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Canada Now Has Deferred Prosecution Agreements

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A guest post today from Toronto-based Borden Ladner Gervais attorneys Milos Barutciski, Graeme Hamilton and Julia Webster.

On September 19, 2018, deferred prosecution agreements (DPAs) became available to resolve corporate offences in Canada under the Criminal Code and the Corruption of Foreign Public Officials Act.

Remediation Agreements will be available to resolve criminal charges against corporations, partnerships and other forms of business organizations without registering a criminal conviction. Remediation Agreements will be negotiated by the prosecution and the accused and are subject to judicial approval. They will typically be accompanied by the payment of penalties, restitution, implementation of compliance measures, and other terms and conditions as negotiated by the parties, including the potential appointment of corporate monitorships.

Offences subject to resolution through a Remediation Agreement include bribery of public officials, both domestic and foreign, fraud, municipal corruption, insider trading, private bribery (secret commissions), money-laundering and other offences (listed at the end of this article). Competition offences such as price-fixing, bid-rigging and misleading advertising are notably absent from the Remediation Agreement regime.

Key Takeaways

  • Remediation Agreements create incentives for corporate cooperation in investigations, recognition of responsibility and payment of penalties and restitution
  • Corporations can resolve criminal investigations and prosecutions without the stigma of criminal conviction and the collateral burden of debarment from public procurement
  • The requirement of judicial approval of Remediation Agreements and the potential involvement of victim representatives may inject uncertainty into the process

Remediation Agreements

The introduction of Remediation Agreements follows from a lengthy public consultation on the merits of DPAs undertaken by the Government of Canada in 2017. The results of the consultation were published in a February 2018 report that highlighted public support for a DPA regime.

A Remediation Agreement is defined in Part XXII.1 of the Criminal Code as: “an agreement, between an organization accused of having committed an offence and a prosecutor, to stay any proceedings related to that offence if the organization complies with the terms of the agreement.” Resolution of offences through a Remediation Agreement is available to organizations as defined in section 2 of the Code, which includes corporations, partnerships and other forms of business organizations, but does not include a public body, trade union or municipality.

The offences subject to Remediation Agreements are listed in a schedule to Part XXII.1, as set out below. Remediation agreements are also available for the offences of conspiracy and attempts to commit, being an accessory after the fact, and counselling in relation to the listed offences.

Like other DPA regimes, Canadian Remediation Agreements are focused on deterrence. The amendments set out the objectives of the regime as denouncing wrongdoing, promoting accountability and respect for the rule of law, encouraging voluntary disclosure, providing reparations and reducing the negative consequences for employees, customers and others not responsible for the corporate wrongdoing.

Commencing a Remediation Agreement Negotiation

Negotiations for a Remediation Agreement are formally initiated by the prosecution, although we expect that corporations accused will typically invite the initiation of a negotiation as part of a company’s cooperation with an investigation. Prior to commencing a negotiation, the prosecution must determine that there is a reasonable prospect of conviction, that the negotiation is in the public interest and obtain the consent of the Attorney General to the negotiation. The prosecution must also determine that the act or omission did not result in serious bodily harm or death, injury to national defence or security, and was not committed at the direction of organized crime or a terrorist group. The prosecution must also inform victims of the negotiation, including non-Canadian victims (e.g., in the case of a foreign bribery prosecution).

The negotiation begins with a notice to the accused that sets out a summary description of the offence to which the Remediation Agreement, and other statutory cautions. One of the most significant cautions relates to the company’s obligation to cooperate and provide information to the prosecution in connection with other matters resulting from the act or omission in question (e.g., ongoing investigations of directors, officers and employees involved in the offence). Any company seeking the benefit of a Remediation Agreement will therefore be well-advised to take appropriate disciplinary action against personnel that it believes have culpability for the relevant offence.

A Remediation Agreement must contain several mandatory terms, including:

  • a statement of facts;
  • an admission of responsibility;
  • an obligation to provide additional information regarding the matter and to cooperate in future investigations and prosecutions;
  • an obligation to forfeit to the Crown any property, benefit or advantage obtained or derived, directly or indirectly, from the act or omission, or to otherwise deal with it as the prosecution directs;
  • an obligation to pay a penalty and restitution to victims; and
  • an obligation not to deduct the cost of any penalties for income tax purposes.

Remediation Agreements may also include optional terms such as:

  • the implementation of compliance measures;
  • the appointment of an independent monitor; and
  • reimbursement of the prosecution’s costs.

Judicial Approval of a Remediation Agreement

Remediation Agreements must be approved by a superior court, which must determine whether the offence charged is one for which Remediation Agreements are available, whether the agreement is in the public interest, and whether the terms of the agreement are fair and reasonable and proportionate to the offence. The court must also consider any victim or community impact statement and reparations to victims under the agreement.

