Pursuant to the order of reference of Tuesday, June 4, 2013, we are considering Bill , an act to amend the Corruption of Foreign Public Officials Act.
I want to thank our witnesses because they have now been back twice—they were supposed to testify before us on Tuesday.
Thank you very much. We do understand that you have busy schedules and so we appreciate your changing your schedules to be here.
It looks like we will once again have the bells within 20 minutes. Voting would be at about 10 minutes to 12:00, which means that we would not be back here until 12:05. I thought it would be helpful to get the testimony in now and then go a little bit longer, if it's okay with the witnesses.
We also will understand if you have other things that you need to do. At least we'll get the testimony in. We will come back and finish off with 30 minutes of questions and answers. If we can get you to stick around, that would be great.
I want to introduce each of our witnesses here today.
From the Canadian Bar Association, we have Noah Arshinoff, staff lawyer for law reform, and Michael Osborne, member of the CBA anti-corruption team. Welcome Michael. Thank you for being here.
From the North-South Institute, we have Joseph Ingram, president. Joseph, it's good to see you here today, sir.
Joining us from Calgary, Alberta, from Transparency International Canada, is Janet Keeping, chair and president. Thank you, Janet, for working us into your schedule. I think the last time we talked you were in Edmonton.
Good morning, Mr. Chair, and honourable members.
The Anti-Corruption Team of the Canadian Bar Association shares the convictions expressed in Bill . As expressed in the Convention, bribery in international business transactions raises serious moral and political concerns, undermines good governance and economic development, and distorts international competitive conditions. That is why the ACT generally supports Bill .
We do, however, have two concerns to bring to your attention today: first, the difficulties associated with repealing the facilitation exception at this time; and second, the difficulties created by increasing the maximum sentence to 14 years.
Turning first to facilitation payments, these are small payments made to officials to get them to do their jobs. They're different from payments made to obtain a business advantage, in the sense of a bribe to get a contract.
The current international consensus seems to be that facilitation payments should be discouraged, but it is not clear that the time is right to require the criminalization of facilitation payments made to foreign officials. Bill appeared to us to reflect this consensus by providing for the repeal of the facilitation payments exception, but not yet, since this repeal will come into force on a date to be fixed by the Governor in Council.
In the view of the CBA anti-corruption team, or ACT, this is not an optimal way of dealing with facilitation payments. Parliament, not the cabinet, should determine when the time is right, and it should do so after a fuller consultation with Canadians who do business abroad. Some of the important considerations that need to be addressed are as follows.
First is the impact on disaster relief. Charities that deliver humanitarian relief need to be authorized to do what it takes to save lives. One in-house counsel with a major charity told us that feared the day when facilitation payments would be illegal and a vital delivery of food would be held up in some hopelessly corrupt country by a jaded customs official who demanded $50 before releasing the food. The question, he said, would whether they could pay the man $50. If they did not, a thousand people or more would die.
There are other exceptions. Sometimes, for instance, people have no choice but to pay. In some countries, we're told, exit visas are routinely held up until money is paid. In others, the police demand a payment before they will even take a report of a crime. There are reports of cases where officials threaten the health or safety of people in order to extort money. I would think that most people would agree that in those circumstances the payment should not be a crime.
Thirdly, on penalties, as Bill stands, people who are coerced into making facilitation payments do so in fear of committing an indictable offence punishable by up to 14 years in jail. In other words, this is among the most serious offences on the books in Canada. The question that needs to be asked is whether or not this is an appropriate treatment for small payments of this nature.
For these reasons, the CBA-ACT recommends not proceeding with the repeal of the facilitation payments exception in this bill.
The second general point is the increase in penalties.
The maximum penalty under current legislation is five years’ imprisonment. The bill proposes that the maximum jail term be increased to 14 years.
