Legal news and trends for Canadian in-house counsel and c-suite executives
Issue link: https://digital.canadianlawyermag.com/i/50882
CORRUPTION CORRUPTION The U.S. legislation, for example, has set the bar for quite some time, not only because it is more extensive than its Canadian counterpart, and recent amend- ments have made it even tougher, but because U.S. authorities have been very aggressive in enforcing it. And in addi- tion to U.S.-based companies or foreign companies listed on U.S. exchanges, they have also enforced it on foreign compa- nies that might have only remote ties to a U.S. jurisdiction. As such, it has become a guideline many Canadian companies simply can't afford to ignore. "It does have an impact on us, everywhere we go," says Scotiabank's GC Alexander. "Around the world we go to highest common denomi- nator, and that's usually the U.S. legislation at the moment — what's in the books in CORRUPTION affect many Canadian companies. "If you have done business in the U.K. or have some connection to the EU, you need to be prepared for it," says Gurinder J. Singh, a lawyer with Miller Canfield Paddock and Stone PLC. "Penalties are much higher in both the U.S. and U.K. acts than they are in the Canadian act." That's why the OECD report could have consequences for Canadian companies. It will be read in places like Washington, D.C., which takes an aggressive look at compliance with its own laws, often prosecuting companies that have only a tangential tie to the U.S., says Philip Urofsky, a partner at Shearman & Sterling LLP based in Washington, D.C., and London, England. He says the OECD report saying Canada is not being tough enough on its [Y]ou have to be patient with us, because it takes time to conduct these investigations. INSP. GORD DRAYTON, RCMP plying out of fear of the U.S. legislation. "Canadian companies that are cross listed in the United States are likely caught up in the legislation relating to anti-bribery in that country, and so it may be the case that Canada is free riding on the legisla- tion of other countries — the U.S. and the U.K. — and therefore not pursuing meri- torious cases with vigour," says Anand. There are differences between the U.S. and Canada that can explain why the Americans seem to be much more active in this area. For one, they have had a law dealing with foreign bribery since the late 1970s, two decades before Canada. They also vigorously use the federal Securities and Exchange Commission to help authorities in exposing and persecuting bribery abroad. In Canada there are problems with the U.K. will be a higher standard just in terms of its obligations. But the practical thing is you do not go around the world and ignore the U.S. legislation and its impact." In fact, Scotiabank's internal code on corruption and bribery of foreign offi- cials is stricter than both the Canadian and U.S. legislation, because it prohibits "facili- tation payments," a grey area left open for small sums, goods, and services given to foreign officials to facilitate doing busi- ness overseas. That puts it in line with the recently adopted U.K. legislation. "There is a broad reach," Anand says of the U.S. legislation. "But the U.K. legislation has an even broader reach." Anand is referring to the U.K. Bribery Act, which will affect Canadian companies that do business in the U.K. and beyond. It comes into force July 1 and is stricter than any other legislation of its kind in the U.S. and Canada. Not everything is entirely clear about the U.K. legislation yet, but it will likely 32 • JUNE 2011 INHOUSE own companies might mean U.S. authori- ties may decide to go after Canadian companies to make an example. "The U.S. is going to read the OECD report, and that's what they are going to take out from that report," says Urofsky, who is a former U.S. federal prosecutor. Canadian companies likely affected by the new pro- visions include public companies whose shares are listed in the U.S. and Canadian subsidiaries of American public compa- nies. However, even Canadian companies with no apparent U.S. ties can be affected, says Urofsky. U.S. authorities have gone as far as claiming jurisdiction when there is an entirely circumstantial U.S. involve- ment such as the use of U.S. dollar trans- fers through U.S. correspondent bank accounts. On the other hand, Anand says U.S. enforcement might be one of the reasons behind the low number of prosecutions in Canada, as this country might be getting a free ride with companies already com- current regulations and the fact that there are 13 different securities commissions instead of a single national body. "You've got this thing in Canada called federal- provincial relations and you have a federal act — the anti-bribery law — and you have the provincial securities legislation," says Anand. "We do have this door that might be opened, however, that is the national securities regulator — if you want to start lobbying, now is the time for what could become the federal securities act." The debate for the national securi- ties regulator is still ongoing, and as this issue went to press, the Supreme Court of Canada was deliberating whether its establishment is constitutional. Courts in Alberta and Quebec had ruled it uncon- stitutional because it would allow the fed- eral government to encroach on provincial powers. At the end of the day, the golden rule for in-house counsel wanting to keep their companies safe while operating abroad is to be prepared, says John Keefe, a part- ner at Goodmans LLP. "Any general counsel of a company that has business in foreign countries where there is some dealing with the government, whether getting licences or contracts, should be very aware of where all the money is going and have internal compliance pro- grams in place to make sure that there is no money going to government offi- cials," he says. IH RRUPTION CORRUPTION CORRUPTION CORRUPTION CORRUPTION