1. Why do you now require our company to sign a declaration denying corruption in EDC supported business transactions?
The corruption of foreign public officials was made an indictable offence on February 14, 1999 under Canada’s Corruption of Foreign Public Officials Act. Consequently, we must take steps to ensure that it is not supporting criminal acts by supporting export transactions that involve corruption of foreign public officials.
We will rely on due diligence and on the anti-corruption declarations provided by its clients as assurance in this regard. In taking these steps, we will also be serving the interests of its clients by alerting them to the new criminal law.
Our Code of Business Ethics states that we shall take measures to avoid supporting corrupt transactions. Further, Canada and EDC have undertaken to support the anti-corruption commitments made by the Export Credits and Credit Guarantees Working Group members of the Organization for Economic Cooperation and Development (OECD). This agreement is found in the November 2000, Action Statement On Bribery and Officially Supported Export Credits (see related websites section). The agencies and countries involved are committed to seek anti-corruption declarations as one of the measures against corruption.
2. The declaration states that my company has not been and will not knowingly be party to a violation of the Corruption of Foreign Public Officials Act. What does this law say and how am I affected?
In essence, the new Canadian law criminalizes international bribery and associated practices by creating three separate criminal offences: the bribery of foreign public officials, the possession of the proceeds of such bribery and the laundering of those proceeds. To constitute this crime, there must be (a) an act, and (b) the act must be intentional. If either element is missing, there is no crime. Whether or not a crime has been committed, there may be a related offence, such as conspiracy to commit the crime, aiding and abetting in committing the crime, and counseling others to commit the crime. These offences may result in imprisonment for up to ten years and/or fines up to $50,000. There are some exceptions to the law discussed in (6) below. If you are concerned that you or your business may be affected by this law, we strongly encourage you to contact your Canadian legal counsel. Professional advice may avoid the potentially grave consequences of breaching the new criminal law and, as far as we are concerned, the discontinuance of our support.
3. I have never been involved in corruption and take exception to signing the declaration. Why should I? What will happen if I refuse?
We are confident that, for the vast majority of its clients, the anti-corruption declaration will not pose any problem. However, all clients will be asked to sign it because, as stated in (1) export credit agencies, including EDC, have undertaken to the OECD to obtain anti-corruption declarations from all exporters and/or applicants for their export support. As a public institution of Canada, we require this declaration from our clients. We will rely on our customer's anti-corruption declaration as one of the indications that no corruption is associated with transactions that EDC will be supporting.
We do not suggest or imply that ur clients may be involved in prohibited activities. We assume that all our clients are conducting their affairs in a lawful and law-abiding manner, but is simply asking the persons who know best about these affairs to confirm the accuracy of that assumption.
Although we will respect a decision not to sign the declaration, w may not be able to proceed with the transaction and may no longer be able to provide insurance coverage.
4. What will happen if I sign the declaration while knowingly being involved in corruption? What if I am involved in corruption without my knowledge?
EDC will rely on the truthfulness of the anti-corruption declarations furnished by its customers both in the protection of its employees and of its own interests. We will also have the right to withdraw from a contract and refuse the claims thereunder, if we determine that corruption, as defined under the Corruption of Foreign Public Officials Act, is associated with the transaction. We will not tolerate a party knowingly delivering a false anti-corruption declaration, and would, in such an unlikely circumstance, consider all of our options. If you have any questions about the implications of engaging in such conduct you should consult your legal counsel. If the declaration was furnished without your knowledge of corruption, there should be no liability unless there has been "willful blindness" on your part. In other words, willful ignorance of the corruption (i.e.: ‘head in the sand’) may still attract criminal responsibility. We strongly recommend that you raise such complicated issues with you legal counsel, because we cannot provide legal advice to you.
5. How can EDC and the Canadian government expect me to carry on business internationally in competition with companies that are willing to pay bribes?
First, the payment of bribes, and the possession of property obtained by bribery and the laundering of these proceeds have been made criminal offences in Canada by the Canadian Parliament. We would draw to your attention that the Department of Justice’s guide The Corruption of Foreign Public Officials Act states: "The five-year maximum term of imprisonment for the offence of bribing a public official ensures that this is an extraditable offence... The amount of any fine would be at the discretion of the judge, and there is no maximum... The penalty is comparable to the maximum penalty for domestic bribery in... the Criminal Code." Bribing of foreign public officials is no longer a matter of business expediency or convenience or judgment. It is a criminal offence. The consequences of bribing can be disastrous both to you as an individual and to your business. And, as explained above, we cannot be associated with such activity.
Second, the international view of bribery is changing. The attitude towards bribery is moving from acceptance and tolerance to abhorrence and prohibition. The firm anti-corruption position of the World Bank and the many global anti-corruption initiatives of other world bodies are increasingly exposing the practice of bribery in an effort to control it. The 29 OECD countries have committed themselves to criminalizing the bribery of foreign public officials in their domestic laws by signing the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, in Paris on December 17, 1997. The OECD is following up on this binding commitment and how it is being implemented by each country. Canada is among the many OECD countries that have already amended their domestic laws to conform with the Convention, and that is the substance of the new Canadian statute, the Corruption of Foreign Public Officials Act.
Third, many countries have entered into mutual information and assistance agreements such as the Mutual Legal Assistance in Criminal Matters Act, that oblige police forces in each participating country to investigate allegations of bribery brought to them by other countries. Disappointed business competitors, having lost the bidding for an international contract because of bribery, may turn to their domestic police force to initiate an investigation in the country of the alleged bribe payer if that country (like Canada) has passed anti-bribery laws.
