Canada: Bribery & Corruption

The key legislative provisions relating to bribery and corruption in Canada are contained the Criminal Code of Canada (“Criminal Code”), in the Corruption of Foreign Public Officials Act, S.C. 1998, c. 34 (“CFPOA”), and, in Quebec, the Quebec Anti-Corruption Act, CQLR, c. L-6.1, s. 17. Simply put, the Criminal Code criminalises the corruption of domestic public officials, and the CFPOA criminalises the corruption of foreign public officials.

Federally, the Criminal Code focus on bribery of public officers, but also criminalise secret payments among private parties. Offences relating to bribery are primarily found in Part IV of the Criminal Code concerning ‘Offences Against the Administration of Law and Justice’.

Criminal Code, Sections 119 to 125 specify various forms of domestic corruption, including:

• Section 119 – Bribery of judicial officers;
• Section 120 – Bribery of officers;
• Section 121 – Frauds on the government;
• Section 122 – Breach of trust by a public officer;
• Section 123 – Municipal corruption;
• Section 124 – Selling or purchasing public office;
• Section 125 – Influencing or negotiating appointments or dealing in offices;
• Section 380 – Fraud; and
• Section 426 – Secret commissions.

Internationally, the CFPOA prohibits Canadian individuals and entities from bribing foreign public officials. The CFPOA creates civil and criminal liability for individuals and entities that engage in bribery or corruption of foreign officials. The CFPOA was the ratifying legislation of the Organisation for Economic Co-operation and Development (“OECD”) Convention on Combating Bribery of Foreign Public Officials in International Business Transactions and has been referred to as the Canadian equivalent to the United States’ Foreign Corrupt Practices Act.

In addition, there are several federal and provincial acts that address issues relating to lobbying and hospitality.

Both the CFPOA and the Criminal Code are addressed as police matters, investigated and enforced by Canada’s federal policing authority, the Royal Canadian Mounted Police (the “RCMP”). The RCMP will work with their counterparts in other jurisdictions to complete investigations when necessary.

Oversight of prosecutions is in the purview of the Public Prosecution Service of Canada (the “Crown”). The Crown and the police work closely together to determine whether to lay charges- with the police generally laying charges while the Crown decides whether to prosecute.

When deciding whether to initiate and conduct a prosecution on behalf of the federal Crown, Crown counsel must consider two issues:

1. Is there is a reasonable prospect of conviction based on evidence that is likely to be available at trial? If there is,
2. Would a prosecution best serve the public interest?

Public Prosecution Service of Canada Deskbook, Part II, s. 2.3.

The Deputy Director of Public Prosecutions is responsible for resolving any disagreement between the policy and prosecutors over the merits of a particular prosecution.

The Criminal Code defines bribery as ‘directly or indirectly, corruptly gives or offers to a person mentioned in Sections 119 or 120, or to anyone for the benefit of that person, any money, valuable consideration, office, place or employment in respect of anything done or omitted or to be done or omitted by that persona in their official capacity’.

The Supreme Court of Canada in R v. Hinchey, 1996 3 S.C.R. 1128 (SCC), stated the benefit offered must constitute a ‘material or tangible gain’. In determining whether something constitutes a ‘material or tangible gain’, courts should consider:

• The relationship between the parties (eg. whether they are business acquaintances or friends, whether such friendship was ongoing and the existence of previous reciprocal arrangements).
• The size or scope of the benefit.
• The manner in which the gift was bestowed.
• The official or employees’ function in government.
• The nature of the giver’s dealings with the government.
• The connection, if any, with the giver’s dealings and the official or employee’s job.
• The state of mind of the receiver and the giver.

(R v. Pilarnos, 2002 BCSC 1267.)

The CFPOA defines bribery, more broadly than the Criminal Code, as ‘directly or indirectly giving, offering or agreeing to give or offer a loan, reward, advantage or benefit of any kind’.

The Criminal Code distinguishes between bribery of a public official and bribery of public persons.

In the public sphere, the Criminal Code Section 2 states that a ‘public officer’ includes anyone who holds an office in government, a civil or military commission or any party who is employed in a public department or who is elected or appointed to discharge a public duty.

