Implementation of the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, and the Enforcement of the Corruption of Foreign Public Officials Act.
Table of Contents
This is the Fifth Report to Parliament under the Corruption of Foreign Public Officials Act ("the CFPOA"). For more detailed background information on the CFPOA and on the Organisation for Economic Co-operation and Development (OECD) Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (the “OECD Convention”), please see the Fourth Report to Parliament.
To date, 35 states have signed the OECD Convention, including all original members of the OECD Working Group on Bribery in International Business Transactions ("the Working Group"). The Working Group comprises the 30 member states of the OECD and six non-members of the OECD: Argentina, Brazil, Bulgaria, Chile, Slovenia and Estonia. In June 2004, Estonia became the latest country to be admitted to the Working Group; however, Estonia is not yet a party to the OECD Convention.
By enacting the CFPOA to deal with corruption of foreign public officials, the Government of Canada has allowed for federal, as well as provincial, prosecution.
Recommendation IV of the OECD Council on Combating Bribery in International Business Transactions urges member countries to disallow the tax deductibility of outlays and expenses related to the bribery of foreign public officials. The Government of Canada and all provinces deny the tax deductibility of outlays made or expenses incurred in the bribery of foreign public officials.
The Royal Canadian Mounted Police (RCMP) has for the first time appointed a commissioned officer to provide functional oversight of its anti-corruption programs. The RCMP is also developing a protocol to track CFPOA cases being handled by the Force and other police agencies. Furthermore, the RCMP’s PROOF Criteria and Weights: Economic Crime system, which determines the priority to be assigned to incoming cases and already placed high priority on fact situations involving corruption, has been amended to specifically include the CFPOA as a positive criterion.
The Canadian International Development Agency (CIDA) has a Protocol for Dealing with Allegations of Corruption which clearly states that: "situations involving allegations of criminal activity may require referral to police authorities or other actions which are different from the procedures outlined in this Protocol", and includes specific internal procedures for reporting allegations of corruption to the relevant Director and of the Director of the Internal Audit Division for appropriate action. The Protocol ensures a thorough assessment of the allegations regarding CIDA financing so that senior management can ascertain whether 'credible evidence' of a violation of the CFPOA has occurred. If the allegations are substantiated, then informing law enforcement authorities falls within the ambit of the Protocol.
In December 2003, CIDA implemented a policy that requires entities wishing to take part in CIDA development projects to declare previous corruption-related offences. New clauses have been included in corporate contract models for dealing with entities convicted or under a sanction for an offence involving bribery or corruption. The new policy requires entities wishing to enter into a contract/contribution agreement with CIDA to declare previous corruption-related convictions and sanctions under non-CIDA financing. Entities must confirm that, in the three years before signing a contract or a contribution agreement, they have not been convicted of, and are not under sanction for, any corruption-related offence. If an entity has been convicted or is under sanction, it will have the opportunity to make representations to CIDA, to show that steps have been taken to counter the problem. However, CIDA reserves the right to accept, to accept conditionally or simply to refuse to do business with an entity convicted of, or sanctioned for, a corruption-related offence.
In order to clarify its policy on bribery, in 2004 Export Development Canada (EDC) introduced its Anti-Corruption Policy Guidelines (a public document) which outlines the measures EDC will apply to combat corruption, including a section on debarring companies convicted of bribery. This has been further developed into an internal procedural document for a company to follow when faced with this situation. Basically the policy guidelines state that any party who has been convicted of bribery will be debarred from support until EDC is satisfied that they have taken appropriate measures to deter further bribery. Such measures include replacing individuals who have been involved in bribery; adopting an effective anti-corruption program; submitting to audit and making the results of such audit available.
We are aware of one prosecution under the CFPOA, currently being prosecuted by the Province of Alberta. Hector Ramirez Garcia, 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., an Alberta-based company, in exchange for showing favour to the company. Garcia was sentenced to, and has served, six months imprisonment.
Hydro Kleen, its president and an employee, have been charged under the Corruption of Foreign Public Officials Act with, among other things, two counts of bribing Garcia. There will be a pre-trial conference on November 23, 2004 and the case is scheduled to go to trial in the Court of Queen’s Bench in Red Deer, Alberta, on January 31, 2005.
No other prosecution under the CFPOA was reported to the Department of Justice by provincial and Heads of Prosecution. Further there are no federally-conducted prosecutions at this time.
