Corporate liability for foreign corrupt practices under Canadian Law.
What are the lessons from R. v. Briscoe and Kozeny for Canadian corporations looking to guard against liability under the CFPOA in connection with the engagement of third party agents or consultants? Several possibilities are discussed below.
First, due diligence with respect to all third party foreign agents is of great importance. Liability under the doctrine of wilful blindness "flows directly from the deliberate refusal to actively pursue additional knowledge and information when one is troubled by or fearful of the revelations such additional knowledge or information may entail." (99) Therefore, in the context of foreign corrupt practices, liability under the doctrine of wilful blindness may be rooted in a deliberate decision not to consider the degree of corrupt practices risk associated with the engagement of a particular third party agent, not to respond to concerns regarding the potential of a third party agent to engage in corrupt practices on one's behalf, or both. Stated somewhat differently, in order to avoid criminal liability under the CFPOA for actions undertaken by a third party agent, Canadian corporations and their senior officers should arguably be careful to always conduct due diligence with respect to all third party agents being considered for a particular mandate, whether related to business development or otherwise, to ascertain the degree to which corrupt practices may present a risk; and they must take preventative measures to mitigate against the risk of corrupt practices if such risk has been identified.
Due diligence with respect to third party engagement in corrupt practices would likely include a number of different inquiries. (100) General considerations would include the jurisdiction and industry in respect of which the agent would be engaged, as it is well understood that corrupt practices are more prevalent in certain countries and industries than in others. (101) Perhaps chief among the individualized inquiries to be conducted would be confirming that an agent has the requisite resources, qualifications, and credentials to perform the services being offered. This may include consideration of the agent's educational and professional background as well as of other clients for whom the agent had performed the same or similar work. It may also include scrutiny of the proposed fees to be charged by the agent, including comparison of the proposed fees with those being charged by agents of similar qualifications in the same industry and market. Verification of the government affiliations of the agent, as well as the agent's ownership structure, may also be essential. Should the agent be partly or wholly staffed or owned by current public officials, the very engagement of the agent could constitute a violation of the CFPOA. It may also be important to verify that the engagement of the agent does not violate any local laws, as certain jurisdictions actually prohibit certain contractual arrangements involving government relations or negotiation. (102) Lastly, if it is difficult for a Canadian corporation to conduct these inquiries itself or through its legal counsel, it may be prudent to engage the services of specialized due diligence agents in the relevant jurisdiction. (103)
Corporations may take a variety of preventative measures in the face of third party corrupt practices risk, including various contractual obligations and rights in favour of the corporation, as may be reasonable in the circumstances. (104) Corporations should avoid success-based fees or lump sums linked with the receipt of government business, contracts, licences, or concessions, in favour of monthly fees or other reasonable payment schedules. They should require agents to make detailed representations and warranties regarding the agent's resources, credentials, and qualifications, as well as a disclaimer of any affiliations with government or public officials except those specifically disclosed to the corporation. An agent can be asked agree to fulsome covenants not to engage in corrupt practices, not to engage any sub-contractors in connection with the corporate engagement without the corporation's prior written consent, and to strictly comply with all applicable laws. Such covenants may also include the obligation to promptly inform the corporation should any of the agent's circumstances change in a manner that could affect the accuracy of any of the agent's representations and warranties, including, in particular, those pertaining to the agent's government affiliations. The corporation can also insist on termination rights should any of the agent's representations or warranties be discovered to be untrue or misleading, or should the agent breach any of its covenants. Additionally, the corporation may impose on the agent the obligation to keep detailed financial records in respect of all monies received by the corporation and the manner in which such monies have been disbursed or distributed, along with a corresponding right in favour of the corporation to audit the agent's books and records upon notice. Lastly, the corporation can reserve the right to withhold payments to the agent upon the advice of legal counsel. (105)
That said, it should be appreciated that not all third party engagements will either afford or warrant the same anti-corruption risk mitigation opportunities. Put another way, the list of contractual risk mitigation mechanisms canvassed above represents more of an ideal than a template of mechanisms that can reasonably be expected to be imposed on third party representatives in all situations. For instance, simpler engagements may not customarily be heavily papered, relying instead on simple purchase orders, service orders, or even email correspondence (for example, in the case of low-level customs or import and export facilitation services). Other engagements may come with only relatively modest anti-corruption risk (for example, domestic transportation services faced with the risk of illegal "tolls" imposed by the police or military at road blocks). On the other hand, the more important or expensive the service being provided, as well as the greater the attendant anti-corruption risk, the better leverage a corporation will have in requiring robust written anti-corruption risk mitigation mechanisms.
However, corporations must appreciate that the appropriate due diligence and monitoring of agents will not, in and of itself, provide immunity from liability under the CFPOA for an indirect violation of section 3(1). A corporation must also abort any engagement of a third party agent in respect of which significant corruption risk has been identified, so that it cannot be argued that the corporation or its senior officers were wilfully blind to any corrupt practices actually engaged in on their behalf by the agent. The difficulty here, however, is determining with confidence at what point this threshold is crossed. That is, at what point could it reasonably be argued that a corporation and one or more of its senior officers were complicit in corrupt practices engaged in by an agent under the doctrine of wilful blindness, either by failing to reject the prospective engagement or by failing to terminate an existing engagement?
This determination will involve difficult questions regarding the amount, frequency, and degree of due diligence and monitoring conducted. The fact that initial due diligence with respect to an agent does not raise any concerns does not necessarily mean that further investigation will not be warranted. On the other hand, business realities limit the amount, frequency, and degree of due diligence and continued monitoring that can reasonably be expected of a corporation and its senior officers: as mentioned above, anti-corruption compliance efforts are often neither simple nor without significant costs. This determination will also likely be complicated by other, more opaque considerations, including significant cultural and linguistic barriers, which can at times make it very difficult to interpret or assess the intentions or motivations of a prospective or current third party agent. (106)
In Kozeny, the Second Circuit highlighted a number of concerning facts relating to the corruption risk of which Bourke was aware, including the high level of corruption in Azerbaijan generally, that Bourke knew of Kozeny's reputation as the "Pirate of Prague", that Bourke had purposefully devised a corporate structure designed to help evade liability for corrupt practices, and that Bourke had decided to refrain from further investigating his suspicions regarding the possibility that his business associates would engage in corrupt practices. (107) Collectively, these facts constitute a damning portrait of Bourke's state of mind, pointing to his own clear understanding that Kozeny would likely engage in corrupt practices on Bourke's behalf. In fact, the Second Circuit essentially acknowledged that this was the case, stating that the evidence could also be used "to infer that Bourke actually knew about the crimes." (108) However, the reality is that "[n]ot all potential agent engagements will present such blatant 'deal breakers'." (109)
Consequently, legal commentators have reached a consensus on a set of facts or circumstances that constitute "red flags" that an agent may be likely to engage in corrupt practices involving foreign public officials. (110) For example, has the agent requested large upfront payments, unusually high commissions, or success-based payments tied to securing government business, licences, concessions, or permits? Has the agent been specifically recommended to the corporation by a public official or government body related to the corporation's business in a foreign jurisdiction? Has the agent resisted providing information regarding its ownership structure, credentials, or resources, or cooperating in the corporation's due diligence? Has the agent resisted providing contractual representations, warranties, or covenants regarding corrupt practices, or agreeing to contractual audit rights entitling the corporation to inspect the agent's books and records on an ongoing basis? Has the agent requested any unusual financial documentation or payment mechanisms, such as payments to be made to bank accounts in unrelated jurisdictions or offshore accounts? Should it later be discovered that the agent did in fact engage in corrupt practices involving a foreign public official, the greater the number of these or other red flags identified prior to, or during the course of, the engagement, the more difficult it will be to argue that the corporation and its senior officers were not complicit in such corrupt practices under the doctrine of wilful blindness.
That said, some red flags are more complicated than others, requiring greater scrutiny and consideration. Stated differently, what may at first appear to be a significant red flag may, in fairness, require a more balanced interpretation and treatment. For example, the fact that a prospective third party agent is a former government employee or foreign public official may at first blush appear to be a red flag, given that the agent would have ties to government that could serve as the conduit for an illicit payment or other unlawful influence. However, it is very common for international consultants and business development agents--both in emerging markets and in advanced industrialized markets--to be former government officials, as it is this former government employment that often serves as the very basis of their expertise. Put another way, the value of the services offered by foreign consultants is often grounded in their previous experience in government, given that this provides them with both inside knowledge of regulatory systems and practices, as well as their networks of government contacts with whom they enjoy good standing and credibility. From a business perspective, it is therefore very often desirable that a prospective foreign agent have previous government experience in the subject jurisdiction, making it inappropriate to automatically interpret the existence of such an affiliation as either evidence of a lack of due diligence or prudence on the part of a corporation, or evidence of the corporation's possible illicit intent.
Overall, while wilful blindness is sometimes considered a relatively high threshold for the Crown to meet, (111) Canadian corporations faced with the risk of foreign corrupt practices "should never continue a suspect third-party agent engagement in reliance on such a premise." (112) Moreover, the fact that "[c]riminal liability (as contrasted with civil liability) for agents and representatives [has to date been] a [foreign] concept ... to Canadian executives" (113) does not affect this calculation. (114) Canadian corporate compliance in international operations has entered a new age, and the widespread engagement of third party agents, coupled with the prescriptions of the doctrine of wilful blindness, represent the front lines of risk exposure. Yet Canadian prosecutors and courts should not take too severe or unsympathetic an approach in their application of the doctrine of wilful blindness in this context. It is reasonable to expect that, when a concern regarding corrupt practices is raised, that concern will be investigated and, if the risk is not too great, available risk mitigation measures will be employed. However, it is unreasonable to expect that all third party agent engagements that present some corrupt practices risk would be automatically abandoned or aborted. It is also unreasonable to expect that robust anti-corruption risk mitigation mechanisms will be employed to counter all identifiable anti-corruption risk. Lastly, it is unreasonable to presume that, where a third party agent actually engages in corrupt practices on a corporation's behalf in the face of identifiable corrupt practices risk, such practices occurred as a result of the wilful blindness of the corporation and one or more of its senior officers. Rather, the analysis should always include consideration of the substance of a senior officer's efforts or omissions to guard against corrupt practices risk, as contextualized by the cultural and business realities in which such efforts or omissions occurred, including, but not being limited to, the reasonable costs of associated risk mitigation strategies.
