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Specific offences and restrictions
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Foreign bribery: Corruption of Foreign Public Officials Act
Section 3 of the Corruption of Foreign Public Officials Act criminalises the provision of a benefit to a foreign public official:
- in return for an act or omission by the official; or
- to induce the official to influence the foreign state or public international organisation for which the official performs duties or functions.
In many respects, the act is similar to the US Foreign Corrupt Practices Act. However, unlike the Foreign Corrupt Practices Act, it contains no option to proceed with civil rather than criminal enforcement.
A ‘foreign public official’ is defined in the Corruption of Foreign Public Officials Act as 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:
- was established to perform a duty or function on behalf of the foreign state; or
- is performing such a duty or function.
This includes employees of wholly or partially state-owned or controlled corporations.
Under Section 3 of the Corruption of Foreign Public Officials Act, a loan, award, advantage or benefit must have been or have agreed to be offered to a foreign public official or any person for the benefit of a foreign public official. Further, the benefit must have been offered:
- as consideration for an act or omission by the official in connection with the performance of his or her duties or functions; or
- to induce the official to use his or her position to influence any acts or decisions of the foreign state or public international organisation for which the official performs duties or functions.
Before the 2013 amendments, for a Canadian court to assume jurisdiction over a Corruption of Foreign Public Officials Act offence, the Crown had to prove a real and substantial connection between Canada and the alleged misconduct. As a practical matter, this significantly limited Canada's ability to enforce the act, as part of the formulation, initiation or commission of the offence had to have taken place in Canada. The amendments closed this loophole by classifying acts by Canadian citizens, permanent residents, corporations, societies, firms or partnerships on a worldwide basis as acts that occur in Canada for the purpose of the act. The practical result of the amendments is that Canadian citizens and companies are subject to worldwide regulation by Canadian authorities under the act, regardless of whether part of the activity occurs in Canada.
The 2013 amendments also criminalised the concealment of bribery in company accounting records. This new offence is similar to the US Foreign Corrupt Practices Act’s books and records provisions. Under Section 4 of the Corruption of Foreign Public Officials Act, it is now an offence to:
- keep secret accounts;
- falsely record, fail to record or inadequately identify transactions;
- enter liabilities with incorrect identification of their object;
- use false documents; and
- destroy accounting books and records earlier than permitted by law for the purpose of concealing bribery of a public official.
One notable difference between the Canadian books and records provision and its US equivalent is that a breach of the Canadian provision is a criminal offence, requiring evidence of a criminal standard, whereas a breach of the US provision is a civil offence.
Criminal Code: domestic and private bribery
The primary vehicle in Canada for addressing domestic corruption is the Criminal Code. Sections 121, 122, 123 and 426 of the Criminal Code criminalise:
- the provision of bribes to officials;
- the receipt of bribes by officials; and
- corrupt behaviour in certain transactions among private parties.
Section 121: bribery of federal and provincial officials
Section 121(1)(a) of the Criminal Code prohibits offering or giving a benefit to a government official, or any member of his or her family, as consideration for cooperation, assistance, exercise of influence or an act or omission regarding the transaction of business with, or a business matter relating to, the government.
Section 121(1)(b) of the Criminal Code criminalises the provision of an award, advantage or benefit to a government official. Notably, this section does not require a quid pro quo arrangement, as it seeks to preserve the appearance of integrity, rather than integrity itself. Section 121(1)(b) therefore penalises the simple provision of a benefit to a government employee or official, with no strings attached, though that benefit must be conferred in respect to the dealing that the accused had with the government. For Section 121(1)(b), obtaining written pre-approval for the benefit from the head of the government branch with whom the accused is dealing would provide a full defence.
Section 121 of the Criminal Code requires that the recipient of the benefit be an ‘official’. This includes employees and officials of provincial and federal governments, as well as municipalities in some circumstances. Employees of government-owned or controlled corporations, known as ‘crown corporations’ in Canada, may also be considered government employees or officials.
Section 122: breach of public trust
Section 122 of the Criminal Code criminalises a breach of trust by an official. To qualify as an offence under Section 122, the accused must:
- be an official acting in connection with the duties of his or her office; and
- have breached the standard of responsibility and conduct demanded of him or her by the nature of the office.
Further, the conduct must have represented a serious and marked departure from the standards expected of an individual in the accused’s position of public trust. Finally, the accused must have acted with the intention to use his or her public office for a purpose other than the public good – for example, for a dishonest, partial, corrupt or oppressive purpose. As Section 122 by itself is applicable only to officials, it must be considered in conjunction with Section 21, under which anyone who assists or encourages the commission of an offence is a party to the offence (eg, by providing an official with an incentive for him or her to breach the public trust).
