Robert Frost wrote that "Two roads diverged in a yellow wood, And sorry I could not travel both." The legislation for deferred prosecution agreements (DPAs /remediation agreements) clearly sets out a permissible route, but also a prohibited route to seek such agreements. It is important to understand the roadmap to DPAs, particularly in light of the oversight by the Organisation for Economic Co-operation and Development (OECD). The OECD is monitoring the allegations that Prime Minister Justin Trudeau's government interfered in a criminal prosecution against SNC-Lavalin.2
THE PERMISSIBLE ROAD: INNOCENT THIRD PARTIES WHO DID NOT ENGAGE IN THE WRONGDOING
A permissible route flows from the purpose section, section 715.31(f) of the Criminal Code: "to reduce the negative consequences of the wrongdoing for persons — employees, customers, pensioners and others — who did not engage in the wrongdoing, while holding responsible those individuals who did engage in that wrongdoing." This road in effect has a sign that says "only those who did not engage in wrongdoing" may benefit from travel on this road.
The identification of those who did not engage in the wrongdoing requires a detailed analysis of the principles of corporate criminal liability applied to each applicant for a remediation agreement.3 In the context of the application by SNC-Lavalin, this requires an analysis of the level of responsibility of those persons alleged to have committed acts of bribery and how widespread the allegations of wrongdoing are. I cannot stress enough that a sound understanding of corporate criminal responsibility, as set out in section 22.2 of the Criminal Code, is essential to undertake this analysis.4
It is possible for senior officers or certain middle managers acting with intent, at least in part, to benefit a corporation and acting within the scope of their authority to have committed bribery offences on behalf of the corporation. At the same time, there may be many employees who are not involved or even aware of the misconduct. Customers and pensioners are a further step removed from knowledge about corrupt practices. A similar test is used in the U.K. legislation which refers to "collateral effects" on the public, employees and shareholders or institutional pension holders.5
We could also learn from the United States' experience, which weighs the impact on innocent persons when considering whether to offer a deferred prosecution agreement. The following comment from the OECD Working Group underscores the division between innocence and the prohibited factor of national economic interest:
Under section 9-28.300 ("Factors to be Considered") in the "Principles of Federal Prosecution of Business Organizations", a decision of prosecutors on whether to charge a corporation, negotiate a plea or other agreement, may consider "collateral consequences, including whether there is disproportionate harm to shareholders, pension holders, employees, and others not proven personally culpable, as well as the impact on the public arising from the prosecution". The evaluators questioned whether these considerations could feasibly include the national economic interest, contrary to Article 5 of the Convention. The U.S. reassured them that a decision based on "disproportionate harm" would not result in terminating proceedings. Instead, the DOJ would carefully consider whether a DPA or NPA might lessen the potential harm to innocent third parties. In addition, the DOJ would make the same kind of determination if the potential for "disproportionate harm" were to non-U.S. companies and individuals.6 [Emphasis added]
In his testimony before the Standing Committee on Justice on the subject of Remediation Agreements,7 Mr. Michael Wernick (Clerk of the Privy Council and Secretary to the Cabinet, Privy Council Office) stated: "My view is that the economic impacts of jobs—and it's explicitly in the Criminal Code. The impact on suppliers, pensioners, customers, communities is a relevant public interest consideration." 8
Unfortunately, perhaps due to time constraints, Mr. Wernick did not mention that the impact on employees and others is only relevant in considering the merits of a remediation agreement where the employees or others "did not engage in the wrongdoing".
If it is possible to identify a group of innocent employees, customers and pensioners, this does not end the matter. The next step is to consider the other purposes of remediation agreements as set out in the Criminal Code.
THE PURPOSES OF ACCOUNTABILITY AND ENCOURAGING VOLUNTARY DISCLOSURE OF WRONGDOING
Section 715.31 sets out the objectives of the remediation regime. As noted, subsection (f) refers to innocent third parties. Other objectives include (a) denunciation; (b) accountability through penalties; (c) promoting a compliance culture; (d) to encourage voluntary disclosure of the wrongdoing; and (e) to provide reparations for harm done to victims or to the community.
I have previously written in this Journal about the purpose of deferred prosecution agreements in "Coming in From the Cold: Deferred Prosecution (Remediation) Agreements in Canada." 9 An important objective of remediation agreements is "to encourage voluntary disclosure of the wrongdoing". Organizations are encouraged to voluntarily come in from the zone of nondiscovery: this is a zone where the government may never find out about serious criminal activity by corporate organizations in the absence of such disclosure. These are circumstances where the government ought to have sympathy for those organizations that "come in from the cold".
In the case of SNC-Lavalin, some commentators have stated that because the company did not self-disclose10 and come in from the cold, it should not be considered for a deferred prosecution programme. It should be noted, however, that at the time there was a discovery by SNCLavalin, there was no safe harbour available as the deferred prosecution legislation only came into force in September of 2018. Accordingly, this is a unique situation that must be considered on its own facts.11
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.
3 See R. c. Pétroles Global Inc,  J.Q. No 5437 (Global Fuels), leave to appeal to the Quebec Court of Appeal granted 2013 CarswellQue 9268, 2013 QCCA 1604 and then abandoned.
4 See Archibald, Jull and Roach, Regulatory and Corporate Liability: From Due Diligence to Risk Management (Thomson Reuters updated annually) at chapter 5, "The Changing Face of Corporate and Organizational Liability" and see also Archibald and Jull, Profiting From Risk Management and Compliance (Thomson Reuters, 2018).
5 Deferred Prosecution Agreements Code of Practice, Crime and Courts Act 2013, Serious Fraud Office, Section 2.8.2 vii: A conviction is likely to have collateral effects on the public, P's employees and shareholders or P's and/or institutional pension holders.
6 PHASE 3 REPORT ON IMPLEMENTING THE OECD ANTI-BRIBERY CONVENTION IN THE UNITED STATES October 2010, Paragraph 60. The OECD made the following commentary: "The evaluators welcome confirmation from the United States that the national economic interest is not a factor to be considered in investigative and prosecutorial decision-making under the FCPA, and that pursuant to the 'Principles of Federal Prosecution of Business Organizations' a decision of prosecutors on whether to charge a corporation, or negotiate a plea or other agreement, would also consider the potential harm to innocent third parties in all cases, including those involving non-U.S. companies and individuals" (at paragraph 63).
7 Out of full disclosure, I testified as a witness about remediation agreements before the Justice Committee on February 25th, 2019. See: https://www.ourcommons.ca/DocumentViewer/en/42-1/JUST/meeting-133/evidence
8 https://www.ourcommons.ca/DocumentViewer/en/42-1/JUST/meeting-138/evidence; Pages 1550 to 1555.
9 Justice Todd Archibald and Kenneth Jull "Coming in From the Cold: Deferred Prosecution (Remediation) Agreements in Canada", Toronto Law Journal July 2018.
10 The Company and its insurers have reached an agreement to settle two class actions, brought in Quebec and Ontario on behalf of security holders, relating to alleged disclosure misrepresentation during 2009-2011. See http://www.snclavalin.com/en/media/press-releases/2018/snc-lavalin-announces-agreement-settle-classactions-brought-2012.aspx
11 I have discussed the difference between bronze and gold standards in Coming in From the Cold: Deferred Prosecution (Remediation) Agreements in Canada", Toronto Law Journal July 2018.
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Originally published by Toronto Law Journal
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