Deal or No Deal – Anticipating the First DPA/Remediation Agreement in Canada

In the wake of the SNC-Lavalin affair Canada awaits its inaugural Remediation Agreement (“RA”), more commonly known as Deferred Prosecution Agreements (“DPA”) in other jurisdictions.

On February 19, 2015, three SNC-Lavalin entities were each charged with one count of fraud under the Criminal Code and one count of bribery under the Corruption of Foreign Public Officials Act (“CFPOA”).  Although the RA regime came into force in September of 2018, the Canadian government did not invite SNC-Lavalin to enter into negotiations for a DPA.

The prosecutor at the heart of the decision not to offer SNC-Lavalin a DPA, the Director of the Public Prosecution Service (“DPP”), Kathleen Roussel, discussed RAs in an interview with The Globe & Mail published on February 28, 2020.[1] Her comments supplement the formal guidance on RAs that was issued by the DPP on January 23, 2020.[2]

The Criteria

Canada’s RA regime is set out in Part XXII.1 of the Criminal Code and may apply in respect of the bribery and accounting offences under the CFPOA and 30 other offences from the Criminal Code. In the guidance issued in January of this year – section 3.21 of the Public Prosecution Service of Canada Deskbook (“RA Guideline”) – the DPP restates the conditions that must exist before an RA can be considered, including that the threshold of a reasonable prospect of conviction must be met.  

The RA Guideline further states that the discretion to negotiate an RA will be exercised only where it is in the public interest to proceed in this way, rather than with a prosecution.

The RA Guideline notes that the list of public interest factors, while mandatory, must be considered on a case-specific basis, and the weight to be given to any particular factor will depend on the circumstances of the given case. This affords prosecutors considerable discretion.

As we have previously noted,[3] there are aspects of Canada’s RA regime that could be problematic for a corporation, depending on prosecutor’s position in a given case. Notably, the Criminal Code requires that an RA include an indication of the obligation of the company to cooperate in any investigation, prosecution or other proceeding in Canada, or elsewhere if the prosecutor considers it appropriate.  A Canadian prosecutor’s ability to insist, as a condition of an RA, that a corporation cooperates with foreign authorities might disincentive self-reporting or destabilize negotiations over an RA, depending on the circumstances. 

At paragraph 3 of Guideline 3.21, the DPP makes it clear that, in order to assess whether the threshold of a reasonable prospect of conviction has been met, a full law enforcement investigation must be undertaken. The Guideline further states that the “RA regime does alter the manner in which criminal offences are to be investigated. Internal or private investigations by the organization are not a substitute for the independent determination of law enforcement whether to conduct an investigation and their assessment of the results of any investigation of the offence even when it results from a voluntary disclosure.” This guidance does not mean that internal investigations will be disregarded by prosecutors, or that their value as a responsible corporate response is diminished. Rather, law enforcement must exercise an independent assessment, based on an investigation of its own to the extent that it deems appropriate. 

The importance of internal investigations by companies operating in Canada cannot be underestimated.  As in the U.S., internal investigations often precede self-reporting, and may run in parallel to a regulatory or law enforcement investigation with varying forms of cooperation.  Even in the UK, where the authorities tend to be less deferential to, or even critical of, internal investigations, they can play an important role in the DPA context.[4]  A hallmark of the first DPA issued under the UK regime - between the Serious Fraud Office (“SFO”) and Standard Bank - was an internal investigation conducted by the bank, authorized by the SFO, after the bank self-reported. The result of the internal investigation provided sufficient admissible evidence to enable the SFO to meet the UK regime’s criteria to offer a DPA.

In Canada, there are key judgements to be made about the timing, nature and extent of an internal investigation prior to any potential approach to the authorities, and over the course of an investigation that runs in parallel to a government investigation. As in the U.S., it is often prudent for Canadian corporations initiate an internal investigation on their own, taking care to gather, preserve and assess evidence responsibly, in advance of decision about whether and how to self-report.  This is distinguishable from Standard Bank’s approach in the UK, where their internal investigation was first authorized by the SFO after self-reporting.

The Role of Crown Counsel

The RA Guideline establishes the circumstances in which a prosecutor may be approached about the likelihood for negotiating an RA in a particular case. The non-exhaustive list of circumstances includes approaches:

  • by counsel for an organization in the context of making a voluntary disclosure or considering such a disclosure;
  • by counsel for an organization in situations where law enforcement are investigating an offence and the organization is aware of the investigation but charges have not been laid (pre-charge);
  • by counsel for an organization following the laying of charges; and
  • by law enforcement prior to or in the course of an investigation.

Counsel for organizations can seek a prosecutor’s view on an RA at the earliest stage (potential voluntary disclosure) through to the latter stages of an investigation (post-charge). However, the Guideline prevents a prosecutor from offering any view to the organization as to the likelihood of an invitation to negotiate being issued.

Where potential offences may be disclosed, prosecutors have a positive obligation to refer the organization to the appropriate law enforcement agency.  In all cases, prosecutors are directed to avoid any comment until a final decision is made pursuant to the process set out in the Guideline.

The Decision Process

The RA Guideline sets out the decision-tree that will be followed if an approach is made to prosecutor by either law enforcement or an organization.

It is only after the prosecutor has reviewed the investigation and concluded that there is a reasonable prospect of conviction that, if the prosecutor is of the view that an invitation to negotiate an RA should be considered, a recommendation is made to the Chief Federal Prosecutor (“CFP”) to seek the ultimate authorization required (which the Attorney General of Canada (“AG”) delegates to the Deputy Director of Public Prosecutions (“Deputy DPP”)).

