Will the Canadian Courts Wreck International Law Enforcement Cooperation on Corruption Cases?

The answer to the question posed in the title depends upon how the Canadian Supreme Court rules in World Bank Group v. Kevin Wallace.  If the court rules that, despite laws providing it is not subject to the orders of domestic courts, the World Bank must obey a directive of the Ontario Superior Court, cooperation between the Bank and national law enforcement agencies is likely to end – or be severely weakened at the least.  The pleadings filed in the case, and just made available on the Supreme Court’s web site, describe how the court is poised to weaken transnational efforts to curb corruption. In summary . . .

in March 2011 the World Bank received a tip that bribes had been paid to win an engineering contract on a bridge construction project in Bangladesh it was helping to finance.  As Oluwafunmilayo explained in an August post, like other development banks, the Bank has a unit that investigates allegations of corruption in projects it finances, and if the allegations are substantiated, the Bank can deny those implicated the right to bid for contracts it or the other development banks finance for a set period of time or even permanently.  But debarment is the only sanction the Bank can levy, and particularly for those whose business does not depend upon competing for development bank contracts, even permanent debarment is not much of a deterrent.

Hence, the Bank may share what it learns about corruption in one of its projects with law enforcement agencies in countries that can prosecute the wrongdoers, prison time and large fines being a much more effective deterrent than debarment.  When the Bank uncovered information that executives of SNC Lavalin, a Montreal engineering and construction company, were the ones who had paid the bribes on the bridge project, it notified the Royal Canadian Mounted Police.  The RCMP investigated and SNC Lavalin senior executive Kevin Wallace and two other employees are now charged under the Canadian law making the bribery of a foreign public official a crime.

During pre-trial proceedings Wallace and his co-defendants sought to question the World Bank investigators who had conducted the investigation that led the Bank to bar SNC Lavalin and its affiliates from bidding on development bank contracts for ten years.  Defendants also demanded to know who blew the whistle on their bribery scheme and to rummage through the files the Bank compiled during the course of its investigation.  The justification, according to an account leaked to the Toronto Globe and Mail, is “to allow the defense to scrutinize [the] investigation for using unreliable witnesses, such as those with an axe to grind, or for relying on flimsy information.”  (Until last week, when the pleadings suddenly appeared on the court’s web site, this news story was only information publicly available on the case.) The Bank has appealed the trial court’s order, setting up the confrontation in the Supreme Court.

As an international organization, the Bank enjoys the same immunity from orders issued by domestic courts as any foreign government.  The rationale for the immunity rests on several grounds.  One example:  if it were to decline to finance a project a government sought, might the government sue it in its domestic courts to force financing?  Or more likely, might it conjure up a criminal case against one of its staff members to pressure the staff to approve the project?  Immunity protects the Bank and its staff from such potential abuses of domestic legal processes.

Before the Canadian Supreme Court the Bank is making a number of legal arguments that turn on fine questions of the immunity of international organizations under public international law and even finer questions of the implied waiver of such immunities under Canadian law.  But the more important arguments are policy-based.  In the case at issue, the immediate concern is that if the Bank discloses the identify of those who blew the whistle on SNC Lavalin, potential informants in the future may be reluctant to come forward — fearing those on whom they blew the whistle will ultimately learn their identify.

An even more important argument is that while it may be one thing to provide information in a proceeding in a country with a strong, trustworthy judiciary, it is quite another in countries where the judiciary is weak and easily penetrable.  In Canada one could imagine crafting a compromise order.   The Bank would agree to a narrow waiver of its immunity, say providing the names of the whistleblowers to defense counsel only and allowing the judge in the case to inspect certain of its investigate records in his or her chambers.  But if the Bank were to allow even this small breach of the rule giving it absolute immunity, it could be employed in countries where such a compromise order is unlikely to be observed.  Hence on policy grounds the Bank’s resistance to the Canadian court’s order rests on the ramifications compliance would have in the 100 plus countries where it does business.

