TRANSPARENCY INTERNATIONAL - CANADA / DAVIS LLP
ANTI-CORRUPTION FOR THE MINING INDUSTRY
Overview of Law on the Corruption of
Foreign Public Officials
Jeffrey Horswill
[email protected] | 604-643-6357
Introduction
An overview of legislation that can frame the discussion on
enforcement and strategies for mitigation and compliance
that will follow.
Overview
• Anti-corruption legislation creates criminal offences for providing
benefits to the officials of foreign government to gain or keep
business.
• The prohibition applies to corporations as well as individuals.
• The criminal sanctions include fines of unlimited amounts; forfeiture
of profits and assets; strict probationary orders with cumbersome
reporting requirements; and prison for individuals.
• Additional sanctions include civil actions and reputational losses.
Legislation in Canada, the United States and
the United Kingdom
• The law in Canada is the Corruption of Foreign Public Officials Act (“CFPOA”).
• The law in the United States is the Foreign Corrupt Practices Act (“FCPA”).
• The law in the United Kingdom is the Bribery Act 2010.
Underlying International Convention
• The Convention on Combating Bribery of Foreign Public
Officials in International Business Transactions is the
foundational document (although the FCPA was already
long standing US law).
• 39 parties to the Convention, each with their own
legislation.
OECD Convention on Combating Bribery of
Foreign Public Officials in International Business
Transactions: Parties as of April 2012
Argentina Australia Belgium Brazil
Bulgaria Canada Chile Czech Republic
Denmark Estonia Finland France
Germany Hungary Iceland Ireland
Israel Italy Japan Korea
Luxembourg Mexico Netherlands New Zealand
Norway Poland Portugal Russian Federation
Slovak Republic Slovenia South Africa Spain
Sweden Switzerland Turkey United Kingdom
United States
Canadian Geographic Reach
• Provides for territorial jurisdiction.
• Only acts committed in whole or in part in Canada are
offences.
• Test is commonly described as requiring a “real and
substantial connection to Canada”.
Geographic Reach of the American Legislation
• Provides for both territorial and nationality jurisdiction.
• Prohibits bribery by American nationals (i.e. citizens or
companies organized under American law) and “Issuers”
regardless of where any of the acts of bribery took place.
• Also applies to actions taken in the United States
regardless of the nationality of the offender. “Tenuous
connection” described as sufficient.
• Provides for a very broadly defined territorial and nationality based jurisdiction.
• Applies to UK nationals even if none of the offence was committed in the UK, and to the nationals of any country if a portion of the offence was committed in the UK.
• Offence of “failing to prevent bribery” applies to actions taken anywhere in the world by commercial organizations that “carry on business or part of a business” in the UK.
Geographic Reach of the American Legislation
Canadian Law – the Basic Offence
The bribery offence is in CFPOA, s. 3(1):
Every Person commits an offence who, in order to obtain business 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.
Canadian Law – Two Elements of the Basic
Offence
• Offence is comprised of two linked elements - an action (the
actus reus) and a state of mind (the mens rea).
• Actus reus is the bribe.
• Mens rea is related to the purpose for which the bribe is
given or promised. To be guilty of the offence, the accused
must have given or promise the bribe for the purpose of
obtaining business or retaining advantage in the course of
business.
Canadian Law – More Detail on the Illegal
Action
• Act drafted to prevent strategic avoidance.
• “Directly or indirectly” - bribes funnelled through or paid by third parties
may be equivalent to a bribe paid directly.
• “Gives, offers or agrees to give or offer” - the bribe does not actually have
to be paid.
• “Loan, reward, advantage or benefit of any kind” – likely interpreted
broadly to include anything that context would suggest has value.
• “To a foreign public official or to any person for the benefit of a foreign
public official” – prohibits avoidance by providing benefits to someone
other than foreign official.
• CFPOA applies to both people and organizations.
Organization is broadly defined (see Criminal Code, s. 2).
Canadian Law - To Whom It May Applies
Canadian Law – How a Corporation Commits
the Offence
• Corporations liable by statutory vicarious liability. The actions and intentions of corporate employees are ascribed to corporations (Criminal Code, s. 22.2).
• The relevant people are the “senior officer” and the “representative”.
• “Senior officer” plays an important role in policy making for or management of the organization.
• “Representative” means a director, partner, employee, member, agent or contractor.
• Mens rea lies with senior officer who must intend the action (actus reus) occur, and be done at least in part to benefit the organization.
• Actus reus may be committed by the senior officer, or a representative of the organization.
The Canadian law contains exceptions. Some bribes are not
crimes. The exceptions are in sections 3(3) and (4) of the CFPOA.
Bribes are excepted where they are
• permitted in the law of the foreign state;
• incurred to provide, demonstrate or explain products or
services;
• related to the execution of a contract; or
• small facilitation payments.
