SINT Committee Meeting

SUB-COMMITTEE ON INTERNATIONAL TRADE, TRADE DISPUTES AND INVESTMENT OF THE STANDING COMMITTEE ON FOREIGN AFFAIRS AND INTERNATIONAL TRADE

SOUS-COMITÉ DU COMMERCE, DES DIFFÉRENDS COMMERCIAUX ET DES INVESTISSEMENTS INTERNATIONAUX DU COMITÉ PERMANENT DES AFFAIRES ÉTRANGÈRES ET DU COMMERCE INTERNATIONAL

EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, December 1, 1998

• 1537

[English]

The Chair (Ms. Sarmite Bulte (Parkdale—High Park, Lib.)): Witnesses, colleagues, I'd like to start the meeting.

I'd like to welcome to the first meeting of the Subcommittee on International Trade, Trade Disputes and Investments, Alan Kessel, who is the Director of the United Nations Criminal and Treaty Law Division. Mr. Kessel has with him Keith Morrill, who is a Deputy Director of the Criminal Law Privilege and Immunities Section, as well as Marie-Josée Rhéaume, Desk Officer.

We also have, from the Department of Justice, Douglas Breithaupt, who is the Counsel of the Criminal Law Policy Section.

The purpose of this meeting is to give us a briefing on the OECD anti-corruption convention.

On behalf of the committee, welcome. Mr. Kessel, you may begin.

Mr. Alan Kessel (Director, United Nations, Criminal and Treaty Law Division, Department of Foreign Affairs and International Trade): Thank you, Madam Chair.

I also want to introduce our colleague Yvan Roy from Justice, who is senior general counsel.

The Chair: Welcome.

Mr. Alan Kessel: It gives us great pleasure to be here at a rather fortuitous moment, since the vortexes have come together and a bill has been presented in the Senate this afternoon, I believe at 2:15 p.m., on the very subject you've invited us to give you a briefing on. So this in many respects makes our lives much easier, because we actually have a focus for our discussion.

Before we get into specifics, it may be worthwhile to just talk about the issue of corruption and the serious problem of international criminality, transnational organized crime, we are experiencing in this modern world, and the responses of the Government of Canada to what we perceive as significant threats.

Corruption is bad: a simple statement. We don't like corruption. It threatens the rules of law, democracy, human rights. It undermines good governance, endangers the stability of democratic institutions, and weakens the moral foundations of society. Corruption also distorts international trade and the working of free market competition. It impedes economic development, particularly within developing countries.

• 1540

While nearly all countries have laws against bribery of their own public officials, very few presently criminalize the bribery of foreign public officials. Where in the past many governments and institutions were prepared to tolerate this discrepancy, there's now an emerging international consensus on binding agreements to criminalize the bribery of foreign public officials and to combat corruption in other ways.

Canada is a leader in the area of combating and encouraging the combating of corruption, and we've encouraged international systems of security to strengthen the ties of trade so that Canada can help people grow and prosper. It is a general recognition that the best way to protect our own interests and defend our interests as a country is to defend them in international institutions and forums and to build those rules and institutions that allow Canadians to get the kind of protection they deserve and need.

Stability and security are essential preconditions for economic growth, prosperity, and sustainable development. Prosperity and employment engender greater security and stability.

Canada has been a constant supporter of international anti-corruption efforts, and Canada's involvement in such activities gives significant expression to Canadian foreign policy and the Canadian image abroad.

Canadians are concerned that their aid is not used effectively, that there is no fair competition, that there is no competition based on merit, and we have seen occasions where, in the Canadian context, Canadian competitors have been at a disadvantage in a system where corruption has played a part.

The OECD, the OAS, and the Council of Europe are all dealing with these issues. This is not a uniquely Canadian perception. We're part of a larger reality that the international community is now engaged in addressing.

We were very pleased to be part of the negotiation and drafting of the OECD convention on bribery and corruption, and this is the very essence of the bill that has been tabled in the Senate today. It is Canada's commitment to implementing that international obligation that this bill will be doing.

If I may briefly run through—without stepping on the toes of my colleagues from Justice—a couple of the things that this bill will be focusing on, essentially it seeks to implement in law the obligations that Canada has undertaken by signing the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions.

I believe you have a copy of the convention with you, together with the commentaries.

The convention was negotiated at the Organization for Economic Cooperation and Development last year. Canada signed the convention on December 17, 1997.

This new act will raise the profile in Canada of the OECD convention and our commitment to combat international corruption and bribery at an international level. It also has the flexibility to develop and evolve in the future, if Canada wishes to sign and ratify additional international criminal law conventions against corruption. One of them, of course, is the OAS convention, which is coming down the pike.

The OECD convention obliges member states to make the bribery of foreign public officials a criminal offence. The provision appears in clause 3 of the bill you have before you and is the centrepiece of the proposed act. The provision prohibits the bribery of a foreign public official in the course of business. This offence would be punishable on indictment and carries a maximum penalty of five years' imprisonment. It would be an extraditable offence.

• 1545

The bill also addresses the issue of two additional criminal offences: the offence of possession of property or proceeds obtained or derived from the bribery of foreign public officials, or from laundering that property or those proceeds, and the offence of laundering the property or proceeds obtained that would derive from the bribery of those public officials.

