Canada: Public Procurement In Quebec: New Authorization Regime Under Judicial Scrutiny

On December 7, 2012, in the wake of the corruption and collusion scandals, the newly elected Quebec government (Government) adopted its first piece of legislation, the Integrity in Public Contracts Act (Integrity Act), which introduced the requirement for business enterprises wishing to contract with the Government to obtain a prior authorization from the Autorité des marchés financiers (AMF), Quebec's financial markets regulator.

On May 15, 2014, for the first time since the adoption of the act, the Québec Superior Court analyzed the normative framework governing applications seeking an authorization to enter into contracts with public bodies. More specifically, the court examined AMF's discretionary power to refuse to issue an authorization to an enterprise based on its failure to "meet the high standards of integrity that the public is entitled to expect from a party to a public contract"; a controversial criteria of the Integrity Act, due to its discretionary and subjective nature which opens the door to interpretation. In this respect, see our March 2013 Blakes Bulletin: Bill 1: Integrity in Public Contracts Act.

In 9129-2201 Québec inc. c. Autorité des marchés financiers, the Superior Court upheld the broad discretionary power of the AMF in assessing whether or not to authorize an enterprise to contract with a public body, in light of the AMF's expertise in considering the integrity of enterprises wishing to do business with the Government. Emphasizing the importance of fighting corruption and collusion in public contracts, a public interest objective of the Integrity Act, the court also held that "[TRANSLATION] the notion of integrity must be interpreted broadly." Additionally, the court underscored that the burden of demonstrating integrity in the course of the authorization process rests on the enterprise. The court finally concluded that the safeguards offered to persons indicted or accused in criminal and penal proceedings, including the presumption of innocence, do not apply in civil matters, such as an application for authorization.


Adopted little more than a year following the launch of a public inquiry into the potential corruption in the management of public construction contracts led by the Charbonneau Commission, the Quebec government adopted the Integrity Act with the purpose of "promot[ing] public confidence in the public procurement process by attesting to the integrity of tenderers." The Integrity Act amended An Act respecting contracting by public bodies (Public Contracts Act) to introduce the requirement for business enterprises wishing to enter into contracts with public bodies and, by order-in-council, with municipalities to obtain a prior authorization. The AMF was designated as the authority responsible to issue or refuse such authorizations in light of its expertise in assessing the probity of enterprises in issuing certificates under An Act respecting the distribution of financial products and services.

Under the new provisions of the Public Contracts Act, the AMF must refuse to issue an authorization if certain objective and specific criteria are not met. In addition, the AMF may exercise its discretion in refusing such authorization based on a subjective criterion, namely an enterprise's failure to meet the "high standards of integrity that the public is entitled to expect from a party to a public contract." In exercising its discretion, the AMF may take into consideration a number of factors, a non-exhaustive list of which is contained in the Public Contracts Act. On July 12, 2013, the AMF exercised its discretion and refused to issue an authorization to 9129-2201 Québec inc., a construction company doing business as Les Entreprises Bentech Inc. (Bentech Enterprises), based on its failure to meet this subjective criterion.

In this case, the Associate Commissioner for Audits of the permanent anti-corruption unit (UPAC) appointed by the AMF to audit Bentech Enterprises had recommended in its advisory opinion that the AMF refuse the authorization. The AMF then sent a prior notice of refusal to Bentech Enterprises and allowed the enterprise to submit written observations and provide additional documents to complete its file. Unconvinced by the additional information provided, the AMF refused to issue the authorization to Bentech Enterprises. Thereafter, Bentech Enterprises' name was entered into the register of enterprises ineligible for public contracts for a period of five years.

The AMF based its refusal to issue the authorization on two grounds:

  • Bentech Enterprises is the nominee corporation (prête-nom) for 9075-3856 Québec inc., doing business as Construction Bentech Inc. (Bentech Construction)
  • Bentech Construction is involved in a false invoice scam and, according to three witnesses who testified before the Charbonneau Commission, has been participating in a system of collusion in the sewer construction and repair industry.

Being of the opinion that the AMF had exceeded its jurisdiction under the Public Contracts Act and acted ultra vires, Bentech Enterprises filed a motion for judicial review (Motion).


Two main issues were raised in the Motion:

  • What is the applicable standard of judicial review to the AMF's decision to refuse the authorization?
  • In light of the applicable standard of judicial review, did the AMF exceed its jurisdiction in refusing to grant the authorization?


The court held that the applicable standard of judicial review of decisions made by the AMF under the Public Contracts Act is "reasonableness." Therefore, the court had to consider "whether the decision [of the AMF] falls within a range of possible, acceptable outcomes which are defensible in respect of the facts and law." In reaching this conclusion, the court took into consideration the parliamentary debates which preceded the adoption of the Integrity Act, the existence of a privative clause, the AMF's broad discretion under the Public Contracts Act, and the mission of the AMF to protect the public as well as its expertise in assessing the probity of enterprises, among other factors. By adopting the "reasonableness" standard of review, the court upheld the broad discretion entrusted by the legislator to the AMF.

The court also emphasized that the burden of proof to establish one's integrity rests with the enterprise seeking the authorization: an enterprise cannot rely on UPAC's powers of investigation or on the AMF's judicial notice to argue that the information which it itself failed to submit should have been unveiled by UPAC during its audit or that the AMF should have taken judicial notice of such information. According to the Superior Court, accepting this argument would be conducive to a lack of accountability of enterprises in a context where the public interest requires the opposite; that they demonstrate a high level of transparency and integrity. In order to convince the AMF of its integrity, an enterprise cannot limit its observations and comments to a mere statement that the information on which the AMF's decision is based is wrong or inaccurate. The enterprise must provide concrete and admissible evidence that casts doubt on or contradicts AMF's grounds for refusal.

The court also deemed admissible for the purpose of refusing to grant an authorization, a fact established by the testimony of three witnesses at the Charbonneau Commission hearings. In holding that it was reasonable for the AMF to base its decision on such a fact, the court confirmed that the notion of "integrity" in the Public Contracts Act must be interpreted broadly. The refusal to authorize an enterprise to enter into contracts with the Government can thus be based on allegations of collusion and corruption even in the absence of an indictment or a conviction. The fact that three separate individuals had implicated Bentech Construction, of which Bentech Enterprises is the nominee corporation (prête-nom), in bid rigging and a system of collusion in the sewer sector was a factor, the AMF could take this into account in determining that the enterprise had failed to meet the high standards of integrity that the public is entitled to expect from a party to a public contract. Indeed, since the authorization process pertaining to public contracts is a civil law matter rather than a criminal or penal law issue, the presumption of innocence is of no application.


For the first time, the Superior Court's decision upholds AMF's broad discretion in assessing the integrity of enterprises as well as the subjective criterion in appraising that notion of integrity. It also signals to, and urges, enterprises to promptly resolve any potential situation of collusion or corruption as soon as allegations to that effect are made. Finally, it imposes on enterprises a demanding and stringent burden of disclosure, transparency and proof in establishing their integrity and probity, both at the time of filing their application for authorization and later, when submitting their additional observations and comments, if they receive a prior notice of refusal.

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