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Tougher Canadian Anti-Corruption Rules Risk Trade Disputes, Report Says

Thursday, December 04, 2014
Sandler, Travis & Rosenberg Trade Report

According to press sources, a report commissioned by the Canadian Council of Chief Executives warns that Canadian anti-corruption rules that were strengthened in March could become the target of trade disputes under free trade agreements with the United States and the European Union or at the World Trade Organization. The Canadian rules are reportedly stricter than those maintained by major trading partners as well as the standard set by the United Nations Commission on International Trade Law, but government officials have defended them as being consistent with Ottawa’s trade and investment obligations.

A Globe and Mail article states that under Public Works and Government Services Canada’s Integrity Framework, “companies seeking to bid on federal contracts must certify that neither they nor their affiliates have been charged with a long list of criminal offenses anywhere in the world, including bribery and fraud, dating back 10 years.” Those who do not meet this standard may be debarred from government procurement deals for up to ten years, and some major suppliers have already received notice of such action. Business groups complain that there appears to be no option to shorten a debarment for a company that has taken remedial actions.

The report argues that the debarment provision poses a number of problems. “Since debarment can be considered a restraint on trade,” the report states, “the Canadian measures may be challenged by foreign partners on grounds of unreasonable extension of the provisions to entities that are not under the control of the supplier.” Debarment could also “expose Canadian companies to legal retaliation abroad.” In addition, debarment would hurt not only the affected companies, which would lose an average of $351 million in annual sales, leading to the loss of more than 400 jobs, but also the Canadian economy as a whole, which would lose more than $1 billion from a decade-long debarment of just one company.

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