Understanding And Mitigating Your Third Party Corruption Risk Under Canada's Corruption Of Foreign Public Officials Act

1. Introduction

   The use of third party agents in international operations or business development, whether consultants, sales representatives, customs brokers, contractors or distributors, is often unavoidable. This may be because the retention of a local agent is a requirement of foreign law, because of cultural or linguistic barriers, or because of practical or logistical realities. However, engaging third party agents can be fraught with uncertainty and this is one of the most significant areas of anti-corruption risk facing Canadian companies. The following is an overview of (i) the potential liability of Canadian companies for the acts of third party agents under the Corruption of Foreign Public Officials Act (CFPOA), and (ii) risk mitigation strategies available to Canadian companies to address this exposure.

2. The CFPOA, the Criminal Code and Indirect Corrupt Acts

   Subsection 3(1) of the CFPOA provides that "[e]very person commits an offence who, in order to obtain or retain an advantage in the course of business, directly or indirectly gives, offers or agrees to give or offer a loan, reward, advantage or benefit of any kind to a foreign public official ..." (emphasis added).

   Importantly, the use of the phrase "direct or indirect" captures payments or other benefits provided through a third party, including third party agents. Individuals and entities may therefore be liable under the CFPOA for illicit payments or promises extended on their behalf by an agent, consultant or other representative to a foreign public official or to any other person for the official's benefit if the individual or entity either knew or was 'wilfully blind' to the fact that the illicit payment or promise would likely be provided.

   This is also reflected in the corporate liability provisions of the Criminal Code. Under section 22.2, a company will be considered to be party to an offence where a senior officer "knowing that a representative of the organization is or is about to be a party to the offence, does not take all reasonable measures to stop them from being a party to the offence. The Criminal Code defines "representative" broadly to mean "a director, partner, employee, member, agent or contractor of the organization."

3. R v. Briscoe and the Doctrine of 'Wilful Blindness'

   Assuming that the vast majority of Canadian companies will not readily initiate or participate in third party activities contrary to the CFPOA, most often the question is at what point an organization may incur liability as a result of the conduct of its agents or representatives even where the organization does not explicitly direct such behavior. This necessitates a close examination of the doctrine of 'wilful blindness' the principle pursuant to which persons can be held criminally liable under Canadian law for actions taken by others where the person had near knowledge of the intended activity but deliberately avoided further inquiry in order to claim ignorance.

   In R. v. Sault Ste. Marie,1 the Supreme Court of Canada (SCC) set out the mens rea requirement for criminal culpability where no threshold is specified within the relevant legislation, as is the case with the CFPOA. The Court stated:

   Where the offence is criminal, the Crown must establish a mental element, namely, that the accused who committed the prohibited act did so intentionally or recklessly, with knowledge of the facts constituting the offence, or with wilful blindness toward them.2

   In this regard, the scope and substance of the 'wilful blindness' doctrine was recently outlined by the Alberta Court of Appeal in R. v. Briscoe3 and the SCC in R. v. Briscoe.4 At issue in that case was whether wilful blindness could be used to determine whether a person who was present during the planning and execution of a murder had the requisite knowledge and intent to be convicted of the same crime.

   The Alberta Court of Appeal (ABCA) held that the doctrine of wilful blindness "is well established in Canadian law."5 Referring to the ruling of the SCC in R. v. Sansregret,6 the Court of Appeal summarized the doctrine as follows:

   [W]ilful blindness arises where a person who has become aware of the need for some inquiry declines to make the inquiry...