As illustrated in previous annual reports, considerable efforts have been made to make persons aware of the CFPOA. Officials continue to make presentations at conferences and at various meetings in Canada and consultations continue to take place with the provinces and territories. More specific instances include:
Department of Justice - in 1999 issued a publication: The Corruption of Foreign Public Officials Act: A Guide. The Guide has been updated to reflect amendments to the Act and has been distributed and posted on the Department of Justice web site. The Act continues to be featured in the Department of Justice's Federal Prosecution Service Deskbook;
Foreign Affairs Canada - the First, Second, Third and Fourth Annual Reports to Parliament are featured on the departmental website along with other material on bribery and corruption as it relates to corporate social responsibility. Foreign Affairs Canada has been providing instructions and information to all staff (local and abroad) on both the OECD Convention and the CFPOA. The following link contains more information on the issue of corruption.
International Trade Canada - continues to provide training for its trade commissioners and commercial officers on the Act and the OECD Convention. The Trade Commissioner Service recently added the promotion of corporate social responsibility, which includes counselling Canadian businesses against engaging in foreign bribery, to its list of roles and activities. Horizons, one of the Department’s intranet websites, now provides information to Canadian trade officers on how to counsel businesses abroad on the Corruption of Foreign Public Officials Act and the risks of bribery. Team Canada Inc has added links on the Corruption of Foreign Public Officials Act to its Export Source website and has referred to the Corruption of Foreign Public Officials Act in the next edition of its Step by Step Guide to Exporting;
The Canadian International Development Agency (CIDA) - has been engaged in raising the awareness of anti-corruption issues within the Agency for several years:
In June 2000, CIDA published two anti-corruption documents: an “Anti-Corruption Primer”, which articulates the parameters of corruption, its impact on development, and reviews donor strategies, and an “Anti-Corruption Questions and Strategies” document, which focuses more on developing bilateral programming approaches and lessons learned;
In October 2003, CIDA included mention of the CFPOA and international anti-corruption conventions in the Governance Orientation Program for New Development Officers (NDOs) and Locally Engaged Professionals (LEPs);
In December 2003 a paper entitled “Corruption and the Development Challenge” was drafted which examines the effects of corruption on the success of poverty reduction and sustainable development strategies and highlights the importance of donor harmonization; and
In June 2004, CIDA circulated an “Anti-Corruption Scoping Study” which provides an overview of anti-corruption policy and programming activity in the Agency.
Export Development Canada (EDC) - has been engaged in awareness-raising of the OECD Convention and the CFPOA, and its activities include:
In order to clarify its policy on bribery, in 2004 EDC introduced its Anti-Corruption Policy Guidelines (a public document) which outlines the measures EDC will apply to combat corruption, including a section on disclosure to law enforcement authorities. This has been further developed into an internal procedural document for the Corporation to follow when faced with this situation;
In addition, the Anti-Corruption Policy Guidelines which outlines the measures EDC will apply to combat corruption, includes a section on debarring companies convicted of bribery. This has been further developed into an internal procedural document for the Corporation to follow when faced with this situation;
EDC has developed an anti-corruption brochure that is systematically distributed to its customers to inform them of the potential risks they face if exposed to corrupt business practices, and to encourage the development of corporate best practices in this area. EDC posts information on its website about corruption and bribery, including the Act, the Convention and the OECD Export Credits Group Action Statement on Bribery and Officially Supported Export Credits;
At various times in the last two years, EDC has written to its customers to inform them about the OECD Convention and the CFPOA; and
In addition to the distribution of its brochure, EDC will continue to exploit other opportunities to communicate to customers and will do so, for example, via articles in its quarterly magazine, ExportWise, and/or through industry association trade publications.
Canada Revenue Agency (CRA) - is in the process of developing a section in its Audit Manual to deal with the application of section 67.5 of the Income Tax Act. This provision prohibits the deduction of outlays and expenses involved in the bribery of foreign public officials. The Investigation Manual, which currently refers to bribery offences under the Criminal Code, will be revised to include a reference to the CFPOA and the new section in the Audit Manual.
In 1999, CIDA implemented an anti-corruption clause in all contracts and contribution agreements, as well as a Protocol for Dealing with Allegations of Corruption, which outlines internal procedures for assessing and reporting such allegations. In response to the Acres International case, CIDA’s Contracting Management Division (CMD) introduced a new anti-corruption clause in its contracts in December 2003. This clause requires entities wishing to enter into a contract or contribution agreement with CIDA to declare previous corruption-related convictions and sanctions and that entities must confirm that, in the three years prior to signing a contract or contribution agreement, they have not been convicted of, and are not under sanction for, any corruption-related offence. If an entity has been convicted or is under sanction, it will have the opportunity to make representations to CIDA, to show that steps have been taken to counter the problem. However, CIDA reserves the right to accept, to accept conditionally, or simply refuse to do business with an entity convicted of, or sanctioned for, a corruption-related offence. In addition, CMD developed a subsequent Protocol for entities found guilty of corruption, to be implemented if/when an entity declares a previous corruption-related offence involving activities funded by an organization other than CIDA.