The CFP must then consider whether the negotiation of an RA is in the public interest. If so, the CFP provides the Deputy DPP with a legal memorandum containing a concise description and analysis of the available evidence, demonstrating how that evidence meets the evidential threshold with respect to the accused organization on each count, and addressing how the public interest is met by negotiating an RA rather than bringing a prosecution. The Deputy DPP conducts an “objective assessment” which the guidance describes as “a challenging function”. If the Deputy DPP agrees that an invitation to negotiate an RA should be issued, the recommendation will be forwarded to the DPP who, on behalf of the AG, will make a final decision on whether to consent to the issuance of an invitation to negotiate an RA.

If at the outset a prosecutor is of the view that an invitation to negotiate an RA is not appropriate, the prosecutor notifies the CFP in writing, who in turn notifies the Deputy DPP by providing a basic overview of the case and the reasons why an RA is not recommended.

Insights from the DPP

The DPP commented in her February 28, 2020 interview that she was wholly unware of any political pressure that was or was not being placed on the former Attorney-General at the time she was considering SNC-Lavalin’s case. The early and sustained test of the independence of the RA process has only served to demonstrate its integrity.

While the DPP did not delve into the details of the SNC-Lavalin investigation, she commented that, although SNC-Lavalin had changed since engaging in the criminal conduct, a prosecution was preferable. The DPP highlighted three factors that weighed against SNC-Lavalin obtaining an RA, namely: the severity and breadth of the conduct, the length of time over which the offending conduct occurred, and the level that the conduct reached within the organization’s hierarchy. This signals that, while post-offense remediation is critical for any organization, it may be insufficient to stave off criminal charges.

The DPP, according to The Globe and Mail, expressed an adamant view that DPA would not be offered to repeat offenders. She describes an RA as a “one time thing”.

Such a rule is not set out in the legislation that created RAs (a fact that the DPP acknowledged) and this approach, if it is followed, stands in contrast to the U.S. and UK, where DPAs have been granted to repeat corporate offenders.

SNC was unable to negotiate an RA[5] and the charges against them were ultimately settled on December 18, 2019 when an SNC affiliate pled guilty to a charge of fraud under section 380 of the Criminal Code and SNC agreed to retain an independent consulting firm to monitor its ethics and compliance program during a three-year probation period. Further details on that case and the implications for anti-corruption enforcement and compliance are set out in our recent client alerts at: “SNC-Lavalin Pleads Guilty in Canada’s Most Significant Foreign Corruption Case to Date”[6] and “SNC-Lavalin Probation Order Sets Out Key Anti-Corruption Compliance Measures”[7].

Awaiting Canada’s First DPA

Canada still awaits its first Remediation Agreement. 

According to The Globe & Mail and our recent discussions with Canadian authorities, at the present time there are at least two alleged cases of foreign corruption that may be candidates for resolution by way of Remediation Agreement in the Canadian judicial system.

 

[1] Robert Fife, “Prosecutor says no deal was offered to SNC-Lavalin due to severity of charges and past behaviour” (February 28, 2020), The Globe and Mail, online: <www.theglobeandmail.com/politics/article-top-federal-prosecutor-says-she-felt-no-political-pressure-on-snc> [subscription required].

[2] 3.21 Remediation Agreements, Public Prosecution Service of Canada Deskbook, Guideline of the Director issued under Section 3(3)(c) of the Director of Public Prosecutions Act, online: <www.ppsc-sppc.gc.ca/eng/pub/fpsd-sfpg/fps-sfp/tpd/p3/ch21.html>.

[3] “Questions and Caution Regarding Canada’s Proposed Deferred Prosecution Regime” (June 6, 2018), McCarthy Tétrault LLP, online: <www.mccarthy.ca/en/insights/blogs/terms-trade/questions-and-caution-regarding-canadas-proposed-deferred-prosecution-regime>.

[4] “UK and Canadian Anti-Corruption Legislation – Deferred Prosecution Agreements” (May 1, 2016), McCarthy Tétrault LLP, online: <www.mccarthy.ca/en/insights/blogs/terms-trade/uk-and-canadian-anti-corruption-legislation-deferred-prosecution-agreements>.

[5] We note that SNC-Lavalin’s application for Judicial Review of the DDP’s decision was denied by the Federal Court on March 8, 2019; see SNC-Lavalin Group Inc. v Canada (Public Prosecution Service), 2019 FC 282. SNC-Lavalin subsequently appealed to the Federal Court of Appeal (see online: <nationalpost.com/news/snc-lavalins-fight-for-a-remediation-agreement-grinds-on-in-federal-court-of-appeal> before settling with prosecutors on December 18, 2019.

[6] “SNC-Lavalin Pleads Guilty in Canada’s Most Significant Foreign Corruption Case to Date” (December 20, 2019),  McCarthy Tétrault LLP, online: <www.mccarthy.ca/en/insights/blogs/terms-trade/snc-lavalin-pleads-guilty-canadas-most-significant-foreign-corruption-case-date>.

[7] “SNC-Lavalin Probation Order Sets Out Key Anti-Corruption Compliance Measures” (January 10, 2020),  McCarthy Tétrault LLP, online: <www.mccarthy.ca/en/insights/blogs/terms-trade/snc-lavalin-probation-order-sets-out-key-anti-corruption-compliance-measures>.

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