Take Two: Canada's Second Court-Approved Remediation Agreement - White Collar Crime, Anti-Corruption & Fraud

The Superior Court of Quebec ("Court") recently published its judgment relating to the approval of a remediation agreement between the Public Prosecution Service of Canada ("PPSC") and Ultra Forensic Technology Inc. ("UEFTI"). UEFTI is the second Canadian company to receive such approval since the legislative framework for remediation agreements came into effect in 2018.

Known as Deferred Prosecution Agreements in the United States, the United Kingdom, and other jurisdictions, remediation agreements in Canada are prosecutorial tools available for combatting economic crimes. They are legal contracts between prosecutors and offending parties whereby charges are laid, stayed, and subsequently dropped if the terms of the agreement are met.

This publication will summarize the most recent decision made by the Quebec Court and highlight notable advancements in the law pertaining to review and approval of remediation agreements in Canada. Following the SNC-Lavalin decision in 2022, the UEFTI judgement further clarifies the remediation agreement approval process for organizations charged with offences such as fraud, bribery, and anti-competitive behaviour.¹

Key Takeaways: Clarifying the Approval Process for Future Remediation Agreements

Taken together, the SNC-Lavalin and UEFTI decisions provide 4 emerging themes that will likely be applied in the future by the courts when approving remediation agreements:

The open court principle applies unless the Court decides that it is in the interest of public morals, the maintenance of administration of justice or is necessary to prevent injury to international relations, national defence, or national security to have the process in camera.
The 'Public Interest' requirement will be examined in the same manner by which public prosecutors will decide to enter into negotiations with an accused and with consideration for broader contextual factors (see below).
There is no room for interveners and their submissions in the assessment of the merits of approving a remediation agreement.
The measure of deference rests on the joint submissions made between the accused and PPSC unless it would hinder the administration of justice or be contrary to the public interest.

Background: The Road to UEFTI's Remediation Agreement

UEFTI is a Canadian company that owns a ballistics recognition system used by law enforcement agencies both in Canada and globally. Between 2006 and 2018, UEFTI developed commercial relations with the Philippine National Police ("PNP") that ultimately led to UEFTI securing a procurement contract with the PNP. However, it later emerged that the relationship involved the payment of various bribes to government officials and falsification of official records to conceal the bribes. It is reported that sales to PNP during the period amounted to $17 million CAD and that an additional $4.4 million CAD in commissions were paid to local intermediaries to help facilitate the purchases.

Following an investigation by the Royal Canadian Mounted Police, UEFTI was charged on two counts for bribing officials of the Republic of Philippines under s. 3 of the Corruption of Foreign Public Officials Act and one count under s. 380 of the Criminal Code for defrauding the Filipino Government.

The Agreement: Terms & Duration

While remediation agreements are negotiated and drafted privately, parties must give consideration to the mandatory provisions and optional content in seeking court approval.²

Remediation agreements must include specific monetary and compliance undertakings for a determined period. In UEFTI's case, the four-year agreement includes the following monetary conditions commensurate with the advantage obtained through the company's wrongful conduct:

a forfeited sum of $3,296,589 CAD paid to the Government of Canada;
a penalty of $6,593,178 CAD paid to the Government of Canada; and
a victim surcharge of $659,318 CAD paid to the Province of Quebec.³

UEFTI is also obligated to abide by the following compliance measures:

UEFTI must cooperate with any investigation or prosecution related to the offences;
UEFTI must report to PPSC on the implementation of the agreement; and
UEFTI must abide by the terms of an anti-bribery and corruption program under the supervision of an external auditor, retained at UEFTI's expense.

Judgement:

Motion Denied: In Camera Hearing Request

Before the hearing on the merits of the agreement, the parties attempted to obtain an order approving the hearing in camera and requested that the matter remain confidential if the agreement was not approved. Leading up to the SNC-Lavalin approval hearing, the engineering firm and PPSC pursued a similar request but in the form of a two-step procedure which allowed all drafting stages to take place in camera to preserve the anonymity and confidentiality of the matter. However, the approval hearing still took place in an open court setting. In the case of UEFTI, the Court denied the motion because in its view, permitting an in camera approval hearing would violate the open court principle. In its decision, the Court listed the criteria in seeking a closed proceeding found under s.486(1) and (3) of the Criminal Code, including as follows:

accounting for public morals;
the maintenance of order or the proper administration of justice; or
the necessity to prevent injury to international relations, national defence or national security.

According to the court, the UEFTI case did not qualify for an in camera or closed hearing, because the reputational, economic, and procedural factors did not favour granting the order. The court held that the administration of criminal law is a public matter and demands transparency of the process in order "to reassure the public that the negotiated agreement is not the result of the undue influence or weight of "big business" and that wealth does not automatically command a favourable result".⁴

Non-Party Interveners in the Agreement Approval Process

In November 2022, Concept Dynamics Enterprises ("CDE"), a local partner in Philippines that facilitated the sale of firearms to the PNP, filed a request to intervene alleging that it had been denied due consideration as a victim in the remediation agreement process. CDE sought to bring forward a different version of the facts than those jointly submitted to the Court stating that CDE was coerced into disbursing the bribes. However, in its submission, PPSC reminded the Court that the only parties to a remediation agreement should be the prosecutor and the accused organization under Part XXII.1 of the Criminal Code. As previously mentioned, since the remediation agreement approval process rests solely on the consideration of the jointly submitted facts, there is no room to assess the weight of the contradictory evidence provided by CDE. As a result, CDE can only be viewed under the remediation agreement approval process as an accomplice in the bribery and fraud scheme as it was outlined in the agreed statement of facts submitted in the remediation agreement.