The act incorporates the new proceeds of crime provisions of the Criminal Code for use in prosecution of the new offences. That, in very short order, is what this bill proposes to do. With the passage of this legislation, which it is hoped Canada can have on the books before the end of the year, it will allow Canada to be the fifth ratifier of the OECD convention. The significance of that would mean that Canada would bring this convention on bribery into force. It would be our stroke of the pen that would put into place a new regime that would have a major impact in terms of creating that level playing field we've all been looking for in international commerce.

So we are at a rather interesting point where we, Canada, can have that influence. It would certainly give us the capacity to say we were influential in making this all happen. The four countries that will probably be ahead of us, or certainly are in the process of doing exactly what we're doing, are the U.S.A., Germany, Japan, and the United Kingdom. To bring this OECD convention into force requires five of the top ten exporting countries of the OECD to effect that. Canada is one of those countries, so we are in this unique position.

I think I may call upon my other colleagues, if they wish to add something to the discussion, to present something now. Then we would be available certainly to answer questions related to corruption in general and the provisions of this proposed bill in particular.

Mr. Yvan Roy (Senior General Counsel, Criminal Law Policy Section, Department of Justice): Madam Chairperson, my name is Yvan Roy and I'm with the Department of Justice. This piece of legislation that was tabled in the Senate this afternoon is obviously for the purpose of giving Canada the tools it needs in order to sign and ratify the OECD convention. Indeed, Canada signed the convention a while back, but its ratification will be able to happen if this piece of legislation is passed.

Perhaps the members of the committee should be aware that there are other conventions that are being negotiated and discussed in other fora. Indeed, my friend Doug Breithaupt, who's here with us today, took part in the discussions on those treaties. Mr. Breithaupt is the one who has been very closely associated with this new piece of legislation. He knows every comma, semicolon, and period that needs to be known about this piece.

We think this legislation is very straightforward. We believe it gives Canada what is needed in order to ratify the convention. More importantly, we believe the business community is strongly behind this piece of legislation because consultations have been conducted with the business community, and in particular lawyers involved in giving advice to the business community, in order to create for Canada a level playing field, but without disadvantaging Canada in comparison with its competition around the world.

We hope, we believe, and ministers who have decided to put this piece of legislation forward, that is, the Minister of Foreign Affairs and the Minister of Justice, believe this legislation that is going to come before you for further study is the kind of legislation that is needed at this point in time, not only in order to give Canada what it needs to do something about the OECD convention, to ratify it, but also to be in a position to sign and ratify the other instruments that are being negotiated. I'm talking about the Council of Europe's Convention on Corruption, as well as the one from the Organization of American States.

• 1550

Obviously these decisions are for the future, and what is in front of you is this piece of legislation, which will allow the ratification of the OECD convention. But I think that in the spirit of being completely transparent, you have to be aware that there are those other instruments that are being looked at in the context of corruption abroad.

We will make ourselves available to discuss the commas, semicolons, and periods of this piece of legislation, if there is a need for that, but for now, given that you haven't had a chance to read the legislation carefully, I think perhaps it would be time to entertain your questions and answer them as best we can. If there is a need for more answers to some questions that may come from you, honourable senators and MPs, we will be more than pleased to answer them, either by phone or otherwise.

Thank you.

The Chair: Yes, Mr. Morrill.

Mr. Keith M. Morrill (Deputy Director, Criminal Law Privilege and Immunities Section, Department of Foreign Affairs and International Trade): Perhaps I can make one more comment. A number of comments have been made on the bill, but it's good to recall that we also are talking about the OECD bribery convention itself, which will, hopefully, implement Canada's obligations.

For those who aren't familiar with the OECD, of course, it's an organization that focuses on international trade issues and policy issues rather than on day-to-day workings like, say, the WTO. One important thing to know about the OECD, in connection with this particular convention, is that the OECD has a very detailed committee structure, which proceeds by a process of what's usually referred to as peer review. In other words, there are meetings of the OECD bribery committee several times a year, and one of the jobs of the bribery committee is indeed to ensure that countries in effect do what they've said they would do, that they live up to the obligations both in this convention but also in other exercises that have been taken in the OECD.

So it's worthwhile for people to know that this isn't a one-shot deal where people sit down, sign a piece of paper, and go away. There is in fact at the international level a process of constant review, where Canadian delegates can call on the French government to explain what it is they've done and vice-versa. People often refer to this with the unhappy name of the “follow-up mechanism”, but a follow-up mechanism to any international convention is an important thing. It's worthwhile to keep that in mind.

The Chair: Thank you, Mr. Morrill.

Are there any other comments before I open it up to questions?

Mr. Penson.

Mr. Charlie Penson (Peace River, Ref.): Yes, thank you, and welcome to the guests here today.

First of all, I want to remind you that this is not a Senate committee, and I have a bit of a problem with the legislation being introduced in the Senate, just for a start, Madam Chairman.

In any case, I want to get to the substance of the matter, and that is the OECD process for trying to clean up this corruption on bribery. Some of this has come out of our committee on small and medium enterprises. I know it was certainly an issue there. But I'm having a little trouble keeping this all straight. I gather it's a little bit like the MAI, where we're introducing it at the OECD, where we don't really need it, so that we can accomplish something further with trying to get these kinds of reforms in developing countries. Is that essentially what we're trying to do?

Mr. Keith Morrill: I wouldn't make that particular analogy, because the important thing to understand about the OECD convention is that what in effect the developed countries, the OECD countries, the major trading countries, are doing is agreeing among themselves that they will criminalize something, including the bribery of third world countries.

