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Saturday, March 9, 2013

Laws against bribery have global reach

In this article we look at anti-corruption and bribery laws and consider their global reach, with particular focus on the recently updated Corruption of Foreign Public Officials Act (CFPOA) of Canada.

Unlike most other criminal statutes on Canada’s books, the CFPOA applies to activities that take place outside of Canada. In this update, we discuss the CFPOA’s extra-territorial jurisdiction. “Real and substantial link” The Supreme Court of Canada (SCC) established the “real and substantial link” test for establishing jurisdiction in the 1985 decision R. v Libman. The test applies to every person or corporation, whether or not such a person or corporation is Canadian.

Establishing a real and substantial link requires that a significant portion of activities constituting an offence must have been committed or must have taken place in Canada or have a real impact on Canadians. This test has two parts: first, the court must take into account all relevant facts that take place in Canada that may legitimately give Canada an interest in prosecuting the offence; second, the court must consider whether it would offend international comity for Canada to take jurisdiction.

Connection to Canada 

The first stage of the test involves a determination of whether there is a sufficient connection to Canada’s geographical territory to take jurisdiction. The Supreme Court explained in Libman that, “All that is necessary to make an offence subject to the jurisdiction of our courts is that a significant portion of the activities constituting that offence took place in Canada.” In that case a telephone fraud scheme was hatched in Canada with victims in the U.S. and proceeds of crime received in Costa Rica and Panama.

The Supreme Court found that jurisdiction was properly asserted in Canada given that these facts evidenced a “real and substantial link” or that a “significant portion of the activities” took place in Canada. Contrarily, in the 2005 case R. v Drakes the Ontario Superior Court of Justice found that a Nigerian letter scam did not have a sufficient “real and substantial link” to Canada for the court to take jurisdiction.

Unlike Libman, the fraud in Drakes was neither devised nor put into effect in Canada. The only connection was that the proceeds of the fraud found their way to a Canadian bank account. The “significant portion” threshold was not met.

In another case, PT Kiani Kertas v Helm, the British Columbia Supreme Court found it did have jurisdiction to decide a civil action involving an Indonesian construction contract obtained through bribery. The fact the defendants were not residents of British Columbia when the conspiracy occurred, but became residents thereafter, was enough to establish a real and substantial connection in order to claim jurisdiction.

Respecting sovereignty 

The second stage of the “real and substantial link” test acts as a check on the first stage to ensure the sovereignty of other nations is respected. Thirty-eight countries have ratified the Convention on Combating Bribery in International Business Transactions of the Organisation for Economic Co-operation and Development, on which the CFPOA is based. It is clear that most countries in the world have an interest in prosecuting those who bribe foreign public officials. Therefore, international comity will not be easily offended when a state steps up to prosecute suspected offenders.

In the April 2012 case of Club Resorts Ltd. v Van Breda, the Supreme Court of Canada affirmed the “real and substantial link” test as the appropriate common law rule for the assumption of jurisdiction. The SCC set out a list of presumptive factors that would entitle a court to assume jurisdiction over a claim. The list includes (i) whether the defendant is domiciled or resident in the jurisdiction; (ii) whether the defendant carries on business in the jurisdiction; (iii) whether the tort was committed in the jurisdiction; and (iv) whether a contract connecting the dispute was made in the jurisdiction. This list of factors is not exhaustive.

Where a connecting factor is established, a presumption of jurisdiction will arise, but that presumption may be rebutted. The SCC noted that (i) the court’s analysis should always be guided by the values of order, fairness and comity; and (ii) new presumptive factors should create similar connections to the forum to those created by the presumptive factors listed above. Even if the “real and substantial link” test has been met, courts may still decline jurisdiction pursuant to the doctrine of forum non conveniens.

In Van Breda, the SCC also outlined the following guiding factors for a forum non conveniens analysis: (i) the location of the parties and witnesses; (ii) the cost of transferring the case to another jurisdiction, or the cost of declining the stay; (iii) the impact of a transfer on the conduct of the litigation or on related or parallel proceedings; (iv) the possibility of conflicting judgments; (v) problems relating to the recognition and enforcement of judgments; and (vi) the relative strengths of the connections of the two parties.

Multiple prosecutions 

Should more than one state claim jurisdiction over the prosecution of the same offender, it is open to that offender to plead autrefois acquit or autrefois convict to prevent any injustices that may result. These are common law pleas that stop trials from proceeding because another jurisdiction has already decided the matter. Many countries have also enshrined in their constitutions that no one shall be tried or punished more than once for the same offence.

In Canada, this protection is found under section 11(h) of the Canadian Charter of Rights and Freedoms. The threat of multiple prosecutions is decreasing as the international community moves towards a consensus regarding cross-border bribery.

The prosecution of Niko Resources Ltd., a publicly traded company based in Calgary, was a joint effort by both Canadian and U.S. authorities. The probation order that was put in place requires Niko to assist not only Canadian authorities, but also U.S. law enforcement agencies. The level of cooperation exhibited in this case suggests a merging of standards regarding international bribery laws.

The World Bank also has a very strict policy against anti-corruption with active and vigorous enforcement, which includes reporting to and cooperation with State authorities where corrupt activities are found.

Recent amendments increase global reach 

An ongoing critique of the CFPOA has been that the Canadian government’s prosecutorial jurisdiction is restricted to territorial jurisdiction, requiring that there be a real and substantial link between the offence and Canada. On February 5, 2013, Canadian Foreign Affairs Minister John Baird announced amendments to the CFPOA that will enhance Canada's efforts to combat corruption and bribery in international business transactions.

Bill S-14 has passed its first reading before the Senate of Canada and would establish nationality jurisdiction. This amendment will expand the RCMP’s jurisdiction to prosecute offences pursuant to the CFPOA. Nationality jurisdiction explicitly permits Canadian authorities to prosecute persons or corporations of Canadian nationality for international bribery, providing Canadian authorities with reach to launch prosecutions regardless of where the alleged bribery took place and regardless of whether the act had any connection to Canada.

Different approaches 

The U.S. has shown considerably more willingness than Canada to impose the jurisdiction of its courts on offences that occur outside of U.S. territory. The U.S. Foreign Corrupt Practices Act applies to activities of any person as long as some element of the offence occurred within U.S. borders.

The U.S. threshold of “some element” is much lower than the Canadian threshold of “significant portion.” Drakes would most certainly have been decided differently if the case had been tried in the U.S.

The U.K. is even more broad than the U.S. in the extraterritorial application of the UK Bribery Act. This legislation catches any offender if it has a “close connection to the U.K. by virtue of being a British national or ordinarily resident in the U.K., a body incorporated in the U.K. or a Scottish partnership.” There is no territorial element required for a U.K. court to claim jurisdiction.

Canada has come under increasing scrutiny by international anti-corruption organizations, including Transparency International, to pursue bribery-related offences more diligently. In light of this, the policy trend may be that Canadian courts and legislators take a more expansive approach to the application of the CFPOA to meet international expectations. What can be said now is that the trend is towards enlarging, rather than limiting, the extra-territorial scope of anti-corruption legislation.

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