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
Canada signed the Organisation for Economic Co-operation and Development (OECD) Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (the "OECD Convention") on December 17, 1997 and deposited the instrument of ratification with the OECD on December 17, 1998. On December 7, 1998, it adopted implementing legislation in the form of the Corruption of Foreign Public Officials Act, which received Royal Assent on December 10, 1998. The law came into force on February 14, 1999. The CFPOA is the main vehicle for implementation of the OECD Convention and is intended to give tangible expression to commitments made in the OECD and to represent Canada's legislative contribution to the international effort to fight corruption of foreign public officials. Section 12 of the CFPOA states that the Minister of Foreign Affairs shall cause an annual report on the implementation of the OECD Convention and the enforcement of the CFPOA to be laid before each House of Parliament. This is the Sixth Report to Parliament under the CFPOA.
For more detailed background information on the CFPOA and the OECD Convention, please see the Fifth Report to Parliament, located on the Department of Foreign Affairs and International Trade.
To date, 36 states have ratified 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.
Enforcement of the Corruption of Foreign Public Officials Act (the "CFPOA")
In February 2005, the Royal Canadian Mounted Police (RCMP) appointed a commissioned officer to provide functional oversight of its anti-corruption programs. The RCMP is 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. There are offences under the CFPOA currently being investigated by the RCMP.
The Trade Commissioner Service of International Trade Canada (ITCAN) has developed specific instructions to Canadian missions abroad, including embassy personnel, concerning the steps that should be taken where credible allegations arise that a Canadian company or individual has bribed or attempted to bribe a foreign public official. In April 2004, an internal committee was established, chaired by the Chief Trade Commissioner, to consider and review cases where Canadian individuals or companies have been found guilty of bribery or corruption overseas and this committee would advise the Minister responsible. To date no cases have been referred to the Committee.
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. CIDA has in place a policy that requires entities wishing to take part in CIDA development projects to declare previous corruption-related offences (see Contracting).
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.
There has been one successful prosecution under the Corruption of Foreign Public Officials Act. 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 (a company based in Red Deer Alberta). Garcia received a 6 month sentence and was subsequently deported to the United States. Hydro Kleen, its president and an employee, were charged under the CFPOA with, among other things, two counts of bribing Garcia. Hydro-Kleen entered a plea of guilty in the Court of Queen's Bench in Red Deer, Alberta on January 10, 2005. The company admitted to one count under s. 3(1)(a) of the CFPOA and were ordered to pay a fine of $25,000. Two other charges against a director and an officer of the company were stayed.
No other prosecution under the CFPOA was reported to the Department of Justice by provincial 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:
a) Foreign Affairs Canada (FAC) and International Trade Canada (ITCAN) - In the Spring 2005, the Deputy Minister of Foreign Affairs announced the intention to build a 21st century Foreign Ministry. Targets were established to achieve this goal and one of the priority items was to create a Values and Ethics Division, within the Office of the Inspector General. The Values and Ethics Division is the centre of expertise for FAC and ITCAN to assist employees in developing a professional culture based on the Values and Ethics Code for the Public Service. It aims to promote a solid culture of values and ethics that inspires confidence in the services provided by the Department to Canadians and in the relationships with the foreign publics and governments with which we interact;
b) Foreign Affairs Canada - The departmental website features material on bribery and corruption as it relates to corporate social responsibility, including the First, Second, Third, Fourth, and Fifth Annual Reports to Parliament, see: http://www.international.gc.ca/tna-nac/social-e.asp. FAC has been providing instructions and information to all staff (local and abroad) on both the OECD Convention and the CFPOA. The Sixth Annual Report will also be made available on the departmental web site. The following link contains more information on the issue of corruption.;
The United Nations Convention Against Corruption will enter into force on 14 December 2005. Not only does this Convention adapt some language from the OECD Convention, but by providing global norms for the criminalization of bribery and for transnational cooperation in related investigations, it is expected to complement enforcement of the CFPOA.
c) International Trade Canada - continues to provide training for its trade commissioners and trade commissioner assistants on the CFPOA 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 trade-focussed intranet websites, now provides information to Canadian trade commissioners on how to counsel businesses abroad on the CFPOA and the risks of bribery.
Team Canada Inc has added links on the CFPOA to its Export Source website and has referred to it in the next edition of its Step by Step Guide to Exporting.
Training - In 2004, the Trade Commissioner Service Renewal Division (TCX) led the development of a comprehensive three-day training course entitled "The Global Learning Initiative" (GLI) which sought to strengthen the capacity of trade program managers in their overall management competencies and skills which was delivered to 116 trade program managers (who serve at Canadian missions overseas) and 19 managers who work in regional offices across Canada. This course has since been made mandatory for all outgoing trade program managers. At the time of this report, all trade program managers in missions abroad and all directors and deputy directors at regional offices in Canada have received this course, which features a number of case studies with broad management issues dealing with Corporate Social Responsibility (CSR). ITCAN addresses issues of bribery and corruption within the general framework of CSR.
Based on the success of the GLI, the need was identified to develop a similar course for all trade staff, not just program managers. As a result, "The Global Learning Initiative for International Business Development Staff Abroad" course (GLI-2) was developed which, inter alia, aims to reinforce Canadian policies vis-a-vis CSR. At the time of this report, 147 IBD staff abroad have received the GLI-2 and the goal is to train all 885 IBD staff abroad by the end of fiscal year 2006/07.
In March 2004, the Trade Commissioner Service Operations Division (TCS) and the Investment Trade Policy Division (EBI) developed a pilot training course specifically on CSR which was offered to all trade staff based at the Canadian Embassy to the Philippines in Manila as well as participants from other Canadian missions in South-east Asia. A module in this course was devoted to foreign bribery and corruption.
