Globe editorial: Canada’s corporate wrongdoing rules need to be smarter

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The scandal engulfing Ottawa may reach its peak this week when Jody Wilson-Raybould, the former justice minister at the centre of the SNC-Lavalin affair, is expected to appear before the House of Commons justice committee.

Since her departure, Gerald Butts, principal secretary to Prime Minister Justin Trudeau, has also resigned, and there are many unanswered questions about the nature and intensity of the pressure put on Ms. Wilson-Raybould to allow SNC-Lavalin to avoid prosecution on bribery and fraud charges.

Linked to all of this are the federal government’s attempts to modernize Canada’s corporate fraud and bribery laws.

As part of a plan to toughen those rules, the Harper government in 2014 got very tough indeed, introducing a policy that a company convicted of any of a long list of crimes would be banned from bidding on government contracts for 10 years. The new policy was widely opposed – and not just by business. Those who felt the government had gone too far included the Canadian Bar Association and the anti-corruption organization Transparency International Canada.

They argued that a 10-year ban, regardless of the severity of the offence, whether a minor breach or a massive fraud, was an unfair punishment, and a kind of excessive mandatory minimum sentence. They also argued that any new rules should be codified in law – the 10-year ban is merely policy, not law – putting punishment in the hands of an independent tribunal, and out of the hands of politicians.

Neither the Harper government nor the Trudeau government took that advice. And the possibility of the company being hit with an automatic 10-year ban underpins the manoeuvring in the SNC-Lavalin affair.

Last fall, Ottawa amended the Criminal Code to allow companies facing fraud charges or charges under the Corruption of Foreign Public Officials Act to reach deferred prosecution agreements (DPAs) and avoid trial. The move was widely supported, but DPAs have opened the door to the possibility of politicization of prosecutions. SNC-Lavalin lobbied for DPAs to be introduced into the law, and for it to be offered the first DPA. The conversations within government that are the subject of the current controversy were about such a DPA.

SNC-Lavalin faces bribery and fraud charges related to business dealings in Libya. These charges have yet to be proven in court but conviction carries with it, in addition to any sanction imposed by the court, the automatic 10-year ban.

In that light, Ottawa’s decision to allow for DPAs, and its plan to soften its debarment policy, might look like a sweetheart deal for one company. But there’s more to the story. The truth is that Ottawa needs to make changes if it wants to successfully sanction Canadian companies that bribe overseas officials or commit corrupt deeds.

Canada is an international laggard in that regard. Ottawa passed the Corruption of Foreign Public Officials Act (CFPOA) in 1999 at the urging of the OECD, but 10 years later only one company had been successfully prosecuted under it. Over the same period, countries like the United States and the United Kingdom successfully prosecuted hundreds of companies every year under similar legislation.

The Harper government responded to international pressure by closing loopholes in the CFPOA, and by bringing in the debarment policy for convicted companies.

A far better solution, and the one Ottawa should adopt, would be to put debarment into law as an option for judges when they are considering sentences for companies convicted of bribery or other offences.

If a judge were to ban a company from bidding on government contracts for a period of months or years, Canadians could have confidence that the length and severity of the punishment would be proportional to the offence, rather than one-size-fits-all. The penalty would also be decided by an independent and impartial court, insulated from the key ingredient of the SNC-Lavalin scandal: political influence.

It is important to remember that the goal of bringing procedural fairness to the debarment policy, and of allowing for deferred prosecution agreements, is to encourage companies to self-report, to root out bad-seed employees, and to end murky practices.

Canada lags behind G7 countries when it comes to bribery convictions and settlements. We need smarter laws to prevent corporate wrongdoing. Smarter, and above politics.