Following our earlier bulletin commenting on Canada's 2018 Budget commitment to introducing a Deferred Prosecution Agreement (DPA) regime for corporate wrongdoing, the Canadian Government swiftly introduced legislation to deliver on its commitment. The legislative framework for DPAs is to be introduced by amendments to the Criminal Code, which in turn are contained within Part 6, Division 20 of the omnibus Bill C-74 - Budget Implementation Act.
In tabling these legislative changes, Canada has taken the critical step in fulfilling its promise to introduce a DPA regime, and given clarity to what it has publicly described as a "made in Canada version" of DPAs.
A brief description of the general nature and purpose of DPAs, as well as their broad impact on the prosecution of economic crime, was contained within our earlier bulletin. This bulletin focuses on the detail of the Canadian DPA regime, as mapped by the proposed legislative framework introduced within Bill C-74.
Core elements of Canada's DPA regime
One distinctive feature of the Canadian DPA regime is the label attached to it. Specifically, the proposed legislation announces that Canada's version is based on "Remediation Agreements," eschewing the conventional "DPA" label adopted by other jurisdictions. However, it is clear from the precise provisions of the legislation that, whatever the label, the framework is fundamentally similar to DPA regimes adopted in other jurisdictions, most notably the UK. The core elements are as follows:
- Remediation Agreements will be available for a range of economic crime offences, including almost the entire gamut of fraud and domestic bribery offences contained within the Criminal Code, as well as—notably—offences under the Corruption of Foreign Public Officials Act;
- Only "organizations" (as already defined within the Criminal Code) will be able to take advantage of Remediation Agreements – they will not be available to natural persons;
- The decision as to whether to offer a Remediation Agreement to a corporate accused will be made by the assigned prosecutor, subject to the Attorney General's consent;
- The prosecutor will be required to take certain
factors into account when deciding whether to offer a Remediation
Agreement, including the following (non-exhaustively):
- How the impugned conduct was brought to the attention of authorities;
- Any efforts by the organization to remediate the wrongdoing and address deficiencies in its compliance program;
- Whether the organization has taken disciplinary action against employees involved in the impugned conduct, and whether it is willing to identify individual wrongdoers to the authorities;
- The gravity of the conduct, as well as any history of offending by the organization;
- "Any other factor the prosecution considers relevant," thereby giving the prosecutor considerable latitude to take account of specific circumstances.
The mandatory considerations set out in the legislation clearly indicate an intention to incentivize self-reporting and promote proactive compliance efforts, which are also features of DPA regimes utilized in several other jurisdictions. In addition, the specific inclusion of obligations to identifying individual wrongdoers (and furnish evidence to support their prosecution, as described below) mirrors a broader enforcement trend in relation to corruption offences of pursuing individuals, led most notably by the US (see Dentons' bulletins regarding US Department of Justice Policy as outlined in the Yates Memorandum and FCPA Pilot Program). As noted in these bulletins, a regime that incentivizes organizations to identify individual wrongdoers within their ranks increases the jeopardy for employees and officers, and adds a further layer of complexity in managing and conducting internal investigations.
Notably, the proposed legislation includes a transitional provision that clearly allows for Remediation Agreements to be utilized for wrongdoing that occurred prior to the regime coming into force. As such, we may not have to wait long after the legislation takes effect to see the first Remediation Agreement brought forward.
The price of a Remediation Agreement
The proposed legislation also sets out the mandatory terms of any Remediation Agreement, which most notably include (summarily and non-exhaustively):
- An agreed statement of facts and an acknowledgment of wrongdoing, to be made publicly available (save in prescribed exceptional circumstances)
- Obligations to fully cooperate in any investigation relating to the alleged conduct, including by providing testimony to support related prosecutions (such as against individuals)
- Certifying that information disclosed to Prosecutors in connection with the offence is both complete and accurate;
- An obligation to forfeit any benefit or proceeds derived from the wrongdoing (or to otherwise deal with such benefits/proceeds as may be directed by the Prosecutor);
- Payment of a penalty to the Government, as well as an additional victim surcharge of up to 30% of such penalty (except in CFPOA cases, as the CFPOA makes no provision for victim surcharges to be applied);
- Payment of "reparations" to any "victims" (as defined), or if no such payments are proposed, the reasons why they are not considered appropriate;
Given that the required terms include not only payment of a penalty, but also require forfeiture of any benefit (which could include the entire proceeds from a tainted contract or concession), as well as payment of potential victim reparations or restitution, the potential sum payable for a given DPA is potentially vast.
While not a mandatory requirement, the legislation also contains a framework for an independent monitor to be appointed to oversee the organization's compliance and remediation efforts throughout the term of the DPA. This potential requirement is likely to incentivize companies to demonstrate to prosecutors that proactive and comprehensive remediation and compliance enhancements have already been carried out, such that ongoing monitoring is unnecessary.
As expected, the Canadian regime also provides for a significant oversight role for the court, similar to the UK DPA regime. Specifically, Remediation Agreements will require the approval of a Superior Court, which must be satisfied that the DPA is in the interests of justice and that the terms are reasonable and proportionate to the wrongdoing.
Is the DPA regime truly a "made-in-Canada" version?
In large part, the key features of the Remediation Agreement regime are not particularly novel when compared to the DPA regimes introduced in other jurisdictions.
However, one striking feature of the Canadian regime, as set out in the proposed legislation, is the apparent level of accommodation for "victims" (as defined) of the impugned conduct. While DPA regimes in several other jurisdictions make provision for the possibility of victim compensation (including the UK regime), what is notable under the proposed Canadian regime is the mandatory nature of the obligations to fully consider victims' perspectives and their compensation entitlements. Specifically, under the proposed legislation, "victims" (as defined) must generally be notified prior to a Remediation Agreement being presented to a court for approval, and the court is required to consider any victim impact statement presented in connection with the approval hearing, as well as to consider whether appropriate provision has been made for "reparations" to victims within the Remediation Agreement. In this regard, it is worth noting that the definition of "victim" under the Criminal Code is very broad, and includes any individual or organization "against whom an offence has been committed...and has suffered or is alleged to have suffered...property damage or economic loss". In domestic or foreign bribery cases, identifying the true victims of, and calculating the scale of the damage caused by, such corruption is often far from straightforward. Indeed, the potential categories of "victim" in the context of the offences covered by Remediation Agreements could conceivably include (among others) foreign governments, local community members, state-owned entities (domestic or foreign) and even commercial competitors. As such, it is at least conceivable that a distinctive feature of the "made-in-Canada" DPA regime may prove to be an unparalleled level of participation by parties claiming status as victims of a given case of corruption.
Ultimately, the impact of the extensive provisions relating to "victims" (as defined) will depend on how prosecutors and courts apply the relevant requirements imposed upon them under the regime and, in particular, how they respond to various parties asserting victim status and/or claims for reparation or restitution by them. However, unless the applicable provisions change during passage of Bill-74 through Parliament, organizations exploring the possibility of negotiating a Remediation Agreement would be well advised to develop a coherent plan for engagement with potential victims and for responding to a potentially broad range of claims.
The introduction of Remediation Agreements has the potential to substantially alter economic crime enforcement in Canada. Prosecutors and corporate accused will no longer face a "zero-sum" game when dealing with corporate fraud and corruption cases and, instead, a "middle-road" will be open to them. Precisely how attractive that middle-road proves to be for organizations will depend on how prosecutors and courts utilize the new tools available under the regime, and how well organizations adapt to that reality.
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