And Corruption in Foreign Business Transactions

by Allan Castle, PhD

Corruption and bribery are widespread and worsening phenomena in international business transactions. These practices undermine the rule of law and economic development, distort free and fair competition, and increase costs for businesses and consumers alike. Corruption and bribery in international business transactions also serve to support non-democratic and arbitrary rule in those regions most in need of good governance and a fair and open economy.

For many years, the United States was the only jurisdiction to have a comprehensive legal prohibition of such practices. Under the Foreign Corrupt Practices Act, or FCPA, bribery of officials in foreign jurisdictions for access to contracts, tax or labour concessions, etc., was proscribed under law. Other developed states, notoriously France and Germany, not only lacked equivalent legislation, but had tax codes which allowed the deduction of foreign bribes as legitimate business expenses. Following intense negotiations after years of inaction on this issue, in December 1997 the states of the OECD concluded a Convention on Combating Bribery of Foreign Public Officials in International Business Transactions. As a leading contributor and signatory to the Convention, Canada is committed to pass new legislation by December 1998 governing corruption and bribery in foreign business transactions.

The benefits of action against corruption are clear when one examines the crippling effect corrupt practices, under-the-table payments and influence peddling have had on institution building and the rule of law in developing or democratising societies. The “when in Rome” approach, which if amoral has in the past appeared expedient at least in the short term in many countries, has come to be recognised in both the private and public sectors as counter-productive from a business perspective as well. Leaving aside for one moment the human cost, corruption in the long term renders a society continually unstable and unreceptive to healthy and mutually beneficial international business development.

What will this legislation mean for Canadians doing business overseas? As a joint endeavour, the International Centre for Criminal Law Reform & Criminal Justice Policy and Transparency International Canada are hosting a one-day seminar on November 3 at Simon Fraser University’s Harbour Centre in Vancouver. The Symposium will provide key information for concerned Canadian firms with overseas business portfolios, and for those firms currently considering overseas investment. The seminar will also provide an opportunity for the corporate community to respond to the proposed Canadian legislative initiative as part of the interactive process of policy development. Highlights will include:

• An overview by a leading legal expert of the challenges facing Canadian companies doing business in new and under-regulated environments.
• Explanation of the OECD convention and Canada’s upcoming legislation from two senior representatives of the Departments of Justice and Foreign Affairs.
• Corporate response: a perspective from the business community from Mr. Timothy Martin (Vice-President and General Counsel, International, Canadian Occidental Petroleum Ltd.)
• Participant response to the new legislation and general question period.

Further information and registration information can be obtained from Vivienne Chin at the International Centre for Criminal Law Reform & Criminal Justice Policy in Vancouver at 604.822.9875 or fax 604.822.9317.

Allan Castle PhD is the Director of the Transnational Financial Crime Program at the International Centre for Criminal Law Reform and Criminal Justice Policy, a non-profit international institution officially affiliated with the United Nations Crime Prevention and Criminal Justice Programme. The Centre’s mandate is to address criminal law and justice issues that have implications for human rights, democracy and good governance, and to provide technical assistance and advisory services in the field.

This article was published in the October 1998 issue of BarTalk. © 1998 The Canadian Bar Association. All rights reserved.