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Conducting business in Canada: Navigating Canada’s anti-corruption laws

I. Introduction

Canada has actively been taking steps to develop its anti-corruption landscape, including the implementation of new laws and policies designed to compliment Canada's equivalent of the U.K. Bribery Act, the Corruption of Foreign Public Officials Act ("CFPOA"). While the CFPOA constitutes an important anti-corruption law to be aware of, for companies considering doing business in Canada the Criminal Code of Canada ("Criminal Code") is of even greater significance as it governs both public and private interactions in Canada. This article provides an overview of the Criminal Code, CFPOA and other anti-corruption laws and initiatives that companies should be aware of when conducting business in Canada.

II. The Criminal Code

The Criminal Code contains a number of provisions that regulate conduct in relation to Canadian "government" officials. In particular, it contains several sections prohibiting the provision of a loan, reward, advantage or benefit of any kind (collectively a "benefit") to a government official by those who have dealings with the government. These provisions generally fall into two categories.

The first category of offences is similar to most anti-bribery statutes, in that it requires that a benefit be provided to a government official in exchange for something in return. An example of this is subsection 121(1)(a) of the Criminal Code, which prohibits the offering or giving of a benefit to a government official, or any member of his family, as consideration for cooperation, assistance, the exercise of influence or an act or omission in connection with the transaction of business with the government. This provision is targeted at prohibiting overt forms of corruption.

In contrast, subsection 121(1)(b) of the Criminal Code is much broader than most bribery offences, including those under the U.K. Bribery Act. Unlike most other anti-bribery offences, which require an element of quid pro quo, this subsection prohibits the provision of a benefit to a government official, even if there are "no strings attached", in respect of a dealing with the government. Written pre-approval is an exception to any issue arising under subsection 121(1)(b). This provision is aimed at preserving not just integrity, but the appearance of integrity as well.

What constitutes a benefit for the purposes of subsection 121(1)(b) has been the subject of discussion in the case law. In R v Hinchey, [1996] 3 SCR 1128, the Supreme Court of Canada held a benefit must constitute a "material or tangible gain". Guidance from case law reflects that hockey tickets, extravagant meals, a $500 gift card, payment for travel or buying someone cable TV are all examples of "material or tangible gains" sufficient to create Criminal Code liability. Conversely, items such as infrequent moderately priced meals, coffee, or low value promotional items would not constitute a benefit.

The Criminal Code also contains a private bribery prohibition. The secret commissions offence (section 426) prohibits the provision to an agent (which includes an employee), and receipt by the agent, of any award, advantage or benefit of any kind as consideration for doing or forbearing to do any act related to the affairs or business of the agent's principal. The hallmark of this offence is secrecy such that disclosure of the benefit to the agent's principal serves as an absolute defence. The secret commissions office applies to all employees and agents, regardless of whether they are in the public or private sector.

III. The Corruption of Foreign Public Officials Act

Section 3 of the CFPOA forbids providing or offering to provide any type of benefit for the purpose of influencing a foreign official to misuse his or her power or influence with the purpose of obtaining or retaining a business advantage. In R. v. Karigar, 2013 ONSC 5199, the Court held that the CFPOA bribery offence is made out upon proof of an agreement to pay a bribe, even in the absence of evidence that any bribe was actually offered or paid. There is also an accounting offence pursuant to section 4 of the CFPOA, such that it is an offence to make or keep false records for the purpose of concealing bribery of a foreign public official.

A CFPOA violation can result in imprisonment for up to 14 years and an individual or corporation convicted of a CFPOA offence can also be subject to significant fines. There is no limit to the fines that can be imposed on corporations. In addition, Canadian courts can, and have, ordered corporate probationary terms, including appointment of a third-party monitor at the sole expense of an offending corporation.

IV. The Integrity Regime

On July 3, 2015, the Canadian Government's principal contracting arm, Public Works and Government Services Canada, announced the implementation of a new government-wide Integrity Regime for all Federal Government procurement.

Under the Integrity Regime, a supplier is barred from doing business with the Government of Canada for 10 years if it, or any board members, have been convicted or discharged in the past three years for a range of integrity-related offences in Canada or abroad, including bribery, fraud, bid-rigging, tax evasion, insider trading and money laundering. However, the decade long ban can be cut in half if the supplier shows it has taken action to cooperate with authorities, takes remedial action and enters into an administrative agreement with the Canadian Government.

The mandatory ban on all Federal Government procurement has been criticized as an unduly harsh penalty on innocent shareholders and employees and for being far more severe than the U.S. and European equivalent integrity provisions, where companies can be reinstated for taking proactive measures aimed at eliminating the risk of future offences.

V. The Extractive Sector Transparency Measures Act

The Extractive Sector Transparency Measures Act ("ESTMA"), which came into force on June 1, 2015, is designed to create greater transparency over payments made by mining, oil and gas companies to foreign and domestic governments (and government officials). ESTMA's reporting requirements apply to companies engaged in the development of oil, gas or minerals that are either (a) listed on a Canadian stock exchange or (b) have a place of business in Canada, do business in Canada or have assets in Canada, and which meet certain size thresholds. ESTMA is not restricted to Canadian-headquartered companies.

Companies subject to ESTMA are required to report and publically disclose all payments, including taxes, royalties, fees and any other consideration for licenses, permits or concessions in excess of CAD$100,000.

The Canadian Government has recently published draft guidelines and reporting specifications. In order to avoid the burden of dual-reporting requirements, ESTMA contains an equivalency provision that allows the Minister of Natural Resources to deem another jurisdiction's reporting standards as an acceptable substitute. In furtherance of this equivalency provision, on July 31, 2015, the Minister issued a direction specifying that compliance with the EU's Accounting and Transparency Directives are an acceptable substitute for reporting under ESTMA. Accordingly, reports submitted under the EU Directive may also be submitted to the Minister as a substitute for a report under ESTMA, subject to certain requirements.

Non-compliance with the reporting requirements is an offence. Any director or officer who directed, authorized, assented to, acquiesced in or participated in the non-compliance can also be held personally liable. These offences are subject to a maximum fine of CAD$250,000 for each day that the non-compliance continues.

VI. Conclusion

Canada is increasingly demonstrating its commitment to anti-corruption enforcement by bolstering the legislative tools available to law enforcement and government agencies. Parties doing business in Canada should be aware that Canada's anti-corruption compliance approach is not only directed at corporations, but also, Canadian authorities will pursue enforcement against individuals who may be involved in commercial corruption schemes. Given the clear trend toward increased regulation and enforcement, parties conducting business in Canada must be savvy with respect to Canada's ever evolving anti-corruption landscape.