• 1555

So it's not simply that we're setting an example and we're hoping others will follow. In fact, if we're worried about Canadian companies competing with French or German companies who are contracting in Africa, it's not just to set an example; it's an important substantive thing that France and Germany have made it a crime for their nationals to bribe the people in Africa to give them a contract. So it's not simply a question of example by the major trading countries actually taking on this obligation to criminalize bribery. In fact, there's a major effect in the third world, the developing countries. You're quite right that to the extent that an Argentinian firm is competing, they may not have taken on that obligation.

The next step, if you will, as Mr. Kessel and Mr. Breithaupt have said, is expanding this process through different regional processes. Also, it will be considered in the UN Convention on Transnational Organized Crime.

Mr. Charlie Penson: That's my point. If we don't expand to WTO countries, for example, we start with 29 countries, but there are a lot of countries that are not included in that.

We know in some third world countries it's a common practice to require a bribe to do business; therefore, aren't they going to seek out other companies from other countries that are not part of the OECD? Shouldn't we try to move this beyond the OECD and into the realm of the World Trade Organization, for example, in order to try to broaden this?

Mr. Keith Morrill: We certainly are pursuing that. Your point is a very valid one. If we just sat back and said, OECD has done it, that's fine, then we'd be doing very much half the job. But as in many things, you have to start somewhere, and the decision has been made that we can get agreement to this in the OECD now.

We also have the OAS convention, which will do a similar thing for all of Latin America. We have the Council of Europe convention, which, although a broader convention, will apply potentially to all the Council of Europe members, which includes Russia and eastern European countries.

Finally—and I'm speaking personally—I'm involved in the negotiations with the United Nations transnational organized crime convention, and it seems fairly certain that there will be provisions on bribery in that convention, which is a universal convention.

So I think this is an issue whose time has come. The initial step is in the OECD, but you're very right that there are necessary steps to follow. In fact, that process is well in hand.

Mr. Charlie Penson: Okay. Does Canada's compliance require changing our extradition legislation again?

Mr. Alan Kessel: No.

Mr. Charlie Penson: That's fine.

In regard to the ratification of the process by OECD members, you were saying that Canada would be the fifth. Are all 29 countries committed to ratifying it in short order, in order to put this through?

Ms. Marie-Josée Rhéaume (Desk Officer, Department of Foreign Affairs and International Trade): It should be before the beginning of 2000; so within the next year. There are 29 OECD members, plus five other signatories: Argentina, Chile, Brazil, and two others, which I think are east European countries.

Mr. Charlie Penson: Okay.

I understand what you're doing in trying to have a process where the OECD members are setting an example and in fact putting some framework around this idea of soliciting a bribe. But what about the countries that are on the receiving end, that ask for a bribe in order to do business? Aren't there a number of countries that don't have legislation that makes this a criminal offence, and therefore it puts a lot of pressure on OECD members, for example?

Mr. Keith Morrill: The short answer is that although there are indeed countries where it is common practice to solicit and receive bribes, in fact the OECD's research shows there's no country where it's not illegal, even countries that have very different legal systems, different cultural realities—

Mr. Charlie Penson: Or where they have hardly any legal system.

• 1600

Mr. Keith Morrill: Yes. In fact, in virtually every country people could find, it was on the books as contrary to the law.

The question is, of course, absent any enforcement mechanism, this doesn't mean much. In fact, what the OECD is doing with countries like Canada, United States, Germany, and Japan—all the OECD members are doing it—is putting in an enforcement mechanism. It's not where it would be ideally—that means the country where the bribe might be received—but it recognizes the need for an enforcement mechanism. It's therefore being put in because it has to be there.

Mr. Alan Kessel: This doesn't stop domestic jurisdictions from prosecuting the issue at home as well. I think what this is trying to do is put teeth where only gums existed before on our side. It's also to create the sense that, as a group, the OECD's major exporters and producers—this is where all the technology is coming from—-are all competing for similar contacts in countries. We all know that, among ourselves, we cannot use this technique to get a contract.

Mr. Yvan Roy: Say by chance there was a country in this world that said you could go over and bribe its people. If there were such a thing, there would be an exception for Canadian officials doing that, as covered in the legislation. Subclause 3(3) says that:

(3) No person is guilty of an offence under subsection (1)

—this is the offence of bribing a foreign official—

if the loan, reward, advantage or benefit

(a) is permitted or required under the laws of the foreign state

The law already provides for this. Mr. Morrill is perfectly right that we're not familiar with any country that has such a regime.

[Translation]

The Chairman: Mr. Sauvageau.

Mr. Benoît Sauvageau (Repentigny, BQ): First of all, I would like to welcome all of the people here.

My first question deals with the way that you operate. Please explain why this bill is coming from the Senate and why the elected members were not able to find out about it until 3:30 pm. Since this bill pertains to the Department of Foreign Affairs and International Trade and the Department of Justice, why was it not tabled in the House of Commons by the elected members, as is normally done?

My second question deals with the process. Since this bill has come from the Senate, do the elected members have to adopt it as is or can they discuss, refine, improve and amend it?

I would also like to discuss the committee report on exporting small and medium-sized businesses, in which we urged the Government of Canada to move forward at the issue of corruption with the WTO. I know that you work with the OECD. What has the WTO done since 1996?