As part of its "New Approach" to client service delivery, the Trade Commissioner Service has undertaken a process to articulate and implement its purpose, vision and six core organizational values. In order to communicate the organization's six core values effectively to all employees, a learning tool was developed for managers to use as a way to introduce the values to their teams and to help them facilitate a meaningful and engaging discussion amongst employees. The learning tool includes questions and scenarios for teams to discuss regarding each of the TCS's six core values which include, inter alia, issues relating to CSR. Since its rollout in September 2004, 47 posts and 5 regional offices have reported that their teams have used the learning tool to engage their teams in an interactive discussion regarding the six core values and how they apply to their everyday work.
In response to feedback received from managers indicating that more clarification was needed with respect to the day to day application of "integrity" (which includes bribery and corruption issues) which is one of the six core values, a set of clear guidelines are currently being developed. These guidelines will help to further enhance the knowledge and understanding that employees of the TCS have of integrity as a core value and build on what they have already gained over the last year through the use of the core values learning tool at posts, regional offices and in headquarters. These guidelines will refer employees to further information on CSR and how employees can assist their clients in this regard.
d) 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
e) 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;
On February 11, 2005, CIDA hosted a seminar on Corruption and Development Effectiveness at its headquarters.
f) 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, including 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 has devoted an entire page on its website to 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.
g) Canada Revenue Agency (CRA) - has developed a section in its Audit Manual to deal with the application of section 67.5 of the Income Tax Act as it relates to outlays and expenses incurred as a result of bribery of foreign public officials. This provision prohibits the deduction of outlays and expenses involved in the bribery of foreign public officials. The Investigations Manual, which previously referred to bribery offences under the Criminal Code, has been revised to include a reference to the CFPOA and a link to the section of the Audit Manual that deals with the application of section 67.5 of the Income Tax Act. The new section in the Audit Manual "Hot Off the Presses" which is a weekly listing of new or revised material updating the CRA Electronic Library changes.
h) Royal Canadian Mounted Police (RCMP) - in March 2005 the Force added the issue of foreign bribery generally and the CFPOA in particular to its training of all RCMP liaison officers before they depart for their assignments overseas.
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 Government of Canada and all provinces deny the tax deductibility of outlays made or expenses incurred in the bribery of foreign public officials.
Monitoring Implementation of the OECD Convention
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 assess 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, 35 of the 36 members of the Working Group have undergone Phase 1 reviews, with only 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. To date, only Hungary and the United Kingdom have received Phase 1bis examinations. 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 examination, the Working Group evaluates, among other things, member countries' enforcement and implementation of their foreign bribery legislation. Phase 2 examinations 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. These on-site visits constitute a 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 17 countries, including Canada. Canada served as lead examiner in the Phase 2 examinations of France and the United Kingdom. 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 OECD Working Group on Bribery approved 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 required Canada to provide information on its follow-up actions at a meeting of the Working Group in March 2005, one year after the publication of the Phase 2 Report on Canada in March 2004, and a more detailed report after two years. Canada provided an oral update at a Working Group meeting on March 17, 2005 and will provide a detailed written report at the meeting of March 2006.
Canada's Oral Update of Implementation of the Recommendations of the Phase 2 Examination
On March 17, 2005 Canada provided the OECD Working Group on Bribery with an oral update on progress made in the implementation of the recommendations arising out of Canada's Phase 2 examination. The Chair of the Working Group indicated that Canada had made impressive strides in the area of awareness-raising and enforcement. However, he cited areas concerning which Canada would be asked to provide more information:
Recommendation 4a) of the Phase 2 examination which recommended that Canada consider the introduction of amendments to the Canada Business Corporations Act (CBCA) to prohibit the making of off-the books accounts and transactions and the use of false documentation.
Recommendation 6c) regarding the establishment of nationality jurisdiction. The Working Group noted that since the Canadian Phase 2 examination many other common-law countries have adopted nationality jurisdiction for the foreign bribery offence. It nevertheless recognized that the Convention does not require members of the Working Group to establish nationality jurisdiction for bribery of foreign public officials. Canada, therefore, complies with the Convention as regards jurisdiction.
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.
Canada and France were lead examiners in the Phase 2 review of the United Kingdom and Canadian officials participated in the on-site visit of the UK from July 19 to 23, 2004. The report on France was adopted at the Working Group's March 2005 meeting.
Implementation of the OECD Convention
Thirty-six members of the OECD Working Group on Bribery had ratified the OECD Convention as of the date of preparation of this report. Annex B to this report contains information on the ratification status of the OECD Convention as of January 28, 2005.
Thirty-five 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, Canada, Chile, Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Japan, Korea, Luxembourg, Mexico, the Netherlands, New Zealand, Norway, Poland, Portugal, Slovak Republic, Slovenia, Spain, Sweden, Switzerland, Turkey, the United Kingdom, and the United States. Bulgaria, Canada, Finland, France, Germany, Greece, Hungary, Iceland, Italy, Japan, Korea, Luxembourg, Mexico, Norway , Switzerland, the United Kingdom and the United States 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, current as of June 2005:
Annex A - Country Evaluation Websites
OECD Convention on Combating Bribery of Foreign Public Officials
in International Business Transactions
RATIFICATION STATUS as of January 28, 2005
|Country||Deposit of instrument ratification/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|
|Estonia||November 23, 2004||January 22, 2005|
|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|
|Portugal||November 23, 2000||January 22, 2001||June 09, 2001|
|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|