Recent amendments to the Criminal Code signify an important development in Canada's white-collar enforcement landscape. The new amendments, which came into effect on September 19, 2018, establish a Canadian deferred prosecution regime. Prosecutors will now have the option of entering into "remediation agreements" (RAs) with companies accused of offences.
RAs are the Canadian equivalent of American and U.K. deferred prosecution agreements and are agreements between prosecutors and accused organizations where criminal proceedings are stayed in exchange for certain conditions being met. This new prosecutorial tool modernizes Canadian white-collar enforcement and should allow for a more flexible and tailored approach to corporate criminal enforcement.
For general background information on RAs, their benefits to the criminal justice system and general implications, please refer to our February 2018 Blakes Bulletin: Another Step Forward: Canada Announces Impending DPA Legislation and Further Integrity Regime Amendments.
The introduction of RAs plugs what has long been a hole in Canada's white-collar enforcement landscape. Most fundamentally, it aligns good corporate compliance with law enforcement. RAs will now provide an avenue for companies that identify wrongdoing by company personnel to remedy that wrongdoing, enhance compliance programs and engage with authorities without necessarily incurring the additional punitive effects of a criminal conviction of the company. By focusing criminal enforcement on the individuals who actually engage in wrongdoing, RAs have the potential of reducing the often disproportionate impact of a criminal conviction on innocent third parties, such as shareholders and employees. The adoption of RAs should lead to a more nuanced and sophisticated white-collar enforcement regime where companies can receive meaningful and tangible credit for "doing the right thing" upon discovery of wrongful conduct by company personnel.
If implemented appropriately, RAs have additional potential benefits including:
- More efficient resolution of inherently difficult, costly and time-consuming investigations and prosecutions
- Increased flexibility in the criminal justice system to better tailor resolutions to particular circumstances
- More timely and meaningful reparation for victims
- To some degree, providing organizations with greater ability to evaluate self-reporting outcomes
Under the new regime, a prosecutor may only enter into RAs with organizations alleged to have committed a criminal offence if the Attorney General has consented to the negotiation of an RA and if the prosecutor is of the opinion that:
- There is a reasonable prospect of conviction
- The offence did not result in serious bodily harm, death or injury to national defence/security and was not committed for or with a criminal organization or terrorist group
- Negotiating the agreement is in the public interest and appropriate in the circumstances
A prosecutor must consider certain factors when determining whether an RA is in the public interest and appropriate. These factors include whether an organization has taken disciplinary action against culpable individuals and whether the organization has taken measures to remedy the harm. Accordingly, a thorough internal investigation and robust remediation are key steps to best position a company to receive an RA as opposed to a criminal conviction.
While self-reporting is a consideration when determining eligibility for an RA, it is not a pre-requisite. By the same token, self-reporting does not automatically mean that an RA will be offered by the Crown.
Further, unlike U.S. deferred prosecution agreements, RAs are only considered after charges have been laid on accused companies. In addition, the RA regime applies retroactivity so that RAs are available for conduct that pre-existed its implementation.
After finalizing negotiations, prosecutors may enter into RAs with an accused company. RAs are standardized through the inclusion of "mandatory content," such as:
- A statement of facts
- An admission of responsibility
- An obligation to identify any additional culpable individuals or wrongdoing
- An obligation to cooperate in any resulting investigation or prosecution
- An obligation to forfeit any property, benefit or advantage obtained from the act
- An obligation to pay a penalty and victim surcharge for each offence
All negotiated RAs are subject to court approval and oversight. Mandatory considerations for courts when evaluating RAs include reparations for victims, community impact statements and victim surcharges. A court must approve an RA or a variation to an RA if it is satisfied that, among other things, the agreement is in the public interest and its terms are fair, reasonable and proportionate to the offence.
Once an RA has been approved by the court, criminal proceedings are put on hold. If a court determines that a company has complied with an RA, it will order a permanent stay of criminal proceedings for that offence. If a court determines that the terms of an RA have not been complied with, criminal proceedings will be recommenced.
Publication of RAs and related orders, decisions and reasons is mandatory unless a court is satisfied that non-publication is necessary for the proper administration of justice.
In combination with the implementation of RAs, the Government of Canada has committed to amending and improving the Integrity Regime, which regulates contracts and real property agreements awarded by the federal government. While the final form of these amendments is currently unknown, the Government of Canada has signalled that debarment-related amendments to the Integrity Regime will be made in conjunction with RAs to ensure companies are incentivized for self-reporting. Additionally, while the current Integrity Regime provides for mandatory debarment, it is expected that the proposed amendments will remove this mandatory debarment requirement in the case of certain RAs.
While its practical application has yet to be tested, the implementation of Canada's new RA regime signifies a long-awaited and welcome evolution of Canada's white-collar crime enforcement regime. RAs allow for the potential resolution of issues without forcing prosecutors to resort to the previous "all or nothing" approach of either declining to proceed with charges or pursuing a conviction. Strategic calculus is still required when deciding whether to self-report under the newly amended regime, as there are no assurances of an RA. For companies that do wish to best position themselves for RAs, it will be important to be proactive in investigating wrongdoing, remedying any compliance or internal control deficiencies, and disciplining as appropriate.
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