VI. Corporate Liability for the Corrupt Practices of Acquisition Targets
Although it is not always widely appreciated, mergers and acquisitions activity has played an important role in the development of anticorruption practices. In particular, mergers and acquisitions transactions, and the due diligence of target entities conducted during such transactions, are a common way for suspected anti-corruption transgressions to first come to light. (115) These proven or suspected transgressions may be relatively minor, and may be met chiefly with bolstered representations, warranties, covenants, and indemnities, as well as a grinding down of the acquisition price. Yet sometimes such transgressions may be significant enough to undermine an entire transaction, collapsing the deal. (116)
The critical importance of conducting thorough due diligence of targets pre-acquisition or pre-merger is therefore unquestionable. However, the analysis does not necessarily end there. Not all acquisitions merit the same considerations. On the one hand, amendments to the jurisdictional reach of the CFPOA, effected by Bill S-14 in June of 2013, create a potentially important distinction among the corrupt practices for which Canadian target entities may be held liable. Furthermore, whether and to what degree liability might follow acquirers in asset acquisition transactions, as opposed to share acquisition transactions, appears to remain an open question in Canadian law.
A. Share Acquisitions and Nationality Jurisdiction Versus Territorial Jurisdiction
It is a fundamental principle of corporate law that when one corporation acquires another through a share purchase, the purchasing corporation indirectly acquires the liabilities of the target which arose prior to the acquisition. This was the case, for example, in Sherwood Design Services v. 872935 Ontario Ltd. In this case, the purchaser of (what the purchaser thought was) a shell corporation to which certain desired assets had been assigned was held liable for unrelated and long-forgotten liabilities also attached to the shell corporation. (117)
The situation is no different in the context of CFPOA liability. A change in ownership of the target corporation will not affect anticorruption liability it incurred prior to the acquisition. Amalgamations present the same result. Corporate legislation across Canada explicitly states that the amalgamated corporation continues to be liable for the obligations of each amalgamating corporation. In other words, an existing liability is unaffected by the amalgamation, and a civil, criminal, or administrative action or proceeding pending against an amalgamating corporation may continue to be prosecuted against the amalgamated corporation. (118) However, the passage of Bill S-14 adds a theoretically significant wrinkle to this equation by imposing different jurisdictional standards to the corrupt practices of prospective Canadian targets occurring before and after the date of passage of the bill. As a result of Bill S-14, section 5(1) to the CFPOA now provides, as follows:
Every person who commits an act or omission outside Canada that, if committed in Canada, would constitute an offence under section 3 or 4--or a conspiracy to commit, an attempt to commit, being an accessory after the fact in relation to, or any counselling in relation to, an offence under that section--is deemed to have committed that act or omission in Canada if the person is: ...
(c) a public body, corporation, society, company, firm or partnership that is incorporated, formed or otherwise organized under the laws of Canada or a province. (119)
Importantly, this additional section has the effect of making Canadian corporations that engage in corrupt practices involving foreign public officials subject to the CFPOA regardless of whether such activities take place inside or outside Canada, and based simply on the fact that the corporation is organized under federal or provincial statute. (120) In the context of a prospective acquisition of a Canadian corporation, the CFPOA & newly applicable "nationality jurisdiction" standard therefore means that acquirers should be acutely aware of any suspected or established corrupt practices occurring after June 13, 2013 which are linked with their Canadian acquisition target, regardless of where such corrupt practices occurred. By contrast, whether corrupt practices engaged in by a Canadian acquisition target prior to June 13, 2013 can be reasonably framed as having taken place in Canada is a question of genuine legal significance. (121)
As noted by Archibald, Jull, and Roach, prior to the passage of Bill S14, "[b]y definition, the bribing of foreign officials involve[d] conduct that occurs outside of Canada and raise[d] jurisdictional issues about the scope of Canadian law." (122) To this end, while prior to Bill S-14's passage the CFPOA itself did not directly address issues relating to extraterritorial jurisdiction, the official guide to the CFPOA explained that a "real and substantial link" between the offence and Canada would be required in order for Canadian courts to assume jurisdiction over the matter. In particular, the guide provided that:
Canada has jurisdiction over the bribery of foreign public officials when the offence is committed in whole or in part in its territory. To be subject to the jurisdiction of Canadian courts, a significant portion of the activities constituting the offence must take place in Canada. There is a sufficient basis for jurisdiction where there is a real and substantial link between the offence and Canada. In making this assessment, the court must consider all relevant facts that happened in Canada that may legitimately give Canada an interest in prosecuting the offence. Subsequently, the court must then determine whether there is anything in those facts that offends international comity. (123)
This now-outdated explanation of the jurisdictional limits of the CFPOA was informed primarily by the decision of the Supreme Court of Canada in R v. Libman and its progeny. The appellant in Libman was charged with fraud and conspiracy in connection with an investment scam whereby sales personnel located in Toronto telephoned US residents to induce them, by a number of material misrepresentations, to purchase essentially worthless shares in two Central American mining companies. (124) The US purchasers had sent their money to Central America, and Libman therefore challenged his conviction on the basis that the alleged offences occurred outside Canada. (125) After an extensive review of the history and evolution of English and Canadian precedent on extraterritorial criminal jurisdiction, the Supreme Court dismissed Libman's appeal. Justice La Forest articulated the modern Canadian approach to the issue as follows:
I might summarize my approach to the limits of territoriality in this way. As I see it, all that is necessary to make an offence subject to the jurisdiction of our courts is that a significant portion of the activities constituting that offence took place in Canada. As it is put by modern academics, it is sufficient that there be a 'real and substantial link' between an offence and this country, a test well-known in public and private international law. (126)
Turning to the facts of the case at hand, the Court did not have trouble concluding that the "real and substantial link" standard had been satisfied. It noted that the scheme was "devised" in Canada, that "the whole operation that made it function" was located in Canada, and that the "directing minds" of the operation were situated in Canada. (127)
Given the effect of Bill S-14 on the jurisdictional reach of the CFPOA, a different risk analysis may therefore be applied by corporations considering the acquisition of a Canadian target with suspected or established liability for corrupt practices, depending on whether such activities took place before or after June 13, 2013. In particular, while it can be assumed without further analysis that corrupt practices engaged in by the Canadian target after June 13, 2013 would attract CFPOA liability regardless of where the corrupt behaviour occurred, the same assumption is not automatically warranted for corrupt practices the target engaged in at an earlier date. Rather, here the degree to which such corrupt practices can be reasonably described as having a "real and substantial link" to Canada will be of material consequence, potentially warranting further consideration and legal analysis.
Of course, a potential acquirer's appetite to engage in such a "second stage" of CFPOA risk analysis will greatly depend on the risk tolerance of the potential acquirer. As noted by Campbell, Preston, and O'Hara, the "Libman test can result in a reasonably expansive approach to territoriality." (128) In this regard, even if a prospective acquirer's detailed investigation and legal analysis of suspected or established corrupt practices by a Canadian target--practices that occurred prior to June 13, 2013--reveal minimal or no connections to Canada, a number of factors would caution the putative acquirer against relying on such an assessment. First, it cannot be guaranteed that further facts will not later come to light that alter the geographical matrix of the target's corrupt practices. Second, it may be difficult to establish with certainty the exact period of time over which the corrupt practices transpired (and to therefore conclude that such corrupt practices did not occur in part after June 13, 2013). Finally, and perhaps most importantly, it cannot be guaranteed that Canadian prosecutors or judges will interpret the jurisdictional characteristics of the target's practices in the same manner as does the prospective acquirer.
The recent conviction of Nazir Karigar by the Ontario Superior Court in August 2013--the sole instance to date of a judicial application of "territorial jurisdiction" to the CFPOA--should serve as a signal of caution in this regard. Karigar was charged with a violation of section 3(1)(b) of the CFPOA for offering or agreeing to offer bribes to Air India officials and to India's then-Minister of Civil Aviation in an attempt to influence the awarding of a security services contract by the airline to Cryptometrics Canada. Cryptometrics Canada is a company based in Ontario, but also a subsidiary of Cryptometrics Corporation, which is based in the United States. (129) In 2005, Karigar had reached out to a senior business development officer at Cryptometrics Canada, stating that he had contacts at Air India and advising the officer that the airline was interested in the company's services. After this initial contact, a series of meetings and correspondence took place between Karigar and various senior Cryptometrics executives, as well as meetings between Cryptometrics executives and Air Indian representatives, and a series of payments by Cryptometrics to Karigar and a second intermediary.
In his defence, Karigar highlighted a number of elements of the case against him which bore little connection to Canada. These included that the "directing minds" of the Cryptometrics scheme--including those individuals who authorized the release of transferred funds--were based in New York, and that all dealings between Karigar, Air India officials, and Cryptometrics representatives, with the exception of two brief meetings in Ontario, took place in India. (130) The Ontario Superior Court disagreed, holding that "territorial jurisdiction is clearly established in this case." (131) In particular, the court noted a number of significant connections between Karigar's activities and Canada, including that, at all material times during the pursuit of the Air India contract, Karigar was "employed by or/and acted as an agent" of Cryptometrics Canada; that Cryptometrics Canada was the contracting party to the agency agreement with Karigar; and that had the Air India contract been secured, Cryptometrics Canada stood to enjoy the greatest benefit within the Cryptometrics group of companies. (132)
Importantly, however, the court also stated that the "substantial connection test is not limited to the essential elements of the offence," (133) and that it would be incorrect to "segregate or otherwise deal with the bribery as a separate and discrete issue" to the exclusion of other "legitimate aspects of the transaction." (134) These are not immaterial pronouncements. The Supreme Court of Canada in Libman had stated that "to make an offence subject to the jurisdiction of our courts ... [it is only necessary] that a significant portion of the activities constituting that offence took place in Canada." (135) As noted above, in Libman, the Court proceeded to conclude that a "real and substantial link" had been established, given that the scheme was "devised" in Canada, that "the whole operation that made it function" was located in Canada, and that its "directing minds" were situated in Canada. (136) As such, the focus of the Court's attention in Libman was primarily on the location of "the activities constituting that offence." (137)
The Ontario Superior Court in Karigar was less concerned with such an emphasis. Rather, by stating that "the substantial connection test is not limited to the essential elements of the offence" and emphasizing the fact that Karigar's corrupt activities were committed on behalf of and for the benefit of a Canadian corporation, (138) the ruling of the court in Karigar implies that all that may be required to contravene the CFPOA under the "territorial jurisdiction" standard is to act in furtherance of Canadian interests when engaging in foreign corrupt practices, regardless of the actual location where the corrupt practices occurred. Leaving aside for a moment whether such a formulation constitutes an unpermitted expansion of the "territorial jurisdiction" standard instituted by Libman, the implications of this approach to territoriality should serve as a stark warning to a prospective acquirer of a Canadian corporation with suspected or established foreign corrupt practices occurring prior to June 13, 2013, as it suggests that the application of "territorial jurisdiction"--compared to "nationality jurisdiction"--in the context of foreign corrupt practices might not yield significant differences.
