After a decade in force, Canada’s Corruption of Foreign Public Officials Act (“CFPOA”) has yielded only one prosecution. Canadian companies, however, should not dismiss compliance with the CFPOA as unimportant.
In 2008, the RCMP created a special unit to detect, investigate and prevent international corruption. In combination with the record breaking number of cases in the U.S. at the end of the last decade (including a settlement by Siemens to pay a hefty $800 million to U.S. authorities for violating the Foreign Corrupt Practices Act, the U.S. counterpart to the CFPOA), Canadian companies doing business abroad should ensure compliance with the CFPOA.
the offence created by the CFPOA
The CFPOA was enacted by Canada in 1999 to meet its obligation under the Convention of Combating Bribery of Foreign Public Officials in International Business Transactions. The CFPOA makes it an offence to bribe a foreign public official. A foreign public official is defined by the CFPOA as:
- a person who holds a legislative, administrative or judicial position for a foreign state;
- 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; or
- 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.1
The specific offence of bribing a foreign public official is in section 3(1) of the CFPOA. The mens rea element is not expressly set out in this section. Instead, the courts are expected to read in the mens rea of intention and knowledge in accordance with common law principles of culpability. Actual subjective knowledge of the bribe will be required in order for the court to find that an offence was committed. In Canada, corporations are deemed to have the mens rea of their senior officers or directors.2 This means that a corporation will meet the mens rea requirement where a senior officer or director “intentionally or recklessly, with knowledge of the facts constituting the offence, or with willful blindness to them” permits the offence to occur.
The actus reus requires that a person (which includes a corporation):
- directly or indirectly gives, offers, or agrees 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
- as consideration for an act or omission by the official in connection with the performance of the official’s duties or functions; or to induce the official to use his or her position to influence any acts or decisions on the foreign state or public international organization for which the official performs duties or functions
- to obtain or retain an advantage in the course of business.
The CFPOA provides two limited defences to bribing foreign public officials. First, section 3(3) states that no person is guilty of bribing a foreign official under the CFPOA if the payment was made to cover the reasonable expenses incurred in good faith by or on behalf of a foreign public official that are directly related to the promotion, demonstration or explanation of the person’s products and services, or the execution of performance of a contract between the person and the foreign state for which the official performs duties or functions. This defence means a Canadian company can pay the expenses of a foreign public official to visit Canada so that the company can promote its products and services. Likewise, a Canadian company can pay the expenses of a foreign public official to visit Canada for the purposes of signing a contract.
Second, section 3(4) of the CFPOA states that a payment is not a bribe if it is made to expedite or secure the performance by a foreign public official of any act of a routine nature that is part of foreign public official’s duties or functions, including:
- the issuance of a permit, license or other document to quality a person to do business;
- the processing of official documents, such as visas and work permits;
- the provisions of services normally offered to the public, such as mail pick-up and delivery, telecommunication services and power and water supply; and
- the provisions of services normally provided as required, such as police protection, loading and unloading of cargo, the protection of perishable products or commodities from deterioration or the scheduling of inspections related to contract performance or transit of goods.
Such a payment is commonly referred to as a “facilitation” or “grease” payment.
The CFPOA provides further guidance on the term ‘act of a routine nature’ in section 3(5) stating that an ‘act of a routine nature’ does not include a decision to award new business or to continue business with a particular party, including a decision on the terms of that business or encouraging another person to make an such decision.
This defence has not been advanced by any company and the courts have not commented on when this defence will be successful. Until the courts have done so or until the Department of Justice or the RCMP provide some public commentary, there can be no certainty about when payments will be permitted facilitation payments and when they will be prohibited bribes.
Corporations found guilty of bribing a foreign official are subject to fines with no maximum limit and are set at the discretion of a judge. Individuals may face imprisonment for up to five years for bribing a foreign public official.3 The five-year maximum term of imprisonment ensures that offence is an extraditable offence. However, the lack of case law in this area makes it impossible to predict the range of fines or the likely length of imprisonment.
There has only been one prosecution under the CFPOA to date.4 Ironically, the case concerns bribes paid by a Canadian company to an American official. A U.S. immigration officer who worked at the Calgary International Airport pleaded guilty in July 2002 to accepting bribes from Hydro Kleen Group Inc. (“Hydro Kleen”). Hydro Kleen had bribed the immigration officer to facilitate the entry of its employees into the U.S. and to delay the U.S. entry of competitors’ employees. The immigration official was paid $2,000 a month for providing immigration consulting services. Unfortunately, this case does not provide any guidance about the boundaries of the offence because the officer pleaded guilty.
The case does provide some guidance about sentences. The official received a six month sentence and was subsequently deported to the United States. The company entered a guilty plea under section 3(1)(a) of the CFPOA and was ordered to pay a fine of $25,000.
This case is not the kind of case that Parliament thought it was addressing with the CFPOA. Rather, it was expected that prosecutions would relate to the corruption of officials in less developed and less democratic countries.
protecting your company
The costs to your company of failing to comply with the CFPOA are potentially enormous. Even without a guilty verdict, companies that are the subject of an RCMP investigation face significant costs in conducting an internal investigation and responding to the charges. Furthermore, violating the CFPOA or even being the target of a CFPOA investigation will cause significant reputational damage.
Protecting your company is a two-step process. The first step is to implement a compliance program to prevent violations from occurring. There is no one-size-fits-all compliance program. However, certain elements are essential to implementing a successful compliance program such as having a formal company policy of compliance with the CFPOA. An effective CFPOA compliance program will also help ensure that your company has a due diligence defence in the event of an investigation.
The second step is to put in place procedures to deal with an RCMP search of your premises. Given the increased RCMP focus on this issue, companies doing business abroad should take this opportunity to ensure an effective CFPOA compliance program before the RCMP knocks on their door. Siemens demonstrates that the price for failing to comply with the CFPOA could be steep.