In the event that a Remediation Agreement is concluded, the criminal prosecution is stayed. No other proceedings may be initiated against the accused once the agreement is in force in relation to the subject matter and any limitation agreements are also suspended. All agreements must be published unless the court determines that partial or complete non-publication is necessary for the proper administration of justice.

If the agreement is terminated at any time and the prosecution resumes, the agreed statement of facts remains admissible, but admissions not contained in the statement of facts or admission of responsibility that were made during the negotiation period are not admissible as evidence during the resumed proceedings.

Remediation Agreements Offer a New Avenue for Resolving Corporate Criminal Prosecutions

Deferred prosecution regimes are increasingly being used globally as a mechanism to resolve corporate criminal investigations:

  • The United States Department of Justice has used DPAs to address corporate wrongdoing since the early 2000s;
  • The United Kingdom introduced a DPA regime in 2014 under the Crime and Courts Act 2014;
  • France introduced the Sapin II law in December 2016, which provides for a DPA (convention judiciaire d’intérêt public) for certain economic offences;
  • Australia introduced legislation in December 2017 to establish a DPA regime (not yet in force);
  • Argentina introduced Law 27.403 in December 2017 (in force since March 2018) to establish a DPA regime (effective collaboration agreements); and
  • Singapore introduced a DPA framework into its Criminal Procedure Code in March 2018.

Remediation Agreements hold out advantages for both prosecutors and corporations. For prosecutors, they provide a means to entice cooperation and further assistance in investigations, admission of culpability, and payment of penalties and restitution, while maintaining judicial supervision and sanction, transparency and accountability. For corporations, there is now the option of settling criminal charges under the Criminal Code and the Corruption of Foreign Public Officials Actwithout the collateral burden of a criminal conviction. Concluding a Remediation Agreement may allow the corporation to avoid debarment from public procurement and an opportunity to demonstrate good corporate citizenship. Depending on the evolution of the process and the extent to which supervising courts defer to the parties as in the case of plea agreements, it may also provide for more expedited resolutions in the public interest, as well as to the benefit of both prosecution and accused.

These types of agreements are not entirely new to Canadian regulators. Similar types of settlement agreements are currently used to address corporate and individual wrongdoing by several Canadian regulatory agencies, such as the Mutual Fund Dealers Association and the Ontario Securities Commission, where the respondent corporation or individual submits to an agreed statement of facts, provides an admission of culpability and may agree to pay penalties and payment of costs.

The requirement of judicial approval may inject uncertainty into the process in the absence of precedent, as will the mandatory notice to victims and potential role for victims’ representatives in the approval process. It is to be hoped that over time, however, courts will draw guidance from case law regarding the negotiation and acceptance of guilty pleas and that a body of case law will provide guidance with regard to the Remediation Agreement process.

Offences Subject to the Regime

Offences under the Criminal Code

(a) section 119 or 120 (bribery of officers);
(b) section 121 (frauds on the government);
(c) section 123 (municipal corruption);
(d) section 124 (selling or purchasing office);
(e) section 125 (influencing or negotiating appointments or dealing in offices);
(f) subsection 139(3) (obstructing justice);
(g) section 322 (theft);
(h) section 330 (theft by person required to account);
(i)  section 332 (misappropriation of money held under direction);
(j) section 340 (destroying documents of title);
(k) section 341 (fraudulent concealment);
(l) section 354 (property obtained by crime);
(m) section 362 (false pretence or false statement);
(n) section 363 (obtaining execution of valuable security by fraud);
(o) section 366 (forgery);
(p) section 368 (use, trafficking or possession of forged document);
(q) section 375 (obtaining by instrument based on forged document);
(r) section 378 (offences in relation to registers);
(s) section 380 (fraud);
(t) section 382 (fraudulent manipulation of stock exchange transactions);
(u) section 382.‍1 (prohibited insider trading);
(v) section 383 (gaming in stocks or merchandise);
(w) section 389 (fraudulent disposal of goods on which money advanced);
(x) section 390 (fraudulent receipts under Bank Act);
(y) section 392 (disposal of property to defraud creditors);
(z) section 397 (books and documents);
(z.‍1) section 400 (false prospectus);
(z.‍2) section 418 (selling defective stores to Her Majesty);
(z.‍3) section 426 (secret commissions); and
(z.‍4) section 462.‍31 (laundering proceeds of crime).

Offences under the Corruption of Foreign Public Officials Act:

a) section 3 (bribing a foreign public official); and
b) section 4 (maintenance or destruction of books and records to facilitate or hide the bribing of a foreign public official).

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