"Nationality jurisdiction" will allow Canadian authorities to "exercise jurisdiction over all ... companies that [have engaged in the corruption of foreign public officials that are incorporated] in Canada, regardless of where the alleged bribery has taken place." (139) However, taken to its logical (and arguably unreasonable) extreme, the holding by the Ontario Superior Court in Karigar that the "substantial connection test is not limited to the essential elements of an offence," and that courts should not treat the bribe "as a separate and discrete issue" to the exclusion of other "legitimate aspects of the transaction," (140) does not arrive at a destination very distant from the result of the nationality jurisdiction analysis. Consider the example of a corporate senior officer of a Canadian corporation engaging in corrupt practices in a foreign jurisdiction where the senior officer is at all times (including the time at which the senior officer devises the corrupt scheme) located in the foreign jurisdiction, the relevant public official is at all times located in the foreign jurisdiction, and all communication (including the offer of illicit benefit) between the senior officer and the public official occurs in the foreign jurisdiction. Pursuant to the ruling in Karigar, the corporation is arguably liable for corrupt practices under the CFPOA and section 22.2 of the Criminal Code simply on the basis that the senior officer is acting further to the interests of a Canadian corporation, and regardless of the fact that none of the actual elements of the offence occurred in Canada.
This conclusion is also supported by certain case law and commentary considering the "real and substantial link" standard in the context of civil proceedings. The Supreme Court of Canada has previously stated that there exists a "close parallel" between the Libman formulation of the "real and substantial link" test at criminal law and the test as applied in private law. (141) Furthermore, in outlining the substance of the "real and substantial link" test in the civil context in Club Resorts Ltd. v. Van Breda, the Supreme Court established four "presumptive" factors, the satisfaction of any one of which will result in a rebuttable presumption in favour of a court accepting jurisdiction in the matter. (142) These factors are that: (i) the defendant is domiciled or resident in the province; (ii) the defendant carries on business in the province; (iii) the alleged tort was committed in the province; or (iv) a contract connected with the dispute was made in the province. As Chan and Hasan note, if applied in the context of CFPOA liability, "the first two presumptive factors may be sufficient to do away with any territorial limits to jurisdiction for Canadian companies operating abroad" under the "real and substantial link" standard. (143)
On the other hand, it seems relatively easy to mount a strong argument that the ruling in Karigar constitutes an illegitimate expansion of the "territorial jurisdiction" standard instituted by Libman, as well as effectively a judicial repeal of section 6 of the Criminal Code, which states that "no person shall be convicted or discharged ... of an offence committed outside Canada." (144). Simply put, how might an offence be legitimately argued, using the Van Breda presumptive factors, to have been committed in Canada so as to give a Canadian court jurisdiction, if none of the actual elements of the offence have a territorial nexus with Canada? Similarly, if Canadian prosecutors had good cause to assume and expect that the "territorial jurisdiction" standard could be legitimately applied in the expansive fashion described above, what was the motivation for Bill S-14 and the imposition of the "nationality jurisdiction" standard? While it might be unfortunate that lawmakers failed to fully appreciate the enforcement difficulties that would follow from not attaching the "nationality jurisdiction" standard to CFPOA offences from the Act's inception, this does not mean that the appropriate remedy is a creative judicial rewrite of section 6 of the Criminal Code with respect to the CFPOA for the application of the "territorial jurisdiction" standard.
B. Asset Acquisitions and the Doctrine of Successor Liability
When a corporation is purchasing the assets of another corporation, the general rule is that the purchasing corporation is not liable for any of the debts and liabilities of the selling company, unless they have been specifically assumed or bargained for in the asset purchase and sale agreement. (145) This segregation of assets from liabilities incurred in connection with the business operation of those assets motivates acquirers' pursuit, in many circumstances, of specific assets rather than the entities that own them. (146)
In the context of liability for corrupt practices, pursuing an asset acquisition rather than the acquisition of the relevant entity therefore represents a risk mitigation strategy employed by potential acquirers; that is, acquirers can choose to acquire only the desired assets and not the entity that currently owns and operates those assets, and which may have attracted an unacceptable amount of actual or potential liability for corrupt practices. Whether or not such a risk mitigation strategy is viable or practical will, of course, depend on the particular circumstances, including the nature of the assets. It should also be noted that, just as purchasers may prefer asset acquisitions, most targets of mergers and acquisitions prefer share dispositions, so pushback on this particular risk mitigation strategy from vendors and targets should therefore be expected. (147)
Importantly, however, the law of successor liability with respect to asset acquisitions in Canada remains an open question. (148) Stated differently, there is at present no guarantee that an asset acquisition taken in place of a share acquisition would successfully evade liability previously attracted by the vendor in connection with the operation of the assets. Rather, there is relatively good indication that Canadian courts would consider conducting a fact-dependent, quasi equity-based investigation to determine whether liability, including anti-corruption liability, should in fact follow the assets to which the liability relates, rather than remaining strictly with the offending party.
The first Canadian court asked to decide whether liabilities may follow assets was the Alberta Court of Queen's Bench in Suncor Inc. v. Canada Wire & Cable Ltd, (149) In Suncor, a fire had occurred at a Suncor facility, leading Suncor to file a civil claim against a number of the engineers and suppliers involved in its construction. Associated Engineering Group Ltd. ("AEGL"), one of the defendants in the claim, applied for summary judgment on the basis that it had not yet been incorporated at the time the alleged contractual breaches and tortious acts had occurred, and that it could not therefore be held liable for these actions. (150) Suncor and two other defendants opposed the application, essentially arguing that a premeditated series of corporate and assets transactions "driven by the desire to avoid liability rather than for various legitimate business reasons" should not be allowed to protect AEGL from liability for wrongdoing. (151)
Unable to rely on substantial Canadian jurisprudence for their position, the respondents turned instead to US case law, particularly the decision of the New Jersey Supreme Court in Ramirez v. Amsted Industries Inc. (152) Discussing what has become known as the doctrine of "successor liability", the court in Ramirez stated that there are four exceptions to the general rule precluding liability for companies who have acquired all of the assets of another corporation. Specifically, the court stated that a company will be liable for the selling corporation's liabilities if the purchasing corporation expressly or impliedly agreed to assume such liabilities, the transaction amounts to a consolidation or merger of the seller and purchaser, the purchasing corporation is merely a continuation of the selling corporation, or the transaction is entered into fraudulently to escape the debts or liabilities of the selling corporation. (153)
The Court of Queen's Bench in Suncor reviewed Ramirez favourably. It held that the Ramirez court's reasoning was "persuasive" and that it was correct to recognize that "the traditional approach [to liability in respect of asset transfers] narrowly emphasized the form rather than the practical effect of a particular corporate transaction." (154) The Suncor court further embraced the holding in Ramirez, reiterating the New Jersey court's summary of US precedent that:
The successor corporation, having reaped the benefits of continuing its predecessor's product line, exploiting its accumulated good will and enjoying the patronage of its established customers, should be made to bear some of the burdens of continuity, namely, liability for injuries caused by its defective products. (155)
Where "such benefits [are] reaped", the Suncor court stated, it would be "improper to allow the form of a transaction to control questions of liability in tort." (156) The court therefore denied AEGL's application, finding that "the corporate liability of successor corporations ... remains an open question in this country" and that "there exists a real possibility that courts in Canada will adopt the reasoning of the successor liability cases in the U.S." (157) Neither was the court convinced by AEGL's argument that the successor liability doctrine espoused in Ramirez was limited to strict liability and product liability claims, holding that "it is not manifestly clear ... that such a limitation is justified." (158)
Importantly, the ruling of the court in Suncor has received favourable treatment on a number of occasions since it was issued. (159) In particular, in 2011, the Ontario Superior Court in Central Sun Mining Inc. v. Vector Engineering Inc. (160) reviewed US case law subsequent to Ramirez to highlight how the doctrine of successor liability has evolved since that pivotal decision, including with respect to how the doctrine treats de facto mergers and situations in which the purchasing corporation is alleged to be a mere continuation of the selling corporation. (161) In this regard, the court highlighted that "the tests for de facto merger and mere continuation have tended to merge," and that four criteria have become "generally accepted" in this context. (162) These criteria are: (i) continuity of ownership between seller and purchaser corporations; (ii) a cessation of ordinary business and dissolution of the predecessor as soon as practically and legally possible; (iii) assumption by the successor of the liabilities ordinarily necessary for the uninterrupted continuation of the business of the predecessor; and (iv) continuity of management, personnel, physical location, assets, and general business operations. (163) The Central Sun court also approved of US courts' finding that "not all of these factors must be present for a finding of mere continuation or de facto merger to be made," but that "the determination of whether a predecessor corporation continues to exist for purposes of successor liability is 'wholly fact specific'." (164) Lastly, the Central Sun court endorsed the argument that the continued existence of the predecessor corporation as a "shell" or "gossamer" form will not prevent the application of successor liability pursuant to the theory of de facto merger or mere continuation, as this would essentially "elevate form over substance". (165)
