Canada: How Trudeau Can Easily Help SNC-Lavalin (And Other Corporate Wrongdoers) Without Corrupting Justice

Last Updated: March 29 2019
Article by W. Michael G. Osborne

“There is no solution that does not involve interference” — this is what Gerry Butts, the former principal secretary to Prime Minister Justin Trudeau reportedly told the chief of staff to then attorney general Jody Wilson-Raybould, about helping SNC-Lavalin. Wilson-Raybould testified at the justice committee that the prime minister’s staff wanted her to intervene to arrange for a remediation agreement, to avoid SNC-Lavalin going to trial on corruption charges that could result in it being banned from obtaining federal contracts for years.

Butts’ statement was untrue. There is a solution that does not involve political interference with an ongoing prosecution. And it does not require any legislative or regulatory changes. All the government has to do is reform an administrative policy officially known as the Ineligibility and Suspension Policy, usually called the debarment policy.

THE PROBLEM WITH DEBARMENT

If SNC-Lavalin is ultimately tried and convicted on corruption charges, the debarment policy will prevent it from bidding on federal government contracts for 10 years (reducible to a minimum of five years). This, it is claimed, might mean thousands of people losing jobs at SNC-Lavalin, one of Quebec’s industrial champions, possibly before a federal election that the prime minister almost certainly needs Quebec’s support to win.

The solution the prime minister reached for, however, namely suborning the criminal justice system to achieve a political/economic objective, is the wrong one. Remediation agreements are a useful tool in the prosecutor’s toolbox, but they do not solve the underlying problem, which is that the debarment policy is fundamentally misconceived. Indeed, remediation agreements are not available for conspiracy offences under the Competition Act such as price fixing and bid rigging. That results in a situation where companies that pay bribes have a way to potentially avoid debarment, while those that conspire to fix prices or rig bids do not. Surely bribery is no less reprehensible than big rigging.

The debarment policy is part of the federal government’s Integrity Regime, which was introduced in 2015 with the goal of ensuring that “the government does business only with ethical suppliers in Canada and abroad.” It provides that convictions for a variety of offences of dishonesty, such as bribery of Canadian or foreign government officials, bid rigging, price fixing, and lobbying offences, automatically lead to a determination of ineligibility, or debarment, from Public Works and Government Services Canada (PWGSC) contracts for 10 years. By entering into an administrative agreement with the government, a supplier can have its period of debarment reduced by as much as five years (except in the case of suppliers convicted of certain more serious offences). The policy includes a public interest exception that allows the government to waive debarment in certain cases, including where debarment would have a “significant adverse impact on the health, national security, safety, public security or economic or financial well-being of the people of Canada or the functioning of any portion of the federal public administration.” Thus firms that are considered too big to fail (perhaps SNC-Lavalin) might draw a get-out-of jail-free card, while firms considered less important face a minimum five-year sentence, which may amount to corporate capital punishment.

There are a number of problems with the debarment policy. Most fundamentally, automatic debarment with no hope of reinstatement for five years is not the best way to advance the stated goal of the policy, which is to safeguard the use of public funds by ensuring that the government only does business with ethical suppliers. Certainly a supplier that has been convicted of an offence of dishonesty should face a searching inquiry from anyone proposing to do business with it. The question should be, however, whether the supplier can demonstrate that it has reformed itself sufficiently that it should now be trusted. Since companies only act through individuals, if the individuals responsible for the offence have left, and the new managers have truly committed themselves and the company to clean business, there is no reason to presume that the corporation will not be an ethical supplier.

Second, debarment as it is presently structured is really a further punishment layered on top of whatever the court has ordered in convicting the company. In our criminal justice system, a judge imposes a sentence commensurate with the offence after hearing evidence and submissions from both sides in open court. The judge is required to weigh a series of factors, including whether the corporation has taken steps to avoid the repetition of the offence. Debarment is an additional sentence imposed, not by a judge, but by civil servants, using administrative policies that do not afford either procedural fairness or transparency. The penalty itself may be wildly disproportionate to the offence, since in practice debarment can amount to corporate capital punishment whose impact will be felt by innocent employees and shareholders.

