Export Credit

Canada: “Export Agency must stiffen bribery sanctions,” report

Mark Bourrie
Inter Press Service News Agency
December 16, 2003

The Canadian agency that underwrites large-scale export projects must adopt tougher rules against bribery by client companies, says a report by a trade union anti-corruption group.


Ottawa: The Canadian agency that underwrites large-scale export projects must adopt tougher rules against bribery by client companies, says a report by a trade union anti-corruption group affiliated with the Organisation for Economic Cooperation and Development (OECD).

Export Development Canada ranked 15th among 28 OECD countries for measures it has taken to deter and sanction bribery, according to the analysis by the London-based UNICORN: Trade Union Anti-Corruption Network for the Trade Union Advisory Committee to the OECD.

The report, released Monday, compared anti-corruption efforts of national agencies that supply export credit by acting as co-signers and insurers of loans for projects.

It found the Canadian agency gives too much discretion to its officials to decide whether to continue to supply credit to companies that bribe foreign officials to win contracts.

The study shows the export credit agencies (ECAs) of the seven largest industrial countries (G7) performed better than other OECD members in informing companies of the legal consequences of corruption and requiring them to sign a “no-bribery” declaration.

But they fared less well on transparency around commissions and agents, and taking action against companies found guilty of corruption.

The report lists Canada’s EDC among 19 ECAs that do not inform investigative authorities of suspicion of bribery or pass to them evidence of corrupt practices.

EDC policies give its executives the choice not to discipline companies that have been reported to be giving bribes. The agency maintains discretion over whether to bar a company that is convicted of bribery, but the report says the EDC, like the other G7 ECAs, chooses not to do so.

“No G7 country ECA reports using the sanction of blacklisting even though 50 percent have the option, both on the grounds of suspicion and evidence, and 62 percent on the basis of a final judgment,” the report says.

“Canada reports that it is willing to exchange information, but only if information is publicly available and there is no breach of its implied duty of confidentiality under domestic laws,” it adds.

The report criticises the EDC for permitting a ceiling of 10 percent on commissions despite calls to limit them to 5 percent, and adds that the EDC does not require companies to report commissions that they pay.

The EDC’s conduct is the focus of several NGOs, including the Ottawa-based NGO Working Group on EDC and Toronto-based Probe International.

Opponents of EDC’s lending practices are focusing on the agency’s relationship with Acres International, a company that was found guilty of corruption in a water project in Africa’s Lesotho, says Fraser Reilly-King, spokesman for the NGO Working Group on the EDC.

The EDC was not involved in the project, but it has supported Acres International in other investments.

“This report confirms, to some extent, what we have been saying about the EDC’s transparency and its attitudes towards corruption issues,” said Reilly-King in an interview. “The EDC needs to get in step with agencies such as the World Bank, which sanctions companies that are involved in bribery.”

“And, right now, the EDC is actually lobbying the World Bank to get it to relax its rules.”

“The entire ECA community has a problem with this,” he added. “Some 60 percent of all ECAs have policies that say they will sanction companies engaged in corruption, but only three percent of them actually do it.”

EDC Spokesman Rod Giles says the corporation does, in fact, have a policy against doing business with companies engaged in corruption.

He said Acres International had to prove that it had developed new systems and programmes to prevent a repeat of the Lesotho scandal.

“I think the Acres International case may illustrate how EDC has put anti-corruption practices in place,” Giles said. “Since they were convicted, they have provided us with information on their new systems and procedures to prevent corrupt practices.”

Patricia Adams of Probe International, who has used Canadian access to information laws to investigate the actions of the EDC and Canadian companies abroad, says the agency’s refusal to bar companies involved in bribery “sends a clear message from the Canadian government that it will protect companies involved in corruption.”

She said corporate and ECA rules against corruption mean very little unless they are backed by laws in home countries that have stiff penalties and are strictly enforced.

“The U.S. has had laws on the books since the 1970s that provide for large fines and jail terms for executives who are involved in foreign corruption. They are not always enforced, but they have been enough to keep most U.S. companies honest,” Adams told IPS.

“And once a company is convicted, it is ineligible for export development support or U.S. government contracts, so the stakes are very high,” she said.

Adams added that no U.S. companies were among the 20 large engineering firms charged in connection with bribery in the Lesotho water project. The Canadian firm convicted of bribery paid money through the honorary Canadian consul in Lesotho.

“The money was funneled through an official representing the Canadian government, appointed by the Canadian cabinet. The Canadian government may claim to be opposed to corruption, but its actions speak otherwise,” she said.

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