That said, it is important to keep in mind that it remains to be seen how Canadian courts will approach the doctrine of successor liability in the context of criminal, rather than civil, liability. Ramirez and its progeny all arose in the context of civil litigation, including product liability cases, as well as cases based on creditor claims. (166) The state of the doctrine of successor liability in US law in the criminal context is somewhat "murkier", (167) and, to the author's knowledge, has yet to be considered in any fashion by Canadian courts. To this end, the US administrative decision in Sigma-Aldrich--a decision that has been heavily criticized (168)--is "widely viewed as providing a key successor liability opinion" with respect to FCPA violations. (169) In this case, Sigma-Aldrich Corporation was fined US$1.76 million for violations of export control laws committed by a newly acquired subsidiary prior to the acquisition. The administrative judge held that liability for the violations passed to Sigma-Aldrich pursuant to the "mere continuation", or de facto merger, branch of successor liability. (170) Controversially, in doing so, the judge applied "a broadened 'mere continuation' theory commonly known as the 'substantial continuity' exception, which eliminates the requirement for a continuity of shareholders," and pursuant to which "a literal 'purchase' of assets is not required to establish successor liability so long as there is some form of a 'transfer' of assets." (171) With respect to the determination of whether the subject statutory penalties should be applied to the purchaser of assets rather than to the originally offending entity, the judge considered a number of matters. First, the judge engaged in statutory interpretation, finding that "both the language and intent of the IEEPA and EAR strongly suggest that 'successors' should not be excluded from liability." (172) The judge then affirmed his decision with reference to policy, holding that "successor liability has been imposed to protect the public interest, as well as to prevent the purpose of federal regulations from being circumvented by corporate structuring formalities." (173)
It is unclear whether Canadian law would allow the same bridges to be built, given that, among other limitations, the purpose of the application of the doctrine of successor liability in the context of a CFPOA prosecution would be to punish criminal activity rather than to provide claimants access to otherwise unavailable damages, as is the case in the application of the doctrine in civil proceedings. To this end, it has been argued that the decision of the tribunal in Sigma Aldrich rests upon a misapplication of US law relating to these issues. As explained by Fellmeth:
Federal and state courts applying the doctrine of successor liability have stated consistently that the doctrine is equitable in origin and nature and, therefore, remedial. As such, successor liability is a remedy to be applied only to avoid injustice and not to aid the government in seeking to punish, and especially not to punish wrongs committed by a third party. Absent an express statutory authorization, the Supreme Court has long held that that it will not sustain an action in equity to enforce noncompensatory penalties. Only when applying a statute can a court resort to successor liability to effect a punishment, such as punitive damages, under positive law, and even then courts have attempted to justify the application of the doctrine as compensatory as opposed to punitive. Where the statute upon which the government bases its authority does not provide a legal basis for successor liability and the government seeks noncompensatory damages, courts cannot properly impose liability by fashioning or applying an equitable remedy such as successor liability. (174)
Other possible limitations to the application of the doctrine of successor liability under Canadian law are identifiable. As conceded by both the United States Department of Justice and the Securities and Exchange Commission,
[s]uccessor liability does not ... create liability where none existed before.... [I]f an issuer were to acquire a foreign company that was not previously subject to the FCPA's jurisdiction, the mere acquisition of that foreign company would not retroactively create FCPA liability for the acquiring issuer. (175)
It is only reasonable that the same principle would be applicable under Canadian law in the context of asset acquisitions. If the owner of assets engages in foreign corrupt practices in connection with the operation of those assets but is not subject to the jurisdiction of the CFPOA, it should not be the case that the transfer of the assets to a Canadian corporation results in CFPOA liability for the past corrupt practices attached to the assets. (176)
VII. Corporate Liability for the Corrupt Practices of Subsidiaries
International business transactions are rarely conducted by Canadian companies without the use of one or more international subsidiaries. These international corporate webs are typically the result of risk mitigation strategies, favourable tax regimes, treaty-shopping strategies, or related commercial or administrative considerations. They may also involve a variety of management structures, control schemes, and majority and minority interests. This reality therefore raises the following question: In what circumstances may a Canadian parent be held liable for the corrupt practices of a foreign subsidiary under the CFPOA and the Criminal Code? The question is a weighty one. If Canadian corporations were permitted to avoid liability for foreign corrupt practices through the mere incorporation of a foreign subsidiary, the purpose of the CFPOA would be significantly undermined. (177)
According to the US Department of Justice and the Securities and Exchange Commission, there are several ways in which a parent corporation may be liable for corrupt practices engaged in by a subsidiary:
First, a parent may have participated sufficiently in the activity to be directly liable for the conduct--as, for example, when it directed its subsidiary's misconduct or otherwise directly participated in the bribe scheme. Second, a parent may be liable for its subsidiary's conduct under traditional agency principles. The fundamental characteristic of agency is control. Accordingly, DOJ and SEC evaluate the parent's control--including the parent's knowledge and direction of the subsidiary's actions, both generally and in the context of the specific transaction--when evaluating whether a subsidiary is an agent of the parent. Although the formal relationship between the parent and subsidiary is important in this analysis, so are the practical realities of how the parent and subsidiary actually interact. If an agency relationship exists, a subsidiary's actions and knowledge are imputed to its parent. Moreover, under traditional principles of respondeat superior, a company is liable for the acts of its agents, including its employees, undertaken within the scope of their employment and intended, at least in part, to benefit the company. (178)
Although this summary rests on a number of principles somewhat particular to US law, in practical terms the different avenues to liability of Canadian corporations for the corrupt practices of foreign subsidiaries under the CFPOA and section 22.2 of the Criminal Code are generally similar to what is described above. In fact, it may be the case that Canadian law offers a wider range of means of attributing liability to a corporate parent for the corrupt practices of a foreign subsidiary than does US law.
First, a Canadian corporate parent may be liable for the corrupt practices of a foreign subsidiary if the parent either participated in or directed those corrupt practices. The former may be the case under the Criminal Code's section 22.2(a), which prescribes liability where a senior officer of the parent corporation is a party to an offence (that is, where the senior officer operating within the scope of his or her authority works with the foreign subsidiary to offer or provide an illicit benefit to a foreign public official). The latter may be the case under the Criminal Code's section 22.2(b), where liability arises if a senior officer of the parent directs the subsidiary to engage in the corrupt practices on behalf of the parent. Furthermore, in each case it must be appreciated that the CFPOA prohibits indirect as well as direct corrupt practices, meaning that the corrupt practices a senior officer of the parent participates in or directs may involve a third party or intermediary in addition to the foreign subsidiary.
Second, a Canadian corporate parent may be liable for the corrupt practices of a foreign subsidiary in various instances in which the parent has a less than immediate role in the corrupt practices. This may be the case pursuant to the Criminal Code's section 22.2(c), where liability arises if a senior officer of the parent knows that a foreign subsidiary is engag ing, or is about to engage, in corrupt practices for the benefit of the parent, but the senior officer does not take reasonable measures to prevent the subsidiary from doing so. This may also be the case under section 22.2, which establishes liability where a senior officer of the parent is wilfully blind to corrupt practices in which a foreign subsidiary engages for the benefit of the parent. Again, in each case, the CFPOA's prohibition of both direct and indirect corrupt practices must be appreciated. This prohibition means that the senior officer's wilful blindness or failure to take preventative measures may involve a third party or intermediary other than, or in addition to, the foreign subsidiary.
Third, section 5(1) of the CFPOA, added to the Act by Bill S-14, expands the means through which a Canadian corporate parent may be found complicit in corrupt practices undertaken by a foreign subsidiary. It provides that where a Canadian corporation engages in a conspiracy or attempt to commit, is an accessory after the fact in relation to, or provides counselling in relation to an offence found in either section 3(1) or section 4(1) of the CFPOA, any such acts or omissions by the corporation, wherever committed, shall be deemed to have occurred in Canada. (179) This essentially has the effect of expanding the nationality jurisdiction standard associated with direct contraventions of the CFPOA to various adjunct offences under the Criminal Code. The result is that a Canadian corporate parent cannot avoid various forms of liability for its complicity in corrupt practices that its foreign subsidiarity engages in merely on the basis that such complicity is grounded in actions taken by the parent and its senior officers outside of Canada.
These forms of attributing liability to a Canadian corporate parent for the corrupt practices of its foreign subsidiary are not without areas of uncertain application. For example, at what point should a court find that a senior officer is engaging in corrupt practices for the benefit of the parent (as is required by the introductory language of section 22.2 of the Criminal Code,), rather than for the benefit of the foreign subsidiary? Or does this distinction not matter, if it is arguable that any benefit to the Canadian parent, even if secondary in nature to that of the benefit enjoyed by the foreign subsidiary, is sufficient to attach liability to the parent under section 22.2? That said, it remains the case that the combination of section 3(1) of the CFPOA and its prohibition of both direct and indirect corrupt practices, sections 22.2(a), 22.2(b), and 22.2(c) of the Criminal Code, and the doctrine of wilful blindness together operate to provide Canadian federal authorities with a multiplicity of means through which to hold a Canadian corporate parent liable for corrupt practices engaged in by its for- eign subsidiary. In fact, considered in conjunction with the provisions in sections 21 and 22 of the Criminal Code (which describe liability attached to attempts, common intention, aiding and abetting, and counselling accessory parties) and the application of nationality jurisdiction rather than territorial jurisdiction to such offences by virtue of the CFPOA's section 5(1), the result is an often overlapping statutory web of prohibitions under which a Canadian parent may attract criminal liability in connection with the corrupt practices of a subsidiary, whether before, during, or following the actual commission of such corrupt practices.
