Canada gets soft on bribery

When International Trade Minister Ed Fast announced the Tories’ enhanced corporate social responsibility (CSR) strategy last year, he sternly warned that Canadian mining companies involved in corrupt practices in other countries would be punished. Most notably they would lose the diplomatic support of the Canadian government. If Doing Business the Canadian Way: A Strategy to Advance CSR in Canada’s Extractive Sector Abroad is Fast talking tough about corruption, it has some industry experts underwhelmed.

John Boscariol, a legal specialist in anti-corruption laws and policies, suspects the measures are an attempt by Canada to catch up to other countries that have long been cracking down on these illegal practices. “This is something [the Conservative government] can no longer pretend it is not seeing,” he says of corrupt practices by Canadian companies in other countries.

“If you look to the U.S., they have a much stronger record of enforcing the Foreign Corrupt Practices Act where penalties sometimes in the hundreds of millions of dollars have been handed out for violations,” he says. “Canada is catching up to that under pressure from the U.S., the Organisation for Economic Co-operation and Development (OECD), Transparency International (TI) and others.”

“Internationally there is a rejection of the attitude ‘when in Rome do as the Romans do,’ ” Boscariol says. “People are recognizing that part of the problem of corruption is not only with the folks in developing countries who are asking for the bribes. It’s the companies that are paying the bribes.” Canadian companies account for roughly half of the world’s mining and mineral exploration activity.

Canada has taken measures in the past to get tough on corruption and illegal development practices. In 1991, for example, the Income Tax Act was amended so that one can no longer claim payments in connection with the bribery of a foreign public official as a business expense.

In 1999 the Corruption of Foreign Public Officials Act was passed, but it has seldom been enforced. Kristine Robidoux is a white-collar investigations and compliance lawyer. She agrees that enforcement has “been slow to start,” and calls the first anti-corruption conviction under the CFPOA in 2002 “an international embarrassment.” In that case, Red Deer, Alta., energy services company Hydro Kleen Group Inc. was fined $25,000 for giving a U.S. immigration officer approximately $35,000 to delay employees working for a competitor as they passed through Calgary International Airport.

“The fine paid by the company was less than the amount of the bribe,” Robidoux says. “But then Canada started getting criticized by Transparency International, the OECD, other NGOs, and then Canada started getting serious about enforcing its law. The RCMP teams started getting more sophisticated, getting more resources, using international co-operation better.” Still, since then, there have been only two examples of “major enforcement activity” under the CFPOA. (Robidoux was involved in both.)

The enhanced CSR strategy now threatens corrupt companies will lose the diplomatic support of the federal government. This includes letters of support, advocacy efforts in foreign markets and participation in Government of Canada trade missions. But Boscariol says it lacks real punishment.

“The CSR is a policy, it’s not legislation. It doesn’t impose hard penalties. So they’re trying to do this in a way that isn’t too heavy-handed but still encourages companies to comply. It makes it look like the government is doing something about it.”

Robidoux agrees the strategy “is certainly well-intentioned.” However, she also says “there are no clear standards to be maintained, no clear deliverables, ‎and no real, tangible consequences for companies that do not implement the desired programs. In fact, the sanction section doesn’t speak to punishment, or even to consequences.  It speaks to ‘encouraging alignment’ with the strategy. It remains to be seen what kind of voluntary compliance comes with the suggestion of encouraging alignment, but I suspect not much. I hope I am wrong.”