Third, debarment creates an unintended consequence for criminal prosecutions. Most corporations facing criminal charges just want to get it over with. They will frequently plead guilty to offences even when their lawyers tell them they stand a very good chance of succeeding at trial. Executives typically consider it a higher priority to quickly put the matter behind them and get on with business. However, a corporation that depends upon government contracts has no choice but to fight to the very end, essentially for its life, no matter what its chances are.

This, in turn, creates a fundamental unfairness: a firm that self-reports, pleads guilty, and amends its ways suffers debarment. A firm that rolls the dice, goes to trial, and is acquitted, does not.

A REVISION COULD MAKE IT WORSE

In mid-October 2018, the federal government released a draft revised debarment policy for comment, providing an unusually short one-month comment period. The government indicated then that it intended to implement the new policy in early 2019. Yet it still remains under consideration today.

The new policy will increase the discretion available to PWGSC bureaucrats in determining the period of debarment. But not only does it not go far enough towards addressing the shortcomings of the current policy, it makes the policy worse in some respects.

Under the new policy, being convicted of certain offences, including corruption offences and Competition Act offences, will automatically result in a determination that the supplier is ineligible to do business with the federal government. Troublingly, the new policy greatly expands the scope of offences that will trigger debarment. Added to the list are not just Competition Act offences, but also violations of provincial laws, securities offences, certain environmental offences, and violations of the Canada Labour Code. The policy will thus be triggered by relatively trivial infractions such as failing to register a business name (an offence under Ontario’s Business Names Act). Instead of being focused on offences of dishonesty, the new policy will debar companies that have committed minor regulatory infractions that are not even criminal offences.

While debarment remains automatic, there will no longer be any minimum period of ineligibility. Rather, the assistant deputy minister of Public Services and Procurement, who bears the title of “Registrar” under the policy, determines the debarment period after weighing the seriousness of the offence against steps taken by the supplier to address the conduct. Unfortunately, the policy does not make it clear whether the goal of the process is to impose a penalty, or to determine whether the supplier should be trusted. The policy does hint at the latter: “The Registrar will need to be convinced that the circumstances leading to the debarment have been addressed.” The process is opaque. The supplier is not entitled to a hearing or even to make submissions; it is only entitled to provide “written certifications, declarations or other information.”

The new policy empowers the Registrar to enter into “administrative agreements” with an ineligible supplier, which can suspend the period of ineligibility. There is no restriction on when the Registrar can initiate these discussions, but an ineligible supplier must wait three years before requesting an administrative agreement. Moreover, while the policy allows that a remediation agreement can be considered to be an administrative agreement, the policy does not provide for negotiation of an administrative agreement before a company pleads guilty.

A SIMPLE SOLUTION

Businesses tend to prefer outcome certainty to taking a chance in court. The Competition Bureau’s leniency program, for example, has an established track record of encouraging firms to self-report, negotiate a fine, plead guilty and clean up their act. Firms know that courts will almost always agree to impose the fine negotiated by the parties. The program thus allows firms to determine their exposure to fines relatively early on. There is no reason why a similar program could not be effective with corruption offences. Yet the current debarment policy undermines attempts to encourage companies to settle criminal charges because it creates a powerful incentive not to settle. The new debarment policy still fails to provide outcome certainty, which is what businesses need in order to agree to plead guilty. A firm cannot know, before agreeing to plead guilty, whether that guilty plea will allow it to move past its misconduct, or will doom it to failure.

There is a solution that does not involve political interference with prosecutions. It does not involve any legislative or regulatory changes. All the government has to do is overhaul the debarment policy to make it fair for all firms — not just those that are too big to fail.

Originally published by Financial Post

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
W. Michael G. Osborne
 
In association with
Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions