By Peter MacKay*, Lisa Douglas* and Christopher Burkett* (Baker McKenzie Canada)
1. Domestic bribery (private to public)
1.1 Legal framework
Canada’s domestic anti-bribery provisions are part of the Criminal Code, RSC 1985, c C-46. Sections 119 through 125 of the Criminal Code create a number of bribery, corruption and “influence peddling” offences that capture the payment of bribes, benefits and advantages to domestic public officials in Canada. All advantages granted to Canadian public officials are illegal if made in violation of the Criminal Code of Canada.
1.2 Definition of bribery
Section 121 of the Criminal Code makes it an offence to: (i) directly or indirectly give or offer to give to an official a loan, reward, advantage or benefit of any kind as consideration for cooperation, assistance, exercise of influence, or an act or omission in connection with the transaction of business or any matter of business relating to the government, or a claim against the government, or any benefit that the government is authorized to bestow; (ii) have dealings of any kind with the government, pay a commission or reward to or confer an advantage or benefit of any kind on an employee or official of the government with respect to those dealings, unless the head of the branch of government has consented in writing; or (iii) give or offer to an official a reward, advantage or benefit of any kind as consideration for cooperation, assistance, exercise of influence or an act or omission in connection with the transaction of business with or any matter of business relating to the government, or a claim against the government, or any benefit that the government is entitled to bestow, or the appointment of any person to an office.
1.3 Definition of public official
For purposes of the Criminal Code provisions, “official” means a person who holds an office or is appointed or elected to discharge a public duty. “Office” includes an office or appointment under the government, a civil or military commission, and a position or employment in a public department. “Government” means the government of Canada, the government of a province of Canada, or Her Majesty in right of Canada or a province. Accordingly, the definition of “official” in this context is broad enough to include those who hold an office with government-controlled enterprises.
1.4 Consequences of bribery
Under the anti-bribery provisions of the Criminal Code, potential penalties include fines in an unlimited amount and imprisonment for up to 14 years. Officials and employees can be convicted personally and companies can be liable as parties to offences committed by “senior officers.” The actions of middle managers are sufficient to make a company criminally liable in appropriate circumstances.
A company may be liable for the acts of agents and contractors in two different ways:
i) First, the company may be aware that an agent is about to pay a bribe and fail to take all reasonable measures to stop the agent.
ii) Secondly, if an agent or contractor is delegated management of an important aspect of the company’s activities, the agent may become part of the class of senior officers who bind the company in criminal law, even where the executives of the company are unaware that the agent is offside.
There is no limitation period for prosecution.
1.5 Political contributions
Contribution to political parties and candidates is regulated under federal and provincial law, with relatively low annual contribution limits as well as certain prohibitions on contributions by corporations, trade unions, associations and groups.
1.6 Limitation applicable to hospitality expenses (gifts, travel, meals, entertainment, among others)
It is acceptable to offer gifts, hospitality and other benefits to public officials if it is done outside the context of contractual negotiations and in accordance with all applicable conflict of interest laws and related codes of conduct. There is some uncertainty with respect to a precise ceiling beyond which gifts and hospitality would be considered unacceptable, because the relevant laws and codes do not define any dollar limits. Much will depend on the context. Generally, however, gifts, hospitality or other benefits arising out of activities associated with the performance of a public official’s duties may be acceptable if such gifts, hospitality or other benefits are within the bounds of propriety, a normal expression of courtesy, or within the normal standards of hospitality; are not such as to bring suspicion on the recipient’s objectivity and impartiality; and would not compromise the integrity of the government.
Note that the total value of all gifts, hospitality or other benefits received by a federal public official in Canada may be reportable by the public official, through the filing of a public declaration maintained in a public registry, if such value goes above a certain threshold (e.g., CAD 200 from any one source in a 12-month period).
2. Domestic bribery (private to private)
2.1 Legal framework
Canada’s anti-bribery laws generally apply to public officials and not to private sector transactions.
2.2 Definition of private bribery
Section 426 of the Criminal Code, however, establishes the offence of corruptly giving “secret commissions” in the context of agency relationships, and the general law of fraud applies more broadly to any business relationship. For example, it is illegal if an agent is paid a commission for referring business to a company and this is not disclosed to the agent’s principal.
2.3 Consequences of private bribery
Although of more limited application, violation of the foregoing prohibition against “secret commission” or criminal fraud can result in penalties similar to those previously outlined in respect of domestic bribery (private to public).
2.4 Limitation applicable to hospitality expenses (gifts, travel, meals, entertainment, among others)
Given the lack of a bribery law applicable to commercial bribery (i.e., not involving public or government interests), there are no restrictions or guidelines in connection with hospitality in this context.
3. Corruption of foreign public officials
3.1 Legal framework
The Corruption of Foreign Public Officials Act, SC 1998, c 34 (CFPOA) applies to corrupt practices in relation to foreign public officials. It applies to Canadian citizens, permanent residents of Canada, companies and other organizations incorporated or formed in Canada, and to persons anywhere in the world whose acts or omissions have a “real and substantial connection” to Canada. In addition to the corruption offences, the CFPOA also includes a “books and records” offence, which requires that all transactions and expenditures be adequately and accurately identified in the books and records.
3.2 Definition of corruption of foreign public officials
It is an offence, in order to obtain or retain an advantage in the course of business, to directly or indirectly give, offer or agree 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.
