Foreign Affairs Committee on June 11th, 2013

[The Chair, Conservative, Dean Allison]

Pursuant to the order of reference of Tuesday, June 4, 2013, we are looking at Bill S-14, An Act to amend the Corruption of Foreign Public Officials Act.

I want to thank our witnesses from Foreign Affairs for being here on such short notice. I know, Mr. Kessel, you're going to be leading off, but I'll just introduce your team. Mr. Kessel is the legal adviser. From the criminal, security, and diplomatic law division, we have Roland Legault, the acting director; Marcus Davies, a legal officer; and Maria Mascaro, who is also a legal officer.

Welcome to the team. Thank you once again for being here.

Mr. Kessel, we're going to turn it over to you for your opening remarks, and then we'll have some time over the next 55 minutes to ask some questions and move forward.

In the second hour we'll be taking some additional witnesses from outside the Department of Foreign Affairs. We'll see if we can go to clause-by-clause.

Mr. Kessel, welcome, sir. We will turn the floor over to you right now.

[Alan H. Kessel, Legal Adviser, Department of Foreign Affairs and International Trade]

Thank you.

Honourable members, Mr. Chair, it's my pleasure to be here with you today to discuss legislative amendments to the Corruption of Foreign Public Officials Act, CFPOA.

Since its introduction on February 5, Bill S-14 has progressed quickly and has received widespread support from both parliamentarians and stakeholders. It's our hope that members of this committee, and indeed all parties, will recognize its importance and move expeditiously to ensure that Bill S-14 is enacted as soon as possible.

Canada has long played a prominent role on the international stage in combatting corruption, and it takes allegations of corruption involving Canadian companies seriously. We have seen an increasing amount of international attention being paid to global corruption, and indeed the Canadian media have taken note of a number of recent high-profile cases in our courts.

The global fight against foreign bribery is intended to create a level playing field for international business so that Canadian companies can compete and win fairly in the pursuit of freer markets and expanded global trade. Canada has been an active partner and has played a prominent role in international efforts to combat corruption and bribery. The CFPOA was first introduced to implement our international obligations under the Organization for Economic Cooperation and Development anti-bribery convention, as well as two more anti-corruption conventions through the OAS and the UN.

Needless to say, Canada takes its international obligations extremely seriously, and we are pleased that at its meeting in March 2013, the OECD working group on bribery praised the government for its amendments as measures that will implement the working group's recommendations to a very high degree, if passed as tabled within one year of tabling.

Mr. Chair, Bill S-14 signals our government's continued commitments to further deter and prevent Canadian companies from bribing foreign public officials in international business transactions. These are important amendments that will strengthen our anti-corruption laws and place Canada at the leading edge of countries taking strong action against corruption, action that will benefit Canadian companies both at home and abroad. These amendments will help ensure that Canadian companies continue to act in good faith. With this bill, Canada is sending a loud and clear signal to the world that we will not tolerate corruption.

I'll now take a minute to briefly explain the six technical amendments that are being proposed in Bill S-14.

First is the introduction of nationality jurisdiction to allow Canada to prosecute Canadians or Canadian companies on the basis of their nationality. Currently we can only do so after proving a substantial link between the offence and Canada.

Second, provide the RCMP with exclusive authority to lay charges under the act.

Third, remove the for-profit requirement so that bribery applies to all bribes and not just those paid by businesses that make a profit.

Fourth, increase the maximum imprisonment from five years to 14 years.

Fifth, introduce a new books and records offence specific to foreign bribery. Although there are already offences under the Criminal Code that criminalize falsification of books and records, they are not specific to foreign bribery. The penalties for the new offence would mirror those for the foreign bribery offence, that is, a maximum of 14 years' imprisonment and unlimited fines.

Finally, eliminate the facilitation payments exception under the CFPOA. You will note that the bill provides for a delay for the coming into force of the elimination of the facilitation payment defense. This delay will provide Canadian companies time to adjust their own practices and internal policies, if they have not already done so, to ban the use of facilitation payments in their day-to-day operations.