The term ‘official’ in Section 122 of the Criminal Code is not confined to provincial or federal governments and may include any person in a position of duty, trust or authority – particularly people working in the public service or in a corporation, society or similar. This has been held to extend to employees of First Nations bands. Further, while not expressly stated in the Criminal Code, the term ‘official’ may also extend to employees or political party members if they are in positions of duty, trust or authority.
Section 123: municipal corruption
Section 123 of the Criminal Code criminalises municipal corruption and is otherwise substantially the same as Section 121(1)(a).
To qualify as an offence under Section 123:
- the accused must have given or offered a loan, reward, advantage or benefit of any kind to a municipal official or another person for the benefit of the municipal official; and
- the benefit must have been given or offered as consideration for the official performing or abstaining from performing an official act.
Further, the accused must have known the recipient was a municipal official and intentionally offered the benefit in exchange for the official performing or failing to perform an official act.
Section 123 of the Criminal Code applies to municipal officials. A ‘municipal official’ is defined as a member of a municipal council or a person who holds an office under a municipal government.
Section 426: commercial bribery
Section 426 of the Criminal Code criminalises secret commissions, prohibiting any person from corruptly offering or giving an agent (including an employee) an award, advantage or benefit of any kind as consideration for performing or in anticipation of any act relating to the affairs or business of the agent's principal. To qualify as an offence:
- an agency relationship must have existed;
- the agent must have received the benefit;
- the benefit must have been provided as consideration for an act to be undertaken in relation to the principal’s affairs;
- the agent must have failed to make adequate and timely disclosure of the benefit; and
- the accused must have been aware of the agency relationship and knowingly provided the benefit as consideration for an act to be undertaken in relation to the principal’s affairs.
Section 426 applies to all agency and employment relationships, including First Nations and private sector businesses.
Extractive Sector Transparency Measures Act: payment reporting
The Extractive Sector Transparency Measures Act is designed to complement Canada’s existing anti-corruption regime, including the Corruption of Foreign Public Officials Act. The Extractive Sector Transparency Measures Act reporting obligations apply to companies engaged in the commercial development of oil, gas or minerals in Canada or abroad that:
- are listed on a stock exchange in Canada; or
- have a place of business, do business or have assets in Canada and meet at least two of the following size thresholds:
- C$20 million in assets;
- C$40 million in revenue; or
- an average of at least 250 employees.
The Extractive Sector Transparency Measures Act is not restricted to Canadian-headquartered companies. Foreign companies can potentially be caught within the act’s ambit where they have a place of business, do business or have assets in Canada and meet the size threshold.
Where such foreign companies engage in the commercial development of oil, gas or minerals anywhere in the world – either directly or indirectly through subsidiaries – they will likely be subject to Canadian reporting requirements.
The reporting requirements also encompass payments made by a foreign company that:
- is controlled by a company listed in Canada; or
- has a place of business, does business or has assets in Canada and meets the size threshold.
The notion of ‘control’ is broadly defined to include direct or indirect control by any means.
Where an entity must disclose payments under the act, it must provide the minister with, and make available to the general public, a report in a form to be prescribed indicating all payments made to a payee during a fiscal year in the following categories:
- taxes (other than consumption and personal income taxes);
- fees, including rentals, entry fees, regulatory charges and any other consideration for licences, permits or concessions;
- production entitlements;
- dividends (other than dividends paid to ordinary shareholders);
- infrastructure improvement payments; and
- any other category of payment that is prescribed by regulation.
Payments must be reported only where the aggregate amount for each type of payment to the same payee is greater than C$100,000, although the government may alter the threshold amount for any particular payment category by regulation.
The report must also include an attestation made by a director, officer, independent auditor or accountant that the information contained in the report is true, accurate and complete.
The concept of a ‘payee’ in the Extractive Sector Transparency Measures Act is broadly stated to apply to all types of government entity, including:
- any government in Canada or a foreign state;
- a body that is established by two or more governments (which is a similar concept to public international organisations in anti-corruption law); and
- any corporation or other body established to exercise or perform, or that exercises or performs, a government power, duty or function.
Given the scope of this definition, the act also applies to payments to certain aboriginal bands, subject to a two-year transitional period for aboriginal bands in Canada.
Notably, and in addition to the act’s objective of detecting and deterring corruption, a payment made to an employee or office holder of a government body is deemed to have been made to that government body and must also be reported. Accordingly, the act requires public disclosure of:
- lawful payments to governments; and
- payments that could potentially violate anti-corruption legislation, such as the Corruption of Foreign Public Officials Act.