If the Canadian Supreme Court upholds the trial court’s order, the Bank most likely will refuse to provide the information requested, and the trial court will most likely then dismiss the bribery case.  Much worse than the free pass defendants in this case will win will be the likely reluctance of the Bank to provide information on corruption to domestic law enforcement agencies in the future.  Fearing exposure to similar orders, the Bank and indeed other international organizations may simply stop sharing information about corrupt activities with national authorities.  That would, if not wreck the robust cooperation between international organizations and national police and prosecutors, undermine it significantly.

Admittedly, there are considerations weighing in favor of the court upholding the order.  Perhaps those who blew the whistle to the Bank were lying about who paid the bribe?  Or perhaps the Bank lied to the RCMP about what it knew about the bribery scheme?  Or at least didn’t tell the Mounties the full story.

But these issues are side issues, collateral to the question of whether the defendants bribed Bangladeshi officials or not.  Knowing who blew the whistle on the corruption scheme or what the Bank knew about it won’t change the answer to that question.  The Canadian Supreme Court should therefore deliberate long and hard before it allows issues collateral to the guilt or innocence of defendants to blow a large hole in the international fight against corruption.  Perhaps it would help the court reach the correct result if members of the anticorruption community weighed in with friend of the court briefs?

7 thoughts on “Will the Canadian Courts Wreck International Law Enforcement Cooperation on Corruption Cases?

  1. OK, I know almost nothing about Canadian law, and even less on the legal issues surrounding the immunity of international organizations like the World Bank, but there’s something about this case that I fundamentally don’t understand: Since the criminal bribery prosecution and the World Bank debarment action are separate proceedings, why would the defendants have any plausible claim to info in the Bank’s files that the Canadian government wasn’t actually planning to introduce as evidence in the bribery trial?

    Put aside the issue of the Bank’s possibly special status as an international organization. Suppose two Canadian companies A retained Canadian Company B as a subcontractor, and someone in Company A discovered (or came to suspect) that executives in Company B were engaging in criminal fraud (maybe because a whistleblower in Company B brought the matter to Company A’s attention). Suppose Company A therefore immediately terminated its business relationship with Company B, and also notified law enforcement, having private conversations about the underlying basis for their suspicions, and the Canadian government initiated a prosecution of Company B executives. Under Canadian law, would those defendants be allowed to have access to all of Company A’s records, including the identity of the Company A employees who might have provided the tip? If not, then I don’t understand how/why the situations are different. If so, then that seems just crazy. (Though if the Canadian government planned to introduce the Bank’s finding as evidence, I suppose i could see an argument about the need to challenge the basis for the finding — but that scenario seems unlikely.) What am I missing?

  2. A July 2, 2015, Toronto Globe and Mail story reports that the RCMP obtained a court order to wiretap certain individuals on the basis of the information provided by the World Bank. From the taps the Mounties learned enough to secure warrants to search various premises. Those searches revealed details of the bribery scheme that ultimately led to charges being laid against Wallace and his co-defendants. They want to rummage through the Bank’s files and interview its investigators to see if the information furnished the RCMP was sufficient to justify the issuance of the wiretap orders.

    I rely on a news story because the case is cloaked in secrecy. The Ontario Superior Court’s decision ordering the Bank to produce its investigative records and make its staff available for interviews is not on the court’s web site. When I tried to obtain a copy, I was told it was secret. The only document posted on the Supreme Court’s web site as of September 27 is the Bank’s opening brief and a docket sheet showing a number of other filings but containing no links to the papers. The docket sheet does show that a number of parties, including Transparency Canada, plan to file friend of the court briefs. I trust it will take the Bank’s side and hope the Bank will prevail.

    Perhaps somewhere along the line someone too will explain why the court records are being kept under wraps.