This is particularly true given the Ontario Superior Court's expansive interpretation of the CFPOA's section 3(1) in Karigar. The defendant in that case argued that that the word "agrees" in the section's phrase "directly or indirectly gives, offers or agrees to give or offer" should be given its "ordinary meaning" to connote "the agreement of two people--one to pay a bribe and one to receive said bribe." (180) The Crown, on the other hand, argued that "inc[h]oate offences, in particular a conspiracy to pay bribes ... constitutes a violation of the Act." (181) Justice Hackland agreed with the Crown, holding first that "the use of the term 'agrees' imports the concept of conspiracy" into the CFPOA, and second, that such conspiracy need not include a foreign public official: that is, that the CFPOA is contravened where the agreement is merely between business associates. (182) In his reasons, Justice Hackland implied that an "agreement" or "conspiracy" to engage in corruption need not necessarily involve or identify a particular foreign public official. (183) In the context of foreign corrupt practices contemplated by international corporate "families", this interpretation of the CFPOA's section 3(1) means that a Canadian parent will have violated the Act simply where it can be said to have "agreed" with a foreign subsidiary to engage in the corruption of a foreign public official, even if no specific foreign public official was selected or nominated, and the plan was never actually put into effect. (184)
Given this already wide net of liability cast by the interaction of the CFPOA, the Criminal Code, and the ruling of the Ontario Superior Court in Karigar, it is noteworthy that yet an another avenue of parental liability for a subsidiary's actions is sometimes discussed in relation to the enforcement of anti-corruption laws--that of piercing the corporate veil. (185) This doctrine is an exception to the fundamental rule of corporate law that a parent corporation will not be held liable for the acts of its subsidiaries (even where the subsidiary is wholly owned). (186) The doctrine may be found to apply, inter alia, where the subsidiary is completely dominated and controlled by its parent and is being used as a shield for a fraudulent or improper purpose, (187) or where the subsidiary is a mere agent, puppet, single enterprise with, or alter ego of the parent corporation. (188) Interestingly, it may be reasonable to argue that each of these avenues may be available to "pierce the corporate veil" to attribute foreign corrupt practices committed by a foreign subsidiary to a Canadian parent, depending on the circumstances.
In the case in which a Canadian parent incorporates a foreign subsidiary with the intent of using the subsidiary to commit corrupt acts abroad and in the hope of insulating itself from liability under the CFPOA, a Canadian court could be justified in piercing the corporate veil to hold the parent directly liable for the ensuing corrupt acts of the subsidiary. The court could reasonably find both that the subsidiary was a sham from the outset, and that there was an improper purpose in the mind of the corporate parent. In the case where the subsidiary is the puppet of the parent corporation, a Canadian court could be justified in piercing the corporate veil to hold a parent directly liable for the corrupt acts of its subsidiary pursuant to the "alter ego" doctrine where the subsidiary is "organized and operated as a mere tool or conduit" of the parent, (189) lacking any inde- pendent mind, operations, finances, or resources devoted to its international operations and associated foreign corrupt practices.
Nonetheless, there exist at least two reasons why reliance on the doctrine of piercing the corporate veil should not be the first port of call for Crown prosecutors seeking to attribute the corrupt practices of a foreign subsidiary to a Canadian parent. The first is that, as is the case with the doctrine of successor liability with respect to asset acquisitions, the doctrine of piercing the corporate veil has historically only been analyzed and applied in Canadian law in relation to civil causes of action and remedies, rather than in relation to criminal liability. As such, it is again questionable whether it would be appropriate under Canadian law to apply a doctrine typically employed to prevent a claimant from being deprived of her rights in a civil context (for example, through the award of monetary damages) for the purpose of preventing the Crown from being deprived of its ability to prosecute criminal sanctions. (190) The second reason is that Canadian and English courts appear to be reaching consensus that the doctrine of piercing the corporate veil should only be applied if there is no alternative remedy available to assist an aggrieved party. (191) Considered in light of the various other means of attributing corrupt practices of a foreign subsidiary to a Canadian parent, this suggests that Canadian courts may hesitate to resort to this doctrine where alternative means to the same end are available. (192)
For a number of different reasons, investigations and prosecutions of corporations for foreign corrupt practices tend to end early and in plea agreements, with very few cases proceeding to judicial consideration and determination. These reasons include the fact that that corporations and their shareholders generally prefer to put criminal controversies behind them as soon as reasonably possible, rather than endure prolonged court battles and the steady stream of headlines that accompany such battles. Moreover, corporations, unlike individuals, cannot be imprisoned. As a result, as noted by the United States Federal Court, "there [have] been surprisingly few decisions throughout the country on the FCPA over the course of the last thirty years." (193) There is no reason to believe that things will be markedly different in Canada. The guilty pleas of Niko Resources and Griffiths International Energy can only support this assumption.
In contrast, given that individuals charged with foreign corrupt practices do face significant terms of imprisonment, they have a far greater incentive to vigorously contest any corruption charges levied against them. To this end, it is reasonable to expect that, going forward, a greater number of foreign corrupt practices court decisions will relate to charges levied against individuals rather than against corporations. The last five years have witnessed a patent increase in the number of prosecutions against individuals under the FCPA by the US Department of Justice. With prosecutions of a number of SNC-Lavalin executives likely to follow the conviction of Nazir Karigar, Canadian authorities appear to be no less dedicated to this pursuit.
Such case law will continue to provide valuable insight into the scope and substance of the CFPOA's prohibitions and related areas of law (for example, the application of the doctrine of willful blindness in the context of foreign corrupt practices). However, these cases are unlikely to touch either frequently or meaningfully on legal questions of particular significance to Canadian corporations, including but not limited to the appropriate application of section 22.2 of the Criminal Code in the context of foreign corrupt practices and the potential application of the doctrine of successor liability to asset acquisitions in the context of criminal proceedings. This is less than ideal. Uncertain application of anti-corruption law can easily result in managerial inefficiencies, increased compliance costs, and the misallocation of resources. It can also create an unnecessary chill on international transactions, decreased Canadian involvement in emerging markets, and decreased competition in those economies that foreign anti-corruption law is partly intended to benefit. Further discussion and deliberation on these issues at academic, policy, and professional levels is therefore worthwhile, and would likely be welcomed by Canadian corporations and enterprises.
(1) Corruption of Foreign Public Officials Act, SC 1998, c 34 [CFPOA],
(2) See Julian Sher, "OECD slams Canada's lack of prosecution of bribery offences" The Globe and Mail (28 March 2011) online: The Globe and Mail <www.theglobeandmail. com/report-on-business/economy/oecd-slams-canadas-lack-of-prosecution-of-bribery-offences/article580736/>.
(3) See Theresa Tedesco, "OECD praises Canada's anti-corruption efforts" Financial Post (27 May 2013) online: Financial Post <business.financialpost.com/2013/05/27/oecd-praises-canadas-anti-corruption- efforts/>.
(4) See Greg McArthur, "Niko Resources: Ottawa's corruption test case" The Globe and Mail (25 August 2011) online: The Globe and Mail <www.theglobeandmail.com/report-on-business/rob-magazine/niko- resources-ottawas-corruption-test-case/article542842/>.
(5) On 25 January 2013, Griffiths International Energy Inc. was convicted of bribing the Chadian Ambassador to Canada in connection with Griffiths' pursuit of oil and gas assets in that country. See Carrie Tait, "Griffiths to pay millions in African bribery case" The Globe and Mail (22 January 2013) online: The Globe and Mail <www. theglobeandmail.com/report-on-business/industry-news/energy-and-resources/griffiths-to-pay-millions-in-african- bribery- case/article7622364/>. SNC-Lavalin has, since 2012, been under investigation by Canadian and other international authorities in connection with its operations in numerous jurisdictions, including Libya and Bangladesh. See Greg McArthur & Claudio Gatti, "SNC bribery probe widens to Algeria" The Globe and Mail (21 February 2013) online: The Globe and Mail <www.theglobeandmail.com/ report-on-business/snc-bribery-probe-widens-to-algeria/article8907906/>. SNC-Lavalin is also defending a class action against investors in connection with alleged non-compliance with securities law. See "SNC-Lavalin Group Inc. Securities Class Actions", CNW (7 February 2013) online: <www.newswire.ca/en/story/1110773/snc-lavalin-groupinc-securities-class-actions>. As of 7 January 2014, however, only individuals at SNC-Lavalin have been charged.
(6) Note that Canadian companies with US subsidiaries that have international operations, as well as companies that are either listed or dual-listed on a US stock exchange, will likely be far more familiar with such considerations due to the comparatively longstanding active enforcement by US federal officials of the Foreign Corrupt Practices Act (15 USC [section] 78dd-l (2012) [FCPA]). Note also that British companies have been experiencing a similar learning curve thanks to the recent passage of the Bribery Act 2010 ((UK), c 23).
(7) Bill S-14, An Act to amend the Corruption of Foreign Public Officials Act, 1st Sess, 41st Pari, 2013 (assented to 19 June 2013), SC 2013, c 26 [Bill S-14],
(8) See John W Boscariol, Brenda C Swick & Zachary Masoud, "Canada Announces New Initiative for Disclosure of Payments to Governments" (13 June 2013) online: McCarthy Tetrault <www.mccarthy.ca/article_detail.aspx?id=6334>.
(9) RSC 1985, c C-46 [Criminal Code],
(10) Canada, Department of Justice, The Corruption of Foreign Public Officials Act: A Guide (Ottawa: Department of Justice, May 1999) [CFPOA Guide] at 3.
(11) CFPOA, supra note 1, s 3(1).
(12) Bill S-14, supra note 7, cl 4.
(13) CFPOA, supra note 1, s 4(1). Note that a violation of the books and records provision of the CFPOA may also attract habihty under substantively similar provisions of the Criminal Code, supra note 9, including sections 361 (false pretences), 380 (fraud), and 397 (falsification of books and documents).
(14) Bill C-45, An Act to amend the Criminal Code (criminal liability of organizations), 2d Sess, 37th Pari, 2003, cl 22.2 (assented to 7 November 2003), SC 2003, c 21.
(15) Criminal Code, supra note 9, s 22.2 [emphasis added],
(16) See Kent Roach, Criminal Law, 5th ed (Toronto: Irwin Law, 2012) at 231-32; see also Halsbury's Laws of Canada--Business Corporations (McGuinness) (2013 Reissue, Lexis-Nexis) [Halsbury's] at HBC-32.
(17) Ibid at HBC-32. See also Roach, supra note 16 at 232; Canada, Department of Justice, A Plain Language Guide: Bill C-45--Amendments to the Criminal Code Affecting the Criminal Liability of Organizations, online: Department of Justice <www.justice.gc.ca/ eng/rp-pr/other-autre/c45/c45.pdf> at 3 [Bill C-45 Guide].