Honourable members, Mr. Chair, as I previously stated, the proposed changes have given Canada tentatively good marks with domestic stakeholders and at the OECD working group on bribery. We are pleased with the OECD working group on bribery's strong, positive endorsement of the significant progress made on investigations and prosecutions of the foreign bribery offence, the awareness-raising efforts undertaken by numerous government departments, and the proposed amendments to the CFPOA included in Bill S-14. It's important to note that these positive comments from the OECD working group on bribery were given with the strong caveat that the proposed amendments be adopted. Canada has invested a lot of credibility in getting this bill tabled, and we must report back to the OECD in the near future regarding its adoption.

Honourable members, Mr. Chair, Canada is positioning itself as a reliable supplier of the resources that emerging markets need to grow. We must create the conditions for Canadian businesses to succeed in the pursuit of its pro-trade agenda. Corruption does the opposite. It hinders economic growth and long-term prosperity. It fosters only an environment conducive to allowing other crimes to flourish. We expect our companies to abide by the laws of the countries they operate in, as well as to act in accordance with applicable Canadian laws and ethical standards and practices. We believe they can compete with the best and win fairly.

As the Minister of Foreign Affairs stated on February 5, when announcing these new measures:

Canada is a trading nation. Our economy and future prosperity depend upon expanding our trade ties with the world. This, we hope, is a good faith sign that Canada's good name retains its currency.

With that, my colleagues and I would be happy to answer any questions you may have.

Thank you, Mr. Chairman.

[The Chair, Conservative, Dean Allison]

Thank you very much, Mr. Kessel.

We're going to start with Madame Péclet, for seven minutes.

[Ève Péclet, NDP, La Pointe-de-l'Île, QC]

Thank you, Mr. Chair.

Thank you to the witnesses for being with us today.

Before I ask my questions, I want to tell the government members that we are very disappointed to see that they have decided to ram this bill through, even though it is extremely important to Canadians. I think it is important to mention that we would have needed more time to study it. In particular, the minister should have appeared to give us some explanations.

He appeared before the Standing Senate Committee on Foreign Affairs and International Trade. I therefore do not see why he could not have taken the time to explain to members of the Standing Committee on Foreign Affairs and International Development of the House the changes being made to the Corruption of Foreign Public Officials Act. Since this Parliament is subjected to the whims of the government, we do not really know if these people are going to table a time allocation motion for this bill at third reading.

In my opinion, it is important to mention that this process is completely anti-democratic in that it does not give members the opportunity to really study the bill, which is extremely important.

Thank you very much for having listened to my preamble. I will now move on to my questions.

Mr. Kessel, the facilitation payments exception will come into force later than the rest of the bill, at a date to be set by cabinet. Are you aware of any consultations on how and when these facilitation payments will come into force?

[Alan H. Kessel]

Part of the development of this legislation has required quite a considerable amount of consultation, not only with the private sector but with NGOs and others. That is an ongoing responsibility the government has and that we take seriously.

One of the things that came up in a two-day workshop we conducted in 2012 was an acknowledgement that while facilitation payments are permitted under the current treaty, most countries—with the exception of Canada, the U.S., Australia, and New Zealand—were really left out, and we should really be moving on that. The issue of facilitation payments is very much in the mind of not only companies, which find it confusing and want clarity, but the NGOs with which we're working.

In developing this legislation, the suggestion was to make it clear that facilitation payments were going to go, but we do need to educate our own people, and that may take just a wee bit of time. We don't know the exact time at the present, but we are in consultation with a lot of companies and we will be providing government with some advice. Our expectation is that it will be sooner rather than later, in terms of coming into force.

[Ève Péclet, NDP, La Pointe-de-l'Île, QC]

Why will it be cabinet and not Parliament that will set this date? Is there any reason in particular? Parliament should be the legislative authority here.

[Alan H. Kessel]

I can't speak for the political level. I believe the concern was in ensuring that the companies, the private sector, and NGOs have enough time to at least put in place provisions that will allow cabinet to be satisfied that entry into force is now due. That will be indicated to cabinet and cabinet will make that decision.