My next question pertains to an example. If we were to ratify the Convention on Combatting Bribery and to adopt this bill, which deals with foreign public officials in clause 3, would a Crown corporation or an independent agency such as the EDC be subject to it? When the president of the EDC appeared before the committee, I asked him whether there was any relationship between respect for human rights and the loans that his corporation approved and ensured. He replied by saying that this was not the business of the corporation. Will the corruption provisions of the bill apply to the EDC, to CIDA and other organizations of this type?

If I have any time remaining, I will ask you other questions. Thank you.

[English]

Mr. Alan Kessel: If I may address simply the original question, then we can work our way through the list.

On the question of House business, as an official, I'm not in a position to comment on House business. I believe that's a question that can be best addressed to the House leaders and the whips of the various parties in terms of how business is being done. We can comment on the piece of paper we have in front of us. I think that refers to at least two questions. If I may be reminded of the second question, I think it was the WTO and whether this was—

• 1605

[Translation]

Mr. Benoît Sauvageau: How far as this gone at the WTO?

[English]

Mr. Keith Morrill: This is an issue that has been discussed in the WTO. One has to be aware that the WTO is an organization that proceeds from an existing negotiated text, the last one being the Uruguay Round of negotiations. This particular issue was not dealt with in the Uruguay Round. I would expect it to be dealt with in the next round. The Uruguay Round took seven years or more.

So the WTO is conscious of the issue, but they have a particular structure in which they work that, in effect, prevents them from moving quickly on a particular issue related to this. This is why the issue has been dealt with in the OECD and why, in the universal or UN-worldwide context, it will probably be dealt with in the UN organized crime convention.

I expect at the end of the day it will also be dealt with by the WTO in a treaty context. I am aware there are discussions about it in the context of the WTO, but there is a limitation on exactly what the WTO can do about it. It's a body for enforcing agreed rules, and in that context they haven't agreed on these rules yet.

[Translation]

Ms. Marie-Josée Rhéaume: I would like to add that the WTO is one of the member organizations, as an observer, of the OECD task force.

Mr. Benoît Sauvageau: My third question pertains to the EDC.

Mr. Yvan Roy: If I may, I would like to answer. I think that the answer can be found in the very wording of Bill S-21, which leads me to talk about clause 3, as it was designed.

Clause 3 reads as follows:

3. (1) Every person commits an offence who, in order to obtain or retain an advantage in the course of business, directly or indirectly—

Obviously we are referring to a business scenario here. In order to make this concept even clearer, the bill provides a definition of the word, “business” which can be found in clause 2, on the previous page, and which reads as follows:

“business” means any business, profession, trade, calling, manufacture or undertaking of any kind carried out in Canada or elsewhere for profit.

This bill is therefore aimed at businesses who are there in order to make money. If we are dealing with a humanitarian organization, unless it is involved in transactions to make money or a profit, no criminal sanctions will be taken because the organization does not meet the basic criterion stipulated in clause 3.

Mr. Benoît Sauvageau: You have just talked about CIDA. What about EDC now?

Mr. Yvan Roy: What field does EDC work in?

Mr. Benoît Sauvageau: EDC gives loans to firms that do business abroad and it charges 4% interest; it therefore makes a profit. If you want to do business in India or in another country and you're not sure that you will be paid, you can sign a million-dollar contract and buy insurance through EDC, which is directly tied to the Canadian government. If you are not paid, EDC will reimburse an amount equal to the contract.

I asked the representatives from EDC whether or not, when involved in such financial transactions, they consider human rights or, in this case, corruption. They didn't provide me with an answer about corruption, but they did say that they didn't concern themselves with human rights.

For instance, under this convention, could we take legal action against EDC, which is in business to make money and is not a charitable organization, should it provide a loan to a Canadian company involved in a shady business deal with a company from another country?

• 1610

Mr. Yvan Roy: If EDC was involved in committing the offence, it obviously would be guilty. However, if it merely insured a transaction which was sullied by bribery, that would not mean that EDC was guilty of a crime. Why? According to this bill, which is a piece of criminal legislation, the person guilty of an offence has to have intent. However, if EDC merely insured a transaction and was unaware of all the details to the point where it did not know that the offence of bribery had been committed, EDC would not be guilty of anything. However, if EDC were quite aware of what was going on and participated in the offence committed, because of an agreement between the two firms and because EDC conspired with this company, then EDC would be guilty just like any other party. There's no exclusion as far as this is concerned.

Mr. Benoît Sauvageau: If I may, I would like to ask two other questions. Clause 3 states:

3. (1) Every person commits an offence who, in order to obtain or retain an advantage— directly or indirectly—

We could interpret EDC's actions as being indirect.

Mr. Yvan Roy: Yes.

Mr. Benoît Sauvageau: If EDC was involved in staging the transaction, who will have to prove it?

Mr. Yvan Roy: It is up to the Crown to prove this beyond all reasonable doubt. EDC, just like anyone else prosecuted in a criminal trial, has the right to remain silent, and the Crown has the burden, from start to finish, of showing not only that an offence was committed but also that the accused was aware that an offence had been committed. To allow this type of proof, clause 8 of the bill provides that the offence that has just been defined in clause 3 will be added to the list of Criminal Code of offences that allow the State to ask a judge to issue a wire-tap warrant.

