After the revelations of corruption and collusion in the awarding of public contracts in the construction industry, most notably heard at the Charbonneau inquiry, the Government of Quebec announced its intention to table a bill designed to facilitate the recovery of funds against companies involved in questionable activities in public contracts. On November 13, 2013, the Quebec Minister of Justice introduced a bill at the National Assembly, titled: Bill n°61: An Act mainly to recover amounts paid unjustly by public bodies in relation to certain contracts in the construction industry. The key provisions of the Bill are as follows:
- The Bill is applicable to public contracts in the construction industry. Once it is judicially established that the company committed fraud or used fraudulent tactics (corruption, collusion or similar activities) in the tendering, awarding or managing of public contracts in the construction industry, the Bill creates a presumption of prejudice to the public body
- The presumed prejudice will subsequently be determined by the government and will correspond to a percentage of the total amount paid by the public body for the impugned contract. Other jurisdictions have established or proposed presumed percentages of damages or surcharge caused by cartels that could inspire the government:
- In the United States, the US Sentencing Commission adopted a presumption that the surcharge caused by collusion represents 10% of the total price. In Hungary, the 2009 Competition act also establishes a presumption of 10% in price-fixing or market-sharing cases;
- The United Kingdom is reforming its competition scheme with regards to civil suits and remedies and proposed a presumed percentage of 20%. Following public consultations, the government chose not to apply the 20% surcharge considering anticipated difficulties in application (e.g., in the case of multiple buyers);
- Some experts proposed rates of surcharge for national cartels (17.2% – Connor, Price-Fixing Overcharges, 2010; 13.6% – Boyer, The Econometrics of Cartel Overcharges, 2011).
- The Bill provides that the directors acting in any capacity whatsoever at the time of the fraud or the fraudulent tactics are jointly liable, unless they can prove that they acted with due diligence. In order to establish due diligence and limit their personal liability, it would be relevant for directors to rely on policies, procedures and controls to prevent fraud or fraudulent tactics that were in place within the company at the relevant time.
- The Minister of Justice may institute recovery proceedings on behalf of public bodies, including municipal bodies. The Bill also permits a public body to institute a proceeding on its own, with authorization of the Minister of Justice, if the Minister is of the opinion that it would be in the public interest.;
- The Bill provides a longer limitation period than the three-year general prescription set out in the Civil Code of Quebec. The Minister of Justice may institute proceedings to recover damages that occurred up to 15 years before and 5 years after the adoption of the Bill.
- A reimbursement program can be established by the government. Such a program would be administered by a neutral and independent person (e.g., a former judge) and would be in place for a limited period, after which, proceedings may be instituted by the Minister of Justice. Companies interested in participating in the reimbursement program could disclose certain problematic contracts to the independent administrator with a view of reaching a settlement.
- Within the scope of such a reimbursement program, the Minister may act on behalf of a public body and grant a release and discharge in respect of contracts disclosed by a company.
- The independent administrator of the recovery program may not be compelled to disclose any information learned in the exercise of its functions. The Act respecting Access to documents held by public bodies and the Protection of personal information is not applicable in this context. No information obtained in the context of such a program is admissible as evidence before a tribunal or court of justice.
- The Bill also includes amendments to the Act respecting contracting by public bodies to provide more flexibility in relation to integrity authorizations issued by the Autorité des marchés financiers before awarding public contracts and sub-contracts.
- The conviction of a company in Canada or abroad, in the last five years, for an offence listed in the Schedule I of the Act respecting contracting by public bodies, would no longer constitute ground for automatically dismissing the request for an integrity authorization. The Autorité des marchés financiers would now have the discretion to dismiss an integrity authorization request if such a company does not comply with the high integrity standards expected by the public.
- However, if a shareholder of a company that holds at least 50% of the voting rights, or one of its administrators or directors, is convicted of an offence listed in the Schedule I of the Act respecting contracting by public bodies in the last five years, this would remain an automatic ground for refusal by the Autorité des marches financiers. Companies that wish to submit requests for integrity authorizations in order to be awarded public contracts would need to terminate the employment of these persons in order to be allowed to receive their authorization.
If adopted, Bill 61 would change the rules with regards to civil
proceedings as they would confer a legal advantage to the State in
the recovery of public funds in the construction industry. Firstly,
as long as a fault can be judicially established, a presumption of
prejudice would apply under the form of a percentage. Secondly,
limitation periods would be extended.
The government will establish a reimbursement program that will strongly encourage companies to participate. In this context, and if a settlement is reached, companies will benefit from the significant advantage that the Minister of Justice could grant a release and discharge for the contracts disclosed, which means the public body could not subsequently institute proceedings against the company with regards to these contracts.
Even if the reimbursement program has in principle no connection with the process for issuing integrity authorizations before awarding public contracts and sub-contracts, the press release issued by the Minister of Justice suggests otherwise: "We offer then [the companies] at the same time the opportunity to demonstrate their true will to make amend and reach the high standards of integrity that people from Quebec can expect" [Our translation]. The participation of a company in the reimbursement program will not constitute an amnesty from criminal and penal proceedings against the company.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.