Ed. Note-this post was originally published in Trade Lawyers Blog and comes courtesy of our colleague Cyndee Todgham Cherniak
On October 2, 2010, I gave a presentation at the University of Windsor, Center for Transnational Law and Justice concerning Canada’s anti-bribery laws. The theme of my presentation was that Canada takes a balanced approach to anti-bribery enforcement.
As part of my presentation, I discussed why it appears that Canada’s anti-bribery enforcement is lacking. Canada is often criticized by the United States because of enforcement of the Corruption of Foreign Public Officials Act (and for the record I would like the name of Canada’s law changed to “The Prevention of Corruption of Foreign Public Officials Act) (CFPOA). There is only one decided case under the CFPOA (Hydro Kleen Group) and currently one case may public by the Royal Canadian Mounted Police, International Anti-Corruption Unit (RCMP, IACU) (being the Nazir Karigan case). In addition, Niko Resources (a publicly listed company) announced issued a press release that they were being investigated under the CFPOA and a number of NGOs have posted a letter they sent to the RCMP-IACU asking that an investigation be commenced concerning Blackfire Exploration.
However, this does not mean there isn’t work being done and other corruption investigations are not being conducted. On the contrary, the RCMP-IACU has two busy branches in Ottawa and Calgary. So, why is it that no one knows about Canada’s anti-bribery enforcement – because the Canadian way is different than the U.S. way of enforcement.
Canada has signed 3 international anti-bribery treaties (the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, the OAS Inter-American Convention Against Corruption, and the U.N. Convention Against Corruption) and has incorporated the international obligations into Canadian law.
That being said, Canada’s anti-bribery regime is different than the U.S. regime even though the U.S. is a signatory to the same international agreements. Canada has implemented its international obligations in a manner that is different and that is permitted.
What are the differences?
1. Canada’s CFPOA was enacted in 1999 and, therefore, is only 11 years old. The first 11 years of The U.S. Foreign Corrupt Practices Act (FCPA) saw a small number of prosecutions.
2. Canada’s population is significantly less than the population in the United States. The volume of Canada’s business in foreign jurisdictions is significantly lower than the volume of U.S. business in foreign jurisdictions. As a result, the proportionate volume of cases would be significantly lower.
3. Canada’s CFPOA does not contain the record-keeping/accounting requirements that are in the FCPA. As a result, cases do not arise from reportings to Canada’s equivalent of the Securities Exchange Commission (since there are not any equivalent FCPA reportings). A large number of U.S. cases commence under the FCPA accounting/reporting provisions. Since this mechanism does not exist in Canada’s law, the volume of cases is significantly reduced in Canada.
4. Canada does not have any foreign whistle-blower incentives. Section 425.1 of Canada’s Criminal Code creates an offence if a company or company officials retaliates against an employee who provides information during the course of an investigation. However, there isn’t Canadian legislation that financially rewards a foreign whistle-blower. Since this mechanism does not exist in Canada’s law, the volume of cases is significantly reduced in Canada.
5. Canada does not have a voluntary disclosure program for companies and company officials to disclose their own wrong-doing or the wrong-doing of a predecessor entity. As previously mentioned, the RCMP-IACU is the enforcement authority in Canada (not the Department of Justice like in the United States). I have spoken with the RCMP-IACU and they have informed me that there is no administrative program that allows a company or company officials to make a voluntary disclosure to prevent or diffuse a potential prosecution. The role of the RCMP is to investigation crimes and hand to the Crown (Department of Justice) the facts (investigative report) so that the Crown can decide whether to pursue a criminal conviction. There isn’t a mechanism to negotiate the payment of a fine without the prosecution.
6. When there is a Canadian investigation, the RCMP-IACU are not inclined to talk about it. When I spoke with the RCMP, they would not confirm any active investigation or the number of investigations underway. The RCMP do not undertake “perp walks” as is common in the United States. There is not significant publicity of active investigations. The Canadian authorities are less likely to commence “overzealous prosecutions” or undertake prosecutions as publicity stunts. Canadian prosecutors are not elected and do not have to “grand-stand” for the votes.
7. Canada’s criminal justice system does not include grand juries. As a result, the job of the RCMP is to gather sufficient information to cause the Crown to lay charges. Canada does not use grand juries as an investigatory tool.
8. Canadian law does not permit tax authorities to share information that they receive during the course of an income tax, sales tax or other tax audit. The information provided during the course of an audit to tax authorities is confidential under the law and cannot under Canadian law be used by tax authorities for purposes other than enforcement of tax laws. If the Canada Revenue Agency is involved in a criminal / special investigation, the information may be used CFPOA purposes. Most tax audits are not special investigations. As a result, if there is evidence of payment of bribes paid to foreign public officials discovered during a review of books and records during a tax audit, the information should not be conveyed by the Canada Revenue Agency to the RCMP-IACU and should not be used as evidence against the taxpayer.
9. Canada does not have a robust advisory opinion mechanism similar to the administrative mechanism in the United States. The RCMP-IACU decide whether to investigate a crime and do not provide guidance on how to avoid prosecutions or get away with crimes. The RCMP-IACU do not make the law, they merely enforce existing laws.
10. Canada’s CFPOA at the present time does not apply where the bribery activity does not have a “real and substantial connection” to Canada. In 2009, the Minister of Justice tabled legislation (Bill C-31) to incorporate a nationality principle in Canada’s CFPOA. However, that legislation did not proceed in the House of Commons when Parliament prorogued in December 2009. The legislation has not been re-introduced.
11. Canada does not have a mentorship program similar to the mechanism in the United States. Since Canada does not have a voluntary disclosure mechanism or a mechanism to improve compliance, Canada does not have a mechanism where a lawyer is appointed to assist Canadian companies comply better with Canada’s anti-bribery laws.
The Canadian anti-bribery regime’s significant differences with the U.S regime makes Canada’s enforcement less visible. Less visible does not mean the Canadian enforcement regime does not exist or it is not active. You cannot look for evidence of enforcement activity in the same places that it is found in the U.S.
Cyndee Todgham Cherniak can be reached at 416-307-4168 or email@example.com.