[English]

Mr. Bob Speller (Haldimand—Norfolk—Brant, Lib.): If I can just respond to Mr. Sauvageau's question regarding why it was sent to the Senate, from what I understand, generally at this time of year, with a couple of weeks left in the schedule, there are bills they want to get through, and the House leaders of all the parties get together and agree on how to deal with them.

The House leaders, not the department, would have sent the bill first to the Senate. I assume they sent it that way because they figured in order to get it done before the new year, given the legislative agenda in the House now, there was time in the Senate to deal with it first and then we would deal with it next week and get it out.

Mr. Charlie Penson: It would have the opposite effect if there wasn't cooperation.

Mr. Bob Speller: By whom?

Mr. Charlie Penson: I'm just saying if there wasn't cooperation among the House leaders on this, it could have the opposite effect of what was desired.

Mr. Bob Speller: That's right. That's why these decisions are always made by all the House leaders together.

[Translation]

Mr. Benoît Sauvageau: That's really what I wanted to understand.

[English]

The Chair: Mr. Assadourian.

Mr. Sarkis Assadourian (Brampton Centre, Lib.): Thank you very much.

I remember three and a half or four years ago we had IMF people here in room 237 to discuss corruption. We focused in on CIS countries. I'm glad we're going through this, but I have two questions.

You mentioned in your presentation that many organizations—OECD, OAS, European, CIS—and countries have passed similar rules or will pass them in the future. Will there be a mechanism in the future to bring everything together to make one universal standard, so to speak, so what applies to Canadian businessmen here will apply to Russian businessmen and be similar—not exactly the same—with the same principles and concept? Many people say what is happening to Russia now is because of the corruption, not because of anything else, because 30% of Swiss accounts originate in Russia these days. That's my first question.

My second question is on commission versus bribery. If I do business in Nigeria, for example—because last year Nigeria was at the top of the list in corruption—and am given baksheesh, so to speak, in a Swiss account, who is to say whether that's a commission or bribery? Where do you draw the line?

It's very fuzzy, because I know in some countries where we give foreign aid, it has to be paid by certain officials before we get in. You have to pay the guy to get into the office. If you don't pay the guy at the door, you'll never get into the office. So how are you going to make a distinction in this business? It's very tricky to make a distinction between a legitimate commission and baksheesh or bribery.

• 1615

Mr. Alan Kessel: Let me try to deal with your first question. I may have to hand the other question over to my colleague from Justice.

I think you raised a very important point on the question of standardization in the world of how we deal with these types of issues. I think Mr. Morrill also mentioned that you have to start somewhere. The encouraging thing about what we're seeing is that the net has been cast right now. A message, a warning, has gone out that says, “We're coming after you and we're going to get you if you do this sort of thing”.

We're starting in the OECD, which I think is a pretty important organization. We're starting to work in the OAS, and the Council of Europe is doing it too. There will probably be another place here and another place there. The net is now starting to define the reality. The size of the net is starting to shrink. Maybe it's a little big now, but it's going to start shrinking. Eventually when we have these positions all together, all these various instruments, we will start to see that the world is covered and we've created a matrix that will at least begin to address this particular issue.

But to repeat what Mr. Morrill said, you have to start somewhere. This is a very positive development, considering that five to seven years ago we were just standing on soap boxes with platitudes saying, “Wouldn't it be nice if we got rid of this corruption”. Well, we're doing it. I think Canada's capacity to make the thing actually happen and get the first instrument functioning will be a dramatic statement on the way this country perceives its role in the world.

On the question of whether baksheesh is Christmas come daily—we can discuss the spirit of Christmas and gifts to your postman—I would pass it to my Justice colleague because I think it's a question of evidence.

Mr. Yvan Roy: Thank you, Mr. Kessel.

The wording that is chosen in clause 3, to which you refer, comes straight from the Criminal Code of Canada. Already in our law you have offences for corrupting Canadian officials. That wording was chosen for the purpose of defining the offence in clause 3 and has received judicial consideration in this country in a number of cases. There are cases where the issue was discussed by the Court of Appeal for Ontario of whether offering you a cup of coffee for the purpose of talking about business in the House would be a bribe under section 121. Obviously the courts have ruled that's not the case.

In this particular piece of legislation I will point to a couple of subclauses that will help, I'm sure, better define what is meant by a bribe.

We've referred to subclause 3(1) of the bill. I pointed out, when there was a question earlier on paragraph 3(3)(a), that it says if it's permitted under foreign law it will be a complete defence to the offence. I would refer you to paragraph 3(3)(b) on page 3, where it is stated in law that when the payment, reward, advantage or loan is made to pay the reasonable expenses incurred in good faith by or on behalf of the foreign public official, it isn't a bribe. That helps define what is meant by that.

I would also refer you to subclause 3(4) on page 3, where the law defines what facilitation payments are allowed. I think this goes directly to the issue you're raising.

We know, and have been told by the business community we have consulted with, there are some countries where you need to make a facilitation payment in order to get something. What is a facilitation payment? The law would seek to describe and define what is meant by that. It is basically a payment made to expedite or secure the performance by a foreign public official of any act of a routine nature. Routine nature is further defined in subclause 3(5).

• 1620

So when you have Canadian businessmen who are doing business abroad and are making those facilitation payments, in order to get your permit in some places you have to give $5 to someone for the purpose of getting your file adjudicated on. This may very well be seen as the kind of facilitation payment that is in law permitted by this piece of legislation.