(18) Rhone (The) v Peter AB Widener (The),  1 SCR 497 at 521, 101 DLR (4th) 188 [Rhone], See also Canadian Dredge & Dock Co u The Queen,  1 SCR 662, 19 DLR (4th) 314 [Dredge & Dock],
(19) Bill C-45 Guide, supra note 17 at 2. See also Norm Keith, Corporate Crime and Accountability in Canada: From Prosecutions to Corporate Social Responsibility (Markham, ON: LexisNexis Canada, 2011) ("a growing consensus determined that the identification theory was inadequate to address the modern, complex corporation" at 46); Roach, supra note 16 at 232-33.
(20) Bill C-45 Guide, supra note 17 at 5.
(21) Ibid at 5. See also Roach, supra note 16 at 235--36; R u Tri-Tex Sales & Services Ltd,  NJ No 230 (QL) at para 42, 70 WCB (2d) 512 (NL Prov Ct) [Tri-Tex], in which the court describes Bill C-45 and section 22 of the Criminal Code as having effected "a fundamental change, if not a revolution, in corporate criminal liability' (quoting The Hon Todd L Archibald, Kenneth E Jull & Kent W Roach, Regulatory and Corporate Liability: From Due Diligence to Risk Management, looseleaf (consulted on 31 January 2014), (Toronto: Canada Law Book, 2013) vol 1 at 5:10 [Archibald et al]).
(22) Bill C-45 Guide, supra note 17 at 5.
(24) Ibid at 7. Section 22.2(a) has been called a "codification of the common law identification theory" (ibid). See also Keith, supra note 19 at 72; Paul Dusome, "Criminal Liability under Bill C-45: Paradigms, Prosecutors, Predicaments" (2008) 53 Crim LQ 98 at 128.
(25) Note also that under section 22.2(a) the "senior officer does not necessarily have to [be] the person who actually commits the offence." This is because section 22.2(a) only requires that the senior officer "is a party to the offence," which may include aiding and abetting under sections 21(b) and 21(c), common unlawful intent under section 21(2), and counselling the commission of an offence under section 22. Therefore, a corporation may be "hable for a subjective intent offence under section 22.2(a) on the basis that its senior officer intentionally assisted or counselled a representative of the corporation to commit the offence" (Roach, supra note 16 at 240). Note also that section 3(1) of the CFPOA, supra note 1, captures both direct and indirect corrupt practices.
(26) For further discussion of the doctrine of wilful blindness, see Part VI, below.
(27) Note that it has been argued that section 22.2(b) is largely redundant, as it essentially duplicates what is already achieved by section 22(1) of the Criminal Code. See supra note 25; Roach, supra note 16 at 240-41; Darcy L MacPherson, "Extending Corporate Criminal Liability?: Some Thoughts on Bill C-45" (2003) 30:1 Man LJ 253 at 261.
(28) See Bill C-45 Guide, supra note 17 at 7; Dusome, supra note 24 at 128.
(29) Tri-Tex, supra note 21 at para 39. Note, however, that the allegation that a bookkeeper qualified as a senior officer was not contested by the company.
(30) Rv Metron Construction Corp, 2012 ONCJ 506 at para 15, 1 CCEL (4th) 266, affd 2013 ONCA 541 (available on CanLII) [Metron], citing MacPherson, supra note 27 at 259.
(31) Metron, supra note 30 at para 2. Note, however, that whether the site supervisor qualified as a senior official was not contested and that the Crown and the defendant had agreed that this standard was satisfied by the facts at hand. See ibid at para 7.
(32) R v Petroles Global Inc, 2013 QCCS 4262 (available on Azimut), leave to appeal to CA granted, 2013 QCCA 1604.
(33) Ibid at paras 42-43.
(34) Note that the Quebec Court of Appeal did not go on to determine whether the two territorial managers also qualified as senior officers (see ibid at para 211).
(35) R v Niko Resources Ltd, 2011 CarswellAlta 2521, 101 WCB (2d) 118 (Alta QB) [Niko Resources], Note that the guilty plea and conviction does not expressly address which individuals within the company constituted senior officers for the purposes of the company's criminal liability.
(36) Rv Griffiths Energy International,  AJ No 412 (QL), Action No 130057425Q1 (AB QB). As in Niko Resources, neither the agreed statement of facts nor the conviction deal in any meaningful detail with which individuals qualified as senior officers of the company for the purposes of the company's criminal liability.
(37) Criminal Code, supra note 9, s 2.
(38) Rhone, supra note 18; Dredge & Dock, supra note 18.
(39) MacPherson, supra note 27 at 262. See also Tri-Tex, supra note 21 at para 43.
(40) MacPherson, supra note 7 at 262.
(41) Archibald et al, supra note 21 at 17:30:70. See also Keith, supra note 19 at 74.
(42) Archibald et al, supra note 21 at 17:30:70.
(43) Ibid at 17:30:20. MacPherson, for his part, suggests that the standard should, at the very least, be greater than that of recklessness, but also recognizes judicial authority to support the contrary position (supra note 27 at 267).
(44) Archibald et al, supra note 21 at 17:20:20. See also ibid at 17:30:70 and Roach, supra note 16 at 242.
(45) Archibald et al, supra note 21 at 17:20:10 [emphasis added]. See also 17:30:20. Similarly, Roach notes that the "reasonable measures" element of section 22.2(c) is "quite close to the due diligence requirement for strict liability offences[,] and courts may well look to the multiple factors that are relevant in determining due diligence in order to determine whether a senior officer took all reasonable steps to prevent a representative from committing or continuing to commit the offence" (supra note 16 at 242).
(46) Archibald et al, supra note 21 at 17:30:30.
(47) FCPA, supra note 6.
(48) In 2009, for example, Halliburton and Kellogg Brown & Root agreed to pay US$579 million in combined penalties, which was one of the largest FCPA settlements to date. The companies' transgressions related to US$6 billion in liquefied natural gas construction contracts in Nigeria. According to the United States Securities and Exchange Commission, the "bribery scheme" included both senior corporate executives and senior Nigerian officials "who took actions to insulate themselves from the reach of U.S. law enforcement." The companies entered into "sham contracts with two agents" to "conceal the illicit payments" and "funnel money to Nigerian public officials." Other records were deliberately falsified. The companies had also formed a "cultural committee' to decide how to carry out the bribery scheme." This included payments to two agents in excess of US$180 million, payments to high-ranking Nigerian officials funnelled through a United Kingdom agent, and payments to lower-ranking Nigerian officials funnelled through a Japanese agent (United States Securities and Exchange Commission, Press Release, 2009-23, "SEC Charges KBR and Halliburton for FCPA Violations" (11 February 2009) online: US Securities and Exchange Commission <www.sec.gov/news/press/2009/200923.htm>).
(49) In 2006, the Securities and Exchange Commission brought cease and desist proceedings against Oil States International, Inc. in connection with alleged violations of the books and records provisions of the FCPA relating to certain payments made by a wholly owned subsidiary of the company to Petroleos de Venezuela, SA (PDVSA), the state-owned Venezuelan oil and gas company. In 2000, the subsidiary, an operator of specially designed oil and gas rigs, hired a Venezuelan consultant to "interface with employees of PDVSA" on its behalf "in the field and at the office level" and to "follow up on daily operations, translate information into Spanish, write up tickets in accordance with PDVSA requirements and submit [the subsidiary's] invoices to PDVSA for payment." Although the consultant "was not involved in the solicitation to obtain business on behalf of [the subsidiary], and only worked on the [referenced] operational matters", in late 2003 the consultant "was approached by three PDVSA employees about a proposed 'kickback' scheme" pursuant to which the consultant would "submit inflated bills to [the subsidiary] for his services and kickback the excess to the PDVSA employees." Should the consultant not agree to the proposed scheme, the PDVSA employees threatened to stop or delay the subsidiary's work. "After learning of the proposed scheme from the Consultant," employees of the subsidiary "acceded to and facilitated the improper activity" (Re Oil States International, Inc (27 April 2006), File No 3-12280, online: <www. sec.gov/litigation/admin/2006/34-53732.pdf> (Order Instituting Cease-and-Desist Proceedings, Making Findings, and Imposing a Cease-and-Desist Order pursuant to Section 21C of the Securities Exchange Act of 1934) at 2-3).
(50) See Keith, supra note 19 at 41, 59, 63, 78.
(51) Archibald, supra note 21 at 17:10, 17:60, referring to, inter alia, Niko Resources, supra note 35. See also John Boscariol, "Anti-Corruption Compliance Message Received?: Risk Assessment Is Your Next Step" Mining Prospects Law Blog (13 August 2012), online: McCarthy Tetrault <www.miningprospectslawblog.com/2012/08/13/anti-corruptioncompliance-message-received-risk- assessment-is-your-next-step>.
(53) See Archibald, supra note 21 at 17:60:10. Other important components of anticorruption policies and procedures may include compensation schemes that reward compliance or strictly discipline non-compliance (ibid at 17:60:20). See also the probation order of the Court in Niko Resources, supra note 35 at para 21.
(54) See Archibald, supra note 21 at 17:30:10, referring to the Ontario Court of Appeal decision in R v Brampton Brick Ltd (2004), 189 OAC 44 at para 28, 62 WCB (2d) 501 (Ont CA) [Brampton], where, further to an appeal of the conviction of Brampton Brick under the Ontario Occupational Health and Safety Act, RSO 1990, c O.l (for the failure to "take every precaution reasonable in the circumstances for the protection of a worker," ibid, s 25(2)(h)), the court held that "[t]he employer must show it acted reasonably with regard to the prohibited act alleged in the particulars [and] not some broader notion of acting reasonably: R. v. Kurtzman (1991), 50 O.A.C. 20; 66 C.C.C. (3d) 161 (C.A.)" (Brampton, supra note 54 at para 28).
(55) Archibald, supra note 21 at 17:30:10 [emphasis in original]. Compare the approach of the Court in Ontario (Ministry of Labour and Ministry of the Environment) v Sunrise Propane Energy Group Inc, 2013 ONCJ 358 at paras 363-68, 77 CELR (3d) 1, in which it was held that, in the case of an inherently dangerous activity, a successful due diligence defence must demonstrate that a preventative system was in place to guard against harm, whether or not it was possible to predict the exact manner in which the harm would occur.
