Canada and Foreign Bribery Enforcement
Canada is an interesting country – not just to visit — but in anti-corruption enforcement. Canada is dead last in the G7 when it comes to anti-corruption enforcement. Transparency International has consistently criticized Canada’s anti-corruption enforcement program as woeful. Last year, the OECD cited Canada for its poor enforcement record.
For companies subject to Canadian anti-corruption law, the Corruption of Foreign Public Officials Act (CFPOA), the situation is changing rapidly. In response to international pressure, Canada is rapidly increasing anti-corruption enforcement.
Earlier this year, Niko Resources, Ltd., a mining company, was fined $9.5 million for bribing Bangladesh’s junior energy minister with a $190,000 SUV and trips to Calgary and New York. The energy minister was investigating the Niko’s liability to Bangladeshi villagers affected by explosions at a Niko operation in Bangladesh.
Blackfire Exploration, another Canadian mining company, has been targeted for enforcement based on allegations it bribed a mayor of a small Mexican town in exchange for political protection for its mine there. The Royal Canadian Mounted Police (RCMP) raided Blackfire’s Calgary office.
Recently, the RCMP executed a search warrant against SNC Lavalin at its Oakville, Ontario office in connection with its failed bid to supervise a World-Bank-sponsored bridge-building project in Bangladesh.
According to Canadian law enforcement, the RCMP has approximately 23 ongoing corruption investigations. The RCMP has created two new corruption enforcement units in Calgary and Ottawa, respectively.
The CFPOA is closely modeled after the US FCPA, with some interesting differences. The CFPOA applies to any company with a “real and substantial connection” to Canada (business operations in Canada or listing on a Canadian stock exchange). It prohibits any individual from giving or promising anything of value, directly or indirectly, to a foreign government official with the intent to obtain/retain business or to secure an unfair business advantage.
The CFPOA does not include a books and records provision but public companies in Canada are already subject to such a requirement under the Canada Business Corporations Act and provincial corporate statutes and securities laws. Like the FCPA, the CFPOA has exceptions for facilitating payments, reasonable expenses to pay officials for the promotion, demonstration or explanation of the company’s products, or if transaction is legal under local law.
For a violation an individual is subject to 5 years imprisonment per violation and corporations are subject to unlimited fines.
Interestingly, the CFPOA does not require a “corrupt intent” like the FCPA. Thus, prosecutors need only show an intent to cause the circumstances to occur. In addition, the CFPOA includes interesting language modeled after the US domestic bribery statute requiring the prosecutor to prove a quid pro quo in exchange for a payment of anything of value. Also, the CFPOA does not include specific language applicable to third party agents but the terminology of “directly or indirectly” has been interpreted to apply to incidents where an individual “knows” that a third party is expected to pay a bribe to a foreign government official.
Canadian International Business Activity
Like other industrialized countries, Canada’s trade and investment has shifted to emerging economies where the risk of corruption is high. Canadian companies in the mining and extractive resource industry are particularly active in foreign markets where corruption is rampant. Canadian companies will be under significant pressure to pay bribes in these industries.
Canada was supposed to submit an update in October 2011 to the OECD on its anti-corruption efforts and enforcement of the CFPOA. The OECD is expected to file a new report on Canada’s performance in March of next year. For those companies subject to the CFPOA, they should expect a more aggressive enforcement environment