However, when you go beyond that and you're paying someone a huge amount of money for the purpose of getting the contract you're trying to get, you are clearly not making a facilitation payment and you are clearly not paying for the reasonable expenses that can be incurred by someone for the purpose of promoting your product.

So the legislation itself narrows down what is the concept of bribery that is to be covered here, and the concept we're talking about is already well known to our law. The words that are used to describe this are coming from the Criminal Code of Canada, where they have received significant judicial attention in the last 100 years.

Mr. Sarkis Assadourian: When this bill passes, we'll have a Canadian businessman and a businessman from a country where they have no such restrictions competing or bidding for a job. This was the case a few months ago in South America, I think, with Bombardier, and we lost the contract.

Mr. Yvan Roy: There was some media attention given to a contract in Mexico.

Mr. Sarkis Assadourian: Yes. We're putting our businessmen at a disadvantage in some ways if this is not going to be universal, and we're going to pay for it in business ways.

Mr. Yvan Roy: This is the reason a number of conventions are being negotiated. As my colleagues from Foreign Affairs have said, the OECD is taking the lead. The United States has had in place for some time a piece of legislation that is perhaps not too dissimilar to this one. You have heard that Japan, the United Kingdom, and Germany will have legislation that will do exactly what this is doing, and we're hoping and we're pushing at the international level for other countries to be covered by this. The idea is that once that is in place, we are all playing on the same field, instead of what we have right now.

At Justice, and I'm sure my colleagues at Foreign Affairs will agree with me, we think this advances the cause of Canada instead of jeopardizing our business community. Indeed, at least from the business community members we have spoken with, we think they are fully supportive of what we have here, especially when we're talking about stuff like facilitation payments or reasonable expenses. These clauses were included in this bill in order to reflect their concerns for the very reason you were bringing forward.

The Chair: On a second round, we'll turn to Mr. Penson.

Mr. Charlie Penson: I think this is very helpful, but I do believe we probably need to have you back before too long once we hear from some business people that are doing business in these areas to see what they think of this legislation. We just got the legislation now, so we need some time to look it over.

This is our implementing legislation. Is there similar implementing legislation going into all countries in the OECD? Is there a basic framework that says essentially the same thing?

Mr. Alan Kessel: The framework you have before you, which is the OECD convention—

Mr. Charlie Penson: Yes, we just got that too, by the way.

Mr. Alan Kessel: The OECD convention is essentially the road map, the blueprint, the basic framework within which all OECD countries have now agreed to work. How they implement domestically their commitments is usually a domestic prerogative. Some countries may have treaties that are self-implementing, in which case the minute they sign it, it is the law. In Canada we do not. Our treaties need to be implemented in some way if it is not an existing law already. In this case it is an existing law, and therefore Parliament has a role to make sure that international obligation is made real through domestic implementing legislation, and this is what we have to do.

Without some research I couldn't tell you what the U.K., Germany, or France does, but in essence, they have the same obligation, and at law they will be held to that obligation. How they bring it into effect, they have to determine. We know the U.S. has something very similar to this.

• 1625

The Chair: Mr. Kessel, if I could interrupt, at tab 4 there is actually a briefing as to what steps are to be taken by each country.

Mr. Charlie Penson: Okay. We'll have a chance to look at that in the future.

On this routine payment that was being explored by Mr. Assadourian, is there not a danger in routine payments becoming a little bigger as a result of trying to get around this process?

Mr. Keith Morrill: When my colleague Mr. Roy was explaining this— Being a foreign service lawyer, I have lived abroad, and I recall very well the situation in a developed country where the mailman came around at Christmas, knocked on your door, and asked for his present. This was normal and we gave him about $20. The people who didn't give him $20 didn't get their mail. It was as simple as that. This was not a third world country. I won't say the country, but it is a very developed European country.

One of the key distinctions in the legislation—and this was discussed in detail at length in the OECD because it's a very real concern; people from this country know they have to give their mailman $20 a year—if you look at subclause 3(4) on page 3, they talk about these facilitation payments “of a routine nature that is part of the foreign public official's duties or functions”. I think that's a key. It's not simply that they are of a routine nature, but the foreign official has an established duty and function and you're giving them money to do what they're already obliged to do. In other words, you're not saying “Here's money to get me a permit”; you're saying “Here's the $5 necessary for you to even look at my file, and then you decide whether you'll give me a permit”. “Here's your $20 so I get my mail”.

Although it is a tricky distinction, it's a distinction that's necessary, given the fact that in some countries these small facilitation payments—in the discussions, in fact, a word was invented—are simply a necessary fact of life and they do not have the nature of the bribery that undermines the whole process. They're in effect recognition in some countries that sometimes you have to do things a little differently from here.

Mr. Charlie Penson: I don't have a problem if that's leading the way here. I think it's important that we do that, but realistically I'm just wondering if we are going to see some pretty creative ways of getting around this. That's the concern I have, I guess.

But I'll go on to another section. It really follows up on Mr. Sauvageau's point about crown corporations here in Canada and their obligations and has to do with the lack of transparency for parliamentarians to review those crown corporations, like the Export Development Corporation. We can't have a look at what they are doing. The Canadian Wheat Board was in that category too.

It seems to me it's important that we tie up those loose ends to make sure, if we're going to lead by example, we clearly have an obligation that our crown corporations— that's no different from what we would expect from Canadian business people in the private sector.

