In a recent expansion of the Harper government’s anti-corruption push and with a possible eye to avoiding embarrassing pre-election headlines, Ottawa has tightened the requirements for companies receiving help from the government in operating abroad.
Since September, the federal government has required Canadian firms operating abroad to declare they are not engaged in corruption if they want to receive help from the Trade Commissioner Service.
The service, housed in Canadian embassies and missions abroad, is asking firms to declare in a document whether they or an affiliate are under charge or have been convicted under Canada’s anti-corruption laws, including the Canadian Corruption of Foreign Public Officials Act, during the past five years.
The new rule extends Ottawa’s growing zeal in tackling corruption, which this year included new procurement rules for the government’s own purchases and legislation mandating the disclosure of government payments by Canadian extractive firms.
“It’s supply-side corruption, namely the payers,” said Milos Barutciski, a board member of the NGO Transparency International and a partner at Bennett Jones LLP, of the new Trade Commissioner Service waivers.
On the other hand, the extractive sector payment disclosure, which is embedded in a budget implementation bill currently before a House of Commons committee, deals with the demand side of the problem by reducing the attraction of bribery among government officials, said Barutciski.
“Determinations on the potential withholding (or withdrawal) of government of Canada economic diplomacy and trade commissioner services will be case-specific, and will be informed by a fair and transparent process,”
The Trade Commissioner Service waiver brings the program in line with requirements at Export Development Canada (EDC) and the Canadian Commercial Corporation (CCC), said Department of Foreign Affairs, Trade and Development (DFATD) spokesperson Caitlin Workman.
The service mainly helps advocate for firms in foreign jurisdictions. The EDC provides loans and risk insurance for Canadian firms working overseas, while the CCC primarily helps companies get procurement contracts in other countries.
The issue of withdrawing Trade Commissioner Service from Canadian firms resurfaced in recent weeks as Ottawa unveiled a retooled Corporate Social Responsibility Strategy for the Extractive Sector that included the power to stop providing the service to a mining or petroleum company.
But the corruption waivers are not part of the new CSR strategy, said Workman.
“This is a standard operating procedure of the Trade Commissioner Service and is neither specific to the extractive sector nor associated with the CSR strategy,” she wrote in an email.
Not only are firms not supposed to be charged or convicted to receive the service, they also are not allowed to have had a “contract annulled by or been barred from contracting with a government, an inter-governmental organization, a state-owned enterprise, or an international financial institution due to bribery or corrupt or fraudulent business practices,” the declaration says.
The Trade Commissioner Service declaration could be tough for small and medium enterprises (SMEs) that might not have the money to ensure they’re compliant with legal and ethical anti-corruption standards.
The federal government is trying to nearly double the number of SMEs in foreign markets from 11,000 to 21,000 by 2018, according to DFATD’s Global Market Action Plan.
The Trade Commissioner Service is a pillar of the Global Market Action Plan, the centrepiece of the government’s ‘economic diplomacy,’ unveiled in November 2013.
Since September, the federal government has required Canadian firms operating abroad to declare they are not engaged in corruption if they want to receive help from the Trade Commissioner Service.
But there’s also reason to believe that the waiver won’t be too difficult for firms given the renewed focus on corruption from the government and the RCMP in recent years, said Barutciski.
The RCMP began earnestly enforcing the Corrupt Foreign Officials Act in 2009 after years of neglect on the file, he said. At the time, the only Canadian companies with strong anti-corruption policies were those listed on stock exchanges in the U.S. because of how much more rigorously the Foreign Corruption Practices Act was enforced there, said Barutciski.
“With no enforcement until the late 2000s, there weren’t very many Canadian companies…that were paying a lot of attention,” he said.
There have been three convictions in the last five years and the RCMP likely have around 35 active investigations on the go right now, he said.
“There’s been an evolution here,” he said. “In some cases, I think it’s fair to say some companies are going through the motions.”
But there has also been a massive amount of investment by some firms in anti-corruption compliance that would make adjusting to the Trade Commissioner Service a non-issue, said Barutciski.
The new rule extends Ottawa’s growing zeal in tackling corruption, which this year included new procurement rules for the government’s own purchases and legislation mandating the disclosure of government payments by Canadian extractive firms.
Ottawa’s anti-corruption policies have received opposition of late from the Canadian Council of Chief Executives, which recently penned an internal report critical of the government’s procurement conditions.
The council’s concerns, at least publicly, did not include conditions related to the Trade Commissioner Service. The council did not respond to a request to comment on the waiver.
As for the extractive sector’s CSR strategy and the Trade Commissioner Service, any potential barring from the service will come from a firm’s reluctance to conform with Ottawa’s mediation process for conflicts between miners and overseas communities, said Workman, the DFATD spokesperson.
The mediation process will be first run through a special counsellor’s office and then through the National Contact Point for the OECD Guidelines for Multinational Enterprises.
But DFATD is keeping to itself any details on how a decision to bar a firm from the service will be made, though eventual decisions to not participate in mediation will be made public, said Workman.
“Determinations on the potential withholding (or withdrawal) of government of Canada economic diplomacy and trade commissioner services will be case-specific, and will be informed by a fair and transparent process,” she wrote in an email.
Around 19 per cent of the world’s bribery incidents are believed to occur in the extractive sector, according to the OECD’s latest global bribery report.
Re-published with permission.