Fourteen years will be the new penalty, and this will make the corruption offence one of the most serious offences on the books. By way of comparison, this 14-year maximum is higher than the maximum sentence for domestic corruption, for instance, which is generally five years, although it can be 14 years in some cases; for child pornography, which is 10 years; for abandoning a child, which is five years; for criminal negligence causing death with a firearm, which is four years; or for assault causing bodily harm, which is 10 years.
The increase in penalty from 5 to 14 years has important knock-on effects. Fourteen years is effectively a magic number in Canadian criminal law. Offences that carry a maximum sentence of 14 years are not eligible, first of all, for discharges, either conditional or absolute. Incidentally, this responds to a question from one of your colleagues the last day, when she asked about the availability of discharges.
Conditional sentences—that is, sentences served in the community—will not be available sentencing options for this offence. This severely constrains the range of remedial outcomes that are available to prosecutors, defence counsel, and the courts. It will, to put it bluntly, make it difficult to make the punishment fit the crime.
Suppose, for example, a Canadian business person is at the airport, trying to leave a developing country. The customs officials demand a facilitation payment. He pays in order to be allowed to leave the country and return to Canada. Has this person really committed one of the most serious offences on the books in Canada? Does this person deserve to have a criminal record? If the answer is no, then the penalty needs to be changed so that discharges remain available.
With respect, prosecutorial discretion is not the answer. The law should be as clear as possible so as to provide reliable guidance. I would also add that it is not the custom in Canada for the prosecution to issue guidance on the substance of offences. This isn't done, except perhaps in the realm of competition law, unlike, for example, in the United Kingdom, where they do have fairly extensive guidance on their Bribery Act.
Suppose a Mr. 10% somewhere requires a Canadian business person to pay a bribe to get a contract. Suppose the contract is relatively small, and the business person is a first-time offender. This would fit within the existing offence under the act. Of course, it's not a facilitation payment, it is a bribery offence. Do we really need to lock this person up? Why not impose a sentence to be served in the community for a person who does not pose a risk to society?
Under Bill as it stands, this outcome would not be available, although I should hasten to add that probation would remain available.
Thank you, honourable members. Those are my submissions.
Thank you, Mr. Chairman.
I want to thank you and other members for inviting the NSI to comment on the proposed amendments to this bill. It's an honour for the institute, Canada's oldest independent development think-tank—and, I might add, ranked for the past two years as the world's leading development think-tank by the Global Go-To Think-Tank survey. Despite our annual budget of less than $5 million, we were also ranked in the same survey as Canada's leading development think tank.
In addressing the significance of the bill, I wanted to briefly describe the global context in which the bill is being considered. I don't do it as a lawyer or as an expert on the amendments themselves, but rather as a Canadian development economist concerned about the defining challenges of 21st century global development. I also do it as someone who has worked in international development since 1970, including 30 years with the World Bank, including 14 years living in and managing financial support to some of the most corrupt countries on the planet, according to Transparency International's Corruption Perceptions Index—and I won't name them in this room.
I know first-hand the insidious and devastating effect that corruption, fed by an absence of representativeness, transparency, and accountability—the three pillars of good governance—has on a society's economic and social health. It's not pretty and it's not how Canadian or any other taxpayers' resources should be used.
As noted in the recent “Africa Progress Report 2013”:
Transparency and accountability are the twin pillars of good governance. Taken together, they are the foundation for trust in government and effective management of natural resources—and that foundation needs to be strengthened.
As also suggested by this eminent international panel, the absence of these pillars is especially damaging in resource-rich states where the financial stakes and temptations to maximize personal gains by political and economic elites, including foreign investors, are high. The unprecedented growth in demand for natural resources, particularly extracts coming largely from the emerging economies, is producing both volatility and rising commodity prices, with global competition for resources intensifying, especially in Africa where the potential is as yet relatively unexploited. For Canada, a globally connected resource-rich country whose economic health depends increasingly on its capacity to globalize its trade relations, the intensified competition constitutes a particular challenge. The comfort zone of producing primarily for domestic consumers and the U.S. market is quickly evaporating.
