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Development and Society

Corporate Social Responsability - Bribery and Corruption

Report to Parliament (October 16, 2001)

The 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
• Canada Legislation
• Amendments to the Act
• Enforcement of the Act
• Monitoring Implementation of the Convention
• Canada's Phase 1 Evaluation
• Phase 2 Evaluations
• Implementation of the Convention
• Annex A - Country Evaluation Web Sites
• Annex B: Review of Canada's Implementing Legislation

Background

This is the second Report to Parliament under the Corruption of Foreign Public Officials Act ("the Act"). As the First Report to Parliament was filed before the Thirty-seventh General Election 2000, this Report repeats background information on the Act and on the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions ("the Convention") for the benefit of new Members of the House of Commons and Senators who may not be familiar with the Act and the Convention.

In May 1997, the OECD Ministerial meeting called for the negotiation of a binding convention to address the bribery of foreign public officials by the end of 1997, and recommended that Member States submit legislative proposals to their national legislatures to criminalize such bribery and seek their enactment by the end of 1998. On June 21, 1997, leaders of the G7 countries (including Prime Minister Chrétien) issued a statement in Denver endorsing this approach and timetable for the OECD.

Negotiations of the Convention concluded on November 21, 1997. Canada participated actively in the negotiations and signed the Convention on December 17, 1997. Bill S-21, An Act respecting the corruption of foreign public officials and the implementation of the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, and to make related amendments to other Acts, was introduced in the Senate on December 1, 1998, and received Royal Assent on December 10 (as S.C. 1998, c.34). Canada ratified the Convention on December 17, 1998, and the Act entered into force on February 14, 1999.

The Act is intended to meet the obligations set out in the Convention and to be in compliance with the Convention. The main offence of bribery of foreign public officials represents an effort to marry the Convention wording and requirements with wording that was found already in paragraph 121(1)(a) of the Criminal Code. The Act calls for an annual report by the Minister of Foreign Affairs, the Minister for International Trade, the Minister of Justice and the Attorney General of Canada on the implementation of the Convention and on the enforcement of the Act.

The Convention came into force after five of the ten countries with the largest share of OECD exports, representing among them at least 60 percent of the combined total exports of the ten, deposited their instruments of acceptance, approval or ratification. Canada's ratification triggered the Convention's entry into force on February 15, 1999, 60 days after the deposit of Canada's instrument of ratification. To date, 34 states have signed the Convention, including all 34 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 five non-members of the OECD: Argentina, Brazil, Bulgaria, Chile, and Slovenia. Slovenia, which joined the Working Group in June, 2001, at the time of writing had yet to sign the Convention but was likely to do so after the summer break. (Membership in the Working Group is a pre-requisite to signing the Convention.) Of the 34 signatory states, 33 have ratified. Because of different constitutional requirements, some of the states that have ratified the Convention have yet to implement it. Ireland has yet to ratify the Convention, but should do so soon, once its implementing legislation is in place.

Canada's Legislation

The Corruption of Foreign Public Officials Act features three offences: bribing a foreign public official, laundering property and proceeds, and possession of property and proceeds. In addition, the Act would make it possible to prosecute, for example, a conspiracy or an attempt to commit the offences. It would also cover aiding and abetting in committing these offences, an intention in common to commit them, and counselling others to commit the offences.

The Act came into force as part of Bill S-21, which also amended other federal laws to combat corruption, notably the Income Tax Act and the Criminal Code.

The offence of bribing a foreign public official was added to the list of offences found in subsection 67.5(1) of the Income Tax Act to deny claiming bribe payments as a deduction. Similarly, all the offences in the Act are defined as an "enterprise crime offence" in the Criminal Code. The following sections of the Code were also added to the definition of an "enterprise crime offence": section 123, on municipal corruption; section 124, on selling or purchasing office; and section 125, on influencing or negotiating appointments or dealing in offices.

In addition, by adding the Corruption of Foreign Public Officials Act offences to the list of offences under section 183 of the Criminal Code, it is possible for police, through the lawful use of a wiretap and other electronic surveillance, to gather evidence in the bribery of foreign public officials cases, and in the possession and laundering of proceeds from these cases. This will assist in the investigation of these offences.

Amendments to the Act

It should be noted that Bill C-24 (An Act to amend the Criminal Code [organized crime and law enforcement] and to make consequential amendments to other Acts) was passed by the House of Commons on June 13, 2001 and at the time of writing had been referred to the Senate for consideration. Bill C-24 proposes purely technical amendments to the Corruption of Foreign Public Officials Act.

