A key issue for anyone doing business is knowing the laws that apply to them. For anti-corruption matters, it is not just the law of your home country or the laws of the overseas jurisdiction where you are doing business. Both UK and Canadian anti-corruption law can have extraterritorial application. This means that any company taking on business anywhere in the world should consider whether UK or Canadian anti-corruption law applies to them.
This article seeks to address:
- When is an overseas company or foreign individual caught by UK and Canadian anti-corruption law?
- What activities outside of the UK and Canada are caught?
When are Canadian or other overseas companies caught by UK anti-corruption law?
The Bribery Act 2010 ("BA") is the main piece of anti-corruption legislation in the UK. Please click here to see our recent quick reference guide.
There are essentially four offences under the BA: bribing another person (Section 1), being bribed by another person (Section 2), bribing a foreign public official (Section 6) and failure to prevent bribery (Section 7). Companies and individuals can be liable under Sections 1, 2, and 6. Only companies can be liable under Section 7.
Foreign Individuals
For Sections 1, 2 and 6 offences, any foreign individual carrying out bribery in the UK as well as foreign individuals with a close connection to the UK may be caught. An individual has a close connection to the UK if they are a British citizen, a British overseas territories citizen, a British National (Overseas), a British Overseas citizen, a person who under the British Nationality Act 1981 was a British subject or a British protected person within the meaning of that Act or an individual ordinarily resident in the UK.
The section 7 offence of failing to prevent bribery does not apply to individuals.
Overseas Corporates
Under Sections 1, 2 and 6 BA, companies (overseas or otherwise) can be held liable under the "controlling mind" principle whereby if a senior person in the overseas company (such as a managing director or director) commits a bribery offence under Sections 1,2 or 6 such activities could then also be attributed to the overseas company. In addition, senior officers (which is defined as a director, manager, secretary or other similar officer or a person purporting to act as such) of a body corporate (overseas or otherwise) can be caught by the BA if the Company has committed an offence under Sections 1, 2 and 6 and the offence is proved to have been committed with their consent or connivance. However, if no act or omission forming part of the offence takes place in the UK the senior officer will only be guilty of the offence if he or she has a close connection with the UK (Section 14). It has often been difficult to convict companies for acts of senior executives in UK law, so the primary concern for overseas companies is likely to be the Section 7 offence discussed below.
For the Section 7 offence (failure to prevent bribery), overseas companies carrying on a business or part of a business in any part of the UK can be liable for failure to prevent bribery.
The UK Ministry of Justice ("MOJ") has provided guidance on whether a particular business presence in the UK is sufficient to mean that a company is carrying on business or part of a business in the UK. In particular, it has highlighted that a common sense approach should be taken as to the question of whether a company carries on business or part of a business in the UK and that organisations that do not have a "demonstrable business presence" in the UK would not be caught. Whilst each case would be determined own its own facts, the MOJ have indicated that the mere fact that a company's securities are listed in the UK and trade on the London Stock Exchange would not of itself qualify the company as carrying on business or part of a business in the UK. Similarly having a UK subsidiary will not, in itself, mean that a parent company is carrying on business in the UK since a subsidiary may act independently of its parent or other group companies. However, if the subsidiary was acting under direction from an overseas parent, then the parent would be caught and prosecutors will be likely to look closely where both parent and subsidiary have similar business operations or where the deliberate motive for setting up a subsidiary is to seek to avoid such liability. A more common way of being caught by the BA may simply be to undertake commercial activities in the UK (even one transaction may be sufficient in certain circumstances to amount to a demonstrable business presence).
Understanding the broad extraterritorial scope of the BA is particularly critical for companies and individuals from Canada and other countries whose anti-corruption laws may differ from the requirements of the BA – for example, both Canada and the United States have exemptions for facilitation payments, while the UK does not.
When are UK or other non-Canadian companies caught by Canadian anti-corruption law?
The Corruption of Foreign Public Officials Act ("CFPOA") and the Criminal Code are the primary anti-corruption legislation in Canada. Please see link above to our recent quick reference guide. The CFPOA applies to both companies and individuals and prohibits the offer or payment of bribes to foreign public officials as well as engaging in a range of accounting-related activities for the purposes of bribery or concealing bribery.
Under Canada's Criminal Code, a company will be liable for violations of the CFPOA and Criminal Code anti-bribery prohibitions when one of its senior officers, with the intent at least in part to benefit the company and acting within the scope of their authority, is party to the offence. "Senior officer" is defined broadly to include a director, CEO or CFO of the company as well as any representative who plays an important role in the establishment of the company's policies or is responsible for managing an important aspect of the company's activities. "Representative" is also very broadly defined to mean a director, partner, employee, member, agent or contractor of the company. The company will also be liable for CFPOA or Criminal Code anti-corruption violations when one of its senior officers (i) acting within the scope of their authority, directs the work of other company representatives so that they commit the offence or (ii) knowing that a company representative is or is about to commit an offence, does not take all reasonable measures to stop them.
The CFPOA can apply to companies and individuals on the basis of either territorial or nationality jurisdiction. Since its inception in 1999, it has always had a territorial jurisdictional standard. Pursuant to the decision of the Supreme Court of Canada in R. v. Libman, [1985] 2 S.C.R. 178, this requires that there be a "real and substantial" connection between the offence and the territory of Canada. Put another way by the Court, all that is necessary for there to be jurisdiction over the offence is that a significant portion of the activities constituting the offence took place in Canada. UK and other overseas companies can therefore be subject to the CFPOA depending on the extent to which their actions were taken in Canada. A UK or other non-Canadian company that undertakes commercial activities in Canada will be subject to the prohibitions under the CFPOA in respect of those activities.