As noted by the Conference Board of Canada in 2012, the past decade has effectively been a lost decade for Canadian exports:
The 2000s were a “lost decade” for Canadian exports of both goods and services, as essentially no growth in volumes occurred—even though the volume of global trade in goods expanded by 68 per cent during this period.... We have lost export market share to emerging markets in a wide variety of products, including Canadian stalwarts like wood and paper products.
During the same period, as noted recently by the former Governor of the Bank of Canada Mark Carney, “We've dampened our  forecast of exports because we're seeing a competitiveness challenge...”. Indeed, among the G-20 countries during the same period of 2000 to 2012 Canada was one of eight economies that lost market share of world exports, by about 37%, just behind the U.K., which had the biggest loss of about 40%. The 12 gainers were led, not surprisingly, by China with a gain of 170%—but Australia also saw a gain of 50%.
This loss of market share in exports at the global level is also consistent with a loss of competitiveness of Canadian extracted investments in Africa. Whereas in 2007 Canada was the leading investor in mining on the continent, notwithstanding an increase in the stock of Canadian investment from just under $3 billion to about $31 billion today, we are now fifth, exceeded by China, Australia, South Africa, and the countries of the European Union.
We recently discussed some of these issues at NSI's Ottawa forum entitled “Governing Natural Resources for Africa's Development”—and here I should add that both Dean Allison and Lois Brown made important contributions to that discussion—and addressed how Canada could elevate itself in that sector to being a leader on the continent in natural resource exploitation and investment.
This is at a time when African governments themselves and members of the G-8 are increasingly concerned about using mineral and energy resources more effectively, thereby ensuring that they become the economic blessing they should be rather than the curse they have tended to be.
Indeed, a senior vice-president of one of Canada's leading mining investors in Africa said during the conference that Canadian mining companies could no longer compete on the basis of cost alone, that we needed other attributes.
Enhancing the Canadian brand is one of them, as is being a policy-maker on dealing with corruption in natural resource exploitation, rather than being a policy-taker. Canada needs to be seen as a leader in setting global best practice standards, especially at a point in history where African governments, many of them democracies, are taking active measures to enhance domestic resource mobilization and stem the illicit outflow of financial resources.
Just to give you an example, it's estimated that the outflow of illicit funds in the form of mispriced trade, transfer pricing, etc., from Africa was about $63 billion in 2012, exceeding the inflow of aid and foreign direct investment of about $62 billion. The new Africa mining vision that was developed by the African Union in collaboration with the UN Economic Commission for Africa sets out a compelling agenda for facilitating such changes by shifting the focus from simple mineral extraction to much broader developmental imperatives in which mineral policy integrates with development policy. This means effective regulations governing extractive companies, the strengthening of institutional capacity, and policies that ensure that resources generated are spent to produce sustainable and more equitable outcomes.
For the international community, this means creating a level playing field where natural resource investors are subject to the same set of rules, building on the U.S. Cardin-Lugar amendment and the EU transparency directive adopted by the Europeans earlier this week, so that companies operating in Africa apply the same accountability principles and the same standards of governance that they are held to in rich countries. They should also recognize that disclosure matters.
In our view, Bill is an important step in that direction, in that it would strengthen the accountability of Canadian firms operating in developing countries and seek to apply the same standards as applied in Canada. We therefore commend the government for preparing it.
On its own, however, it falls short of what is needed for Canada to be seen as a global leader in stemming corruption in that it only deals with one of the pillars of good governance, namely, accountability. Indeed, China adopted its eighth amendment to its criminal code, a law not dissimilar to the Canadian legislation, in 2011. What is also needed is regulation that requires transparency on the part of Canadian investors. Per the call of Prime Minister David Cameron in the lead-up to the G-8 meeting later this month:
we must lift the veil of secrecy that too often lets corrupt corporations and officials in some countries run rings around the law. The G-8 must move toward a global common standard for resource-extracting companies to report all payments to governments, and in turn for governments to report those revenues. This will encourage more investment in resource-rich countries and level the playing field for business.
