You are here: Home / Resources / Frontpage Articles / ACRN Blog: A View from Canada

ACRN Blog: A View from Canada

This blog post deals with corruption in Canada, a country that is commonly viewed as being relatively free from corruption. It suggests that when it comes to private sector corruption, particularly in the case of foreign bribery, Canada still has a long way to go.

Please note that views expressed in this blog post are those of the author alone and do not represent the position of The Anti-Corruption Research Network, Transparency International, or any of its affiliates. 


Corruption and Canada: the Problem of Foreign Bribery

By Robert Hanlon, Contributing Editor to the Anti-Corruption Research Network

Transparency International’s Corruption Perceptions Index consistently rates Canada amongst the cleanest economies in the world[i].  In 2010, Canada was ranked the 6th least corrupt country, squeezed between Sweden and the Netherlands.  Yet is Canada as clean as popular perception suggests?  The quick answer is probably yes, doing legitimate business is relatively easy and, for the most part, Canadian political leaders are relatively clean[ii]. The long answer, on the other hand, is complicated. Corruption within the private sector has become increasingly problematic when Canadian industry operates abroad. In fact, it has been alleged that Canada has some of the weakest and most dysfunctional anti-foreign corruption laws of all the OECD jurisdictions.      

 

A recent report by the OECD identified Canada’s Corruption of Foreign Public Officials Act (CFPOA) as a ‘problematic’ law[iii].  The report pointed out four main flaws to the CFPOA.  First, the law lacks clarity in stipulating that it applies to “any business, profession, trade, calling, manufacture or undertaking of any kind carried on in Canada or elsewhere for profit.”  Critics often cite this definition as vague and confusing. Second, the law has been weak in sanctioning firms who violate the Act and has failed to function in an ‘effective, proportionate and dissuasive” manner.  That is, the CFPOA falls outside the legal norms and jurisprudence as set by the OECD anti-bribery convention. Third, the report found that the CFPOA poses serious challenges for prosecutors since it requires that corruption charges must demonstrate a “real and substantial” link to the domestic jurisdiction of Canada. Finally, the Canadian government has questionably interpreted the OECD anti-bribery convention by arguing that investigations into acts of foreign corruption could be considered ‘improper’ under Article 5 of the Convention. 

 

So what does this mean for Canadians? Until recently, it meant nothing, with industry going about business as usual, acting more or less with impunity, with little political support for regulating how Canadian industry operates abroad.  In fact, the government recently defeated a legislative attempt at introducing what would have become Canada’s first corporate social responsibility (CSR) law[iv].  Yet things may be changing on two fronts.

 

First, the recent bribery charges brought against Calgary-based Niko Resources Ltd should be seen as a path breaking development for Canada’s anti-corruption efforts.  The company reached a plea bargain for bribing a Bangladeshi energy minister while agreeing to pay $9.5 million (CAD) in fines. The ruling not only impacted the Niko’s quarterly profits, but also brought significant reputational damage to the firm. The judge presiding over the case was quoted as saying, “It is an insult to its shareholders and it besmirches the reputation of that Canadian corporation.  It tarnishes the reputation of Alberta, and of Canada. It is an embarrassment to all Canadians”[v].  Although the conviction holds no criminal liability, examples such as this demonstrate how corruption can bring financial and reputation damage to a firm.

 

Second, the concept of Corporate Social Responsibility (CSR) is gaining ground. Canadian activists, journalists and scholars are regularly confronting the issue of its industry acting illegally and unethically in emerging economies. For example, a recent report by Amnesty International Canada cited government complicity in human rights violations for allowing industry to act as it does overseas[vi]. A view similarly expressed by participants at a recent conference entitled ‘CSR in the Pacific Rim’ held at the University of British Columbia[vii].  Several speakers at this conference expressed concerns over how foreign industry behaves in Asia, a region where much of Canada’s extractive sector is highly active.  Moreover, Canada’s influential Maclean’s magazine has even introduced a CSR ranking to help readers navigate socially responsible companies. Canadians are increasingly starting to ask how our home-based brands are operating abroad. 

 

Although these developments appear promising, serious questions remain as to whether they will influence the government and industry to support anti-corruption policies.  First, while the Niko example sets a new precedent for Canadian graft fighters, the punishment still lacks substance, with no jail time for executives and a relatively minimal financial risk, considering the firm’s annual unrestricted cash flow of over $108 million (CAD). Similarly, CSR remains a contentious issue, with many questioning the concept’s ability to combat corruption.  With little government support and frequent examples of “corporate Greenwashing”[viii], CSR remains an anti-corruption strategy that has yet to prove itself. 

 

Regardless, Niko’s prosecution has brought the issue of corruption to the front page of newspapers across the country, a level of exposure that other Canadian firms operating abroad most certainly have not welcomed.  Moreover, the evolving discourse surrounding CSR will continue to challenge the role of business in society while proving to be an important mechanism for civil society groups seeking to engage the private sector[ix].   With another 23 corruption cases currently under investigation by the Royal Canadian Mounted Police (RCMP), observers speculate that the Niko example is only the beginning of a renewed commitment to fighting illicit business practices abroad[x].



[i] Canada is often ranked in the top ten least corrupt countries in the world.  For more information, please see: http://www.transparency.org/policy_research/surveys_indices/cpi/2010

[ii] While corruption in Canada is widely perceived as low, there have been several high profile scandals such as those found here, here and here

[iii] For more information, please see ‘The Phase 3 Report on Canada by the OECD Working Group on Bribery’ available from: http://www.oecd.org/dataoecd/55/25/47438413.pdf

[iv] The law (Bill C-300) was introduced as a private members bill by Liberal Member of Parliament John McKay.  For more information please see http://www.miningweekly.com/article/canadian-mps-vote-against-bill-c-300-2010-10-28

[v]The case was widely reported on in Canada and saw significant backlash from the community with many commentators questioning how Canadian industry conducts business abroad.  For more information please see: http://www.canadianbusiness.com/article/31035--niko-resources-pleads-guilty-to-bangladeshi-bribe-agrees-to-9-5m-fine

[viii] Greenwashing is often seen as sophisticated marketing or public relations designed to create the illusion that a company has strong environmental policies and/or is behaving in an ethical manner.  For more information, please see http://stopgreenwash.org/  

[ix] There is significant literature discussing the use of CSR strategies in combating corruption including good governance, codes of conduct, and ethical supply chain management using best practice policy.  For more concise overview see here: http://www.ethics.org/files/u5/Anti-corruptionFINAL.pdf

[x] For more information, please visit Transparency International Canada at http://www.transparency.ca

 

Author :

22 Aug 2011


Bookmark and Share

Document Actions

Our partner