Clause 58 of Bill C-24 proposes the repeal of sections 4 to 7 of the Act. However, clause 12(7) proposes to amend s. 462.3 of the Criminal Code, by adding a new subsection 462.3(3) of the Criminal Code. This subsection would provide that the Attorney General of Canada may exercise all the powers and perform all the duties and functions assigned to the Attorney General by or under the Criminal Code in respect of a designated offence where the alleged offence arises out of conduct that in whole or in part is in relation to an alleged contravention of an Act of Parliament or a regulation made under such an Act, other than the Criminal Code or a regulation made under the Criminal Code. Clause 12(7) would also add a new subsection 462.3(4) of the Criminal Code. This proposed new subsection would make it clear that subsection (3) does not affect the authority of the Attorney General of a province to conduct proceedings in respect of a designated offence or to exercise any of the powers or perform any of the duties and functions assigned to the Attorney General by or under the Criminal Code

Clause 12(6) would amend subsection 462.3(1) of the Criminal Code, by defining a "designated offence". Designated offence would mean (a) an indictable offence under this or any Act of Parliament, other than an indictable offence prescribed by regulation, or (b) a conspiracy or an attempt to commit, being an accessory to, or any counselling in relation to, an offence referred to in paragraph (a) [the aforementioned indictable offences].

Clause 13 of the bill amends paragraphs 462.31(1)(a) and (b) of the Criminal Code, so that they would read:

1. the commission in Canada of a designated offence; or

2. an act or omission anywhere that, if it had occurred in Canada, would have constituted a designated offence.

In summary, these proposals would reorganize the statutory provisions in a consolidated way. The end result would mean that the Attorney General of Canada and the provincial attorneys general would continue to be able to prosecute possession and laundering offences in respect of the s.3 Corruption of Foreign Public Officials Act offence. There would not be diminished coverage under the Convention.

Enforcement of the Act

By creating a new separate Act to deal with the corruption of foreign public officials, the federal government has allowed for federal, as well as provincial enforcement. There are some practical reasons for carrying out prosecutions federally: the Act is a federal government response to an international initiative and demonstrates Canada's commitment to its trading partners. It is also likely that prosecutions will be infrequent and require specialized knowledge in this area which could, for practical reasons, be obtained and maintained by Justice Canada. Notwithstanding the foregoing, Justice Canada has contacted provincial authorities to ascertain if there have been any provincial prosecutions under the Act. None have yet to be recorded, either federally or provincially.

Officials have been active in the business and legal community in publicizing the existence of the Act. Considerable efforts have been made to make persons aware of Bill S-21 and the Corruption of Foreign Public Officials Act:

• Press releases and backgrounders were distributed on the date of introduction of Bill S-21 (December 1, 1998) and just prior (February 12, 1999) to the coming into force of the Act and the Convention. Documents were broadly distributed and posted on web sites of the Department of Justice and the Department of Foreign Affairs and International Trade (e.g. sent to business associations). Subsequent mailings were also provided to interested persons.

• Officials have made presentations at conferences and at various meetings in Canada.

• Consultations have taken place with the provinces and territories.

• DFAIT has held several meeting with EDC officials to discuss their duties under the Act.

• The Department of Justice issued a publication: The Corruption of Foreign Public Officials Act: A Guide. The Guide was distributed and was posted on the web sites of the Departments of Justice and Foreign Affairs and International Trade.

• The Act is featured in the Department of Justice's Federal Prosecution Service Deskbook, in accordance with which on or before January 1 of each year, the Senior Regional Director in each region, and in Ottawa-Hull, the Prosecution Group Head, shall forward on or before January 1 of each year, to the Senior General Counsel (Strategic Prosecution Policy Section) a report on activities with respect to the provisions of the Corruption of Foreign Public Officials Act.

• The First Annual Report to Parliament is featured on the website of the Department of Foreign Affairs and International Trade, along with other material on bribery and corruption as it relates to corporate social responsibility. See: http://www.dfait-maeci.gc.ca/tna-nac/social-e.asp#bribery

The Second Annual report will also be made available through the Department of Foreign Affair's web site.

• The Department of Foreign Affairs and International Trade is providing training for its trade commissioners and commercial officers on the Act and the Convention. Three seminars have been held to date, involving locally engaged staff from the Department's missions in Latin America, West Africa, and Asia.

Monitoring Implementation of the Convention

The Convention aims to stop the flow of bribes and, among other benefits, to remove bribery as a non-tariff barrier to trade. The Convention and the 1997 Revised Recommendation of the Council on Combatting 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 a level playing field. The review process is in many respects adversarial in nature.