The Criminal Code criminalise bribery in the private sphere separately under Part X relating to ‘Fraudulent Transactions Relating to Contracts and Trade’ (Criminal Code, Section 426). The Code makes it an offence for a party to bribe an agent to do, or omit to do, an act contrary to her or his duties to a principal. However, unlike the bribery provisions addressing public officials, these provisions specially criminalise the offering of bribes, but not the acceptance of those bribes. While the recipient of the bribe remains distinct, the definition of bribery remains unchanged across the offences.

In the international context, the CFPOA prohibits Canadian individuals and entities from bribing foreign public officials. While the Act does not extent to private persons, the definition of bribery remains broader than that provided in the Criminal Code.

There are no civil or administrative enforcement bodies specifically responsible for investigating or prosecuting bribery or corruption. However, bribery in the private sphere could result in civil liability through claims such as unjust enrichment or breach of fiduciary duty. The most significant penalty in the civil context is that of civil damages, which may be made up of both general and punitive damages.

Specific punishments are prescribed for each anti-corruption offence under the Criminal Code, with maximum sentences ranging from five to fourteen years. For example, an individual who bribes a public official, or the public official who accepts said bribe, can face up to fourteen years imprisonment.

Under the CFPOA the potential sanctions are equally severe. Bribery of foreign officials carries a maximum term of imprisonment of fourteen years (CFPOA, Section 3(2)). Further, the offence carries a fine that is entirely in the discretion of the judge. The CFPOA does not stipulate any maximum amount.

To date Corporations held liable for breaches of the CFPOA have been fined up $10.35 million (R v Niko Resources Ltd., 2011 CarswellAlta 2521 (ABQB)).

Furthermore, corporations convicted under the CFPOA or the Criminal Code may also face debarment from doing business with: the federal government under the Integrity Regime; and other provincial governments.

Gifts, travel expenses, meals and entertainment may constitute an award, advantage or benefit in contravention of the CFPOA or the Criminal Code. Whether such expenses are acceptable or not is assessed on a case by case basis. As there is no government-issued guidance available for acceptable gifts and hospitality under Canadian law, the threshold benefit remains unclear. While the amount of a gift or payment is often considered when determining whether it was given for the purpose of a bribe, there is no de minimis threshold for a bribe under the legislation.

The CFPOA provides an exemption from an offence where the loan, reward, advantage or benefit was provided to pay reasonable expenses incurred in good faith by or on behalf of a foreign public official and the expenses were incurred related to promotion of the accused’s products and services or the execution or performance of a contract between the accused and the official. Expenses incurred for the purpose of demonstrating, promoting or explaining products, or executing or performing obligations of a contract formed with a foreign government will generally be permissible. However, entertainment of other similar expenses may not qualify for the exemption.

Conversely, the Criminal Code does not contain any comparable exceptions and courts have found that an advantage or benefit under that legislation may include such gifts. The courts have been clear that the size of the gift is a crucial indicator of whether it should be perceived as an advantage or benefit, such that a trivial gift would likely not constitute a benefit for the purposes of the code (R v. Hinchey, 3 S.C.R. 1128 (SCC), at para 68).

Codes of conduct applicable to public officials in provincial and federal jurisdictions also shed some light on the matter. For example, the federal government’s Policy on Conflict of Interest and Post-employment holds that gifts must be ‘infrequent and of minimal value, within the normal standards of courtesy or protocol, arise out of activities or events related to the official duties of the public servant concerned’ and not ‘compromise or appear to compromise the integrity of the public servant concerned or of his or her organisation’. However, these policies are binding on government officials and employees not the actual giver of any gift or hospitality. Resultingly, the exact threshold for what benefit constitutes a bribe remains unclear.

Absent a quid pro quo, political contributions are generally permissible and do not offend the Criminal Code’s bribery provisions. Having said that, federal and provincial legislation determine whether political candidates can accept benefits from certain entities.

At the federal level, foreign political contributions are banned. However, provincially, political candidates may be permitted to accept foreign political contributions.

Facilitation payments are no longer permitted under the CFPOA as of October 31, 2017 and remain prohibited under the Criminal Code.