Mr. Keith Morrill: I would certainly not disagree that crown corporations have to obey the law. As I understand the structures for the various crown corporations, there are ministers responsible for ensuring certain things. But from my point of view as an official of the Department of Foreign Affairs, I know this is an issue that was also discussed. In Canada we have a few crown corporations, and I think state-run organizations play quite a large part in the commerce of OECD countries.

One of the answers is that the other countries will be keeping their eyes on us. There is a detailed review process. For example, if Australia thinks the Canadian Wheat Board is doing something wrong, we're going to hear about it and we're going to have to defend ourselves.

• 1630

Mr. Charlie Penson: It's too bad parliamentarians don't have a chance to look at that directly, because we have to rely on the Americans to get an audit of the Canadian Wheat Board; we can't get it ourselves. I'd like to see that kind of transparency here at home, if we're talking about setting an example.

The Chair: Mr. Breithaupt, you had a quick answer, and then we'll move on to Madame Debien.

Mr. Douglas Breithaupt (Counsel, Criminal Law Policy Section, Department of Justice): Yes, if I may. I wanted to comment briefly on the comment and concern that was raised following the answer to the previous question about the concern that facilitation payments may blend into being bribes. I should point out that the focus of the OECD convention is to focus on bribes to obtain or retain business or other improper advantage in the conduct of international business. That's the focus, and that's the way our offence in subclause 3(1) is framed.

In facilitation payments, in subclause 3(4), there is the issue that Mr. Morrill brought up, which is that in the chapeau it talks about any act of a routine nature that is part of the foreign public official's duties or functions. Surely it wouldn't be part of the foreign public official's duties or functions to do something to give an improper advantage to someone who provided a payment. So we think that would be caught there.

The commentaries of the convention suggest that an improper advantage, for example, might be giving an operating permit for a factory to exist that would go against the statutory preconditions that are set out in a particular country. That would not be part of the foreign public official's duties or functions to do this, to provide that improper advantage. I also point out that in subclause 3(5) it says:

For greater certainty, an `act of a routine nature'

—that is, those facilitation payments that are dealt with above—

does not include a decision to award new business or to continue business with a particular party, including a decision on the terms of that business, or encouraging another person to make any such decision.

So we're basically closing the door on payments given to secure an improper advantage, to obtain or retain an improper advantage or to obtain or retain business. We're hoping and expecting through this, the way we've framed the facilitation payments exception in the bill, to prevent that kind of blending to take place.

[Translation]

The Chair: Ms. Debien, have you got any questions?

Ms. Maud Debien (Laval-Est, BQ): Mr. Sauvageau asked me to try to obtain some clarifications about the process to adopt the bill. My question does not deal with the content of the bill as such, but rather with the process that will be followed once this bill is tabled in the House, given that this way of proceeding is unusual. Bills are rarely reviewed by subcommittees. Mr. Sauvageau wanted to know what steps would be taken after our review. You said that it was anticipated that the bill would be adopted before the Christmas break. What steps do we have to take now?

[English]

The Chair: Mr. Speller, I don't know if you're in a position to answer the question.

Mr. Bob Speller: No, I'm just going from what I've heard. From what I understand, it was introduced in the Senate. The Senate will look at it in the committee of the whole and deal with it in one day. It will then be sent down to the House, and then, from what I understand, they're making time next week possibly to introduce it into the House. Then it will come to the foreign affairs committee or this committee—I don't think that's been decided yet—to go through clause-by-clause. I would think then we would take some time to listen, if that's the wish, to witnesses.

Depending on what the opposition feels, we could get this out by next week. All that is being negotiated by House leaders and not us, so I would assume we would have to wait to see what they say.

The Chair: Madame Debien, it's a coincidence that the bill was brought in by the Senate. We decided last week at our meeting on future business that we would like to look into this area of corruption as potentially a way of also seeing how we could bring it to the WTO. It just so happened that today we have our meeting; so it's a coincidence more than anything else.

Mr. Assadourian, do you have any further questions?

• 1635

Mr. Sarkis Assadourian: I have no more questions.

The Chair: If I may, I just have a few questions. In the United States, the Foreign Corruption Practices Act, which has been in place for a while, applies, as I understand it, to Canadian subsidiaries of American companies. Will this law affect American subsidiaries operating in Canada, or are they going to be bound by the Foreign Corruption Practices Act? What's the jurisdiction here?

Mr. Keith Morrill: In fact, the United States passed additional legislation three weeks ago, I think, revising the Foreign Corruption Practices Act to reflect the OECD bribery convention.

You are quite right that what the Foreign Corruption Practices Act in the United States was trying to do was in fact very similar to what the OECD convention does. But some change has been made.

My understanding—Doug or Marie-Josée can correct me if I'm wrong—is that, at least as I can recall from reading the American bill that was before Congress, it didn't apply to Canadian-incorporated subsidiaries. The issue has always been there not because the American law actually applied to the officials of the Canadian-incorporated company, but for cases like General Electric Canada, as an example. Your international company, the group of companies that operates worldwide, has an international practice, and they coordinate that practice. As I understand it, the existing U.S. legislation applies to American nationals, which includes American citizens and American-incorporated companies. That's my understanding. But I stand to be corrected.

The short answer is that if an American national—for instance, it could mean either an American-incorporated company or an American citizen—is working in Canada for a Canadian company or operating in Canada and they were involved in bribing a foreign public official, then they would be subject to this law, having committed a crime in Canada.

