Nearly four years after the federal government added deferred prosecution agreements to the Criminal Code as part of its arsenal to fight corruption and other white-collar crime, legal experts hope that guidance provided by Quebec Superior Court in Canada’s first ever remediation agreement will prompt federal prosecutors and organizations to take advantage of the new way of settling criminal charges.
The comprehensive, meticulous and “important” decision introduces a “welcome” degree of certainty to the new process in the absence of accompanying regulations, guidelines or policies in the remediation agreement regime, according to legal experts. The ruling by Quebec Superior Court Justice Éric Downs sheds light on how remediation agreements will be broached by the courts, indicating that while they will not act as a “rubber stamp” in reviewing proposed settlements, the agreements will be afforded a high degree of deference, added the experts. The judgment also signals that self-reporting, though not a “hard condition,” will carry considerable weight as does “strong cooperation” to help sway the courts to sanction the agreement, they added.
“It’s an important decision because there were question marks around how the courts would approach the approval of a remediation agreement and how involved they would be in the process,” noted Louis-Martin O’Neill, a Montreal M&A and securities litigator with Davies Ward Phillips & Vineberg LLP. “The Court was very mindful of the fact that there is a huge need for stability in the system, and that implies that when a corporation starts to negotiate with the prosecution for a remediation agreement it has to know that unless something very grave happens, that agreement should stick when presented to the court.”
Justice Downs sanctioned an agreement between the Quebec Director of Criminal and Penal Prosecutions (DCPP) and SNC-Lavalin Group Inc., with the Montreal-based engineering, procurement and construction services company paying nearly $29.5 million to settle allegations of criminal wrongdoing in connection with bribes paid in exchange for obtaining a bridge contract awarded two decades ago. An independent monitor will oversee the company’s compliance of the agreement, which also calls for SNC to maintain and improve its integrity measures.
Remediation agreements, formally added into a new section of the Criminal Code Part XXII.1 in 2018, allow prosecutors to resolve corporate wrongdoing such as fraud and corruption by granting corporate amnesty in exchange for certain undertakings that the corporation must fulfill in order to have the charges dropped. In place in the U.S. since the 1990s under the moniker deferred prosecution agreements, they have become a mainstay of white collar criminal law enforcement, with more than 400 such agreements concluded from 1992 to 2022, according to a recent study by Columbia Law School professor Frederick Davis.
But legal experts are puzzled why the Canadian remediation regime has stalled, particularly since these agreements can hold companies accountable without triggering the collateral consequences of a formal conviction on innocent third parties such as employees, customers, suppliers and investors. “The federal government’s lack of movement four years later is a cause of concern,” noted Jennifer Quaid, vice-dean research in the Civil Law section at the University of Ottawa and a leading expert on organizational criminal liability and corporate accountability. “The longer it goes without there being a first case, the more it sort of weakens the credibility and benefit of having this program.”
But Guy Pinsonnault, a competition and antitrust law and white collar defence lawyer with McMillan LLP in Ottawa, expects the Quebec Superior Court decision will lead to more such agreements because Justice Downs provided clear guidance and emphasized that one of the objectives behind remediation agreements is to encourage to self-reporting over corporate wrong-doing, without provoking “harmful effects” on innocent third-party stakeholders. “This is the way of the future for companies to make a clean sweep and settle all their issues so that they can move forward without having disastrous consequences,” said Pinsonnault, former general counsel of the Competition Law Section, Public Prosecution Service of Canada. “A guilty plea would be disastrous because it would lead to a suspension or cancellation of public contracts.” In Canada companies convicted of fraud offences would automatically be ineligible for public contracts for a period of 10 years for public contracts while in Quebec that figure stands at five years.
In an 80-page decision in R. c. SNC-Lavalin inc., 2022 QCCS 1967, Justice Downs noted that the provisions of remediation regime are closer to the foundations of the British system than the American. In the U.S., judges have virtually no role in reviewing deferred prosecution agreements, points out Davis in his study entitled “Judicial Review of Deferred Prosecution Agreements: A Comparative Study.” Pinsonnault adds that if U.S. judges “interfere too much in the remediation agreement process by refusing to approve it or asking too many questions,” prosecutors will simply turn to their cousin and draft non-prosecution agreements which are not formally filed in court. Ottawa instead opted to follow the UK model where the emphasis is on transparency and judicial review, noted O’Neill.
Canadian courts must therefore perform a “delicate balancing act” in remediation agreements, added O’Neill. As Justice Downs underscored, “under no circumstances” are remediation agreements a “free pass” for large or public companies that are “too big to fail.” But “on the other hand, too much uncertainty” could deter companies from using remediation agreements, especially in self-reporting scenarios, something that would contravene a major objective behind the remediation agreement regime, said Justice Downs. Heeding guidance from R. v. Anthony-Cook, 2016 SCC 43, [2016] 2 S.C.R. 204, Justice Downs noted that the most important factor in the ability to conclude resolution agreements is certainty.
“The Court has a role to play to make sure that the agreement essentially meets all the requirements and that it is in the public interest,” said O’Neill. “But the court will not go out of its way essentially to renegotiate an agreement simply because it does not agree or would have done things differently. The bar is very high, and that’s very welcome by the community because it gives stability to the system. You’re always a little concerned when you’re the first negotiating an agreement and having it sanctioned by the court. The fact that we now have one in the system that has been approved should open the door to others.”
Self-reporting, while an important consideration that would carry “considerable weight, is not a “mandatory precondition” stipulated by the legislator, underlined Justice Downs. A high degree of cooperation may also be a factor in favour of approving a remediation agreement, held Justice Downs, adding that in this case the company cooperated extensively with the authorities during the investigation, voluntarily provided police with documents, and implemented a robust set of self-imposed compliance measures.
“Self-reporting is very important because when a company self-report the chances that they will not be given a deferred prosecution agreement are almost nil,” said Pinsonnault. “But they have to cooperate, and put all of their cards on the table. They have to identify individuals who committed the crime, and hand all evidence they have in their possession to police and the prosecution.”
It remains to be seen whether the two-step, U.K.-inspired court approval process endorsed by Justice Downs in this case will become the norm, said O’Neill. Before the remediation agreement was made public, the DCPP and SNC proposed that a confidential stage, grounded in the privilege of settlement discussions, take place before the public hearing, something that is not expressly provided in the Criminal Code. “The confidential process allows the court to essentially consider at least the terms of the agreement and speed up the approval process, although the Court was careful to mention that it did not address the merits of the remediation agreement during that confidential phase,” said O’Neill. “It does make sense to have that type of process, particularly when publicly-traded companies are involved. In the case of non-publicly-traded companies, it’s probably more difficult to justify.”
Following the Quebec Superior Court decision, legal experts are hoping that federal prosecutors and organizations take advantage of remediation agreements. But Quaid notes that the pressure may come from outside forces. Canada, which signed the OECD Anti-Bribery Convention in 1997, will be subjected to a peer review by co-lead examiners Austria and New Zealand, an effort that is expected to begin this year and be completed by June 2023.
“I’m not sure that Canada has a lot on its ledger to show a great deal of progress in its anti-corruption enforcement,” said Quaid. “I would think that there’s probably an incentive on the part of the federal prosecution service to, if they can, come out with a deal before you start getting close to that date because otherwise it’s not going to look that good because in 2013 Canada made a lot of promises about the way they were going to strengthen their anti-corruption enforcement. And there aren’t too many clear wins on the table.”