After substantial international scrutiny and criticism, on June 19, 2013 the CFPOA was amended to also include nationality jurisdiction. Now, every person who commits an act or omission outside Canada that, if committed in Canada, would constitute an offence under the CFPOA is deemed to have committed that act or omission in Canada if the person is (i) a Canadian citizen, (ii) a permanent resident (who, after the commission of the act or omission, is present in Canada), or (iii) a company, partnership or other entity formed or organized under the laws of Canada. Although nationality jurisdiction may not be directly relevant to UK and other non-Canadian companies, it may still capture the activities of their Canadian national executives and employees.
Overseas Activities - does UK law catch you?
Overseas corporations can be liable for acts of associated persons undertaken anywhere in the world.
For Sections 1, 2 and 6 BA, an offence is committed where acts or omissions forming part of an offence were undertaken within the UK or anywhere in the world by those with a close connection to the UK and the relevant act or omission would have been an offence if made in the UK (Section 12 BA).
For Section 7 BA commercial organisations (provided they have a demonstrable business presence in the UK – see above) are liable for acts of associated persons anywhere in the world regardless of whether or not they have any connection with the UK. A person is associated with another if it performs services for or on behalf of it. The associated person can be an individual or a company and could include employees (who are presumed to be providing services for their employer), agents, subsidiaries, joint venture partners, contractors, suppliers, introducers or other intermediaries: a very wide potential list. Whether a person is performing services for an organisation is determined by reference to all the relevant circumstances and not merely the nature of the relationship. It can clearly be very difficult for an overseas company to control the activities of all the potential associated persons in multiple global locations. This is particularly true where the association is contractual in nature or such person is part of a global supply chain. The extraterritorial scope of the BA is clearly very wide and poses real challenges to companies seeking to prevent bribery overseas.
To encourage commercial organisations to put procedures in place to prevent bribery by persons associated with them and in recognition of the fact that due to the breadth of the legislation even well run commercial organisations may experience an isolated incident, the BA introduces a defence to a Section 7 offence, that of Adequate Procedures. There is extensive guidance on what constitutes Adequate Procedures. If Adequate Procedures have been put in place by an overseas company to seek to prevent bribery, this can be a full defence to a Section 7 offence. The standard of proof which the overseas company would need to discharge in order to establish the defence is a balance of probabilities.
Overseas activities – does Canadian law catch you?
The CFPOA and Criminal Code do not impose an obligation to prevent bribery as does Section 7 of the BA. That being said, the corruption offence includes both direct and indirect payments and offers of payments to government officials as well as agreeing to any such offers or payments. This includes payments to other parties for the benefit of a government official. Such activity conducted through a third party, such as an agent, consultant, distributor, lawyer or broker, regardless of their connection to Canada, can create CFPOA liability for a company that is subject to the CFPOA either by virtue of territorial or nationality jurisdiction.
The CFPOA is enforced on a criminal basis and therefore convictions require proof of mens rea on the part of the accused, meaning they committed the act intentionally or recklessly with knowledge of the facts constituting the offence. This also includes wilful blindness. Accordingly, those who fail to raise questions about the activities of their third party representatives because they fear the answers may affix them with direct knowledge of bribery can also be found liable for such violations. It is especially important to note that, as described above, a company will be liable under the CFPOA or Criminal Code when one of its senior officers, acting with intent to benefit the company, knows that a third party representative of the company is bribing or about to bribe a foreign official and does not take all reasonable measures to stop them.
Canadian attempts to enforce against foreign nationals
Canadian authorities have not been shy in their attempts to enforce the CFPOA against foreign nationals, including UK nationals. In one case, Chowdhury v. H.M.Q., 2014 ONSC 2635, Chowdhury was one of five individuals jointly charged with bribing a foreign public official in connection with alleged attempts to exert influence over the selection committee for the Bangladesh Padma Bridge project in favour of a Canadian company. Chowdhury, a Bangladeshi citizen and resident and the former Bangladesh Interior Minister and Minister of State, was alleged to have acted as agent for the Canadian company in offering bribes to Bangladeshi government officials. The Court agreed that Canada had jurisdiction over the offence at issue. However, because Chowdhury was neither a citizen nor resident of Canada, was not and had not been in Canada, and his acts in furtherance of the alleged bribery occurred entirely in Bangladesh, it determined that Canada did not have jurisdiction over him and granted an order staying the prosecution. Notably, Canada does not have an extradition treaty in place with Bangladesh.
Despite the Crown's lack of success against a foreign national in the Chowdhury case, on June 4, 2014 the Royal Canadian Mounted Police charged three foreign nationals in connection with an alleged conspiracy to offer bribes to officials of Air India and an Indian Cabinet Minister intended to make a Canadian company, Cryptometrics, the successful bidder in a multi‑million dollar contract to supply facial recognition software to Air India. Two US nationals (the Cryptometrics's former CEO and its former COO) and a UK national who was an agent of Cryptometrics were charged in connection with their roles in the conspiracy. All three have been charged under the CFPOA and the UK national faces an additional fraud charge under the Criminal Code. Canada‑wide warrants were issued for all three and it is expected that extradition requests will also be pursued as necessary with the United States and United Kingdom.
Conclusion
UK and Canadian anti-corruption law has a very broad reach: it can apply to non UK and non Canadian companies undertaking activities anywhere in the world. It has much wider application than many other domestic laws. The complexities of the legislation, the differing tests in both the UK and Canada, the newness of the legislation and lack of developed jurisprudence, the growing reach of UK and Canadian anti-corruption legislation and the serious consequences for breach mean that companies undertaking international business ignore UK and Canadian anti-corruption law at their peril.
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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