Remediation Agreement Approved: Criteria

In approving a remediation agreement under s.715.37(6) of the Criminal Code, the court must be satisfied that:

the organization is charged with an offence to which the agreement applies;
the agreement is in the public interest; and
the terms of the agreement are fair, reasonable and proportionate to the gravity of the offence.

According to the Court, the remediation agreement easily satisfied the first requirement because both corrupting a foreign public official and fraud apply to the legislative framework.

In regards to the second requirement, the Court agreed with the previous approach taken in the SNC-Lavalin decision which affirmed that while there is no definition of what constitutes a matter of "public interest" under the Criminal Code in the approval stage, the Court can rely on the factors considered by a prosecutor in deciding to enter into negotiations for a remediation agreement on that same issue found under s.715.32(2) to (i) in the Criminal Code. The Court also determined that the following factors can supplement the analysis when assessing the public interest:

Whether the organization remains commercially viable in order to benefit innocent third parties that could impact positively on the national economy.
Whether the agreement avoids a lengthy, complex and expensive criminal investigation.
Whether the agreement avoids lengthy, complex and expensive criminal and/or civil litigation.
For transnational offences, the extent of collaboration that can be expected from a foreign state at the police investigatory stage.
The extent and sincerity of the collaboration offered by the organization to state authorities.
The degree of confidence and certainty generated by the terms of the remediation agreement that further offences will not occur.

The additional factors coupled with those considered by the prosecutor at the negotiation stage allow for a broader analysis of public interest. By clearly outlining the factors, the Court sought to further enhance the public's confidence in the process and illustrate the considerations that would ultimately lead to approving or refusing a remediation agreement.

The third and final requirement demands that the terms of the agreement be fair, reasonable and proportionate to the gravity of the offence.

The Court decided that in assessing the fairness of a remediation agreement, consideration must be given to the interests of the parties involved including the accused, the complainant, and the community. The decision outlined that reasonableness is to be determined by the standard of a reasonable and informed person aware of all circumstances of the file. Finally, by drawing on the R v Bissonnette decision, the Court elaborated that the principle of proportionality should be assessed in a way that it is "severe enough to denounce the offence but not exceed "what is just and appropriate, given the moral blameworthiness of the offender and the gravity of the offence"".⁵

The Court also clearly outlined that a remediation agreement should be approved if it:

denounces the wrongdoing and the harm caused to victims and the community;
imposes effective, proportionate, and dissuasive penalties;
imposes corrective measures to ensure the respect for the law and to promote a compliance culture;
provides reparations to victims or to the community;
reduces the negative consequences of the wrongdoing on innocent third parties; and
holds responsible individuals who engaged in the wrongdoing.

Measure of Deference

The Court affirmed that since the decision to approve a remediation agreement rests on a joint record of the agreed statement of facts, the statement of responsibility, and the agreement submitted by UEFTI and PPSC, the hearing environment should be non-adversarial and the procedure should not provide consideration to contrary views or conflicting evidence beyond the joint submissions.

Additionally, the Court agreed with the previous SNC-Lavalin decision that a deferential approach towards reviewing a remediation agreement should be taken in the same manner as applies to a joint submission on sentencing in criminal law. Deference is owed unless "the proposed sentence would bring the administration of justice into disrepute or would otherwise be contrary to the public interest".⁶

The Court went on to explain that deference is owed for the following reasons:

Remediation agreement negotiations between the parties are arduous and lengthy.
There is a voluntary disclosure of wrongdoing.
There is a full description of facts relevant to the offences in the proposed agreement.
There are otherwise limited options available to the court other than approving or rejecting an agreement.
Remediation agreements are advantageous because they help victims gain compensation, ensure offending organizations are rehabilitated, and help government collect penalties thus avoiding lengthy litigation (and criminal investigations).

Conclusion: Clarifications on the Remediation Agreement Framework for Future Cases

The UEFTI judgement provides further guidance on Canada's remediation agreement program and builds on the SNC-Lavalin decision in 2022. It is now clear that each remediation agreement will be drafted and approved based on the specific circumstances of the offence, the parties involved, and the consequences stemming from the criminal activity. Despite the fact specific nature of the process, certain key themes are emerging, including:

protecting the open court principle is critical to maintaining public confidence in the agreements;
the "Public Interest" requirement is broad and will be considered based on the contextual factors of case;
there is little room for interveners in the approval process; and
court deference will apply unless the agreement would hinder the administration of justice or be contrary to the public interest.

Footnotes

1. Beginning in 2018, McMillan released a series on Canada's deferred prosecution agreement ("DPA") program. For a brief primer on DPAs, otherwise known in Canada as remediation agreements, see our bulletin on Deferred Prosecution Agreements – A New Canadian Regime.

2. See bulletin.

3. Under s.715.37(5) of the Criminal Code, the amount of the victim surcharge is set at 30% of the imposed penalty or any other percentage that the prosecutor deems appropriate in the circumstances. In UEFTI's case, the PPSC determined that the victim surcharge should be set at 10% of the penalty since no victim surcharge is possible for 2 of the 3 charged offences.

4. R v UEFTI, 2022 QCCS 4401, para 42.

5. R v Bissonnette, 2022 SCC 23, para 50.

6. R v Anthony-Cook, 2016 SCC 43, paras 5 and 32.

The foregoing provides only an overview and does not constitute legal advice. Readers are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained.

Canada: Take Two: Canada's Second Court-Approved Remediation Agreement