In my discussions with members of the Mining Association of Canada, some of whom participated in our recent forum, I've heard the same desire expressed, along with concerns that rising resource nationalism in Africa and elsewhere will first target the firms from those countries seen as being less rigorous in their application of laws to stem corporate corruption by their own firms. Indeed, the Africa Progress Panel report explicitly cited Canada, stating: “Not all the opposition [to stronger regulation] emanates from industry. The Canadian government has opposed the introduction of mandatory standards.”
Canada being perceived by African governments and civil society as one of those recalcitrants is neither good for our brand nor for our competitiveness in the medium term. The statement, therefore, by Prime Minister Harper yesterday in London that Canada “will establish new, mandatory reporting standards for payments made to foreign and domestic governments by Canadian extractive companies” is a welcome development, and the government is to be warmly applauded for this step.
This new policy will help change perceptions and enhance our brand, and should it include compliance with the Extractive Industries Transparency Initiative, Canada would align itself with 23 countries that are currently compliant with this initiative. An additional 16 are candidate countries, including Australia and the United States. France and the U.K. will apparently announce their compliance during the G-8 summit, while Germany recently informed EITI's former chairman—who's a German—that it too is on the verge of joining.
Canada's compliance would demonstrate our full commitment to transparency and provide comfort to Africa's governments and civil society that Canadian extractive firms investing in Africa are being subject to the same standards they would be in Canada.
This would contribute both to Africa's economic development and Canada's economic prosperity. It would also move Canada, once again, into a position of global leadership in the area of natural resource governance.
Thank you, Mr. Chair.
Thank you very much for this opportunity to speak to the committee.
I'll just correct something right off the bat. I am with Transparency International Canada. I'm president and chair of the board of Transparency International Canada, which is a national chapter of Transparency International. That parent organization was formed in 1993 and is based in Berlin. It has about 100 chapters around the world and is often considered the leading NGO committed to the struggle against corruption globally.
TI Canada, on the other hand, was formed in 1998. We're a coalition that includes professionals, lawyers, such as me, and accountants, and people from the NGO community, retired government officials, and people from business, including from the extractives.
My primary mission today speaking on behalf of Transparency International Canada is to urge the adoption of Bill . In our view, it is a very good thing that the Canadian government is responding to criticisms of the Corruption of Foreign Public Officials Act that have mounted over the years.
Passage of the bill will allow the Canadian struggle against corruption abroad to move on to other fronts. The bill addresses issues that have been pointed to by many over the years, both from within Canada, including from Transparency International Canada, and from outside our country, as I'm sure you well know.
I'm going to be very brief here and just mention the provisions of the bill that have been of special interest to Transparency International Canada. One is the addition of nationality jurisdiction. It needs to be added. Bill would add it, and we're very pleased to see this.
On the more serious penalties that the earlier speaker from the Canadian Bar Association alluded to, in our view, increasing the penalties sends the message that Canada is truly serious about the struggle against corruption. Many people believe that only when individuals realize they could go to jail for a significant period of time will more people resist what they see as the corrupt, easy way to do business. I think it's probably more important that enforcement of the law be vigorous and consistent than to have the possibility of long jail sentences, but generally speaking, we are pleased to see that the penalties are being increased.
What about facilitation payments? We have debated this internally in TI Canada and within the course of public events that we've put on several times over the last few years. We understand the complex and, with some of them, subtle issues here, but we are supportive of eliminating the current exemption for facilitation payments.
In our view, the addition of the books and records offence that's created by Bill constitutes a very important start in the area of books and records. We also need a civil books and records provision, but we are fully aware of the constitutional limitations on the federal government in this area. In our view, adding a criminal books and records offence, which Bill S-14 does, will be of tangible assistance to the struggle against corruption.
Just briefly, we also spent a fair bit of time at TI Canada talking about the change to the definition of “business”, eliminating the words “for profit”, and we believe that too is an appropriate measure and are glad to see it in Bill .
