International pressure mounts on Canada to prosecute Canadian businesses complicit in corruption abroad.
Blackfire Exploration, a junior Canadian mining company, recently made headlines across the country amid allegations that it bribed the mayor of a small Mexican town in exchange for political protection for its mine there. Most Canadians may not be aware that paying such a bribe in Mexico is a crime in Canada.
Little more than a decade ago, Canadians and other western business people typically considered side payments and kickbacks to be part of the normal cost of doing business in countries where bribery is standard practice. However, revelations of the RCMP raid on Blackfire’s Calgary office are a good reminder that times – and international norms about acceptable international business practices – have changed.
Although criminal charges have not yet been laid against Blackfire, news of its investigation follows on the heels of a recent foreign bribery case involving another Canadian firm. In June, Calgary-based oil and gas firm Niko Resources Ltd. agreed to pay close to $10 million in fines for bribing a Bangladeshi public official in violation of Canada’s Corruption of Foreign Public Officials Act (CFPOA). Before the Niko case, only one Canadian company had ever been similarly charged: In 2005, Hydro Kleen Systems Inc. paid a paltry fine of $25,000 – less than the amount of the alleged bribe – for CFPOA crimes.
Canada is dead last among G7 countries when it comes to combatting corruption.
In contrast to Canada’s lacklustre record, the United States vigorously enforces its Foreign Corrupt Practices Act. In the past five years alone, dozens of high-profile cases against prominent U.S. and multinational corporations have yielded hundreds of millions of dollars in criminal fines, disgorgements of profit, damages, and other penalties for violations of the FCPA. Companies prosecuted in the U.S. for paying bribes abroad include Halliburton and KBR ($579 million), Siemens ($450 million), Baker Hughes ($44 million), Chevron ($30 million), General Electric ($23.5 million), Johnson & Johnson ($21.4 million), and IBM ($10 million). The list goes on.
Other countries have also stepped up their enforcement of international anti-bribery rules. On top of its U.S. fines and penalties, Siemens paid €596 million (or approximately US$856 million) for violating German international anti-bribery laws. In the U.K., Balfour Beatty paid up £22.5 million, Aon Limited £5.25 million, and Mabey & Johnson £6.5 million for various transgressions of similar laws. And it is not just companies that are being penalized. Individual executives in 10 countries have been sentenced to up to five years in prison for international business bribery.
Amid this international momentum, Canada is an anti-corruption laggard. Transparency International, the leading international non-governmental organization devoted to anti-corruption activism around the world, recently criticized Canada for being the only G7 country that fails to enforce international anti-corruption rules. Last spring, the Organization for Economic Co-operation and Development (OECD), the sponsor of a 1997 treaty requiring all signatories to criminalize foreign bribery, called out Canada for worrisome problems in its implementation of the treaty and enforcement of the anti-bribery law.
Canada’s reluctance on this issue is significant. International business bribes export corrupt payments from rich countries to poor ones. In recipient countries, this type of graft hampers democratic accountability, skews public-spending patterns, damages economic-development efforts, and impedes the protection of human rights. In the Blackfire case, the bribery probe itself grew out of an investigation into the unsolved murder of Mariano Abarca Roblero, a local anti-mining activist.
Bribery in international business also impedes fair market competition and obstructs liberal international trade. By paying bribes, corrupt firms gain an unfair business advantage over more efficient firms, and raise the cost of doing business for all. The cost of bribes can escalate, and the advantages gained become increasingly unreliable.
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Canadians should not be complacent in the belief that international business corruption is somebody else’s problem. Since the global financial crisis of 2008, Canadian trade and investment has shifted increasingly to emerging economies in which corrupt payments are more likely to be expected. Canada’s particular commercial strength in the mining and extractive industries, in which the risk of corrupt expectations is particularly high, is an additional vulnerability. Canadian companies, which have invested over $60 billion in mining and extraction in developing countries, are not immune to pressure to pay bribes.
Along with its G7 and OECD partners, Canada’s government can best help its companies avoid the pitfalls of corrupt practices by enforcing the CFPOA and the international anti-bribery standards to which it has committed. Only when Canadian, American, British, German, French, and other businesses respond to pressure for international bribery with refusal in deference to their own domestic laws will the global fight against corruption stand a chance.
The OECD is expecting an update from Canada in October 2011 on steps it is taking towards full enforcement of the CFPOA, and will issue a new report on Canada’s status in March 2012. In anticipation of this international scrutiny, and to enhance Canada’s reputation among leading industrialized nations, the Harper government should ensure that action is being taken and progress made. With two new anti-corruption units in the RCMP, and approximately 23 ongoing investigations, we can expect to see more Canadian firms in the headlines in the coming months. International pressure, it appears, may finally be forcing Canada’s hand on corruption, prompting tougher enforcement of our own laws against Canadian companies paying bribes abroad.
Photo courtesy of Reuters.