3.3 Definition of foreign public official
“Foreign public official” means:
(a) a person who holds a legislative, administrative or judicial position in 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 organizations.
Note that the definition does not include members of political parties that are not in power (i.e., opposition parties) but caution should be exercised in this scenario.
It is not necessary to prove that a bribe was actually paid to a foreign official to establish a violation of the CFPOA; it is sufficient for the party to believe that a bribe was being paid to such an official. The concept of conspiracy applies in relation to CFPOA offences. Where there is a conspiracy, the prosecution need not prove the identity of the recipient of a proposed bribe as this could put foreign nationals at risk.
Furthermore, the doctrine of wilful blindness applies to the level of intent required, and imputes knowledge to an accused whose suspicion is aroused to the point where he or she sees the need for further inquiries, but deliberately chooses not to make those inquiries.
3.4 Consequences of corruption of foreign public officials
Under the CFPOA, potential penalties include fines in an unlimited amount and imprisonment for up to 14 years. Officials and employees can be convicted personally and companies can be liable as parties to offences committed by “senior officers.” The actions of middle managers are sufficient to make a company criminally liable in appropriate circumstances.
A company may be liable for the acts of agents and contractors in two different ways:
i) First, the company may be aware that an agent is about to pay a bribe and fail to take all reasonable measures to stop the agent.
ii) Secondly, if an agent or contractor is delegated management of an important aspect of the company’s activities, the agent may become part of the class of senior officers who bind the company in criminal law, even where the executives of the company are unaware that the agent is offside.
There is no limitation period for prosecution.
3.5 Limitation applicable to hospitality expenses (gifts, travel, meals, entertainment, among others)
The CFPOA contains an exemption for reasonable promotional expenses. To be exempt, the payment or benefit made to cover reasonable expenses must be made in good faith and be directly related to the promotion, demonstration or explanation of the products or services of the business, and not in furtherance of any personal interest.
4. Facilitation payments
Facilitation or “grease” payments are illegal under Canada’s Criminal Code in relation to Canadian (domestic) public officials.
The CFPOA currently includes an exception for facilitation payments (e.g., payments made for acts of a routine nature such as the issuance of a permit or the processing of official documents). However, amendments to the CFPOA provide for the elimination of the exception for facilitation payments to foreign public officials at a later date (yet to be determined).
5. Compliance programs
5.1 Value of a compliance program to mitigate/eliminate criminal liability for companies
It is important to have a robust compliance program in place to help mitigate criminal liability involving internal policies; the screening of agents and contractors; and the ongoing training of employees, agents and contractors in compliance policies and procedures.
5.2 Absence of a compliance program as a criminal offense
Failure by a company to institute a compliance program is not, in and of itself, a criminal offence. For a corporation to attract criminal liability in Canada, a “senior officer” must have had the intent at least in part to benefit the corporation, and that: (i) the senior officer, acting within the scope of his or her authority, was himself a party to the offence (section 22.2(1)(a) of the Criminal Code); (ii) the senior officer had the required mens rea for the offence, was acting within the scope of his or her authority, and directed the work of other “representatives” (including employees, agents or contractors) of the corporation to perform the actus reus of the offence (section 22.2(1)(b)); or (iii) knowing that a representative of the corporation is or is about to be a party to the offence, the senior officer fails to take “all reasonable measures to stop them from being a party to the offence” (section 22.2(1)(c)). Section 2 of the Criminal Code defines “senior officer” broadly and is not limited to individuals appointed by the board of directors. Specifically, a senior officer is defined as a director, chief executive officer, chief financial officer, partner, employee, member, agent or contractor “who plays an important role in the establishment of a corporation’s policies or is responsible for managing an important aspect of the corporation’s activities.”
Canadian law is unsettled as to the meaning of the phrase “all reasonable measures” and, in particular, the nature and the extent of the burden that that provision may (as a matter of statutory construction and constitutional law) impose on corporations, through their “senior officers,” to stop or prevent fault-based criminal conduct, including bribery, in order to avoid liability in circumstances where such officers are not themselves parties to the offence.
If a compliance program falls within the definition of “all reasonable measures,” it may qualify as a defence in those sectors that are under the supervision of senior officers. However, such a program will not be a defence at the senior officer level, but will serve in mitigation of sentence only.
As a practical matter, as previously noted, it is good practice for all companies operating in Canada to ensure they have implemented a robust anti-bribery compliance program.
5.3 Elements of a compliance program
- Proportionate Procedures: The one-size-fits-all solution is rejected in favour of a tailor made approach.
- Top Level Commitment: This requires that senior officers specifically address bribery risks.
- Risk Assessment: External risks (such as country risk and sector risk) must be evaluated along with internal risks (such as poor training, cultures that promote excessive risk-taking and poor financial controls).
- Due Diligence: Commercial organizations should put in place due diligence procedures that adequately inform the application of proportionate measures designed to prevent persons associated with them from bribing on their behalf.
- Communication (including training): Communication is not only done from the top, but should include the creation of a confidential means to report bribery conduct.
- Monitoring and Review: Methods may include staff surveys, testing and verification of procedures by outside parties and certified compliance by multilateral bodies.
6. Regulator with jurisdiction to prosecute corruption
The Criminal Code and the CFPOA are administered by the federal Department of Justice while the Anti-Corruption Unit of the Royal Canadian Mounted Police (RCMP) investigates corruption and lays charges.
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