Corporate liability for foreign corrupt practices under Canadian Law.

AuthorBlyschak, Paul
PositionAbstract through V. Corporate Liability for the Corrupt Practices of Third Party Agents C. 'Conscious Avoidance' and United States v. Kozeny, p. 655-679

Compliance with, and risk management in respect of, foreign anti-corruption law has quickly become a priority for Canadian corporations with international operations or assets. This article tracks this rapid evolution in Canadian corporate culture and compliance through a broad examination of corporate liability for foreign corrupt practices under Canadian law. Rather than merely conduct a review of the law governing corporate liability for foreign corrupt practices under Canadian law, however, this article also highlights a number of unresolved, problematic, or more complex areas of such law. This review does not purport to the exhaustive; nor does it presume offer definitive answers to the numerous questions posed. Rather, given the recent acceleration of the enforcement of the CFPOA by Canadian authorities, the aim of this article is to contribute novel legal analysis to an increasingly important area of corporate law and practice.

La conformite avec les lois concernant la lutte a la corruption a l'etranger et la gestion des risques associes a cette problematique sont rapidement devenues des priorites pour les societes canadiennes qui operent a l'etranger ou qui y detiennent des actifs. Le present article retrace cette evolution rapide dans la culture d'entreprise canadienne en se penchant sur le droit de la responsabilite des personnes morales pour la corruption a l'etranger. En plus d'exposer l'etat du droit canadien, cet article identifie plusieurs questions irresolues et aspects problematiques et complexes de ce domame de droit. L'analyse ne se veut pas exhaustive et l'auteur ne pretend pas apporter de reponses definitives aux questions soulevees. L'article vise plutot a contribuer a l'analyse juridique d'un domaine du droit canadien des societes qui prend rapidement de l'expansion, notamment par la recente acceleration de la mise en ceuvre de la Loi sur la corruption d'agents publics etrangers par les autorites canadiennes.

Introduction I. The CFPOA and its Prohibitions II. Bill C-45 and Section 22.2 of the Criminal Code III. Corporate Liability under the CFPOA and Criminal Code Sections 22.2(a) and 22.2(b) IV. Corporate Liability under the CFPOA and Criminal Code Section 22.2(c) V. Corporate liability for the Corrupt Practices of Third Party Agents A. Third Party' Agents and Foreign Corrupt Practices Risk B. R. v. Briscoe and the Doctrine of "Wilful Blindness" C. "Conscious Avoidance"ajidUnited States v. Kozeny D. Wilful Blindness and Criminal Code Section 22.2 VI. Corporate Liability for the Corrupt Practices of Acquisition Targets A. Share Acquisitions and Nationality Jurisdiction Versus Territorial Jurisdiction B. Asset Acquisitions and the Doctrine of Successor Liability VII. Corporate Liability for the Corrupt Practices of Subsidiaries Conclusion Introduction

Compliance with, and risk management in respect of, foreign anti-corruption law has quickly become a priority for Canadian corporations with international operations or assets. Although enacted in 1999, the Corruption of Foreign Public Officials Act ("CFPOA") (1) sat largely ignored by Canadian federal officials for over a decade until growing international criticism prompted a revision of policy. (2) Federal action has been swift since this time, with details of new arrests and prosecutions regularly making the news, and approximately thirty-five investigations reportedly underway in 2013. (3) The watershed moment was the guilty plea of Niko Resources Ltd. to the bribery of a Bangladeshi energy minister in June 2011. (4) Since that time, other highly recognizable tribulations have likely been those of Griffiths International Energy Inc. and SNC-Lavalin. (5)

Faced with this sea change in the Canadian enforcement landscape, Canadian corporations with international operations have rushed to ensure compliance with the CFPOA and its prohibitions, including through the adoption of anti-corruption policies and procedures. These typically include the appointment of officers charged with the oversight and enforcement of such policies and procedures, mandatory employee training, and special purpose audit and accounting practices and reviews. The result has been a rapid evolution in the corporate culture of Canadian companies previously unaccustomed to conducting business in the shadow of vigorously enforced anti-corruption legislation. (6)

