Canada’s enforcement of foreign bribery is ‘exceedingly low’, find its OECD peers in Phase 4 monitoring report

On October 19, 2023, the Organisation for Economic Co-operation and Development (OECD) Working Group on Bribery in International Business Transactions (the Working Group) released its report [PDF] (the Report) of its Phase 4 evaluation of Canada’s performance under the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (the OECD Convention) and related instruments.

Consistent with criticism in recent years of Canada’s perceived lack of anti-corruption and white-collar crime enforcement (as we have previously written), the Report was highly critical, noting Canada’s “exceedingly low” enforcement of foreign bribery offences.

The OECD Anti-Bribery Convention

Adopted in 1997, the OECD Convention establishes legally binding standards for signatory countries to criminalize bribery of foreign public officials in international business transactions, and provides for a host of related measures that make this criminalization effective.

In 1998, pursuant to its obligations under the OECD Convention, Canada enacted  the Corruption of Foreign Public Officials Act (CFPOA). The CFPOA — Canada’s foreign bribery legislation — creates an offence for directly or indirectly giving, offering or agreeing to give or offer any form of a loan, reward, advantage or benefit to a foreign public official, or to any person for the benefit of a foreign public official, in order to obtain or retain an advantage in the course of business. Various forms of public and private corruption are also prohibited domestically under the Criminal Code.

The OECD Working Group monitors the implementation and enforcement of the OECD Convention in each signatory country through a rigorous peer-review monitoring system. Monitoring has proceeded in several phases, each focusing on a different aspect of each country’s implementation of the OECD Convention:

• Phase 1 [PDF] evaluated the adequacy of each country’s legal framework to fight foreign bribery and implement the OECD Convention.
• Phase 2 [PDF] assessed whether each country is applying this legislation in practice.
• Phase 3 [PDF] focused on enforcement and cross-cutting issues, and unimplemented recommendations from Phase 2.
• Phase 4 [PDF] focuses on enforcement and cross-cutting issues tailored to specific country needs, and unimplemented recommendations from Phase 3. 

Most recently, the Working Group’s Phase 3 Report [PDF] for Canada (released in 2011) found that “significant concerns” remained at the time regarding Canada’s framework for implementing the OECD Convention, and urged Canada to dedicate resources to better its progress. The Phase 3 Report was followed by legislative reforms including the codification of territorial jurisdiction in Canada over corrupt acts committed overseas through section 5(2) of the CFPOA, as well as the introduction of Remediation Agreements in 2018 (Canada’s take on deferred prosecution agreements, as we have previously written). Canada’s Phase 4 monitoring launched in June 2023 to evaluate the country’s challenges and achievements with respect to implementation and enforcement, as well as to appraise progress made since the Phase 3 Report.

Phase 4 findings

The results of Canada’s Phase 4 evaluation were scathing: while acknowledging that Canada has implemented positive legislative reforms to enhance its foreign bribery framework since the Phase 3 Report, the Working Group expressed serious concerns about Canada’s efforts to implement the OECD Convention and to proactively detect, investigate and prosecute foreign bribery.

As the Phase 4 Report observed, Canada’s businesses operating abroad have a relatively high exposure to foreign bribery, since the majority of Canada’s exports and investments are related to high-risk sectors including manufacturing, energy and mining. Despite these risks and the fact that the CFPOA was adopted over 25 years ago, the Working Group found that enforcement of foreign bribery remained “exceedingly low” considering the size of Canada’s economy and the industrial sectors in which its companies operate.

Since the CFPOA was adopted, charges have been laid in only nine cases, and conclusion of foreign bribery cases with sanctions remains scarce, with only two individuals convicted for foreign bribery and four companies sanctioned. The Report also criticized Canada’s lack of detailed statistics on foreign bribery detection sources, mutual legal assistance and enforcement, which hinders the Working Group — and Canada itself — from assessing the effectiveness of efforts to combat foreign bribery.

Recommendations

The Report sets out a number of recommendations to improve Canada’s implementation and enforcement of the OECD Convention.

Most notably, the Report recommends that Canada take measures to ensure that the regime for imposing corporate criminal liability for foreign bribery does not require knowledge by a person with the highest level of managerial authority. The Report was critical of the “senior officer” test set out in the section 22.2 of the Criminal Code for corporate criminal liability, which requires knowledge or involvement of an individual within the company with responsibility for a significant aspect of its operations (which may include middle management). Instead, the Report recommends that companies be held liable where management fails to prevent foreign bribery by an employee, in line with Convention standards — similar to the “failure to prevent bribery” offence set out under the U.K. Bribery Act.

The Report also recommends that Canada adopt a clear and transparent framework regarding non-trial resolutions such as deferred prosecution agreements (known as remediation agreements under Canadian legislation), including, where appropriate, voluntary self-disclosure of misconduct, cooperation with law enforcement authorities and remediation measures. Noting that only one foreign bribery case has been resolved through a remediation agreement since their introduction in 2018, the Working Group encouraged Canada to ensure that the mechanism reaches its full potential, including by issuing appropriate guidance and ensuring that it is not undermined by conflicting administrative policies.

Other recommendations set out in the Report include (among others) the following:

• Whistle-blower protection legislation: Canada should enact strong legal and institutional frameworks to protect and provide remedy against retaliatory action to persons working in the private or public sector who report, on reasonable grounds, suspected acts of foreign bribery and related offences in a work-related context.
• Detention of foreign bribery: Relevant Canadian agencies and Ministries should systematically collect, maintain and consider publishing data on foreign bribery reports, with a view to allowing for an assessment of the effectiveness of the various reporting channels.
• Conclusion and sanctioning of foreign bribery cases: Canada should take measures to make publicly available elements of resolved foreign bribery cases, irrespective of their method of resolution (i.e., including cases that did not result in a conviction, like those resolved through a remediation agreement). Information recommended to be made available includes the main facts, the natural or legal persons sanctioned, the approved sanctions and the basis for applying such sanctions — for example, by proactively publishing them on a single government-supported website.
• Engagement with the industry: Canada should take steps to engage with relevant Canadian business organisations and professional associations to incite them to assist companies in preventing foreign bribery, particularly in the development of internal controls, ethics and compliance programs.

Takeaways

The Working Group’s Phase 4 Report is another example of Canada facing criticism and pressure in recent years (most notably from Transparency International) to ramp up enforcement of anti-bribery and corruption offences and white-collar crime more broadly. Although it remains to be seen what action the Canadian government and regulators will take in response to the findings and recommendations in the Report, businesses should keep a close eye on developments in this area as reforms are likely to follow.