Canada: Debarment Proposals Loosen Their Grip But Reach Out Farther

Last Updated: June 12 2019
Article by Kenneth Jull

When a corporation is convicted of serious offences such as bribery of foreign officials, the Government of Canada debars that corporation from federal government work. The existing Integrity regime sets the period of debarment at ten years, which may be reduced to five years if the corporation has cooperated with law enforcement authorities or undertaken remedial efforts to address the wrongdoing.

Debarment has been in the news in the SNC-Lavalin affair, as this was cited as one of the key reasons that the company sought a deferred prosecution agreement. The Chief Executive Officer of SNC-Lavalin, Neil Bruce, said that if the engineering firm is convicted and barred from bidding on federal contracts here at home its workers would end up working for the Montreal-based company's foreign rivals.

Revision of the debarment rules may be another route to mitigate the collateral impact on jobs of innocent workers, apart from a deferred prosecution agreement.

The Government of Canada has released a very comprehensive document which describes a proposed new debarment regime.2 This policy is effective as of a date to be determined. This date is expected to be in 2019. 3 The proposals to revise the debarment regime loosen their grip, but reach out farther.

Maximum ceilings but no minimum floors

The most important change is that the 10-year ban category is no longer a floor, but rather is a ceiling (hence the reference to a maximum period but no reference to a minimum period). The guidelines state that ineligibility dates are "no more than ten (10) years from the delivery of the Notice of Ineligibility."4

The new programme is complex and relies on material event charts and an appendix that sets out balancing criteria. It is therefore possible to have a debarment period as short as one or two years under the new proposals.

Loosened Grip

The proposed amendments will also add a degree of leniency to those affected by the debarment policy.

Contractors who have been debarred may request an administrative agreement after 36 months from the delivery of a Notice of Ineligibility. It may be granted, at the registrar's discretion, if the contractor can demonstrate cooperation with authorities and has undertaken adequate remedial action.5

In terms of the numbers, an application for an administrative agreement would only apply to those cases where debarment exceeded three years (36 months).

Matrix analysis of factors based on two axis

For most offences, the criteria that will apply are set out in Appendix 3, which require a balancing of factors that is amenable to matrix analysis.

An excerpt from Appendix 3 is reproduced below:

In determining the length of a supplier's ineligibility period, the Registrar will take into account the seriousness of the conduct engaged in, balanced against the steps taken by the supplier to ensure that similar conduct does not recur. The more serious the conduct that resulted in the determination of ineligibility, the more comprehensive the steps taken to address it will need to be. The Registrar will need to be convinced that the circumstances leading to the debarment have been addressed.

Factors that the Registrar may take into account include the following:

Seriousness of the conduct engaged in

  • the supplier's role in the conduct
  • the degree of planning involved in carrying out the offence and the duration and complexity of the offence
  • the extent of senior management involvement
  • the gains realized by the supplier as a result of the offence
  • the cost to public authorities of the investigation and prosecution of the offence
  • known membership in or associations with organized crime and money laundering
  • Whether the supplier is a repeat offender, or was previously warned about such behaviour, will also be a serious consideration as it indicates an unwillingness or inability to address compliance issues effectively and credibly

Steps taken to address concerns

  • voluntary disclosure of involvement in the offence
  • whether the supplier has completed a thorough investigation of the circumstances that led to the debarment and cooperated with the investigating authorities
  • steps taken to address the wrongdoing, including addressing any criminal, civil or administrative sanctions and paying compensation for damage
  • appropriate disciplinary action against the individuals involved in the conduct
  • whether the supplier had compliance measures and internal control systems in place at the time the conduct took place
  • the adoption and implementation of a credible and effective compliance program that demonstrates the supplier's commitment to complying with the law
  • whether the supplier has implemented or agreed to implement remedial measures, including through personnel changes and the adoption of new procedures and training and having regard to any measures that might be recommended by the Registrar or the investigating authority
  • whether the supplier's management appears to recognize and understand the seriousness of the conduct and is committed to taking serious steps to ensure that it does not recur

Matrix analysis6 is perfectly suited to balance the above categories on a vertical and horizontal axis, as follows:

The red quadrant represents the area where the debarment period will be most stringent. In this quadrant, the seriousness of the conduct in issue is high and the steps that must be taken to address the misconduct must be the most rigorous. In the opposite green quadrant, where the seriousness of the conduct is low, the level of steps taken to address the concerns is proportionately lower. The blue and purple quadrants are variations of these combinations.

There are many proposed changes to the debarment program that will also expand its reach. I would like to highlight five areas.

To read the full article click here

Footnote

1 Kenneth Jull is Counsel at Gardiner Roberts LLP, Adjunct Professor, Faculty of Law, University of Toronto, and author of Profiting from Risk Management and Compliance. Mr. Jull testified as a witness before the Standing Committee on Justice on Remediation Agreements.

2 https://www.tpsgc-pwgsc.gc.ca/ci-if/pp-pd-eng.html

3 https://www.tpsgc-pwgsc.gc.ca/ci-if/pp-pd-eng.html

4 https://www.tpsgc-pwgsc.gc.ca/ci-if/pp-pd-eng.html, section 6.3.1.3.

5 https://www.tpsgc-pwgsc.gc.ca/ci-if/pp-pd-eng.html#s6, section 10 Administrative Agreements

6 See Archibald and Jull, Profiting From Risk Management and Compliance 2018 (Thomson Reuters).

Originally published Toronto Law Journal

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.

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