Recent increases in enforcement actions by the Quebec anti-corruption enforcement unit and the RCMP should be heeded by management of Canadian companies. At a minimum, they should prompt a thorough review of their company’s risk management policies and procedures to address the increased likelihood of criminal investigations under the Criminal Code and Corruption of Foreign Public Officials Act. Osler publications to assist our clients in developing such risk management policies and procedures can be found here. This update goes beyond the criminal law implications of bribery and corrupt practices and addresses the civil litigation risks. Indeed, it is very common for criminal proceedings related to corruption to be followed by civil proceedings. As such, companies today must be mindful of the very damaging civil consequences and the immense jeopardy to potentially the most valuable assets of the company that are often grounded in its commercial contracts.A civil claim relating to bribery generally extends into the commercial context in these three common scenarios:

  1. Two parties have entered into a contract which involves the carrying out of a scheme for bribery. Contracts which involve bribery are treated by courts as ab initio unlawful and against public policy. As such, the public policy doctrine has long been used to invalidate any contract involving an agreement to engage in bribery.
  2. The second scenario is where the contract, which is otherwise consistent with applicable laws, was procured through bribery by unlawfully influencing an agent of one of the principals to the contract. In this scenario, the existence of a bribe or “secret commission” would provide the agent’s principal the right to rescind the contract. The right to rescind exists where the defrauded principal can demonstrate that it was not aware of the agent’s acceptance of the bribe or commission, the principal acts promptly upon becoming aware of the agent’s wrongful conduct, and before the rights of innocent third parties are affected.
  3. A third common scenario is where the main contract under which a civil claim is being brought was not procured by bribery, but a related sub-contract or third party arrangement involved bribery. Courts have sometimes found that contracts that are “tainted” by corruption in a sub-contract may also be voidable and unenforceable depending on the circumstances. The weaker the nexus between main contract and the commission of bribery, the less likely it is that the court will void or rescind the contract. Occasionally, the court will severe the valid parts of a contract from the parts which involved wrongdoing or illegality.

The civil implications of a contract tainted by corruption will therefore depend very much on the factual nexus between the corruption and the contract at issue. The contract may be void ab initio, voidable, or severed. These civil implications increase the commercial uncertainty of contracts obtained through bribery and reinforce the need for risk controls and anti-corruption compliance measures.