(56) Archibald, supra note 21 at 17:20:20, 17:30:10.
(57) Ibid at 17:30:10, referring to Chris Guthrie, Jeffrey J Rachlinski & Andrew J Wistrich, "Inside the Judicial Mind" (2001) 86:4 Cornell L Rev 777 at 811.
(58) Archibald, supra note 21 at 17:30:10, referring also to R v Roks, 2011 ONCA 526 at paras 135-37, 274 CCC (3d) 1.
(59) Archibald, supra note 21 at 17:30:10.
(60) See Eileen Skinnider, "Corruption in Canada: Reviewing Practices from Abroad to Improve Our Response" (March 2012), online: International Centre for Criminal Law Reform and Criminal Justice Policy <icclr.law.ubc.ca/sites/icclr.law.ubc.ca/files/publications/ pdfs/Final%20Paper%20Corruption-09%20May%202012.pdf> at 15-17, discussing the "affirmative compliance" defence available in certain jurisdictions and referring, inter alia, to Ellen S Podgor, "A New Corporate World Mandates a 'Good Faith' Affirmative Defence" (2007) 44:4 Am Crim L Rev 1537; Mike Koehler, "Revisiting a Foreign Corrupt Practices Act Compliance Defense" (2012) 2 Wis L Rev 609.
(61) Generally speaking, an "affirmative compliance" defence provides that a corporation will not be held hable for a contravention of anti-corruption law by an employee or agent if the corporation established procedures reasonably designed to prevent and detect such contraventions by its employees and agents. Arguments supportive of such a defence include that it provides incentives for corporate compliance; "contributes to a more consistent, transparent, and predictable application of the defence ... [;] can increase public confidence in enforcement actions ... [;] and allow[s] enforcement authorities to better allocate its [investigative and prosecutorial] resources" (Skinnider, supra note 60 at 16-17).
(62) See Mike Koehler, 'The FCPA, Foreign Agents, and Lessons from the Halliburton Enforcement Action" (2010) 36:2 Ohio NUL Rev 457 at 459 [Koehler, "Foreign Agents"] (citing Lisa Middlekauff, "To Capitalize on a Burgeoning Market?: Issues to Consider before Doing Business in the Middle East" (2008) 7:2 Rich J Global L & Bus 159 at 170).
(63) See Koehler, "Foreign Agents", supra note 62 at 459; Michael Hwang & Kevin Lim, "Corruption in Arbitration--Law and Reality' (2012) 8:1 Asian International Arbitration Journal 1 at 26, 39-44.
(64) See Koehler, "Foreign Agents", supra note 62 at 459.
(65) Ibid at 459-60, 470-71.
(66) Paul Michael Blyschak & John W Boscariol, "Understanding and Mitigating Your Third Party Corruption Risk Under Canada's Corruption of Foreign Public Officials Act" (22 January 2013), online: McCarthy Tetrault <www.mccarthy.ca/article_detail. aspx?id=6146>.
(67) CFPOA Guide, supra note 10 at 3.
(68) R v Sault Ste Marie,  2 SCR 1299 at 1309, 85 DLR (3d) 161.
(69) R v Briscoe, 2008 ABCA 327, 437 AR 301 [Briscoe ABCA],
(70) R v Briscoe, 2010 SCC 13,  1 SCR 411 [Briscoe SCC].
(71) Briscoe ABCA, supra note 69 at para 16.
(72) Ibid at para 16, citing R v Sansregret,  1 SCR 570, 17 DLR (4th) 577 [Sansregret cited to SCR],
(73) Ibid at 570.
(74) Briscoe ABCA, supra note 69 at para 21.
(76) Ibid, citing R v Duong (1998), 39 OR (3d) 161 at para 23, 108 OAC 378 (CA).
(77) Briscoe SCC, supra note 70 at para 21.
(78) Ibid at para 23, citing Glanville Williams, Criminal Law: The General Part, 2d ed (London: Stevens & Sons, 1961) at 159 [emphasis in Briscoe SCC, added by the Court].
(79) Briscoe SCC, supra note 70 at para 20 [emphasis in original].
(80) Ibid at para 22, citing Sansregret, supra note 72 at 584 [emphasis in Briscoe SCC, added by the Court].
(81) Briscoe SCC, supra note 70 at para 24, citing Don Stuart, Canadian Criminal Law: A Treatise (5th ed) (Toronto: Carswell, 2007) at 241.
(82) United States u Kozeny, 667 F (3d) 122 (2011), 87 Fed R Evid Serv 104 [Kozeny cited to
(83) Ibid at 127. 1
(84) Ibid at 126.
(85) Ibid at 127.
(87) Ibid at 127-28.
(88) Ibid at 128.
(90) Ibid at 128-29.
(91) Ibid at 130.
(93) Ibid at 132.
(95) Ibid at 133.
(97) Ibid at 134.
(98) Ibid at 135.
(99) Blyschak & Boscariol, supra note 66.
(101) Transparency International, for example, is a well-regarded non-governmental organization that publishes an annual corruption perception index rating and ranking countries based on their responses to questionnaires completed by individuals and companies operating in their subject jurisdictions. See Transparency International Canada, Inc, online: <<transparency.ca/1-Overview/index.htm>. Industries in which corruption practices are generally considered to be of greater prevalence, include mining and resources, energy, telecommunications, defence, healthcare, and pharmaceuticals. See also Blyschak & Boscariol, supra note 66.
(102) See Hwang & Lim, supra note 63.
(103) See Blyschak & Boscariol, supra note 66. Potential advantages offered by such agents include, but are not limited to, proficiency in applicable local languages and the ability to conduct in-person interviews or on-site visits.
(104) See ibid. For an example of a model international consultant agreement with robust anti-corruption representations, warranties, rights and covenants, see the Association of International Petroleum Negotiators, 2008 Consultant Agreement for Business Development in a Host Country, online: AIPN <www.aipn.org>.
(106) See Skinnider, supra note 60 at 17.
(107) Kozeny, supra note 82 at 133.
(109) Blyschak & Boscariol, supra note 66.
(110) Ibid. See also Robert W Tarun, The Foreign Corrupt Practices Act Handbook: A Practical Guide for Multinational General Counsel, Transactional Lawyers and White Collar Criminal Practitioners, 2d ed (United States: American Bar Association, 2012) at 91-92.
(111) Archibald et al, supra note 21 at 17:20:20.
(112) Blyschak & Boscariol, supra note 66.
(113) Archibald et al, supra note 21 at 17:30:70.
(114) Blyschak & Boscariol, supra note 66.
(115) See Daniel J Grimm, "The Foreign Corrupt Practices Act in Merger and Acquisition Transactions: Successor Liability and Its Consequences" (2010) 7:1 NYU JL & Bus 247 at 305-22.
(116) See ibid; see also Jeff Gray, "Bribery concerns scupper resource mergers" The Globe and Mail (27 June 2013), online: The Globe and Mail <www.theglobeandmail. com/report-on-business/industry-news/the-law-page/bribery-concerns-scupperingresource-mergers/article12831990>.
(117) See Christopher C Nicholls, Mergers, Acquisitions, and Other Changes of Corporate Control (Toronto: Irwin Law, 2007) at 56. The law firm used by the purchaser was in the practice of incorporating and holding shelf corporations that could be easily offered to clients when needed on an expedited basis.
(118) See e.g. Alberta Business Corporations Act, RSA 2000, c B-9, s 186; Ontario Business Corporations Act, RSO 1990, c B.16, s 179.
(119) CFPOA, supra note 1, s 5(1).
(120) See Parliamentary Information and Research Service, Legislative Summary of Bill S14: An Act to amend the Corruption of Foreign Public Officials Act by Robin MacKay (Ottawa: Library of Parliament, 2013) [Legislative Summary],
(121) The jurisdictional amendments effected to the CFPOA by Bill S-14 are not retrospective in application. See R v Karigar, 2013 ONSC 5199 (available on CanLII) at para 35 [Karigar].
(122) Archibald et al, supra note 21 at 17:30:90. See also Neil Campbell, Elisabeth Preston & Jonathan O'Hara, "Foreign Corrupt Practices--The Growth and Limitations of Canadian Enforcement Activity' (2013) 23:1 Ind Int'l & Comp L Rev 35 at 43, where the authors note that "[fjoreign corrupt practices inherently involve cross-border activity [Campbell et al].
(123) CFPOA Guide, supra note 10 at 7, citing R v Libman,  2 SCR 178, 21 DLR (4th) 174 [Libman], As Campbell et al note, section 6(2) of the Criminal Code "expresses the default position that Canada will not assert jurisdiction over an offense which occurs outside Canada" (supra note 122 at 45).
(124) Libman, supra note 123 at 181.
(125) Ibid at 182.
(126) Ibid at 212-13.
(127) Ibid at 211.
(128) Campbell et al, supra note 122 at 46. Evidence assembled by the authors in support of this proposition includes that the Canadian Competition Bureau "regularly asserts jurisdiction over international cartels that involve direct or even indirect sales to Canadian customers on the basis that such transactions have a real and substantial link to Canada; Canadian courts have accepted numerous guilty pleas on this basis" (ibid). See also Gerald Chan & Nader R Hasan, "The Corruption of-Foreign Public Officials Act and Canada's Expanding Jurisdiction Under the 'Real and Substantial Link' Test" (2012) 1:4 Commercial Litigation and Arbitration Review 57 ("[t]he Supreme Court of Canada's definition of 'real and substantial link' has evolved to the point where it is virtually coterminous with nationality jurisdiction" at 58).
(129) Karigar, supra note 121 at paras 40-42.
(130) Ibid at para 38.
(131) Ibid at para 39.
(132) Ibid at para 40.
(133) Ibid at para 39.
(135) Libman, supra note 123 at 213 [emphasis added].
(136) Ibid at 211.
(137) Ibid at 213.
(138) Karigar, supra note 121 at para 39.
(139) Legislative Summary, supra note 120 at 7.
(140) Karigar, supra note 121 at para 39.
(141) Morguard Investments Ltd v Be Savoye,  3 SCR 1077 at 1107, 76 DLR (4th) 256.
(142) 2012 SCC 17 at para 90,  1 SCR 572.