The Extractive Sector Transparency Measures Act criminalises non-compliance with several of its provisions. Further, there is a general anti-avoidance provision making it an offence to structure any payment or other financial obligation or gift to avoid reporting requirements. These offences are subject to a maximum fine of C$250,000 for each day that the offence continues.
Where an entity commits an offence under the act, any officer, director or agent who directed, authorised, assented to or acquiesced or participated in its commission is also guilty of the offence. This is subject to a due diligence defence if the entity or its directors and officers can show that all reasonably prudent measures were implemented. Such measures typically include:
- establishing and monitoring the effectiveness of policies and procedures;
- providing adequate training;
- maintaining a system of internal controls to ensure accurate books and records; and
- auditing payment records.
The Extractive Sector Transparency Measures Act also requires companies to keep records of payments for seven years from the date on which the company provided its report to the government, or such other period as may be prescribed by regulation. This retention obligation should be read in conjunction with Section 4 of the Corruption of Foreign Public Officials Act, which criminalises the destruction of accounting records earlier than permitted by law for the purpose of concealing bribery. Accordingly, non-compliance with record-keeping obligations under the Extractive Sector Transparency Measures Act may also be punishable by criminal penalties under the Corruption of Foreign Public Officials Act if the non-compliance was for a bribery-related purpose.
Are specific restrictions in place regarding the provision of hospitality (eg, gifts, travel expenses, meals and entertainment)? If so, what are the details?
While Canada’s anti-corruption provisions do not specifically mention hospitality, it is an offence under the Corruption of Foreign Public Officials Act to provide “a loan, reward, advantage or benefit of any kind” to a foreign public official. There is no judicial guidance specific to the act on what constitutes a ‘benefit’. However, the phrase “a loan, reward, advantage or benefit of any kind” is also used in Section 121 of the Criminal Code, which prohibits bribery of Canadian government officials. There is a significant body of case law on what constitutes a benefit in the context of Section 121 of the Criminal Code, which is likely applicable to the Corruption of Foreign Public Officials Act.
In R v Hinchey ( 3 SCR 1128), the Supreme Court of Canada held that a ‘benefit’ must constitute a “material or tangible gain” before criminal liability will be imposed. Other case law suggests that benefits include:
- the provision of tickets to sporting events;
- a one-sided pattern of paying for meals (or one lavish meal); and
- payment for travel.
Conversely, the courts have stated on a number of occasions that the provision of a trivial social courtesy, such as a cup of coffee, does not constitute a benefit. In the context of the Corruption of Foreign Public Officials Act, it is important to note that what constitutes a “material or tangible gain” may be different in Canada than for a US public official earning $200 per month.
Under Sub-section 3(3)(b) of the Corruption of Foreign Public Officials Act:
“No person is guilty of an offence under subsection (1) if the loan, reward, advantage or benefit… was made to pay the reasonable expenses incurred in good faith by or on behalf of the foreign public official that are directly related to the promotion, demonstration or explanation of the person’s products and services, or the execution or performance of a contract between the person and the foreign state for which the official performs duties or functions.”
To meet this exception, the expenses must be:
- incurred in good faith; and
- directly related to:
- the promotion, demonstration or explanation of the person’s products or services; or
- the execution or performance of a contract with the foreign official’s state.
For example, paying for an official’s travel to a company facility may be legitimate, but an all-expenses paid side trip would not be. An example of the danger of side trips is R v Niko Resources Ltd ( AWLD 4536), in which payment of a foreign government official’s travel expenses to the Calgary gas and oil exposition was defensible, but payment of C$5,000 for non-business related travel and expenses was not.
However, the above exception applies only in respect of foreign government officials. There is no exception for the payment of reasonable and bona fide expenses regarding the promotion, demonstration or explanation of products or services to Canadian government officials.
What are the rules relating to facilitation payments?
A ‘facilitation payment’ can generally be described as a payment made to a government official in order to expedite or secure the performance of a routine non-discretionary government action. While not definitive, facilitation payments are typically small and made to low-level government officials to secure or expedite routine services, such as:
- unloading cargo;
- processing visa paperwork;
- expediting permits or licences; or
- activating telephone or mail delivery services.
There is no facilitation payment exception in the Criminal Code for dealing with Canadian government officials.
The Corruption of Foreign Public Officials Act permits facilitation payments involving foreign government officials. However, the Canadian government introduced amendments to the act in February 2013 that, among other things, will remove the exception for facilitation payments at a later date. The timing for such removal is subject to a further order of the governor in council.
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