3, which makes it a criminal offence to directly or indirectly provide, offer, or agree to provide or offer any benefit to a foreign public official, either in consideration for an act or omission by the official or to induce the official to influence the foreign state for which the official performs duties or functions.⁷ Canadian courts have found that the term "agrees" imports a concept of conspiracy into the CFPOA, and that prosecutors need not establish that a bribe was actually paid to a government official. If the offending party agrees to pay a bribe to a government official, that is sufficient to create liability under the CFPO A.

Case Example

R v Karigar⁸ was particularly notable for involving the first trial and first conviction of an individual pursuant to the CFPO A. Karigar revolved around the actions of Nazir Karigar, an agent for the Canadian subsidiary of American technology firm CryptoMetrics, Inc. Mr. Karigar conspired to bribe Air India officials and the Indian Minister of Civil Aviation to secure a contract for a Biometric Passenger Security System valued at approximately USD $100 million. He was convicted in August 2013 following a lengthy trial. The salient points of the court's decision included:

— an agreement to pay a bribe constitutes an offence under the CFPOA, even in the absence of proof that a bribe was actually offered or paid;

— the court accepted an expansive definition of "foreign public official," finding that officials from state-owned enterprises are foreign public officials under the CFPOA; and

— the 2013 amendments to the CFPOA, which expanded its jurisdiction to include any offences involving Canadian companies or citizens, do not apply to offences committed prior to June 19, 2013. For these cases, the prosecution must establish a connection between the offence and the physical territory of Canada. The court found that Mr. Karigar's position as an agent for a Canadian company and the fact that the alleged bribes would benefit a Canadian company were sufficient to establish a Canadian connection.

Mr. Karigar was sentenced to three years imprisonment in 2014, despite the fact that he was 67 years old and suffering from health complications.

The CFPOA's definition of "foreign public official" is broad, and extends beyond traditional government officials to include those who exercise state functions, such as employees of state-

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owned or controlled enterprises. For the purposes of the CFPOA, "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

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