[Ève Péclet, NDP, La Pointe-de-l'Île, QC]

Maximum sentences will be increased from 5 to 14 years. However, a number of legal associations believe that mandatory sentences take away the discretion of judges.

Could you confirm that mandatory sentences would prevent judges from using their discretionary power in the form of absolute or conditional discharge?

[Alan H. Kessel]

What I can confirm to you is that the sentencing that will be applied now to foreign bribes—Canadians who are bribing foreigners—will be the same as Canadians bribing Canadians. So what we are doing with this legislation is ensuring that there isn't a double standard, that when Canadians go overseas and bribe others, they will be suffering the same penalty as Canadians bribing other Canadians.

[Ève Péclet, NDP, La Pointe-de-l'Île, QC]

What impact would this have on conditional sentences?

[Alan H. Kessel]

I'm sorry, that's an issue you would have to put to the judiciary. I'm not able to answer that.

[Ève Péclet, NDP, La Pointe-de-l'Île, QC]

Because it would be impossible to reduce sentences or make them more lenient, this offence would be one of the most serious in the Criminal Code. Do we not run the risk of having sentences that are too harsh in proportion to the seriousness of the crime?

Mandatory sentences would take away judges' ability to take certain circumstances into consideration. How will judges be able to ensure that there is a balance?

[Alan H. Kessel]

My colleague has just reminded me that in fact these aren't mandatory sentences up to 14 years. They're a maximum of 14 years. There's quite a bit of discretion within the judiciary and the judge, bearing in mind how the case comes before him or her, to determine the degree to which they would apply a sentence or a fine. You will have seen in a number of cases that have already gone through our courts that there has been a considerable degree of discretion on the part of the courts.

As the culture changes in Canada with respect to whether these are acceptable or not, if companies actually come forward on their own to prosecutors and say they've noticed that this is going on.... When they do that, the judge, of course, would have the discretion as to whether the maximum is applied or not.

[The Chair, Conservative, Dean Allison]

That's all the time we have.

Thank you very much, Madame Péclet.

We're going to move to the Conservatives and Mr. Dechert, for seven minutes.

[Bob Dechert, Conservative, Mississauga—Erindale, ON]

Thank you, Mr. Chair, and thank you, Mr. Kessel and your colleagues, for being here this morning. This is very important legislation for Canada to pass. I appreciate your assistance in helping with the drafting of the bill, helping to appear before Senate and parliamentary committees, and helping to move it along.

I believe that all the political parties, at least at this stage, are in agreement that this is something that needs to be done soon.

Last week I had the opportunity to speak to the Transparency International Canada conference, and they expressed wide support for this legislation. There were people in the room representing stakeholders in government, academia, NGOs, businesses, law firms, accounting firms, and other kinds of consulting firms, and they all agreed that this was valuable legislation that should pass very quickly.

Mr. Kessel, in your opening remarks you mentioned the 2008 OECD working group on bribery report. It outlined some recommendations for Canada. Would it be fair to say that Bill S-14 is a response to the OECD report? Can you specifically tell us how the legislation addresses each of those recommendations? As a signatory to a number of anti-corruption conventions, including the OECD convention, does this help Canada live up to its commitment under those conventions?

Could you address those questions for us?

[Alan H. Kessel]

In my third hour of response to Mr. Dechert, I'll get to a number of these questions.

[Voices]

Oh, oh!

[Alan H. Kessel]

Maybe I can condense it, because it's starting to feel like a law school exam again.

The reality is, absolutely. Let me also put it in context. You're not dealing with just some amorphous working group on bribery sitting in the basement of a building in Paris. We're actually dealing with peer review by our colleagues.