Previously, facilitation payments constituted a defence under the CFPOA, such that payments made to expedite or secure the performance by a foreign public official of any act of a routine nature that is part of the official’s duties or functions, and which therefore do not require discretion – were excluded from the bribery offence.

As mentioned above, the CFPOA Section 3(3) provides an exemption from the bribery offence where the loan, reward, advantage or benefit:

• is permitted or required under the laws of the foreign state or public international organization for which the foreign public official performs duties or functions; or
• was made to pay the reasonable expenses incurred in good faith by or on behalf of the foreign public official that are directly related to promotion of the accused’s products and services or the execution or performance of a contract between the accused and the official.

Offences under the Criminal Code require proof of intent and knowledge. Therefore, an accused can defend them self by proving that they did not have the requisite knowledge to commit the offence.

Neither the Criminal Code nor the CFPOA expressly require Canadian multinational corporations to engage in anti-corruption or anti-bribery compliance programs or, by extension, the required content of such programs. While the legislation still does not require compliance programs, the justice system has shown leniency to entities that make good faith attempts to remain compliant with the CFPOA.

Nonetheless, several training initiatives have been developed to assist multinational corporations in developing best practices, in accordance with anti- bribery legislation and may be taken into account by law enforcement. Existing jurisprudence suggests that an effective anti-corruption program is one that is endorsed and enforced by management, designed to address the unique circumstances of a company and is routinely reviewed to ensure that it continues to address the company’s specific risks adequately. A compliance program typically addresses the following key topics:

• responsibilities for compliance;
• internal controls, auditing practices and documentary policies;
• internal reporting mechanisms;
• enforcement and disciplinary procedures;
• training and education; and
• regular maintenance and review.

Individuals and companies can both be held liable under anti-corruption laws in Canada.

The Criminal Code applies to ‘everyone’ in Canada. The definition in Section 2 of ‘everyone’, includes ‘public bodies, bodies corporate, societies, companies’.

Section 22.2 of the Criminal Code extends criminal liability to a body corporate when one of its senior officers is:

1. acting within the scope of their authority, is a party to the offence;
2. acting within the scope of their authority, directs the work of other representatives so that they commit the act or omission specified in the offence; or
3. knowing a representative is or is about to be party to the offence, does not take all reasonable measures to prevent them from doing so.

Criminal Code Section 2 defines ‘senior officer’ as:

a representative who plays an important role in the establishment of the organisation’s policies or is responsible for managing an important aspect of the corporation’s activities and, in the case of a body corporate, includes a director, its chief executive officer and its chief financial officer.

The court in R v. Pétroles Global, 2013 QCCS 4262, held that an employee need not be senior management or a member of the board of directors to constitute a senior officer under Section 2 of the Criminal Code and therefore engage corporate criminal liability under Section 22.2. The court advanced that the title of an employee is not decisive, and courts may consider the full scope of what constitutes a ‘management position’.

Similarly, the CFPOA expressly applies to conduct by Canadian citizens, permanent residents and companies or corporate entities formed or incorporated in Canada. To date only one individual has been convicted under the act (R v. Karigar, 2013 ONSC 5199), despite the fact that several companies have been charged.

A number of federal departments, agencies and Crown corporations provide guidance, though official guidance is limited.

Global Affairs Canada (“GAC”) represents Canada at international anti-corruption forums and in outreach efforts with emerging economies regarding corruption. The GAC applies the 2010 Policy and Procedure for Reporting Allegations of Bribery abroad by Canadians or Canadian Companies, which instructs Canadian missions on the steps that must be taken when allegations arise that a Canadian company or individual has bribed a foreign public official or committed other bribery-related offences.

Furthermore, Export Development Canada’s (“EDC”) policy statement regarding bribery as set out in the Code of Business Ethics and Code of Conduct, places the onus on employees to “ensure that EDC does not knowingly support a transaction that involves the offer or giving of a bribe, and that EDC exercises reasonable diligence and care not to support such a transaction unknowingly.” It further provides that “[e]mployees are responsible for exercising reasonable due diligence in transactions, and for complying with EDC’s Anti-Corruption Policy Guidelines, including provisions regarding identification of persons associated with transactions who have been convicted of bribery.”