Canadian Law – Exceptions
Canadian Law – Related Offences in the
Criminal Code
The Criminal Code extends liability of the CFPOA by providing sanctions for:
• attempts (Criminal Code, ss. 24 and 463(b))
• aiding (Criminal Code, s. 21(1)(b))
• abetting (Criminal Code, s. 21(1)(c))
• common intention (Criminal Code, s. 21(2))
• counselling (Criminal Code, s. 22)
• counselling an offence not committed (Criminal Code, s. 464)
• conspiracy (Criminal Code, s. 21(2) and 465(1)(c))
• accessory after the fact (Criminal Code, s. 23(1))
Canadian Law – Attempts
Criminal Code, s. 24(1)
Every one who, having an intent to commit an offence, does or omits to do anything for the purpose of carrying out his intention is guilty of an attempt to commit the offence whether or not it was possible under the circumstances to commit the offence.
Imprisonment for an attempt one half of that term applicable for commission of the offence.
Canadian Law – Aiding and Abetting
• Criminal Code, s. 21 establishes aiding and abetting as offences.
(1) Every one is a party to an offence who
(b) does or omits to do anything for the purpose of aiding any person to commit is; or
(c) abets any person in committing it.
• Aiding synonymous with assisting. Conviction requires proof of acts in aid of offence, and that the purpose of the acts was to assist in its commission.
• Abetting synonymous with encouraging. Conviction requires proof of the encouragement, and that the words or acts done were intended to encourage the commission of the offence.
• Those guilty of aiding or abetting an offence subject to the sanctions as if they committed the underlying offence.
Canadian Law – Common Intention
• Those who form common intentions to commit an offence
are liable for the crimes each other commit in pursuit of the
common purpose where that offence is one that should have
been foreseen. (Criminal Code, s. 21(2))
• The offence underlying the charge does not need to have
been aim of the common purpose.
• The accused does not need to have aided or abetted it.
• Those guilty of the common intention are subject to sanctions
as if they committed the underlying offence.
Canadian Law – Counseling an Offence and
Counseling an Offence Not Committed
• Counselling an offence is the deliberate encouragement or active inducement of the offence.
• Defined in the Criminal Code to include “procuring, soliciting or inciting” an offence (Criminal Code, s. 22.1(3)).
• The person counselling must intend that the acts that make up the underlying offence be committed. (Criminal Code, s. 22.1(2)).
• A person can be convicted of counselling an offence that is carried out in a way other than as counselled (Criminal Code, s. 22.1(1)).
• A person can be convicted for counselling an offence that is not committed.
• Sanction for counseling an offence as if committed underlying offence.
• Sanction for counseling an offence not committed is the same as applied to attempts (Criminal Code, s. 464).
Canadian Law - Conspiracy
• Illegal to form an agreement to commit a criminal offence. Such an agreement is a criminal conspiracy. (Criminal Code, s. 464)
• Conspiracy conviction requires proof of: an agreement to commit a criminal offence or to achieving some lawful object by commission of a criminal offence.
• An intention on the part of two or more people to form that agreement; and
• An intention on the part of two or more people to put that agreement into effect.
• No action need be taken to perform the agreement for a person to be guilty under the section.
• Conspirators in respect of indictable offences such as that in s. 3(1) of CFPOA liable to the sanction they would be if they were convicted of the offence.
• Conspiracy extends the geographic reach of the sanctions in the CFPOA by making an offence of the act of forming the agreement, even if no action other than entry into the agreement by the accused is done in Canada. (Criminal Code, s. 465(3))
Canadian Law – Accessory After the Fact
• It is an offence to assist someone who has committed an offence.
An accessory after the fact to an offence is one who, knowing
that a person has been a party to the offence receives,
comforts or assists that person for the purpose of enabling that
person to escape. (Criminal Code, s. 23.1)
• Knowledge that an offence has been committed can be established
through wilful blindness - suspicion combined with a conscious
decision not to make inquiries.
• A person who is an accessory after the fact is sentenced as one
guilty of an attempt (Criminal Code, s. 463(b)).
Canadian Law – Conclusion on the
“Extensions” in the Context of the CFPOA
• Criminal Code provisions on attempts, aiding, abetting,
common interest, counselling, conspiracy, and accessory
after the fact widen the reach of the CFPOA.
• Advisors and others may attract criminal liability even where
they do not participate in the bribery.
• These provisions also make more difficult, if not impossible
to effect, liability avoidance schemes.
Canadian Law - Whistleblower Protection
• Criminal Code provides “whistleblower” protection (s. 425.1).
• An offence to take or threaten action against employees to
prevent them from reporting offences committed by the
organization or its employees.
• The section provides protection for whistle-blowing but does
not incentivize it (unlike the Dodd-Frank legislation in the
United States).
Canadian Law – Sentencing
• Bribery under section 3(1) of the CFPOA is an indictable offence
punishable by a term of imprisonment of up to 5 years.
• Imprisonment is for individuals. Not been sought in Canada to date.
• Big issue for organizations are monetary sanctions including fines,
victim surcharges and possibly restitution (Criminal Code, ss. 735,
737 and 738).