  3. Referring information to domestic enforcement authorities for further investigation and consideration under domestic law is a critical part of the World Bank’s anti-corruption efforts. The Bank’s internal debarment sanctions are quite modest compared to the domestic penalties a respondent might face for fraud, corruption, collusion, coercion, or obstruction. See the 2006 World Bank Enforcement Guidelines: http://bit.ly/1Wsc619

    Many firms are debarred for just a few years before they become eligible again to bid for World Bank contracts. The list of debarred entities and the duration of their debarment is publicly available here: http://bit.ly/1LfF02E

    Given the World Bank’s relatively narrow sphere of influence, at least in terms of enforcement powers, domestic authorities have a huge role to play in following up to determine if civil or criminal penalties are appropriate.

    I completely agree with Rick Messick’s characterization of the risk here — that a ruling against the Bank would “wreck international law enforcement cooperation” for investigations and sanctions. Loss of immunity would potentially sever the critical communication lines that enable such valuable collaboration.

    • While fully recognizing the potential risk posed by this case, I remain optimistic that the Supreme Court will rule in the Bank’s favor. In responding to the World Bank’s petition to appeal to the Supreme Court, SNC Lavalin’s brief (available at: http://www.scc-csc.gc.ca/WebDocuments-DocumentsWeb/36315/MM030_Respondent_Bhuiyan.PDF) indicates that a factor motivating the lower court’s decision was the fact that World Bank officials did not appear in court to defend their case. Their argument seems to be that allowing the Bank to appeal the decision would set the “dangerous” precedent of permitting those who disregard the court system to have a second kick at the can to challenge any adverse decision.

      As the Supreme Court has nevertheless agreed to hear the case, the World Bank’s immunity seems to be strongly supported by a 2013 case in which the Court held that international organizations are entitled to the immunities provided by their constituent documents. That said, ongoing cooperation between the Bank and domestic authorities is absolutely critical to the practical deterrent effects of INT’s work, so I hope my optimism is not misplaced.

  4. Pingback: Canada’s Supreme Court Hands Corruption Fighters a Victory Worth Savoring | GAB | The Global Anticorruption Blog

  5. As was anticipated from the expected memo of appeal of the appellant, the Supreme Court passed ruling by allowing the appeal meaning that the World Bank including whistle blowers are enjoying immunity from participating in the proceeding and by cooperating with the RCMP investigators it has not waived that as trial court considered. This information of immunity was unknown to the RCMP as such they they did not keep evidence for using in the trial. Thinking that they will produce the evidence contained in the World Bank file. At the same time the Mountings have been found careless in giving full information in the their applications for wiretap use. Evidently, the trial court has rejected all evidences gathered by using wiretap that did not comply statutory requirement. Thus the trial court fell short of evidence and acquitted the accused. So, this case has not received any seriousness from the RCMP and the World Bank despite having evidence. World Bank should have equipped the investigating police with enough evidences as they knew of their immunity to participate as third party. One of the accused Mohammad Ismail SNC-Engineer (released earlier) has already told CBC news that he will give testimony in the case on the evidence, and SNC is serving 10 year ban mutually settled for the said corruption as well. There is hardly any possibility of wining in appeal against the trial courts decision dated Feb. 10, 2017.
    So, my point of concern lies on how an International Development Bank can be so careless? If they learned about the bribing they should have laid trap to catch them red handed at subsequent time instead of cancelling the project. A poor country had to incur huge loss to get the project done by themselves without caring for the public money. This does not go with the object of developing the poor and under developed countries. It is not unknown to them that the developing countries are governed by the corrupt officials. Bangladesh has been put to a tremendous loss by such indifferent, reckless and inefficient treatment of the World Bank. Though, the case has ended on technical ground and not on merit the Parliament of Bangladesh and the corrupt officials are rejoicing by telling to the Bangladeshis through media that it was false accusation and all those against whom the offence alleged are so very honest, this time they will get more votes to get to power. This is so very poor handing of the case indeed!

    • I agree that the outome is disappointing, but I am not sure the blame lies with my former colleagues (and friends) at the Bank. It looks to this admiteddly biased observer that either the RCMP dropped the ball or that the judge was determined to acquit no matter what. I would think that defendants are still vulnerable to a civil suit in some forum, perhaps Canada, perhaps Bangladesh.

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