Further, EDC exporters are required to sign anti-corruption declarations. In general, the anti-corruption declarations state, with respect to the transaction(s) being supported by EDC, that the exporter has not been and will not knowingly be party to any action which is prohibited by any applicable criminal law dealing with the bribery of foreign public officials, including the CFPOA. Exporters are also required to declare whether they are currently charged with or, within the previous five years, have been convicted of, bribing a foreign public official.

Similarly, the Canadian Commercial Corporation’s (“CCC”) Code of Conduct and Business Ethics Policy forms the basis for CCC’s approach to fighting bribery and corruption. This Code provides specific guidance and direction to CCC’s employees and clients with regard to ethical behavior in all of its business activities. All employees have access to a copy of this Code and are obligated to sign a yearly acknowledgement confirming their understanding of, and responsibility to comply with it.

Finally, the OECD Guidelines for Multinational Enterprises (Guidelines), contain guidance regarding corporate social responsibility aimed at multinational enterprises investing abroad. The Guidelines are supported by National Contact Points, which are offices established by adherents to implement and raise awareness of the Guidelines. In February 2018, Canada’s NCP underwent a voluntary peer review to map its strengths and accomplishments, while also identifying opportunities for improvement.

Canadian law includes some protection for whistle-blowers at federal and provincial level, but protection is less robust than that seen in other jurisdictions such as the United States.

It is an offence in Canada for employers to threaten to or to take disciplinary action, demote, terminate or otherwise adversely affect employment with the intent to force the employee to refrain from providing information to law enforcement about an offence or to retaliate against an employee who has already provided such information (Criminal Code, Section 425.1). Nevertheless, this provision is limited, applying to employees who report to law enforcement officials only, and not to employees who report wrongdoing to other parties, such as media sources or outside agencies or advocacy groups.

Federally, The Public Servants Disclosure Protection Act (“PSDPA”) prohibits employers from taking retributive action against a public servant who has made a protected disclosure or has, in good faith, cooperated in an investigation into a disclosure or an investigation commenced under the PSDPA. Numerous provincial statutes protect employees who disclose actual or foreseen contraventions of the provisions of that legislation.

In the last decade, the trend in Canada has been towards enhanced whistle-blower protections and incentives. Numerous Canadian public bodies and administrative agencies (such as the Securities Commissions of both Ontario and Quebec, the National Energy Board of Canada, the Canadian Food and Drug Inspection Agency, the Canadian Armed Forces and Canada Revenue Agency) operate whistle-blower programs. The PSDPA has received criticism in recent years for alleged inadequacies, such as placing the onus on whistle-blowers to prove that adverse actions were intended by the employer as reprisals. No action has been taken to rectify these inadequacies; however, with the recent trends in Canada’s anti- bribery jurisprudence, change is likely to come.

There have been limited convictions to date under the CFPOA, although generally-speaking Canada’s commitment to the CFPOA’s strict enforcement appears to be increasing though specific information about the number of investigations is not publicly available.

The most significant development in Canada is the introduction of “remediation agreements” with companies accused of offences pursuant to which prosecutors and accused organizations where criminal proceedings are stayed in exchange for certain conditions being met. Remediation Agreements are the Canadian equivalent of American and U.K. deferred prosecution agreements.

Remediation agreements are expected to provide an avenue for companies that identify wrongdoing by company personnel to remedy that wrongdoing, enhance compliance programs and engage with authorities without necessarily incurring the additional punitive effects of a criminal conviction on innocent third parties.

A prosecutor may only enter into a remediation agreement with organizations alleged to have committed a criminal offence if the Attorney General has consented to the negotiation of an RA and if the prosecutor is of the opinion that:

• there is a reasonable prospect of conviction;
• the offence did not result in serious bodily harm, death or injury to national defence/security and was not committed for or with a criminal organization or terrorist group; and
• negotiating the agreement is in the public interest and appropriate in the circumstances.