They might also have committed a crime in the United States. As my colleagues from Justice might say, that's nothing too unusual. In the context of conspiracy, say, it's almost always the case—take drug smuggling, for instance—that a person is committing a crime in two places.

There are fairly practical ways in the context of mutual legal assistance as to who proceeds. It's left to basically who has the person. The short answer is that it's certainly possible that a person can be committing a crime in two countries. That's not something particularly unusual in this context.

The Chair: I don't mean to be too technical with this. I was looking at what the rule of paramountcy would be between the two pieces of legislation. But from what I understand, you could be prosecuted by both countries.

Mr. Keith Morrill: Yes.

The Chair: Please answer very quickly, Mr. Breithaupt.

Mr. Douglas Breithaupt: I believe the Foreign Corruption Practices Act applies to domestic concerns as well. I think the term is “issuers”. So perhaps if a Canadian company were registered on an American stock exchange—I'm not certain of this—they would fall within the ambit of their act.

The Chair: My concern is that it wouldn't preclude us, again just to use Canada as an example, from taking action against General Electric Canada.

Mr. Douglas Breithaupt: No. Our offences begin with “Every person”. So that would mean every natural person or corporation. It could include a foreigner here in Canada. It's very broad. If they come within the offence, the offence can apply. We would use the definition of “person” as defined in section 2 of the Criminal Code. So the same rules of corporate criminal liability would apply to this offence as they would to domestic bribery offences, for example.

• 1640

The Chair: My final question is this. In 1996 Mr. Penson talked about the Standing Committee on Foreign Affairs and International Trade doing a report on Canadian SMEs in the world economy. At that time, one of the recommendations of that committee, in the context of corruption, was to participate in the work of the OECD, which I see this being the culmination of. But there was another recommendation that said the Canadian government should take the lead in carrying this matter forward in the World Trade Organization. I was wondering, since we are going to be entering the WTO negotiations, what can Canada do to take this matter forward? Is that something we can do?

Mr. Alan Kessel: Clearly this is a matter that's on the forefront of our consciousness, and all the countries of the OECD are included in the WTO. Certainly this is an issue we can bring to the attention of colleagues in Foreign Affairs and the WTO, and we can raise their consciousness again about this being in the forefront. That is no problem.

The Chair: Thank you.

One quick last question, Charlie.

Mr. Charlie Penson: I just wanted to follow up on the United States' legislation. Do I understand you to say it's been revived, that they've had it before and brought it back now?

Mr. Keith Morrill: I'm sorry. I said revised.

Mr. Charlie Penson: Oh, revised. I'm sorry.

Mr. Keith Morrill: They have existing legislation, which is basically criminal law—bribing of foreign officials. It didn't fit exactly what the OECD convention ended up being, so they changed it slightly to fit.

Mr. Charlie Penson: The reason I'm asking that is I wondered if you have any idea if there was any history of charging Americans under that legislation in the past. I guess the question really is, has it been used?

Mr. Keith Morrill: Doug can correct me if I'm wrong, but I'm told it's been in place for two decades. As I understand it, there haven't been many successful prosecutions—about 20. It's not a crime that proceeds to successful prosecution often. One of the key aspects of it, of course, which we haven't discussed here, but you may see if you read the OECD convention itself, is that presently there are a number of countries where not only is this not a crime, but in fact bribes are tax deductible. They're part of doing business.

By making it a crime in those countries, one automatically in effect, as I understand the process, ends the tax deductibility. There are also effects on accounting processes. So in addition to the actual successful prosecution, there is the fact that a signal is sent that this is simply unacceptable. Also, it changes the way the tax and accounting processes work, while in effect you are dealing usually with businessmen who are trying to make a living and don't want to end up in jail as they're making a living.

So although there haven't been a large number of prosecutions in the United States, as I understand the American view, they regard it as having been quite effective in preventing corruption, preventing bribery by American officials of foreign public officials.

Mr. Charlie Penson: I think that's really the point here, though, to try to expand this and get it into the World Trade Organization, although it may be step by step in doing that. It seems to me that's the vehicle we need to use to try to strengthen legislation in these countries to— They might have legislation on the books, but in practice it may not be very strong. It seems to me that's really where we need to move to, to try to make it a crime also to accept that bribe. It should work both ways. Therefore, I would see that the WTO would be a useful vehicle in trying to establish that.

The Chair: Thank you very much.

[Translation]

Ms. Maud Debien: Given what Mr. Morrill has just said, I believe that Canada does not have any legislation that forbids tax deductions for bribes. However, in signing the convention on Combatting Bribery, we would succeed in doing that indirectly.

• 1645

Mr. Keith Morrill: No, not exactly.

Mr. Yvan Roy: I can try to give you a very quick answer. We are suggesting, in section 10 of the bill, that we amend the Income Tax Act to avoid any difficulties, ambiguities and problems. Subsection 67.5(1) of this Act would read as follows:

67.5 (1) In computing income, no deduction shall be made in respect of an outlay made or expense incurred for the purpose of doing anything that is an offence under section 3—

Ms. Maud Debien: That's it.

Mr. Yvan Roy: The Act can't be any clearer than that.

Ms. Maud Debien: All right. Thank you.

[English]

The Chair: Madam Debien, do you have anything else you wanted to add?

Thank you very much for coming and briefing us. I hope the committee can call on you again if they have any additional questions.

Thank you colleagues. If there are no further questions, I adjourn the meeting.