The Corruption of Foreign Public Officials Act (CFPOA), enacted in 1999, provides Canadian federal authorities with the power to levy both criminal charges and unlimited monetary penalties against companies and individuals guilty of bribing foreign officials or dealing with property obtained through bribery. Recent Canadian cases suggest that the Canadian government has stepped up its CFPOA enforcement activities. Canadian companies should re-evaluate their policies and practices to ensure that they have taken appropriate steps to avoid corrupt practices and to mitigate the risk of CFPOA violations.

Scope of the CFPOA

The CFPOA casts a wide net in that it applies to Canadian persons and companies regardless of where they conduct business and whether illegal conduct was undertaken outside of Canada. Subsection 3(1) of the CFPOA states:

“Every person commits an offence who, in order to obtain or retain an advantage in the course of business, 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…”

Both direct violations (i.e. by the company and its employees) and indirect violations (i.e. by third-party contractors and representatives) are criminal offences. Furthermore, based on a recent decision of the Ontario Superior Court of Justice (R. v. Karigar), simply conspiring with others to pay bribes is sufficient to incur liability, regardless of whether the bribes were actually paid.

Consequences of Violation

CFPOA violations expose companies, their directors and employees to the risk of severe financial and strategic consequences, as illustrated by the following recent cases:

  • Earlier this year, Griffiths Energy International Inc. paid $10.35 million in fines and surcharges after it voluntarily disclosed that it had entered into a US$2 million “consulting contract” with the wife of the Chadian ambassador to Canada in exchange for preferential treatment during a land bidding process. The ensuing negative publicity forced Griffiths to postpone its planned initial public offering.
  • SNC Lavalin Group Inc. may face charges under the CFPOA for its role in a kickback and bribery scheme involving the Gaddafi regime in Libya. In addition, two former SNC Lavalin employees have been charged for attempting to bribe Bangladeshi government officials during a construction project bidding process in that country.
  • In 2011, Niko Resources Ltd. was fined $9.5 million and put on probation for three years for giving a SUV valued at less than $200,000 to a Bangladeshi energy and mineral resources minister.

Anti-Corruption Procedures to Help Mitigate Corruption Risk

Canadian companies should take steps to ensure that compliance measures are in place to avoid corrupt practices, and to ensure full compliance with the CFPOA. Companies should consider following strategies:

  • Strengthen corporate governance policies to discourage corrupt practices and demonstrate a corporate culture of integrity. Companies may wish to adopt an “anti-corruption” policy, along with supporting internal controls and procedures.
  • Perform an initial corruption risk assessment as part of due diligence before working with a new foreign third party contractor. This may be performed internally, or through an external investigative agency. Companies in mining, energy, and other industries that are especially susceptible to corrupt practices should take extra care. Concerns raised during the initial assessment should be carefully evaluated to avoid engaging high-risk contractors.
  • Foreign contractors who satisfy the company’s due diligence should be engaged under comprehensive contracts that include robust anti-corruption provisions. Appropriate provisions include covenants not to undertake certain activities which could lead to corruption, and representations and warranties regarding the avoidance of corrupt practices. An example of an anti-corruption representation from a foreign contractor, weighted in favour of a Canadian employer, is included below at section (iv).
  • Adopt an internal (accounting/legal) compliance program, and record company efforts to monitor compliance with such internal standards. It is also advisable to monitor foreign contractors on an ongoing basis for purposes of early detection of any illegal conduct.

The following is an example of an anti-corruption representation that a Canadian company might require from a foreign contractor. We would be pleased to discuss anti-corruption clauses tailored to your company’s needs and circumstances.

No Unlawful Payments. Neither the Consultant nor its subsidiaries and affiliates nor, to the knowledge of the Consultant, any director, officer, agent, employee or other person associated with or acting on behalf of the Consultant, has, directly or indirectly, (i) used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expense relating to political activity; (ii) made any unlawful payment to any foreign or domestic government official or employee out of corporate funds; (iii) violated (or is currently in violation of) any applicable provision of the United States Foreign Corrupt Practices Act of 1977 or the Corruption of Foreign Public Officials Act (Canada) (the “CFPOA”); or (iv) made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment. At no time will the Consultant permit any of its subsidiaries, affiliates, directors, officers, employees or agents acting on its behalf to offer, promise or give any undue pecuniary or other advantage, whether directly or indirectly through intermediaries, to a public official, for that official or for a third party, (a) to act or refrain from acting in relation to the performance of such public official’s official duties, or (b) to obtain or retain business or any other improper advantage or indulgence. The Consultant and, to the knowledge of the Consultant, its subsidiaries and affiliates, will regularly monitor their respective businesses to ensure compliance with the CFPOA and any internal compliance program, as applicable, and if any violations of the CFPOA are found, will promptly take remedial action to remedy such violations.

NOTE: This publication is intended to provide information to clients on recent developments in provincial and national law. Articles in this newsletter are not legal opinions and readers should not act on the basis of these articles without first consulting a lawyer who will provide analysis and advice on a specific matter.