The decision to prosecute an individual or company under the CFPOA or the Criminal Code remains solely in the hands of the Crown, as discussed above. This discretionary power is termed ‘prosecutorial discretion’ and it covers all decision regarding the nature and extent of the prosecution’s participation in a matter.

A basic principle of the legal system is that prosecutorial discretion must not be subjected to routine second guessing by the courts (judicial non-interference); however, prosecutorial discretion is reviewable very limited circumstances (largely for abuse of process (R v. Anderson, 2014 SCC 41)).

Convictions under the CFPOA or the Criminal Code are subject to judicial appellate processes.

It is expected that prosecutorial resources will be dedicated to the use of remediation agreements and, by extension, that organizations involved in allegations of bribery will similarly focus on this new tool.

Canada has signed and ratified a number of conventions aimed at addressing bribery and corruption worldwide. On December 17, 1997, Canada signed the OECD Convention and Parliament passed the CFPOA to implement Canada’s obligations under the OECD Convention into Canadian law.

Canada is also signed on to the Convention on Avoiding Bribery of Foreign Public Officials in International Business Transactions; the UN Convention against Corruption; the Inter- American Convention against Corruption; and the UN Convention against Transnational Organised Crime.

Solicitor-client privilege protects all communications between a professional legal advisor and the clients from being disclosed without the permission of the client. This privilege is held by client and not the lawyer, though it can be waived by either party.

The purpose behind this legal principle is to protect an individual’s ability to access the justice system by encouraging complete disclosure to legal advisors without fear that disclosure of those communications may prejudice the client in the future.

In order to substantiate a claim of solicitor client privilege over an internal (lawyer-led) investigation conducted by a lawyer, the claimant must prove three elements on a balance of probabilities. First, it must be a communication between the client and their solicitor; second, it must entail the seeking or giving of legal advice; and finally, it is intended to be confidential by the parties. This requires the claimant to prove that the internal investigations were done for the dominant purpose of obtaining legal advice, or getting recommendations based on the facts that were gathered. Legal advice also includes ascertaining or investigating the facts upon which the advice will be rendered, and that investigation is an important part of legal service if it is connected to providing that legal service.

Another relevant form of legal privilege is that of litigation privilege. This privilege is more limited in scope and duration, covering only that which is gathered in contemplation of litigation, and terminates at the closing of said litigation. This could be relevant to information collected during an internal investigation, if the dominant purpose of the collection was for or in contemplation of litigation.

Canada’s government would likely express considerable commitment to tackling bribery and corruption. However, commentators have called such commitment into question, including criticism by the OECD in 2011. Prosecutions due to contraventions of anti-bribery laws in Canada do appear to be significantly less than in other countries, such as the United States and the United Kingdom. That said, recent legislative amendments set out above do suggest further governmental focus.

There appears to be greater organisational commitment to preventing bribery and corruption, likely because of both social pressure and the fear of law enforcement (if not by Canadian authorities, than by foreign agencies). Businesses are increasingly working to introduce or improve their policies, controls and risk management processes.

Before the inclusion of remedial agreements in the Criminal Code, organisations and individuals had very little incentives to self-report. This placed a great burden on the agency responsible for investigation and prosecution to collect sufficient evidence to advance prosecutions. These agreements however are a new tool that allow prosecutorial authorities to stay any proceedings related to an offence, if the organization complies with the terms of the agreement. The aim is to reduce the burden of conducting an independent investigation and encourage compliance with the CFPOA.

There are no real changes on the horizon – organizations in Canada continue to struggle with the gray areas of what constitutes a bribe, as well as waiting to see how the remediation agreement framework gets utilized.

Public attention is increasingly focused on bribery allegations facing a large Canadian corporation such that it expected that law enforcement efforts will increase in the coming months.

Focus should be shifted from the punishment and external enforcement of anti-bribery laws to the internal regulation, monitoring and preventing of bribery and corruption.

This could be done by introducing clear compliance programs with reporting requirements to prevent and not prosecute breaches. The benefit achieved by internalizing information collection to the sources themselves would likely be more accurate and complete data. Another aspect that would be required to ensure proper use of compliance programs is ensuring sufficient training is provided to those parties responsible for the collection and interpretation of the reported data.