The Ontario Superior Court provides guidance on the Corruption of Foreign Public Officials Act

In the recent decision of R v Arapakota, the Ontario Superior Court of Justice found Damodar Arapakota not guilty of bribing a foreign public official. The reasons for decision offer clarity on the legal test required to establish an offence pursuant to s. 3(1)(a) of the Corruption of Foreign Public Officials Act (CFPOA). These reasons also highlight important compliance considerations for businesses when dealing with foreign public officials in respect of gifts and hospitality.

Background

The then-CEO of Imex Systems, Mr. Arapakota, organized and financed a $40,000 family trip to Florida for a Government of Botswana public official. The Crown alleged that Mr. Arapakota provided the trip in exchange for certain letters from the Government of Botswana to Imex which confirmed a new agreement with Imex for certain services. The Court found that Mr. Arapakota had provided the public official a benefit, despite accepting the public official repaid Mr. Arapakota $15,000 cash for the trip, but did not find that Mr. Arapakota provided the trip as consideration for the letters or that the letters provided Mr. Arapakota an advantage in the course of business.

Test under section 3(1)(a) of the CFPOA

The Court took the opportunity to specify the four elements of the actus reus, or guilty act, that the Crown must prove, beyond a reasonable doubt, to secure a conviction under s. 3(1)(a) of the CFPOA. Those include:

• the accused, directly or indirectly, gives, offers, or agrees to give or offer a loan, reward, advantage, or benefit of any kind;
• the recipient is a public foreign official (or to a person for their benefit);
• the offer was made in order to obtain or retain an advantage in the course of business; and
• was made as consideration for an act or omission by the foreign public official in connection with the performance of the official’s duties or functions.

The Court also confirmed that the mens rea, or mental element, to be proven beyond a reasonable doubt is one of subjective fault requiring specific intent with knowledge of the relevant circumstances.

“Benefit, reward or advantage”

The Court held that in order to satisfy the first part of the test above, the giving of a benefit, reward or advantage must be more than trivial. Rather, it must “advance the recipient’s interests in a material way”. The Court distinguishes “ordinary hospitality” from benefits, rewards or advantages that confer a material or tangible gain or economic advantage to the recipient. While buying coffee or other objectively benign acts of hospitality are unlikely to attract scrutiny, the surrounding circumstances and context of any gift or benefit offered to a foreign public official should always be carefully considered.

The Court held that reimbursement by the official of the expenses paid (or a portion of them) after the fact did not vitiate the benefit received. The public official was found to have received not only the monetary benefit of the trip, but the benefit of the planning and logistical efforts by Mr. Arapakota as well. The decision appears to leave open the possibility that a full reimbursement of a benefit by an official may, in specific circumstances, negate the benefit provided, however businesses should not rely on the return of a benefit to avoid liability.

“Advantage in the course of business”

Like a “benefit, reward or advantage” given to a foreign public official, any advantage obtained in return must constitute a “material economic advantage”, whether that advantage is ultimately realized or not. In acquitting Mr. Arapakota, the Court found that while the letters may have put Mr. Arapakota and Imex in a “better position”, they did not rise to the level of providing a “material economic advantage”. In particular, the information in the letters had already been publically disclosed in other forms by the Government of Botswana and did nothing further to materially advance the economic position of Imex.

Consideration

To prove consideration was given for actions or omissions by a public foreign official, the Court held there must be a quid pro quo, or “something for something”. Whether true consideration was given requires assessment of the broader context and circumstances surrounding the transaction. In the case of Mr. Arapakota, the Court considered whether Mr. Arapakota perceived the letters as conferring an advantage in business, in addition to assessing whether the letters actually provided an advantage. The Court found neither existed on the facts, and therefore, no consideration was established under the fourth part of the test.

Notably, this case was not brought under the broader offence in s. 3(1)(b) of the CFPOA which does not require quid pro quo. As such, businesses should not rely on the absence of a quid pro quo when determining whether a gift or benefit provided to a foreign official is likely to violate Canadian law.

Takeaways

In this important decision, the Court provided helpful guidance on the elements of an offence under s. 3(1)(a) of the CFPOA. Though a finding of not guilty was made in this case, Arapakota is fact-specific and businesses would be well advised to consider their policies and procedures relating to anti-bribery and corruption and gifts and hospitality to reconsider how their practices align with the Court’s latest findings.