The evaluation takes place in two phases. The first is designed to evaluate whether the legal texts through which participants implement the Convention meet the standard set by the Convention, as well as initial actions to implement the 1997 Revised Recommendation. The second phase of evaluations will study and assess the structures put into place to enforce national laws and the application of the laws and rules in practice.

The essential elements of Phase 1 reviews include: (i) preparation for consultation in the Working Group, including a reply to a questionnaire by the country being examined, which forms the basis of a provisional review by the Secretariat; (ii) consultation in the Working Group, including questions and comments from two countries that serve as lead examiners and responses by the country being examined; and (iii) adoption of a report by the Working Group. Each country report contains a review of a country's relevant laws, and an evaluation, which outlines the principal findings of the Working Group.

The Working Group has worked on an intensive basis and its output over the last two years has been impressive. Of the thirty-four original signatories to the Convention, Brazil, Chile, Ireland and Portugal and Turkey have yet to undergo their Phase 1 reviews. As other countries accede to the Convention, such as Slovenia, the Phase 1 evaluation process will be applied to them. Though the original signatories were all due to be evaluated in Phase 1 by Spring 2000, it appears Winter 2002 is now more realistic. Where countries have amended legislation in response to the evaluations they have received, such responses will be reviewed in a Phase 1 bis monitoring exercise.

Twenty-one countries, including Canada, underwent their Phase 1 evaluations before the June, 2000 OECD Ministerial. These evaluations could not be annexed to the First Report to Parliament, due to confidentiality constraints. However, the Working Group included these evaluations as part of its 2000 Report to Ministers, which was released to the public after approval by Ministers. Likewise, a further seven countries were evaluated before the May, 2001 OECD Ministerial. These evaluations were included in the Working Group's 2001 Report to Ministers.

The 28 Phase 1 country evaluations conducted and publicly available to date constitute over 1400 pages of assessment, in French and English, of members' implementing legislation. Annex A to this Report contains a list of web sites where individual country evaluations may be viewed as well as the Working Group's 2000 and 2001 Reports to Ministers. For ease of reference, Canada's review is attached as Annex B. Paper copies of the Report to Ministers and individual public country evaluations may also be obtained from the Cabinet and Parliamentary Affairs Division of the Department of Foreign Affairs by phoning 944-0389.

Canada's Phase 1 Evaluation

Canada's implementing legislation was reviewed by the Working Group July 8-9, 1999. The Working Group concluded that the Act meets the requirements set by the Convention. The Working Group also noted that some issues may benefit from further examination during the Phase 2 evaluation, such as 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 courts' discretion in imposing fines.

Phase 2 Evaluations

In addition to its other work, the Working Group over the last year has developed a questionnaire and procedures for Phase 2 evaluations, including terms of reference for on-site visits. These are attached as Annex C to this Report. The questionnaire forms the preliminary basis upon which Phase 2 evaluations will be conducted, although evaluators may ask supplementary questions in any given area. On-site visits by the Secretariat and lead examiners will constitute another major aspect of the evaluation process, and will include informal exchanges of views with key representatives of the private sector and civil society. (Each examined country will be consulted on the best manner of obtaining input from the private sector and civil society.)

On-site visits will be followed by preparation of preliminary reports, consultation on and adoption of reports by the Working Group meeting in plenary, and finally transmission of the reports to the OECD Council. When the Working Group drafted the questionnaire and procedure, Canada and other federal states stressed the importance of giving federal states sufficient time to respond to the questionnaire. As a result, the time limits for responding to the questionnaire will be fixed by the Secretariat in co-ordination with the country concerned and the two lead examiners. Phase 2 evaluations will begin with an on-site visit to Finland from September 12-14, 2001, followed by a Working Group meeting in November 2001. Phase 2 evaluations should be completed roughly by 2006.

Implementation of the Convention

Thirty-three Members of the OECD Working Group on Bribery had ratified the Convention as of the date of preparation of this report. Twenty-nine 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, Bulgaria, Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Iceland, Italy, Japan, Korea, Luxembourg, Mexico, Norway, the Netherlands, New Zealand*, Poland, Slovak Republic, Spain, Sweden, Switzerland, the United Kingdom, and the United States. (* indicates an evaluation in draft form, due to be finalized in Spring 2002 and at present confidential.) Following is a chart, based on Member submissions to the OECD, of steps taken and planned future actions by other participating countries to ratify and implement the Convention, current as of February 21, 2001:

Annex A - Country Evaluation Web Sites

* These countries have not yet adopted implementing legislation

Annex B: Review of Canada's Implementing Legislation

Canada - Review of Implementation of the Convention and 1997 Recommendation
Link to the OECD Report