At Export Development Canada, exporters are asked to sign anti-corruption declarations. The wording in the declarations may be different depending on the product in question, but generally states: “We have not been and will not knowingly be party to any action which is prohibited by Canada’s Corruption of Foreign Public Officials Act”. Further, EDC’s insurance policies and loan documents include clauses / representations and warrants against bribery.
The OECD Anti-Bribery Convention (the “OECD Convention”) aims to stop the flow of bribes and to remove bribery as a non-tariff barrier to trade. The Convention and the 1997 Revised Recommendation of the OECD Council on Combating Bribery in International Business Transactions provide for self and mutual evaluation by members of the OECD Working Group on Bribery in International Business Transactions (the ”Working Group”). The aim of the review exercise is to ensure the effectiveness of national instruments to combat bribery and that all members enjoy a level playing field.
The evaluation takes place in two phases. Phase 1 is designed to evaluate whether the legal texts through which participants implement the Convention meet the standards set by it, as well as initial actions to implement the 1997 Revised Recommendation. Phase 2 studies and assesses the structures put into place to enforce national laws and determine their practical application.
Phase 1 involves the review of each member country’s implementing legislation to determine if it meets the requirements of the OECD Convention. To date, 34 of the 36 members of the Working Group have undergone Phase 1 reviews, with only Slovenia and Estonia left to be examined.
Where a country’s implementing legislation has been found not to meet the standards of the OECD Convention, a Phase 1bis examination is conducted to determine if legislation implemented in response to the initial Phase 1 review meets OECD Convention standards. Most Phase 1 reviews are available on the OECD's web site. Annex A to this Report contains a list of web sites where individual country evaluations may be viewed.
During the Phase 2 evaluation, the Working Group evaluates, among other things, member countries’ enforcement and implementation of their foreign bribery legislation. Phase 2 evaluations involve the completion of a questionnaire by the reviewed country followed by an on-site visit by members of the OECD Secretariat and lead examiners from two other OECD countries. On-site visits by the Secretariat and lead examiners constitute another major aspect of the evaluation process, and include meetings with government representatives as well as informal exchanges of views with representatives of the private sector and civil society. (Each examined country is consulted on the best manner of obtaining input from the private sector and civil society.)
Following an on-site visit, the Secretariat, in consultation with the lead examiners, drafts a preliminary report. The Working Group, meeting in plenary, then reviews and adopts the report which is later transmitted to the OECD Council.
Finland was the first country to be evaluated under Phase 2 in 2002. Since then, the Working Group has also reviewed, and approved, Phase 2 reports for: the USA, Iceland, Germany, Bulgaria, Canada, France, Norway and Luxembourg. All Phase 2 examinations of current members should take place by the end of 2007.
Canada's Phase 1 Evaluation
The Working Group reviewed Canada's implementing legislation, July 8-9, 1999 and concluded that the CFPOA met the requirements set by the Convention. The Working Group also noted that some issues may benefit from further examination during the Phase 2 evaluation. These include the exemption of reasonable expenses incurred in good faith, Canada's choice not to establish nationality jurisdiction with respect to bribery of foreign public officials, payments to secure performance of any act of a routine nature from the purview of the offence and sentencing court’s discretion in imposing fines.
Canada’s Phase 2 Evaluation
At its June 17-19, 2003 meeting, the Organisation for Economic Co-operation and Development Working Group on Bribery (the “Working Group”) approved, in principle, the report on the evaluation of Canada's enforcement of its laws against foreign bribery. Overall, the report is positive in its evaluation of Canada's fight against corruption. However, the report makes recommendations which, in the opinion of the Working Group, would further improve Canada's capacity to fight corruption. These recommendations deal with the measures to prevent and detect foreign bribery and measures to prosecute and sanction it. The Report also identifies issues requiring follow-up by the Working Group because of insufficient practice at the time the evaluation was conducted to assess Canada’s performance.
Some of these recommendations, if accepted, would require legislative amendments. Other recommendations call on Canada to review and/or consider making changes to its policies or practices.