This evolution remains ongoing. In June 2013, Bill S-14 became law, amending the CFPOA to significantly expand the reach of the CFPOA by replacing the stricter standard of "territorial jurisdiction" with that of "nationality jurisdiction"; and to impose a "books and records" provision prohibiting accounting practices intended to conceal corrupt practices. (7) The prosecution of foreign corrupt practices by Canadian authorities is also being supported by complementary efforts in related legal regimes, including in securities law. (8)

This article tracks this rapid evolution in Canadian corporate culture and compliance through a broad examination of corporate liability for foreign corrupt practices under Canadian law. Rather than merely conduct a review of the law governing corporate liability for foreign corrupt practices under Canadian law, this article also highlights a number of unresolved, problematic, or more complex areas of such law. Following a brief review of the prohibitions of the CFPOA (Part I), this paper moves to a multi-tiered consideration of section 22.2 of the Criminal Code, (9) which is the provision controlling those circumstances in which a Canadian corporation may be held criminally liable for the acts of its human agents (Part II). This Part includes a review of the legislative purpose of section 22.2, as well as an examination of the three separate avenues pursuant to which a corporation may attract CFPOA liability based on the actions or inactions of one or more of its "senior officers". Part III offers an analysis of the interaction of the doctrine of "wilful blindness"--the doctrine pursuant to which persons may be held criminally liable for acts committed

Paul Blyschak, Blake, Casseis & Graydon LLP. Paul Blyschak is called to the bar in Alberta, New York State, and New South Wales. He would like to thank Alison Wegner and Ryan Maclsaac for their assistance in the research and preparation of this article.

on their behalf with their passive approval, that is, in circumstances in which the person suspected the intended activity but consciously sidestepped additional investigation out of fear of what would be discovered--with the prescriptions of section 22.2 of the Criminal Code. Finally, in Part IV, this article considers corporate liability for foreign corrupt practices in the context of other business transactions and structures, including corporate liability for the acts of acquisition targets and for the acts of foreign subsidiaries.

This review does not purport to be exhaustive; nor does it presume to offer definitive answers to the numerous questions posed. Rather, given the recent acceleration of the enforcement of the CFPOA by Canadian authorities, the aim of this article is to contribute novel legal analysis to an increasingly important area of corporate law and practice.

  1. The CFPOA and its Prohibitions

    Generally speaking, the CFPOA imposes criminal and civil liability on individuals and entities that engage in bribery or other corruption of foreign public officials. Section 3(1) is the "centrepiece" of the Act. (10) It provides that:

    (1) Every person commits an offence who, in order to obtain or retain an advantage in the course of business, directly or indirectly gives, offers or agrees to give or offer a loan, reward, advantage or benefit of any kind to a foreign public official or to any person for the benefit of a foreign public official

    (a) as consideration for an act or omission by the official in connection with the performance of the official's duties or functions; or

    (b) to induce the official to use his or her position to influence any acts or decisions of the foreign state or pubbc international organization for which the official performs duties or functions. (11)

    In addition, Bill S-14, enacted and effective as of 19 June 2013, adds a corresponding "books and records" offence to the CFPOA. (12) This enactment makes it a criminal offence for an individual or entity to, "for the purpose of bribing a foreign public official ... or for the purpose of hiding that bribery," engage in any of the following accounting practices:

    (a) establish[ing] or maintaining] accounts which do not appear in any of the books and records that they are required to keep in accordance with apphcable accounting and auditing standards;

    (b) mak[ing] transactions that are not recorded in those books and records or that are inadequately identified in them;

    (c) record [ing] non-existent expenditures in those books and records;

    (d) entering] liabilities with incorrect identification of their object in those books and records;

    (e) knowingly us[ing] false documents; or

    (f) intentionally destroying] accounting books and records earlier than permitted by law. (13)

    Therefore, generally speaking, a corporation may be liable for corrupt practices under the CFPOA both where the corporation provides, offers to provide, or agrees to provide something of value to a foreign public official to induce that official to use the her authority or influence to obtain or retain a business advantage for the corporation; and where the corporation engages in accounting practices designed to disguise such corrupt activity.

  2. Bill C-45 and Section 22.2 of the Criminal Code

    What does it mean for a corporation--rather than an individual--to be liable for corrupt practices under the CFPOA? Pursuant to section 22.2 of the Criminal Code, enacted in 2004 by Bill C-45, (14) a corporation may only be held criminally liable in certain prescribed...

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT