Development and Society
Corporate Social Responsibility
- Bribery and Corruption
Fifth Report to Parliament (October 26, 2004)
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
Background
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.
Enforcement of the Corruption
of Foreign Public Officials Act (the “CFPOA”)
General
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.
Enforcement
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.
Prosecution
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.
Awareness Raising
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.
Contracting
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.
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.
Evaluation Process
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.
The Phase
1 evaluation of Canada
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.
The Phase
2 Report on Canada.
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. The
report on France.
In 2004, Canada will participate with France in the Phase 2 review
of the United Kingdom’s implementation of the Convention.
Implementation of the OECD 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, current as of 01 July 2004.
Annex A - Country Evaluation Web Sites
OECD Convention on Combating
Bribery of
Foreign Public Officials in International Business Transactions
RATIFICATION STATUS as of March 10, 2004
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
|
|