I want to conclude my very brief remarks by expressing appreciation to those in the Department of Foreign Affairs and International Trade who organized a two-day workshop in early January 2012 to examine many of the issues now addressed by Bill . It was an excellent effort that was well prepared for, well conducted, and well followed up on. Several government agencies were represented, and TI Canada was pleased to have had a number of its directors and our administrative consultant involved in that process.
It was an open and honest discussion. We felt we were heard, and we probably would have had a whole lot more to say about Bill had we not been involved so far up front in this process.
Thank you for the opportunity to make this statement, and I welcome questions later.
I agree with Janet's remarks. We do welcome this. We think this is a very important step forward, both the amendments to the bill—with the provisos mentioned by Michael—and this announcement by the Prime Minister.
As I said in my presentation, transparency and accountability are kind of Bobbsey twins: they go together. You have to have the two of them present.
As Janet was suggesting, however, the devil will be in the details in terms of what exactly we mean by mandatory reporting requirements. With regard to what we could do as a government, on the demand side there are issues. And by “demand side”, I mean on the side of governments in Africa, for example. We talked about this with Lois at our conference.
Oftentimes they don't have the capacity themselves. They can have very good laws on the books, and even have the political will to enforce those laws, but they don't have the capacity. Finance ministers make decisions based on limited resources. They have to establish priorities. You can have very good legislation, but you can have a ministry of mines and energy, for example, which is supposed to regulate that legislation, that doesn't have the vehicles, doesn't have the computers, and doesn't have the trained people, and the finance minister decides that he would want to spend his scarce resources on something else.
In that kind of situation, it would be helpful if the Canadian government and the development department, the former CIDA, in supporting Canadian private investment—mining companies, for example, working in certain countries in Africa—were to work with the host government and look at the capacity of that government to enforce whatever regulations they have in the books, and to help them build up that capacity.
I'd like to go directly to the issue of facilitation payments, and we've had a lot of discussion about it here today.
My understanding is that Canada is responding to the OECD report that included interventions by the United States in a peer-reviewed report that pointed out a number of areas of the current Corruption of Foreign Public Officials Act that needed, in their view, to be amended and updated to reflect the OECD convention. One of those criticisms was the fact that our legislation currently does not prohibit facilitation payments.
We all know that there is a provision in Bill allowing a delay in enforcement to give Canadian companies time to change their policies and procedures to ensure that they don't run afoul of this, which will be a new prohibition on Canadian companies.
There's some misunderstanding as to whether or not American companies are allowed to make these kinds of payments. When I asked that question of our officials—of Mr. Kessel—he pointed out that under the Securities Exchange Act these kinds of payments are in fact illegal and that administrative proceedings can be brought against public companies in the United States that are governed by the Securities Exchange Act.
I wonder if you could, Ms. Keeping, tell us, in your view, is the facilitation payments provision of Bill a response to the criticisms that were made of Canada by the United States and other countries in the OECD report? Do you think that it puts Canadian companies at any kind of a disadvantage versus American companies in doing business around the world?
Maybe I could ask the same questions of you, Mr. Osborne. Do you agree with Mr. Kessel's view of American provisions that prohibit some American companies from making these kinds of payments?
I concur with you, with the fact that, unfortunately, we don't have sufficient time, because there are a lot of unanswered questions. We also haven't been able, as a committee, to hear from non-governmental organizations. Given what's at stake, it would have been worth it to have more time to really study this bill in depth.
Mr. Ingram and Ms. Keeping, I have a question for you both. I'd like to come back to Mr. Ingram’s comment that we badly need to enhance our brand abroad. You talked about capacity building, providing resources for revenue management and going after income tax and things like that. There's a very good example recently. The U.K. helped Ethiopia with its tax collection system, and the tax revenue in that country multiplied by seven as a result. We often hear the government say that Canadian businesses will bring in taxes, but helping revenue agencies in developing countries is key too.
What the Prime Minister announced yesterday, in terms of transparency, is a good step. What are the next steps that Canada could take to help enhance, reshape our brand a bit?