• Fines for indictable offences are in the discretion of the Court
(Criminal Code s. 735(1)(a)). There is no statutory maximum.
• The sanction in the Niko Resources Ltd. case was approximately
$9,500,000 ($8,200,000 fine plus a 15% victim surcharge).
Canadian Law – Sentencing Organizations There are particular rules for sentencing organizations in s. 718.21 of the Criminal Code:
A court that imposes a sentence on an organization shall also take into consideration the following factors:
(a) any advantage realized by the organization as a result of the offence;
(b) the degree of planning involved in carrying out the offence and the duration and complexity of the offence;
(c) whether the organization has attempted to conceal its assets, or convert them, in order to show that it is not able to pay the fine or make restitution;
(d) the impact that the sentence would have on the economic viability of the organization and the continued employment of its employees;
(e) the cost to public authorities of the investigation and prosecution of the offence;
(f) any regulatory penalty imposed on the organization or one of its representatives in respect of the conduct that formed the basis of the offence;
(g) whether the organization was - or any of its representatives who were involved in the commission of the offence were - convicted of a similar offence or sanctioned by a regulatory body for similar conduct;
(h) any penalty imposed by the organization on a representative for their role in the commission of the offence;
(i) any restitution that the organization is ordered to make or any amount that the organization has paid to a victim of the offence; and
(j) any measures that the organization has taken to reduce the likelihood of it committing a subsequent offence.
Civil Actions and Reputational Losses
• Criminal liability does not extinguish civil liability (Criminal
Code, ss. 11 and 741.2).
• Class action was certified against SNC-Lavalin in September
2012 in respect of an alleged misrepresentation in respect of
controls and procedures for financial reporting in relation to
alleged bribes.
• Reputational losses may be more severe. In certain
circumstance the reputational losses from bribery convictions
may jeopardize the continued existence of the company.
United States – Key Differences – Legislation
• Same basic prohibition and exceptions.
• Explicitly prohibits bribes made by agents or third parties and
imposes liability both where the company authorized the payment,
where it knew the improper payment would be made, and where
there was “conscious disregard or wilful ignorance”.
• Imposes record keeping requirements on issues to ensure that
books, records an accounts, “accurately and fairly reflect the
transactions” of company (FCPA, ss. 78(m)).
• The Dodd-Frank Act incentives whistle blowing. There is not
Canadian equivalent to this Act.
US Key Differences – Experience
• American legislation enacted in 1977 - more extensive experience in investigating and prosecuting offences, a formalized opinion procedure, and a more substantial body of case law.
• Enforcement in the United States has been vigorous. Between 2007 and 2012 the Department of Justice has charged 82 individuals and brought 70 cases against companies (in addition, more cases were brought by the SEC).
• The vast majority of cases are resolved through plea agreements.
• 23 individuals were sentenced to terms of 6 months or more between January 2010 and mid-2012.
• The fines in the United States totalled US$1,700,000,000 in 2011.
• United States has a formalized opinion system - individuals and companies can request “opinions” from the Department of Justice on questionable transactions.
UK Key Differences
• UK Bribery Act was passed in 2011. The foreign corruption
provisions are somewhat different than Canada’s.
• UK Act contains no formal exceptions.
• UK Act also makes it an offence to fail to prevent bribery by an
associated person. The offence does not depend on the accused
having any knowledge that the associated person was going to, or
even likely to commit bribery.
• There is a due diligence defence to the offence of failing to prevent
bribery. Accused must show that it had “adequate procedures”
designed to prevent associated persons from engaging in bribery.
The Future – Shifting Politics
• Are the politics shifting, so that we can expect countries to be
more stringent?
• As late as 1997 the World Bank was reporting government
resistance to taking measures to combat corruption to avoid
putting their companies at a competitive disadvantage.
• Once the OECD Convention was widely ratified, this
changed.
• The United States has increased enforcement dramatically in
the last 6 years. The UK Bribery Act goes well beyond what
the treaty requires. What is next?
The Future – Expanded Canadian Jurisdiction
• There is a reasonable possibility of legislative amendment to
broaden Canadian jurisdiction to include “nationality”
jurisdiction.
• An amendment to effect such a change before the legislature
in 2009. It died when parliament was prorogued in December
of that year.
The Future – Canadian Enforcement
• Enforcement should be expected to continue at current if not even increased levels.
• Was the creation of the RCMP International Anti-Corruption Unit a response to the OECD criticism in OECD’s 2004 Phase 2 report?
• OECD Phase 3 Report criticized the level of resources provided to the Unit and the readiness of the Public Prosecution Service of Canada to handle the expected caseload. Will there be more resources?
• Could investigations be further internationalized through cooperation with the governments of the countries into which investments are made, and indeed the very departments susceptible to bribery?
• Supreme Court of Canada’s decision in R. v. Hape, 2007 SCC 26 indicates that the Charter does not apply to investigations outside Canada, and allows evidence that was not collected in accordance with the Charter to be used in Canadian criminal proceedings in certain circumstances.
