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Time to tighten screws on corruption of foreign officials

Canadians love to revel in their reputation as the good guys in a world of nastiness.

It's why Canadian companies and tourists proudly wave the flag on foreign soil, eager to soak up the rosy hue.

So it's a little hard to figure out why Ottawa won't do what virtually every other developed country does: Aggressively pursue Canadian citizens and companies who bribe foreign officials, on foreign soil.

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Canada acknowledges it's a crime. In 1997, Ottawa signed a binding OECD anti-corruption convention. That agreement was later enshrined in Canadian law with the 1999 Corruption of Foreign Public Officials Act.

The problem is that to make a charge stick, prosecutors must show a "real and substantial link" to Canada. It's the so-called "territoriality" principle. Most other developed countries, including the United States and Britain, apply a nationality test that allows them to go after one of their own, wherever the offence is committed.

In a world where companies operate through local agents and vast networks of subcontractors, Canada's territoriality test is proving to be a pretty high bar. There's been just one conviction in a dozen years, and the fine applied in that case ($25,000) was less than the bribe.

The United States, meanwhile, has recorded scores of convictions, and recently stepped up its crackdown, slapping several multinationals with fines in the hundreds of millions of dollars.

It would be comforting if the dearth of Canadian prosecutions meant there's no bribery going on. But improbable.

Canada is a global centre for resource financing. It's home to three-quarters of the world's mining exploration companies and the source of tens of billions a year in investments. Its companies operate in many of the most notoriously corrupt corners of the planet.

Law enforcement officials are concerned. The RCMP recently disclosed that it's investigating 23 cases under the 1999 act. The only known target of those probes is Calgary-based oil and gas producer Niko Resources Ltd., which disclosed in 2009 that the RCMP was looking into allegations of bribing senior government officials in Bangladesh. No charges have been laid in the case.

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Anti-bribery advocates aren't surprised. Transparency International argues there would be more prosecutions if Ottawa made it clear that bribery is a crime, wherever it occurs.

"We are very disappointed at Canada's failure to close the loophole on nationality jurisdiction," said James Klotz, president of Transparency International Canada Inc.

A bill to amend the bribery act died when the government shut down Parliament in early 2010. And the major parties have been conspicuously silent about bringing the legislation back.

Canadian resource companies such as Niko, however, argue they're already at a disadvantage because they compete against companies from countries with laxer anti-corruption laws who can use "inducements" to win the favour of foreign officials.

The international community is watching. Last month, the Organization for Economic Co-operation and Development issued an uncharacteristically stern reprimand. The Paris-based organization said "Canada's regime for enforcement remains problematic in important areas." And it prodded Ottawa to "urgently take such measures as may be necessary to prosecute its nationals for the bribery of foreign public officials."

Canada could, for example, follow the lead of the United States and use securities laws to root out dubious payments. The U.S. Securities and Exchange Commission recently proposed new anti-corruption rules that would force U.S.-listed companies to disclose all payments made to foreign governments. That would affect several large Canadian oil and mining companies with listings on the New York Stock Exchange, such as Nexen Inc., Talisman Energy Inc., Barrick Gold Corp. and Iamgold Corp.

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Canada's provincial securities regulators have so far shown little interest in investigating what companies are doing outside Canada.

Eager to stoke the debate, Transparency International Canada is holding a "day of dialogue" on fighting domestic and foreign corruption May 12 in Toronto.

Canadian inaction is a lost opportunity. A major conviction would send a strong signal to Canadian companies operating overseas that business as usual is not okay, even in tough and lawless environments.

With the election over and a new government pending, maybe it's time to convert the commitments Canada made in 1997 into a law with teeth.

Waving the Maple Leaf could prove awkward if Canada becomes known as a key source of global baksheesh.

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About the Author
National Business Correspondent

Barrie McKenna is correspondent and columnist in The Globe and Mail's Ottawa bureau. From 1997 until 2010, he covered Washington from The Globe's bureau in the U.S. capital. During his U.S. posting, he traveled widely, filing stories from more than 30 states. Mr. McKenna has also been a frequent visitor to Japan and South Korea on reporting assignments. More

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