Although the new Act allows bribing of foreign public officials where it is permitted under the laws of the foreign state, we know of no country where bribery of public officials is actually permitted under law.
6. The declaration states that my company has not been ‘party’ to any action prohibited by the Corruption of Foreign Public Officials Act. My company hires agents in various countries to bring in business contracts.
Our declaration relates only to violations of Canadian law under the Corruption of Foreign Public Officials Act. That law specifies a number of circumstances to which that law will not apply. The Department of Justice guide says the following:
"Under subsections 3(4) and 3(5), not all payments would amount to bribing a foreign public official. The Act allows for "facilitation payments," which are made to expedite or secure the performance by a foreign public official of any "act of a routine nature" that is part of the foreign public official’s duties or functions. Examples of such payments are provided in subsection 3(4) but this is not an all-inclusive list.
Subsection 3(5) emphasizes that an "act of routine nature" does not include a decision to award new business or to continue business with a particular party, including a decision on the terms of that business, or encouraging another person to make any such decision. In addition, a payment to obtain or retain an improper advantage could not be characterized as a facilitation payment, because such a payment would not relate to an act of a routine nature that is part of the foreign public official's duties or functions.
Paragraph 3(3)(a) sets out a lawful exception that an accused could use as a defence, namely, that the payment was lawful in the foreign state or public international organization for which the foreign public official performs duties or functions. If successful, this would be a full defence to the offence in subsection 3(1).
Paragraph 3(3)(b) sets out an additional defence. To use this defence, the accused must show that the loan, reward, advantage or benefit was:
- A reasonable expense,
- Incurred in good faith,
- Made by or on behalf of the foreign public official, and
- Directly related to the promotion, demonstration or explanation of the person's products and services or to the execution or performance of a contract between the person and the foreign State for which the official performs duties or functions.
This defence is virtually identical to the defence in the U.S. "Foreign Corrupt Practice Act."
The foregoing indicates that these provisions are complex and may apply to a multitude of circumstances. It should be born in mind that these parts of the Act have not yet been interpreted by Canadian courts and should not be abused; one is best to err on the side of caution. Canadian legal counsel should be consulted to obtain advice relating to your company’s particular circumstances.
7. The declaration states that my company has not been ‘party’ to any action prohibited by the Corruption of Foreign Public Officials Act. Can the activities of my agents expose my company to liability under this Canadian law?
The declaration is intended to catch any knowing involvement in corruption (as defined), whether committed directly by your company (or its employees) or indirectly through an agent.
Typically, the activities of an agent may expose the principal (in this case, your company) to liability. The agent's actions may be or be deemed to be those of the principal and for which the principal must bear full responsibility, depending on many factors. Literature is available describing the safeguards that companies should use in retaining agents. These safeguards relate to the selection of the agent, the reputation and qualifications of the agent, the language of the retainer, as well as the quantum of and the method and other arrangements for payment. (See related websites section for website addresses.) The responsibilities and liabilities of a principal for the acts of its agent are no different with regard to the new anti-corruption law than they are with regard to other matters.
8. Will I violate the Canadian law against corruption if the actions of my company that involve bribery, corruption or kickbacks are carried on outside Canada?
This question involves complex areas of law. The Department of Justice’s Guide on The Corruption of Foreign Public Officials Act states:
"Canada has jurisdiction over the bribery of foreign public officials when the offence is committed in whole or in part in its territory. To be subject to the jurisdiction of Canadian courts, a significant portion of the activities constituting the offence must take place in Canada. There is a sufficient basis for jurisdiction where there is a real and substantial link between the offence and Canada. In making this assessment, the court must consider all the relevant facts that happened in Canada that may legitimately give Canada an interest in prosecuting the offence. Subsequently, the Court must then determine whether there is anything in those facts that offends international comity."
We caution that this area of Canadian law dates back to a 1985 case, and it is evolving. In the United States, the test for involvement in activities that will trigger the U.S. anti-corruption law which has been in existence for over 20 years (the Foreign Corrupt Practices Act) has always been tougher, extending to just about any contact made by the accused bribe-payer with the U.S.A. This could encourage a similar approach by the Canadian judiciary in the future.
9. My company is extremely concerned about not violating anti-corruption laws. How can we distance ourselves from potential corruption in transactions?
There are a number of indicators of potential corruption. These red flags should alert you to further investigate. You can also implement various anti-corruption measures. Following are just a few common sense suggestions - the list is by no means exhaustive:
- Does your agent / counter-party / supplier have a good reputation? A discrete inquiry by your local lawyer or agent may save a great deal of difficulty.
- Is the jurisdiction in which you operate known for corruption? Transparency International’s Index is a well-known indicator. You may wish to speak with the Canadian Embassy. Make sure your strategy for dealing with requests for bribes - a firm "no" - is determined well in advance.
- Do the business numbers ‘make sense’? Any unexplained payments or numbers that do not add up or are not ‘businesslike’ may be indications of irregularity.
- Have you clearly said "no"? Failure to say "no" can lead to the misunderstanding that your company might consider loans, rewards, or benefits of other kinds for a foreign official.
- Are others informed about your anti-corruption policy? You should clearly inform agents and all employees, especially those working outside Canada, of your company’s unwavering anti-corruption policy and require them to refer troublesome situations to your head office for direction.
10. What should I do if I discover that my company is involved in corrupt practices for transactions supported by EDC?
We believe that you should act as you would for any other criminal offence. We recommend that you obtain legal advice on the matter. Remember that criminal offences may be attributed to persons who may have no direct role in carrying out the offence. Examples of such offences are conspiracy, counseling, aiding and abetting, etc.