Law Times

Page 12 February 4, 2013 Law Times • FOCUS U.S. regulators issue guidance on corruption act BY Julius Melnitzer For Law Times I n mid-November, the U.S. Department of Justice and the U.S. Securities and Exchange Commission released their long-anticipated guidance on the U.S. Foreign Corrupt Practices Act. Intended to be a one-stop shop for direction on compliance and enforcement issues in relation to the act, the guide will be of interest not only to Canadian companies subject to the legislation but also to companies falling within the ambit of our own Corruption of Foreign Public Officials Act. "The value of the guide in a Canadian context is that it is a high-level blueprint and reasonable forecast of how Canadian officials may proceed in similar circumstances," says Paul Blyschak of McCarthy Tétrault LLP's Calgary office. Indeed, the U.S. and Canadian laws have many similar substantive provisions and all indications are that authorities in both countries are co-operating and even co-ordinating their anti-corruption activities. "We are expecting a certain similarity of approach and that makes sense in the big non-prosecution agreepicture not only for pracments, that are not availtical reasons but because able to their Canadian certain companies and counterparts," says Blytransactions are subject to schak. both statutes and the simiAlthough Canadian larity of approach will make and U.S. lawyers practising co-operative efforts easier," in the anti-corruption area says Blyschak. "This having have for the most part welbeen said, it's also imporcomed the guide, it has also tant to remember that these disappointed many observanti-corruption statutes are ers who say it fails to break not enforced in a vacuum new ground. but in the context of do"The big-picture takemestic laws and particuaway is that the guide reiterlarly criminal laws that may ates many of the positions deal in different ways with that the government has the liability of corporations and their human agents as 'The value of the guide in a Canadian con- taken in previous enforcewell as with jurisdictional text is that it is a high-level blueprint and ment actions, which is not and territorial differences." reasonable forecast of how Canadian offi- to say that the guide is not a It's also important to cials may proceed in similar circumstances,' valuable document because it is of course very helpful to understand that Canadian says Paul Blyschak. have all these issues appear and U.S. authorities may approach prosecutions differently despite any in a condensed form," says Kevin Harnisch, cohead of Fried Frank Harris Shriver & Jacobson similarity in their enforcement policies. "For example, there are a number of LLP's anti-corruption compliance and enforceprocedural avenues available to U.S. pros- ment group in Washington. Many grey areas remain, especially ecutors, such as deferred prosecutions and CANADIAN LAW LIST 2013 YOUR INSTANT CONNECTION TO CANADA'S LEGAL NETWORK Inside you will find: of more than 58,000 barristers, solicitors and Quebec notaries, corporate counsel, law firms and judges in Canada; for the Supreme Court of Canada, the Federal Court of Canada, Federal Cabinet Ministers, departments, boards, commissions and Crown corporations; February each year L88804-590 L88804-590 Prices subject to change without notice, to applicable taxes and shipping & handling. related to each province for the Courts of Appeal, Supreme Courts, County and District Courts, Provincial Courts, law societies, law schools, Legal Aid, and other law-related offices of importance. MORE THAN A PHONE BOOK Visit carswell.com or call 1.800.387.5164 for a 30-day no-risk evaluation Untitled-1 1 www.lawtimesnews.com 13-01-29 3:10 PM regarding the most controversial issues. "In some ways, it's not surprising that the government has not articulated bright-line tests and that the SEC and the DOJ are trying to give themselves a lot of wiggle room," says Harnisch. "But even where they try to give helpful advice, the tendency is to follow with a caveat that detracts from the guidance." More particularly, the guide lacks specificity on the particulars of who will be regarded as a "foreign official; on the compliance defence; on successor liability and due diligence in an M&A context; on the distinction between allowable and non-allowable gifts, entertainment, and travel expenses; on third-party due diligence; and on facilitating payments. So far as the really difficult issues are concerned, the guide merely reiterates that each case depends on what is reasonable in particular facts and circumstances," says Harnisch. Lawyers and clients were also hoping for more clarity on which entities the law would regard as being under the ownership or control of foreign governments. "What the guide tells us is that if a foreign state doesn't own a majority stake or control in an enterprise, it will probably not be regarded as a government entity," says Harnisch. "But then the guide goes on to say that there may be circumstances that lead regulators to a different conclusion even where a company is not majority-owned by the foreign state." In other words, there's a dearth of new substantive information for lawyers practising in this space. What's clear, however, is that enforcement of the act continues to be a priority for regulators. "There are numerous examples that reiterate some of the government's more aggressive positions and suggest that it won't be bashful about continuing them in the future," says Harnisch. A continuing emphasis on compliance programs is also apparent. In fact, the guide is the first compilation of U.S. regulators' perspectives on the hallmarks of effective compliance programs. That perspective includes a commitment from senior management to the program; a clearly articulated corporate policy; establishment of a code of conduct, compliance policies, and procedures; risk assessments that focus on the program; ongoing training and continuous advice to employees, directors, officers, and affected agents and partners; incentives and disciplinary measures to reinforce the program; risk-based third-party due diligence and monitoring of thirdparty payments and relationships; confidential reporting and investigative processes; periodic reviews; and pre-acquisition due diligence and post-acquisition integration in the mergers-and-acquisitions context. LT

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