How will latest changes to Volcker Rule affect non-US banks?
Kathleen A. Scott discusses the final Volcker Rule, focusing on some of the issues raised by non-US banks in their comments.
On July 6, 2017, in R v Karigar (2017 ONCA 576), the Ontario Court of Appeal upheld a decision under Canada’s anti-bribery legislation in which Nazir Karigar, a Canadian citizen, was convicted of agreeing to bribe a foreign public official.
The trial decision regarding Mr. Karigar received widespread attention as it was the first conviction of an individual under the Corruption of Foreign Public Officials Act (the CFPOA). The lower court convicted Mr. Karigar for a scheme to bribe Indian officials in return for a contract. There was no proof that any officials actually participated in the scheme, and Indian officials never awarded a contract to the company for whom Mr. Karigar acted. The Court of Appeal upheld the lower court finding that Mr. Karigar’s “agreement” with representatives of the Canadian company to offer bribes was enough for a conviction under the CFPOA. The sentence of three years in prison was upheld.
The appeal decision reminds international companies operating in Canada that our anti-bribery laws can lead to prison sentences for individuals engaged in corrupt corporate practices. The Court of Appeal found that conviction can occur without proof that such corruption went beyond mere agreement or was even successful. Developing a robust corporate culture in which corruption is never acceptable is certainly useful in keeping executives and employees out of prison and protecting your company’s reputation.
Mr. Karigar was charged under section 3 of the CFPOA in connection with a corrupt scheme to win a contract with Air India. This section makes it an offence to “directly or indirectly” give, offer or agree to give a bribe to a foreign official.
Under the scheme, bribes were arranged for Indian officials who oversaw the tender process at the airline, including India’s minister of civil aviation. The company’s records, including spreadsheets pricing the bribes, proved the existence of the scheme and Mr. Karigar’s central involvement.
Mr. Karigar was in India at the time the scheme was conceived, and he alleged a belief that corrupt practices such as bribes were commonplace in India. There was no evidence that any Indian officials had received any money as a result of the scheme or had agreed to offer a contract in exchange for bribes. In fact, the company was not granted any contracts.
The Court found that Mr. Karigar was guilty for simply agreeing with the CEO of the Canadian company for whom he was acting to offer Indian officials a bribe, despite there being no involvement by foreign officials and the failure of the scheme. The fact that he was in India at the inception of the scheme and his belief that corruption was commonplace in that country were not relevant to his conviction or sentencing or the Court’s jurisdiction over the matter.
On appeal, Mr. Karigar alleged two primary errors in the lower court decision (the third and fourth errors alleged related to evidentiary issues and are not relevant here):
The Court of Appeal concluded that proof of the actual participation of a foreign public official in a bribery scheme would hamstring the CFPOA’s enforcement. Further, Canada enacted the CFPOA in accordance with an international convention requiring countries to target conspiracies to bribe as well as actual bribery. The Court of Appeal upheld the lower court finding that section 3 of the CFPOA criminalizes agreements between “any parties” to offer a bribe to a foreign public official. Therefore, proof that Mr. Karigar had conspired with representatives of the company to offer bribes was sufficient for a conviction.
The Court further rejected Mr. Karigar’s assertion that the “essential elements” of the offence must be committed in Canada in order for a Canadian court to have territorial jurisdiction. Where, as in this case, the accused is a Canadian citizen acting on behalf of a company operating in Canada, there is a real and substantial link to Canada such that the accused is subject to section 3 of the CFPOA and the jurisdiction of our courts.
After Mr. Karigar participated in the bribery scheme, the CFPOA was amended to specifically confirm Canada’s jurisdiction over offences committed by Canadian nationals and permanent residents operating outside the country. The amendment was not applied retroactively, but a substantial link to Canada was found on the basis of a common-law test.
Charges have also been laid against executives of the U.S. parent company, and against a U.K. national acting as an agent for the company.
Several aspects of the decisions illustrate the legislation’s breadth and implications:
At the time of publication, no leave to appeal has been registered as filed at the Supreme Court of Canada.
To learn more about what your company needs to know and how to educate its executives and employees worldwide about the provisions and impact of the CFPOA, please don’t hesitate to contact us.
The authors wish to thank summer student Ian Wylie for his help in preparing this legal update.
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