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Gary Guidry, the new president and CEO of Griffiths Energy International Inc., speaks to media outside of a Calgary court in January after a judge approved a $10.35-million penalty to the company for bribing a foreign official.Chris Bolin/The Globe and Mail

Ottawa will toughen laws outlawing the bribery of foreign officials, shoring up an area where the country has long been seen as lax after high-profile payoff cases have rocked corporate Canada.

A new law proposed by the Conservative government will allow authorities to prosecute Canadians even if they pay the bribe outside the country – closing a loophole that has made it harder for police to file charges. It will also increase the maximum sentence for bribing a foreign official to 14 years, from the current five-year maximum.

Although Ottawa has for a decade endured criticism from international organizations that it does too little to stop Canadian companies from paying off foreign governments for business deals, two high-profile cases have thrust the issue into prominence and prompted action long sought by anti-corruption activists.

"We're very pleased that this has finally come," said Janet Keeping, a Calgary lawyer who is president of Transparency International Canada, an anti-corruption organization.

In January, Calgary-based oil firm Griffiths International Inc. disclosed that it had paid $2-million in February, 2011, to the wife of Chad's then-ambassador to Canada to help secure oil-and-gas exploration contracts in the African country, according to an agreed statement of facts filed in a Calgary court. The company pleaded guilty to bribery charges, and agreed to pay a $10.35-million fine last month.

The RCMP is also investigating a case involving Canadian engineering giant SNC-Lavalin Inc. over alleged payoffs in Moammar Gadhafi's Libya. RCMP officers allege employees of the company paid $160-million to get business in Libya, including buying luxury yachts for Saadi Gadhafi, the son of the late dictator, according to warrants that were unsealed in January. Those allegations have not been proven in court.

Now, Foreign Affairs Minister John Baird has tabled changes to Canada's anti-bribery laws in the Senate, saying it will help prosecutions and Canada's trading reputation. "This, we hope, is a good-faith sign that Canada's good name retains its currency," he said.

Mr. Baird himself brought an SNC executive to meet Libya's new leaders in 2011, but when reports emerged that indicated the company had worked with organizations linked to the Gadhafi regime's military, he pledged Canada would review its laws.

In addition to allowing prosecutors here to go after Canadian companies for bribes they pay abroad, the new law will outlaw so-called "facilitation payments" – the grease money paid to foreign officials even if it's not directly linked to gaining a business deal or advantage. Those payments, technically different from a bribe, will not be immediately made illegal, but the government will outlaw them at a later date, presumably to give companies warning of the changing rules.

"Anybody who's familiar with the problem of corruption in the world … recognizes that facilitation payments are bribes," Ms. Keeping said.

The new law will also make it an explicit criminal offence for companies to hide bribery on their own books.

Although Canada signed an international convention on fighting bribery in 1998, the Organization for Economic Co-operation and Development has repeatedly issued reports calling Canada's enforcement weak.

The measures were for the most part welcomed by Bay Street lawyers who advise companies on anti-bribery matters, but some warned that smaller companies, notably in the natural resource industry, might be forced to make major changes.

Many larger Canadian companies that have operations or list stock in the United States have already made internal reforms to catch financial irregularities that smack of potential bribery, because they face the threat of aggressive enforcement from the U.S Securities and Exchange Commission. But some smaller Canadian companies now will have to bring in similar standards to avoid prosecution here.

"This will be a huge sea change for the smaller companies that have not been mindful of the books-and-records provisions because they are not caught by the SEC," said Riyaz Dattu, a lawyer with Osler, Hoskin & Harcourt LLP in Toronto.

Toronto lawyer Milos Barutciski of Bennett Jones LLP, who took part in the government's consultation process on the changes, said chief financial officers will want to make sure no possible bribes are being hidden in the company's accounts.

"Having the obligation to maintain books and records is going to force corporations to introduce the internal controls and financial reporting standards that will make sure this stuff pops up rather than gets hidden," he said. "Because the financial guys will be liable if they cover it up."

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