FCPA Compliance and Ethics Blog

December 5, 2014

North of the 49th: Recent Developments in Canadian Anti-Corruption Enforcement

Filed under: CFPOA,John Boscariol — tfoxlaw @ 12:01 am

John BoscariolEd. Note-I recently ask John Boscariol a partner at McCarthy Tétrault LLP if he could provide an update of anti-corruption comings and goings from North of the Border. John graciously responded with information which is today’s post. 

In Transparency International’s recent report, Exporting Corruption: Progress Report 2014: Assessing Enforcement of the OECD Convention on Combating Foreign Bribery, Canada was bumped up from the “Limited Enforcement” category to “Moderate Enforcement”, joining Australia, Austria, Finland and Italy. Although still ranked below the “Active Enforcement” countries – Germany, Switzerland, the United Kingdom, and the United States – it’s positive news for Canadian authorities as the report highlights Canada as one of only two countries to improve its standing as a result of their enforcement efforts during 2013.

However, as we approach 2015, some may observe that there has not been a corporate penalty imposed under Canada’s Corruption of Foreign Public Officials Act (CFPOA) for almost two years now – the last one being the fine of $10.35 million levied against Griffiths Energy’s as a result of its guilty plea in January of 2013. That being said, all has not been quiet on the enforcement front as a number of developments during 2014 are worthy of note. These are my top five:

  1. CFPOA Prosecution Stayed

On April 28, 2014, Mr. Justice Ian Nordheimer of the Ontario Superior Court stayed a CFPOA prosecution against Abul Hasan Chowdhury (Chowdhury v. H.M.Q., 2014 ONSC 2635). Chowdhury was one of five individuals, including three former employees of SNC Lavalin Group, jointly charged with bribing a foreign public official in connection with alleged attempts to exert influence over the selection committee for the Bangladesh Padma Bridge project in favour of SNC Lavalin.

Chowdhury, a Bangladeshi citizen and resident and the former Bangladesh Interior Minister and Minister of State, was alleged to have acted as agent for SNC Lavalin in offering bribes to Bangladeshi government officials. The Court agreed that Canada had jurisdiction over the offence at issue, however, because Chowdhury was neither a citizen nor resident of Canada, was not and had not been in Canada, and his acts in furtherance of the alleged bribery occurred entirely in Bangladesh, it determined that Canada did not have jurisdiction over him and granted an order staying the prosecution. Notably, Canada does not have an extradition treaty in place with Bangladesh.

  1. First Jail Sentence Under the CFPOA

On May 23, 2014, Mr. Justice Charles Hackland of the Ontario Superior Court sentenced business executive Nazir Karigar to three years in prison for conspiracy to bribe foreign public officials in India (R. v. Karigar, Sentencing Decision, 2014 ONSC 3093). This was the first jail sentence handed down under the CFPOA since it came into force in 1999. All previous prosecutions had been against corporations and were disposed of with guilty pleas and fines.

Karigar’s case arose prior to the CFPOA amendments in 2013 which increased the period of imprisonment from five to 14 years. Karigar was convicted on August 15, 2013 for his leading role in a conspiracy to offer bribes to officials of Air India and an Indian Cabinet Minister. The scheme was intended to make Cryptometrics the successful bidder in a multi‑million dollar contract to supply facial recognition software to Air India. For more detail on this case, see First Trial Under Canada’s Corruption of Foreign Public Officials Act Results in Conviction and First Prison Sentence Under Canada’s Corruption of Foreign Public Officials Act Sends Strong Message to Business Community.

  1. RCMP Charge Foreign Nationals

Despite the Crown’s lack of success against a foreign national in the Chowdhury case discussed above, on June 4, 2014 the Royal Canadian Mounted Police (RCMP) charged three foreign nationals in connection with the Cryptometrics case – US nationals Robert Barra (former Cryptometrics CEO) and Dario Berini (former Cryptometrics COO) and UK national Shailesh Govindia, an agent of Cryptometrics in connection with their roles in the conspiracy to bribe Indian government officials.

The RCMP’s press release is here. All three have been charged under the CFPOA and Govindia faces an additional fraud charge under the Criminal Code. Canada‑wide warrants were issued for all three and it is expected that extradition requests will also be pursued as necessary with the United States and United Kingdom.

  1. New Legislation and Policies Targeting the Extractive Sector

One legislative development is of particular significance for companies in the extractive sector. On October 23, 2014, the Extractive Sector Transparency Measures Act (ESTMA) was introduced into Canada’s Parliament. It contains broad reporting obligations with respect to payments to governments made by oil and gas and mining companies and is intended to supplement the anti‑corruption measures contained in the CFPOA and Canada’s Criminal Code.

Expected to be in force by April 1, 2015, the ESTMA applies (i) to firms listed on a Canadian stock exchanges and (ii) private companies that have a plce of business in Canada, do business in Canada or have assets in Canada and meet certain asset, revenue and employee thresholds. The ESTMA is intended align with similar measures set out in the EU Transparency Directive and the U.S. Dodd-Frank Wall Street Reform and Consumer Protection Act, although its full impact will not be known until its regulations are released. More detail on the ESTMA can be found at Canada Introduces New Payment Disclosure Regime: The Extractive Sector Transparency Measures Act.

Extractive companies should also be carefully reviewing Canada’s “enhanced” corporate social responsibility (“CSR”) strategy, Doing Business the Canadian Way: A Strategy to Advance Corporate Social Responsibility in Canada’s Extractive Sector Abroad, announced on November 14, 2014. In addition to setting out key initiatives and international CSR standards, including those related to anti‑corruption, the Policy provides that extractive companies that do not comply with CSR best practices or fail to participate in the CSR strategy dispute resolution processes will face the loss of trade commissioner and government advocacy support abroad as well as financing or other support from Export Development Canada.

  1. Waiting on Facilitation Payments

Although last on the list, it’s certainly not least. The impending removal of the facilitation payments exception from the CFPOA continues to cause significant concern for a number of Canadian firms operating in jurisdictions where these payments can be demanded on a daily basis.

As a result of amendments to the CFPOA made on June 19, 2013, the exception for facilitation payments is now subject to elimination by an order of the federal Cabinet. In doing so, the Canadian government put companies on notice that the exception for payments made to expedite or secure the performance of acts of a routine nature will be eliminated at a future date, allowing time for changes in compliance policies. This is of concern to a number of Canadian firms that are cognizant of the competitive disadvantage this may create vis-à-vis the small group of other countries (such as the United States) whose anti-corruption laws continue to allow their companies to make such payments.

Forecast for 2015?

Although the RCMP no longer appears to be publicly announcing the number of ongoing CFPOA investigations, it is generally understood that there are three dozen or so in the pipe – some very public, but the vast majority still undisclosed. Depending on how those investigations play out, 2015 could be the most active year yet for Canadian anti-corruption enforcement.

John Boscariol leads the International Trade and Investment Law Group at McCarthy Tétrault LLP and specializes in enforcement and compliance matters involving anti-corruption law and policy, economic sanctions, export and technology transfer controls and other laws governing cross-border trade in goods, services and technology. He can reached via email at jboscariol@mccarthy.ca 

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