(143) Chan & Hasan, supra note 128 at 60. The authors also make a number of policy-based arguments that the "real and substantial link" test "should be applied less restrictively in the anti-bribery context than in other contexts" (ibid).
(144) Criminal Code, supra note 9, s 6 [emphasis added].
(145) See Central Sun Mining Inc v Vector Engineering Inc, 2011 ONSC 1439 at para 27 (available on CanLII) [Central Sun], See also Comineo Ltd v Westinghouse Canada (1981), 33 BCLR 202, 1 WWR 640 (SC).
(146) See Nicholls, supra note 117 at 55.
(148) See Wayne D Gray, "Creditors, Losers Under CBCA Reform but Winners in Judge-Made Corporate Law" (2003) 39 Can Bus LJ 92 at 135, n 166.
(149) Suncor Inc u Canada Wire & Cable Ltd,  3 WWR 630, 15 CPC (3d) 201 (AB QB) [Suncor cited to WWR],
(150) Ibid at para 7.
(151) Ibid at para 17.
(152) Ramirez v Amsted Industries Inc, 171 NJ Super 261, 408 A.2d 818 (NJ Super 1979).
(153) Ibid at 268-69.
(154) Suncor, supra note 149 at para 25.
(155) Ibid, citing Ramirez, supra note 152 at 817.
(156) Suncor, supra note 149 at para 25.
(157) Ibid at para 26.
(158) Ibid at para 27.
(159) See Winnipeg Condominium Corp No 36 v Bird Construction Co,  2 WWR 370, 132 Man R (2d) 32 (QB); Caranci v Huckerby,  OTC 374 (available on CanLII) (ON SC); Parlette v Sokkia (2006), 151 ACWS (3d) 1059 (available on CanLII) (ON SC), aff'd Parlette v Sokkia (2007), 221 OAC 11, 46 CCLT (3d) 161.
(160) Central Sun, supra note 145.
(161) Ibid at paras 39-47.
(162) Ibid at para 40.
(164) Ibid at paras 42-44, referring to Milliken & Co v Duro Textiles, 451 Mass 547, 887 NE (2d) 244, (Mass Sup Ct 2008) [Milliken cited to Mass].
(165) Central Sun, supra note 143 at para 45, citing Milliken, supra note 164 at 559.
(166) See Grimm, supra note 115 at 285, referring to United States v Mexico Feed & Seed Co, 980 F (2d) 478 at 487 (8th Cir 1992).
(167) Grimm, supra note 115 at 286.
(168) See ibid at 289-91; Aaron Xavier Fellmeth, "Cure Without a Disease: The Emerging Doctrine of Successor Liability in International Trade Regulation" (2006) 31 Yale J Int'l L 127 at 151.
(169) Ibid at 287-92, referring to Re Sigma-Aldrich Business Holdings (29 August 2002), 01BXA-06, 01-BXA-07, 01-BXA-ll, [archived online at: United States Department of Commerce, Bureau of Industry & Security <web.archive.org/web/20130315213655/ https://www.bis.doc.gov/enforcement/casesummaries/sigma_aldrich_alj_decision_02.pdf.] [Sigma-Aldrich]; see also Peter D Trooboff, "Successor Liability" National Law Journal (4 April 2005), online: National Law Journal <www.nlj.com>; Carolyn Lindsey, "More Than You Bargained For: Successor Liability Under the U.S Foreign Corrupt Practices Act" (2009) 35:3 Ohio NUL Rev 959 at 965-68; John Barker, Ronald Lee & Michael Ginsberg, "Buyer Beware; Successor Liability for Export Violations and Due Diligence Measures to Identify and Mitigate Deal Risks" (2007) 11:3 The M&A Lawyer 1.
(170) Sigma-Aldrich, supra note 169 at 12-13.
(171) Ibid at 9, referring to, inter alia, Gould, Inc v A & M Battery and Tire Service, 950 F Supp 653 (MD Pa 1997). Furthermore, though the "substantial continuity exception" requires "knowledge of potential liability on the part of the successor corporation," the judge held that "it is easy to infer knowledge or notice when the successor holds itself out as the continuation of the previous enterprise by retaining the same employees, the same supervisory personnel, the same production facilities in the same location, produces the same product, and maintains continuity of assets and the general business operations" (Sigma-Aldrich, supra note 169 at 9-10).
(172) Ibid at 7.
(173) Ibid at 11.
(174) Fellmeth, supra note 168 at 175.
(175) US Department of Justice & US Securities and Exchange Commission, A Resource Guide to the U.S. Foreign Corrupt Practices Act (14 November 2012) at 28, online: <www.sec.gov/spotlight/fcpa/fcpa-resource-guide.pdf> [FCPA Guide].
(176) Note that this analysis is separate and distinct from an analysis of whether a part of the assets or related personal property could be considered "proceeds of crime" under Part XII.2 or section 354(1) or both of the Criminal Code, supra note 9.
(177) This issue is international in its pertinence. As noted by Skinnider, supra note 60 at 13, "[w]hether the authorities in a parent company's country can take action against the parent company where one of its foreign subsidiaries bribes a foreign public official is a priority issue for OECD."
(178) FCPA Guide, supra note 175 at 27 ; see also Tarun, supra note 110 at 49.
(179) CFPOA, supra note 1, s 5(1).
(180) See Karigar, supra note 121 at para 22.
(181) Ibid at para 24.
(182) Ibid at paras 28-29, 33.
(183) Ibid at paras 29-30.
(184) This interpretation is not without potentially unexpected results. For example, it is common for the executives of parent companies to also serve as executives of their foreign subsidiaries. If this is the case, pursuant to Karigar, it is arguable that the decision of a senior officer of a parent company, who is also a senior officer of one of its foreign subsidiaries, to engage in foreign corrupt practices would constitute an "agreement" between the two entities in violation of section 3(1) of the CFPOA, supra note 1.
(185) See e.g. Archibald et al, supra note 21 at 17:30:90, referring to, inter alia, Niko Resources, supra note 35; William B Jacobson et al, "Caveat Emptor: Why and How FCPA Due Diligence Should be Conducted Prior to Mergers and Acquisitions" (2010) 29:1 Corporate Counsel Review 65 at 77-78.
(186) See e.g. 807608 Alberta Ltd v Medichair Ltd, 2006 ABQB 781 (available on CanLII) at paras 11-13 (discussing Salomon v Salomon & Co (1896),  AC 22 HL (Eng)).
(187) See e.g. 642947 Ontario Ltd v Fleischer (2001), 56 OR (3d) 417, 209 DLR (4th) 182 at para 68 (CA); Performance Industries Ltd v Sylvan Lake Golf & Tennis Club Ltd, 2000 ABCA 116, 189 DLR (4th) 269.
(188) See e.g. Palmolive Manufacturing Co v R,  SCR 131, 2 DLR 81; Aluminium Co of Canada v Toronto (City),  SCR 267, 3 DLR 609 (cited in Phillips v 707739 Alberta Ltd, 2000 77 Alta LR (3d) 302 at paras 159, 205-10, CarswellAlta 147 [Phillips]); Parkland Plumbing & Heating Ltd v Minaki Lodge Resort 2002 Inc, 2009 ONCA 256 at para 51, 205 DLR (4th) 577 ; Sun Sudan Oil Co v Methanex Corp,  5 Alta LR (3d) 292 at paras 34-43,  2 WWR 154; Kosmopoulos v Constitution Insurance Co,  1 SCR 2 at 10, 34 DLR (4th) 208 [Kosmopoulos].
(189) Phillips, supra note 188 at para 207, citing United States v Funds Held in Name of Wetterer, 899 F Supp 1013 (EDNY 1995) at 1013-17, 1020, 1027. Note, however, that the court in Phillips was careful to highlight that US courts have shown a greater willingness than their Canadian counterparts to treat one company as a mere instrumentality of another and that, as a result, American jurisprudence on these matters should be treated with caution.
(190) See Kosmopoulos, supra note 188 at 11, where the Supreme Court of Canada stated that "if the veil is to be lifted at all that should only he done in the interests of third parties who would otherwise suffer as a result of that choice," citing LCB Gower et al, Principles of Modern Company Law, 4th ed (London: Stevens & Sons, 1979) at 138 [emphasis added]. See also Transamerica Life Insurance Co of Canada u Canada Life Assurance Co (1996), 28 OR (3d) 423 at 433-34, 2 OTC 146, (Ont Ct J (Gen Div)), affd 74 ACWS (3d) 207 (available on QL) (Ont CA). Note, however, the more general pronouncement by the United Kingdom Supreme Court that "the recognition of a limited power to pierce the corporate veil in carefully defined circumstances is necessary if the law is not to be disarmed in the face of abuse," and "is consistent with the general approach of English law to the problems raised by the use of legal concepts to defeat mandatory rules of law" (Prest v Petrodel Resources Ltd,  UKSC 34,  2 AC 415 at para 27, Lord Sumption JSC[Prest]).
(191) See Prest, ibid at para 35, where it is held "if it is not necessary to pierce the corporate veil, it is not appropriate to do so, because on that footing there is no public policy imperative which justifies that course." Compare XY, LLC u Zhu, 2013 BCCA 352,  BCJ No 1624 at paras 86-97.
(192) That said, there remain circumstances in which it is conceivable that the doctrine of piercing the corporate veil may be of significant utility in CFPOA enforcement. One of
these circumstances is if it is desirable to move one step further up a chain of Canadian affiliates, given that the lower level Canadian corporation is a shell company without significant assets or funds of its own against which to levy monetary penalties for criminal offences. Another is if the prosecution concerns corrupt practices occurring prior to the passage of Bill S-14 (and is therefore subject to territorial jurisdiction rather than nationality jurisdiction), and the parent's actions have a greater connection to Canada than do the subsidiary's actions.
(193) United States v. Kozeny, 493 F Supp (2d) 693 (SDNY 2007) at 697.
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|Title Annotation:||V. Corporate Liability for the Corrupt Practices of Third Party Agents D. Wilful Blindness and Criminal Code Section 22.2 through Conclusion, with footnotes, p. 679-705|
|Publication:||McGill Law Journal|
|Date:||Mar 1, 2014|
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