Is that Gift a Bribe? How to Avoid Violating Anti-Corruption Laws

Authors: Derek Hoffman and Jocelyn Sirois

It is commonplace in business for “gifts” to be exchanged between parties. These gifts may range from a simple coffee or meal to extravagant vacations or large sums of cash. On this broad spectrum, the Corruption of Foreign Public Officials Act, SC 1988, c 34 (the “CFPOA” or “Act”) classifies certain gifts in certain circumstances as acts of bribery which may attract punishment under the Act.

What Counts as Bribery?

Section 3 of the CFPOA creates an offence for bribery of a foreign public official:

Every person commits an offence who, in order to obtain or retain an advantage in the course of business, directly or indirectly gives, offers or agrees to give or offer a loan, reward, advantage or benefit of any kind to a foreign public official or to any person for the benefit of a foreign public official

  1. as consideration for an act or omission by the official in connection with the performance of the official’s duties or functions; or
  2. to induce the official to use his or her position to influence any acts or decisions of the foreign state or public international organization for which the official performs duties or functions.

The offence must be broken down into individual parts in order to better understand how the offence relates to the offering or giving of gifts.

For the Purpose of Obtaining a Benefit

As a starting point, two key conditions must be present:

  1. The gift must be given or offered to compel the foreign official to act or refrain from acting in order to influence an act or decision of the foreign state.
  2. The purpose of giving or offering the bribe must be to obtain or retain an advantage in the course of business.

Giving or Offering

Another important aspect of the bribery offence related to gifts is that there is no requirement for the gift to actually be given or to actually influence the foreign public official. Merely offering a gift, whether or not it is accepted, suffices as conduct actionable under section 3 of the CFPOA. Furthermore, even conspiracy to give or offer a gift is capable of attracting sanction under section 3.

There is also no requirement that the foreign public official act or refrain from acting in the manner sought by the party giving or offering the gift. The fact that the gift has been given or offered, regardless of whether the party giving or offering the gift obtained any benefit in exchange, is sufficient to ground a violation of the Act.

To a Foreign Public Official, Friend or Relative

Finally, the Act explicitly prohibits gifts to foreign public officials or any other person for the benefit of the foreign public official. Accordingly, gifts to spouses, friends and relatives of foreign public officials can constitute bribes within the meaning of section 3 of the CFPOA where the intention or effect of the gift is to gain a business advantage by benefitting the foreign public official in some indirect manner.

What Constitutes a Gift?

The broad reference to a “benefit of any kind” in the CFPOA captures various types of gifts.

Cash or Equivalents

The most obvious form of gift likely to be construed as a bribe is cash. However, organizations should also be aware that cash equivalents, like gift cards, cheques or shares, also qualify as gifts, and offers of these items can attract prosecution under the Act.

Travel and Entertainment

Organizations often cover or reimburse potential business clients or partners for the cost of travel and entertainment. With the exception of particular business visits outlined in the following section, organizations must not purchase flights, meals or event tickets for foreign public officials or their friends or relatives. Payment of such expenses may constitute a bribe under the Act.

Charitable and Political Contributions

Organizations also commonly engage in charitable or political giving as part of legitimate local and international outreach initiatives. While donations to charities or political organizations are not explicitly prohibited by the CFPOA, such donations will constitute bribery when they are made for the purpose of achieving a business advantage by influencing foreign public officials. If the foreign public official has a close association with the charity and/or has requested payments be made to that charity, that charitable donation may be offside the Act.

Miscellaneous Benefits

Keeping in mind the breadth of section 3 of the CFPOA, there are various other items and opportunities that may be construed as a gift under the Act. For example, offering scholarships, business opportunities or employment to a foreign public official or a relative or family member of a foreign public official for the purpose of obtaining a business advantage will be offside the Act.

As the boundaries of what constitutes a gift are nearly limitless, organizations must adopt rigid and comprehensive compliance policies to ensure all members of the organization are aware of the far-reaching scope of the offence contained in section 3 of the CFPOA.

What Does Not Constitute a Gift?

Notably, subsection 3(3) of the CFPOA carves out two specific exceptions to the bribery offence.

First, gifts given or offered will not constitute a bribe where the gift is permitted or required under the laws of the foreign state for which the foreign public official performs duties or functions.

Second, gifts given or offered will not constitute a bribe under section 3 of the Act where the gift was made to pay the reasonable expenses incurred in good faith on behalf of the foreign public official, so long as the payments are directly related to either the promotion, demonstration or explanation of the offeror’s products and services or the execution or performance of a contract between the offeror and the foreign state.

This second exception includes instances of routine corporate hospitality where meals and small gifts are exchanged as part of business transactions. The exception is intended to permit an organization to pay for a foreign public official to visit Canada for the purposes of signing a contract, performing an annual review of a contract, or possibly even visiting a work site. However, as noted earlier, paying for foreign public officials to visit Canadian attractions or events while on their own in the country is not acceptable and may constitute a bribe under the Act.

Practical Compliance Requirements

To ensure your organization acts in compliance with the restrictions imposed by section 3 of the CFPOA pertaining to gifts, two key elements should be included in all compliance documents.

  1. First, create a policy which requires all gifts offered or given to be properly documented and recorded. Where an onus exists to document the offering or giving of a gift, it creates an element of transparency and accountability that may deter the offering or giving of inappropriate gifts.
  1. Second, include a review and approval system in your organization’s anti-corruption compliance policy. As a best practice, compliance personnel should have to review and approve any gift over a certain value to a foreign public official before the gift is offered or given.

When considering compliance, keep these two concerns in mind.

  1. It is often the management or directors of an organization who are involved in activities that may attract scrutiny under the CFPOA. Accordingly, an approval policy must apply to all members of the organization equally in order to ensure everyone is held accountable.
  1. Setting a value threshold at which gifts need to be approved may not be effective on its own. For example, multiple gifts may be given below a threshold which, individually, would not amount to bribery under section 3 but, when taken as a whole, are suggestive of an illegal gift. Accordingly, organizations should require review and approval for all gifts, regardless of value, and implement a recording system in order to assist with the monitoring and periodic review of gifts offered or given.

Organizations must be wary of offering or giving gifts in business transactions. The bribery offence contained in section 3 of the CFPOA is broadly drafted to capture various types of exchanges which may not be immediately recognizable to organizations as a “gift.” Furthermore, the broad wording of the Act prohibits the offering or giving of gifts to not only foreign public officials, but any significant others, friends or relatives of the foreign public official as well. Organizations are best prepared by taking proper precautions in drafting comprehensive compliance policies to ensure transactions are carried out within the parameters set by the CFPOA.

Contact our experienced anti-corruption professionals at MLT Aikins if you have questions or concerns regarding the offer of gifts in foreign transactions.

Note: This article is of a general nature only and is not exhaustive of all possible legal rights or remedies. In addition, laws may change over time and should be interpreted only in the context of particular circumstances such that these materials are not intended to be relied upon or taken as legal advice or opinion. Readers should consult a legal professional for specific advice in any particular situation.