Canada Tackles Foreign Corruption and Bribery with Bill S-14

Davis LLP International Corporate Governance Bulletin

February 08, 2013

Federal government proposes three key amendments to the Corruption of Foreign Public Officials Act

This week, the Federal Government tabled Bill S-14 in the Senate to amend the Corruption of Foreign Public Officials Act (“CFPOA” or the “Act”). The Act has been on the books since 1998, but has escaped a serious re-working before now. In summary, CFPOA criminalizes, and makes prosecutable in Canada, the bribery of foreign public officials to obtain a commercial gain. Despite formation of an RCMP task force to investigate such corruption and news that the task force is investigating a number of suspected cases of bribery, the Act has been the source of a small number of high profile prosecutions since its inception. Bill S-14 might suggest a renewed vigour on the part of the Federal Government to take action against Canadian agents of foreign corruption.

The Bill makes three key amendments to the Act. First, the maximum custodial sentence for offences under the Act will be raised from five to fourteen years. This is unsurprising, as fourteen years is the maximum imprisonment permitted for bribing judicial officers or Canadian public officials, as per sections 119 and 120 of the Criminal Code.

The second amendment is the introduction of a series of new offences addressing business records. The Government proposes criminalizing, for the purpose of enabling the bribery of foreign public officials:

  • Keeping a second set of books outside of what records are legally required;
  • Making false records of transactions in the relevant corporate records, or failing to record actual transactions;
  • Incorrectly identifying liabilities in the corporate records;
  • Knowingly using false documents; and
  • Intentionally destroying accounting books and records earlier than permitted by law.

The “knowing use of false documents” offence will, eventually, require clarification, as it is not immediately clear what counts as “using” a false document. One can conceive of obvious examples, such as the backdating or falsifying of receipts to cover an illicit payment, or a marketing campaign designed to give a veneer of legitimacy to a front company whose actual purpose is the funneling of bribes. The question is murkier, however, if the false documents are created internally but never used externally, or are discovered to be false after their use. As well, it is worth noting that (aside from potential prosecutions under the Act) the failure to keep accurate books and records and the failure to maintain proper internal controls may also be an offence under the applicable Securities Act in the case of a public company.

Finally, the third change relates to the jurisdiction of the Canadian Courts. Bill S-14 provides that any person who commits an act outside Canada that, if committed in Canada, would constitute an offence under the Act, is deemed to commit that offence inside Canada if they are a Canadian citizen, permanent resident, public body, or corporate entity organized under Canadian or provincial laws. This means that the employees local to the foreign operations of a Canadian business, if they are Canadian citizens or permanent residents, are within the force of this Act. The Act was previously silent on this question and as a result the jurisdiction of Canadian Courts over offences taking place outside Canada was questionable.

The Act permits payments to expedite (or encourage) public officials acting in the ordinary course of their jobs. This exception, for “facilitation payments”, can be criticized for its vagueness. The goal of allowing facilitation payments is to avoid hindering a Canadian company or person from doing business in the ordinary, customary matter of certain foreign jurisdictions. What form of conduct amounts to routine business is a fact-specific question to each case of alleged corruption. Bill S-14 eliminates the facilitation payments defence. It makes no changes to address CFPOA’s lack of de minimis provisions to permit gifts or goodwill gestures.

Bill S-14 faces debate in the Senate and reading in the House of Commons, and will likely not be law before the end of this parliamentary session. Nevertheless, this bill was introduced into the Senate by the Government house leader in the Senate and we can accordingly anticipate that the reforms to CFPOA proposed in the Bill will become law, and may signal the intention of the Government to crack down in a more meaningful way on foreign bribery.

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