In the review of Canada, we had the U.S., a very strong reviewer, I must say, which holds its own high standards, together with Austria. One of the things that was developed under this particular piece of international treaty work was to say it's all very well that treaties are created and are sent out there, and they expect countries to just say yes, we've lived up to our obligations, but what they did put in there was a review mechanism by peers. I have to say that some of us don't like it too much, being under scrutiny; it was extremely painful on occasion sitting there in those meetings and being told we didn't live up to the values and ethics that we thought we had. The Americans are extraordinarily tough.

The result of that review and examination and entrail reading was to come up with a series of very specific items. I don't want to belabour all of them, but, for example, the not-for-profit issue was one that they found extraordinarily odd, as it doesn't appear in many other countries. In fact, no other country has it in their legislation. That came up as an issue. The question of prosecuting nationals hasn't been obligatory in the past, and we didn't think about it about 20 years ago when we brought this in. It appears that smart accountants and lawyers other than ourselves have suggested to their clients that they should just go overseas, do their corrupt practices from an office in another country, and therefore they wouldn't be prosecutable in Canada. This was seen as a massive, gaping hole. Canada could stand up and say they were applying all the language of the law, but the spirit of it was being abrogated. The issue of nationality jurisdiction now says that if you're a Canadian and you think you're going to go to Unga Bunga, and you're going to sit there and do some horrible thing to some other country, forget it, because we're now going to get you. We have now made it easier for prosecutors, who before had to show a substantial link to this country before they could prosecute. It has removed that.

One of the things that we got high marks on was that particular thing.

The other thing was companies were running two sets of books. They had one set of books that were reviewed by the auditors and looked perfectly good, and another set of books that were not. We do have falsification legislation, but this was specifically designed to ensure that when their companies were overseas and their chief of marketing and sales was giving a cool million dollars to whomever to ensure that there was a deal, that went into a different set of accounting. What we've now put in place is a very clear criminalization of that particular issue.

The other question....

[Bob Dechert, Conservative, Mississauga—Erindale, ON]

If I may just interrupt for one second, Mr. Kessel—I know I'm running out of time—you mentioned that the Americans are tough reviewers, and they obviously have delivered some messages to Canada through that OECD report, which we're addressing.

I understand, though, that the United States does not prohibit facilitation payments. That's one of the issues here. We are doing that. The Americans are currently allowing their companies to do facilitation payments, and there may be other countries as well that allow facilitation payments.

Can you just address that issue for a moment?

[Alan H. Kessel]

Absolutely.

There are very few countries that allow facilitation payments. I mentioned the four of them. The reason the U.S. still has it on its books is because it gets around that in a very serious way.

I'm going to ask Marcus Davies to just give us a very brief analysis of why the Americans, regardless of whether they have it on their books, are still much stronger than we are.

Do you want to take it, Marcus?

[Marcus Davies, Legal Officer, Criminal, Security and Diplomatic Law Division, Department of Foreign Affairs and International Trade]

Sure. Thank you very much.

As mentioned, there are some countries that still do permit it. When you look at the U.S. system, because of a constitutional division of powers, the U.S. has two mechanisms under their Foreign Corrupt Practices Act, and this is a longstanding piece of legislation.

They can go through criminal measures under the DOJ, which we do. We have to go criminally under our constitutional division of powers, but they can also go through their Securities and Exchange Commission and do administrative sanctions.

[Bob Dechert, Conservative, Mississauga—Erindale, ON]

Because they have a federal securities regulator and we don't.

[Marcus Davies]

Right. We work quite a lot with our U.S. counterparts on this. They don't recommend at all that you pay facilitation payments. The reason is that those payments are probably illegal in another country and are probably criminalized by other jurisdictions.

The U.K. would be an example where they don't have that exemption, but they will use administrative sanctions to address this, so the person doesn't get a criminal record.

Whereas you will see with the U.S. higher numbers, most of their cases are done on books and record-keeping offences, and we're introducing this in our legislation. We are on the same par, but we have to use different tools to address the same types of practice. That's what we're doing with this legislation.

[Bob Dechert, Conservative, Mississauga—Erindale, ON]

Thanks for the explanation.

[The Chair, Conservative, Dean Allison]

Thank you very much.

Mr. McKay.