These recommendations are currently being reviewed by departments responsible for their implementation. The OECD post-Phase 2 follow-up procedure requires Canada to provide information on its follow-up actions at a meeting of the Working Group in March 2005, one year after the release of the Phase 2 Report on Canada, and a more detailed report after two years. Both Canada’s implementation of the recommendations and the new follow-up procedure will be discussed in subsequent Annual Reports.
Canada’s Activities as Lead Examiner
Canada and Italy were lead examiners in the Phase 2 review of France and Canadian officials participated in the on-site visit of France from June 23 to 27, 2003. The report on France was adopted at the Working Group’s October 2003 meeting.
In 2004, Canada will participate with France in the Phase 2 review of the United Kingdom’s implementation of the Convention.
Thirty-four members of the OECD Working Group on Bribery had ratified the OECD Convention as of the date of preparation of this report. Estonia officially joined the Working Group on Bribery but has yet to ratify the OECD Convention. Annex B to this report contains information on the ratification status of the OECD Convention as of 10 March 2004.
Thirty-two members of the Working Group (including Canada) have had their implementing legislation evaluated as part of the peer review process. The other Members who have been evaluated include: Argentina, Australia, Austria, Belgium, Brazil, Bulgaria, Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Japan, Korea, Luxembourg, Mexico, the Netherlands, New Zealand, Norway, Poland, Portugal, Slovak Republic, Spain, Sweden, Switzerland, the United Kingdom, and the United States. Finland, the United States, Iceland, Germany, Bulgaria, Canada, France, Norway and Luxembourg have also had their enforcement mechanisms evaluated as part of the Phase 2 review.
The following is a chart, taken from the website of the OECD Anti-Bribery Department and based on Member submissions to the OECD, of steps taken and planned future actions by other participating countries to ratify and implement the OECD Convention (PDF*, 391 KB), current as of 01 July 2004.
Annex A - Country Evaluation Web Sites
|Country||Deposit of instrument gratification/accession||Entry into force of the Convention||Implementing Legislation|
|Argentina||February 08, 2001||April 09, 2001||November 10, 1999|
|Australia||October 18, 1999||December 17, 1999||December 17, 1999|
|Austria||May 20, 1999||July 19, 1999||October 01, 1998|
|Belgium||July 27, 1999||September 25, 1999||April 03, 1999|
|Brazil||August 24, 2000||October 23, 2000||June 11, 2002|
|Bulgaria||December 22, 1998||February 20, 1999||January 29, 1999|
|Canada||December 17, 1998||February 15, 1999||February 14, 1999|
|Chile||April 18, 2001||June 17, 2001||October, 2002|
|Czech Rep||January 21, 2000||March 21, 2000||June 09, 1999|
|Denmark||September 05, 2000||November 04, 2000||May 01, 2000|
|Finland||December 10, 1998||February 15, 1999||January 01, 1999|
|France||July 31, 2000||September 29, 2000||September 29, 2000|
|Germany||November 10, 1998||February 15, 1999||February 15, 1999|
|Greece||February 05, 1999||April 06, 1999||December 01, 1998|
|Hungary||December 04, 1998||February 15, 1999||March 01, 1999|
|Iceland||August 17, 1998||February 15, 1999||December 30, 1998|
|Ireland||September 22, 2003||November 21, 2003||November 26, 2001|
|Italy||December 15, 2000||February 13, 2001||October 26, 2000|
|Japan||October 13, 1998||February 15, 1999||February 15, 1999|
|Korea||January 04, 1999||March 05, 1999||February 15, 1999|
|Luxembourg||March 21, 2001||May 20, 2001||February 11, 2001|
|Mexico||May 27, 1999||July 26, 1999||May 18, 1999|
|Netherlands||January 12, 2001||March 13, 2001||February 01, 2001|
|New Zealand||June 25, 2001||August 24, 2001||May 03, 2001|
|Norway||December 18, 1998||February 16, 1999||January 01, 1999|
|Poland||September 08, 2000||November 07, 2000||February 04, 2001|
|Slovak Republic||September 24, 1999||November 23, 1999||November 01, 1999|
|Slovenia||September 06, 2001 (accession instrument)||November 05, 2001||January 23, 1999|
|Spain||January 4, 2000||March 04, 2000||February 02, 2000|
|Sweden||June 08, 1999||August 07, 1999||July 01, 1999|
|Switzerland||May 31, 2000||July 30, 2000||May 01, 2000|
|Turkey||July 26, 2000||September 24, 2000||January 11, 2003|
|United Kingdom||December 14, 1998||February 15, 1999||February 14, 2002|
|United States||December 08, 1998||February 15, 1999||November 10, 1998|
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