Companies Should Examine Their Compliance with Federal Lobbyists' Code of Conduct

Investigation reports released February 16 by Canada's Commissioner of Lobbying[1] should serve as a wake-up call to all companies and organizations doing business with the federal government. The Lobbyists' Code of Conduct[2] is being enforced. Any prudent corporation, non-profit association or consultant lobbyist should review its activities and practices to ensure compliance.

Though it has been in effect for nearly 14 years, the federal Lobbyists' Code of Conduct is probably less known than the Lobbying Act (formerly Lobbyists Registration Act). While the Act requires registration and reporting, the Code enumerates the professional and ethical standards that lobbyists must meet. Those standards have had somewhat of a low profile. Indeed, until this week only one lobbyist was ever found to have breached the Code.[3]

All that has changed. The Lobbying Commissioner has now reported to Parliament that three more lobbyists - two consultants and one in-house (or employed) lobbyist - contravened the Lobbyists' Code of Conduct. Violation of the Code does not carry any penalty,[4] but being the subject of a detailed report to Parliament and subsequent news media coverage is a significant deterrent.

Together, the three investigations found contraventions of four of the eleven provisions of the Lobbyists' Code of Conduct:[5]

  • Two of the lobbyists were found to have contravened Rule 8, which prohibits lobbyists from placing public office holders in a conflict of interest by proposing or undertaking any action that would constitute an improper influence on a public office holder.
  • One lobbyist was found in breach of Rule 2, which obliges lobbyists to give public office holders information that is accurate and factual and prohibits them from knowingly misleading anyone.
  • The same lobbyist was held to have violated Rule 3, which requires that lobbyists indicate to their clients, employers or organizations their obligations under the Lobbying Act and their obligation to adhere to the Code.
  • The same lobbyist was also found to have breached the principle of professionalism.[6]

Conflict of Interest

Two of the reports explored the issue of political activity by lobbyists, in the context of Rule 8, which states that lobbyists must not place government officials in a conflict of interest.

The Commissioner explained that the prohibition against placing public office holders in a conflict of interest requires that the lobbyist avoid placing a government official in a real conflict or an apparent conflict.

In other words, the term "conflict of interest" incorporates both real and apparent conflict. Even if a lobbyist does not actually interfere with the public duties of a government official, a lobbyist contravenes the rule by creating reasonable apprehension of an apparent conflict. The lobbyist must avoid creating tension between, on the one hand, the official's public duty and, on the other hand, a private interest or obligation created or facilitated by the lobbyist.

The Commissioner's analysis flowed logically and clearly from the 2009 ruling of the Federal Court of Appeal in Democracy Watch v. Campbell.[7] There the Federal Court of Appeal had explained that, "the rule against conflicts of interest is a rule against the possibility that a public office holder may prefer his or her private interests to the public interest."[8] [emphasis added]

According to the Court, it is not enough that a public office holder uphold his or her public duty over a private interest. Actually choosing a private interest over the public duty is not a conflict of interest; it is corruption.[9] The mere existence of the competing private interest is what gives rise to the conflict:

"If one looks to [previous court decisions], they refer to the possibility that one private interest may interfere with the discharge of one's public duty."[10]

"Since a public office holder has, by definition, a public duty, one can only place a public office holder in a conflict of interest by creating a competing private interest. That private interest, which claims or could claim the public office holder's loyalty, is the improper influence to which the Rule refers."[11]

[italics in original; bolding and underlining added]

In the two specific cases considered by the Lobbying Commissioner, lobbyists had sold tickets to a political fundraiser sponsored by the political riding association of a Cabinet Minister, while also being registered to lobby the Minister's department. The Commissioner concluded that their involvement contravened Rule 8.

The Commissioner's interpretation of the rule was unsurprising and was consistent with prudent advice that we have previously provided. Since 2006 we have cautioned lobbyists about the effect of Rule 8 on the extent of their involvement in political fundraising.[12]

Technical Arguments Rejected

According to the Commissioner, two of the lobbyists were represented by lawyers, who advanced technical arguments in response to the investigation. (For example, the lawyers argued that Rule 8 was being applied retroactively, even though the Code had been in existence since 1997 and the Federal Court of Appeal had pronounced on its meaning six months prior to the activity in question.[13])

All of those arguments were rejected. In particular, the Commissioner refused to adopt what she called a "narrow and restrictive" interpretation of the Code and the jurisprudence.[14]

The important lesson for lobbyists and their employers is that pre-emptive steps to avoid an investigation are preferable to making legal arguments in the midst of an investigation. Technical advocacy is no substitute for a robust, prudent compliance system, based on expert advice, that reduces (or eliminates) the risk of challenge to one's adherence to the Code.

Practical Implications

In light of the investigation reports, corporations, associations and consultants may wish to adopt the following due-diligence measures:

  • Incorporating the obligation of legal compliance (including adherence to the federal Lobbyists' Code of Conduct) into employment contracts with all employees engaged in government relations.
  • Ensuring that consultant-lobbying contracts make proper disclosure of obligations under the law (including the Code).
  • Better training of employees who deal with government.
  • A review of communications with the federal government, to ensure they are compliant with the Code.
  • Regular reviews to ensure that government relations activity meets standards of ethics and professionalism, including adherence to all rules.
  • Specific in-house education to make employees sensitive to the prohibition against placing public office holders in conflicts of interest.

A healthy dose of prudence beforehand will help to avoid significant compliance problems later.