Mr. Chair, my understanding of the legislation is that we are raising the bar here. What I believe we heard from the officials and from the Canadian Bar Association is that under domestic law there is a range of offences and the penalties, from 5 to 14 years, depending on the offence. Bribing a judge is 14 years.
Under this legislation, there is no minimum penalty, which is usually the objection raised by the opposition. The judge can impose any sentence from a day to 14 years. There is also the opportunity for probation. We heard from Transparency International Canada, an organization that is directly involved in these issues. It is a non-governmental organization and it represents the entire range of views in Canada. There was extensive consultation done with Transparency International. We heard from Ms. Keeping that they think this penalty clause is appropriate. They think Canada should send a strong message to Canadian businesses that these types of bribes are not tolerable. We hope this will be in line with what other countries are doing.
With respect to facilitation payments, we know, because this is something new, that Canadian companies need time to adjust their policies and processes and procedures. That's why there is a provision in Bill providing for implementation at a later date. It would not be required to go back to Parliament, which would be a long and involved process. Of course, the opposition and any other Canadian can put pressure on the government, both through Parliament and outside of Parliament, to bring those provisions into force, which they can then do with the stroke of a pen. That is actually a fairly effective way of dealing with it.
With respect to the point about NGOs, the Canadian Bar Association pointed out that only organizations that carry on a business, a profession, or a calling would be caught by these prohibitions. Clearly, the Red Cross or Doctors Without Borders is not a business, profession, or calling. If the Red Cross had to pay some small facilitation payment to get food or medical supplies into an affected country, it's hard to see that there would be any risk of prosecution under Bill , since the Red Cross is not a business, profession, or calling. That's pretty clear. I also think you have to rely on prosecutorial discretion not to lay a charge in what is essentially a de minimis situation.
For all those reasons, I don't think we need to add another provision to this bill. I also think what we're doing here is raising the bar. This is a modern statute with modern language. There may be an argument that the Criminal Code provision should be revisited, and such an argument could be taken up at a later date.
Therefore, I would suggest we leave the legislation as drafted, and pass it accordingly.
This issue has come up a number of times. It's important to remember that the legislation applies to business transactions to retain or gain an advantage; it's not simply any bribe. If you have a payment where someone's in a situation in which they're under duress and they feel they have to pay it, then it's likely not going to be covered by the CFPOA. That's the answer to the question.
I think what you would also like to know is how we deal with it in a scenario.
TI, Transparency International, which is supported by a number of NGOs in humanitarian situations, has guidelines they have put out for how you deal with corruptions in humanitarian scenarios. They have a number of guidelines and best principles. Those guidelines and best principles emphasize monitoring; evaluation; preparation up front to avoid risky environments, such as scenarios where you're going for visas and issues like that; transparency of an organization; reporting up to management; and engagement with law enforcement. Then it refers to scenarios where you may be forced, under duress, to pay. But if you're under duress to pay, you don't have the intent of securing a business advantage.
So our view of the CFPOA and this legislation is that it's not going to affect humanitarian interventions. The support from the major civil society dealing with corruption has been to eliminate bribery. Under the Paris Declaration on Aid Effectiveness, the principle is for us to eliminate bribery, and in the most recent U.N. report in chapter 10 on their commitments to sustainable development for 2015, eliminating bribery is one of the key issues.
Our view is the legislation will not affect humanitarian intervention, and further, the measures proposed are supported by what is going on internationally by civil society and by government.
All right. Then I'll proceed.
Shall the short title carry?
Some hon. members: Agreed.
The Chair: Shall the title carry?
Some hon. members: Agreed.
The Chair: Shall the bill carry?
Some hon. members: Agreed.
The Chair: Shall the chair report the bill to the House?
Some hon. members: Agreed.
The Chair: Thank you very much.
We will meet on Tuesday to discuss the Jewish refugee report and the OAS report.
Thank you very much to our officials from DFAIT.
With that the meeting is adjourned.