American counsel who expect the Canadian DPA framework to mirror theirs, may be in for a bit of a shock.
“There are a bunch of differences between the Canadian and US regimes,” says Carol Hansell, senior partner of Toronto’s Hansell LLP. “For example, our provisions tell prosecutors what they must take into account and also what they must not consider.”
“If the organization is alleged to have bribed a foreign public official, for example, the prosecutor is not permitted to consider Canadian economic interests, potential relations with a state other than Canada, or the identity of the organization or the individual involved.”
Unlike in the US where DPAs can be used for most federal offense, in Canada their use is limited to 32 offenses under the Criminal Code and the Corruption of Foreign Public Officials Act, Hansell says.
The provisos include the offences cannot have hurt national security, involved a criminal or terrorist group, that the prosecution must believe there is a reasonable prospect of conviction, and that a DPA is in the public interest.
That public interest consideration — which does not exist in the US regime — ignited a massive firestorm in Parliament, Canada’s Capital Hill, in the public’s introduction to the new regime.
The kerfuffle centred on engineering giant SNC-Lavalin Group Inc., which was charged with fraud and corruption in 2015 over allegations it allegedly paid $47.7 million in bribes in Libya between 2001 and 2011. The company employs about 8,000 people in Canada and 50,000 people worldwide.
It has been widely reported that behind the scenes, Quebec-based SNC-Lavalin had lobbied the federal government — elected in 2015 — to adopt a deferred prosecution regime. Indeed, such a regime was adopted. However, in the Fall of 2018, the Director of Public Prosecutions declined to pursue a Deferred Prosecution Agreement with SNC-Lavalin.
It exploded into the headlines three weeks later, shortly after Jody Wilson-Raybould, the Justice Minister and Attorney General of Canada, had been moved out of that position to another one in a cabinet shuffle. It surfaced that she believed she was moved because she had refused to override the Director of Public Prosecutions decision on SNC-Lavalin. She complained she had been constantly pressured from the Prime Minister's Office by its key players including the Prime Minister.
She quit cabinet a month later — but the political firestorm raged for months.
The key questions, says Hansell, are whether the provision that says the Prosecutor must consider a DPA to be in the “national interest” can be separated from the provision stating Canada’s economic interests cannot be taken into consideration — and whether the government has any place making national-interest arguments with the attorney general.
“Minister Wilson-Raybourd, as she then was, has noted that she doesn’t think there were any breaches of criminal law,” says Hansell. “What that means is she must have concluded that the issue of jobs was something that was fair game for the government to talk about. The fact that she rejected it doesn’t mean it was wrong of them to be discussing it.”
From the public and media debate that followed, it appears many Canadians seem to think granting a DPA is allowing a corporation to get away with something. “It’s not a free pass,” says Hansell. “Nothing could be further from the truth.”
The UK, and several European countries already have DPA regimes and Singapore, France, Argentina and Australia are looking at or are in the process of implementing them.
The reason is they provide enforcement with a way to clean up companies but punish just the law-breakers, says Wendy Berman, the head of the securities litigation and white collar crime and regulatory response groups at Cassels Brock & Blackwell LLP.
“Typically a DPA would come in only where you’ve had a lot of change within the corporation so a whole bunch of stakeholders are not destroyed by a few bad actors who previously ran the company, and were presumably involved in the wrongdoing,” she says. “With SNC, all the top executives were gone.”
Berman points out Canada’s regime requires the corporation admit wrongdoing and pay significant financial penalties as well as disgorgement. “If a corporation were tried and convicted, you would probably remain somewhere around the same amount in terms of financial penalty.
“I feel like a lot of people ignore that. They think the company’s going to get away with it, no one’s going to be held accountable. I can’t understand that, that somehow a corporation’s buying its way out of responsibility. They start by admitting responsibility.
“And any company that signs a DPA it will have a lot of conditions on it for improvement: enhanced compliance regimes, a monitor — which can be very costly — and a duty to report on the implementation of the conditions to the court.” If the company violates any of the terms, the criminal prosecution will proceed.
Berman says any corporation convicted on foreign bribery charges in Canada is barred from bidding on large federal projects not just in Canada, but in many jurisdictions around the world for five to 10 years, which might well lead to its collapse.
Jon Levin, a corporate partner at Fasken Martineau DuMoulin LLP in Toronto, says “it’s not appropriate to punish innocent shareholders, innocent employees, innocent retirees or customers by having a company penalized by a conviction. It’s quite different to penalize the individual wrong-doers.”
Canada’s officers and directors are not included in Canada’s deferred prosecution regime, he says, only the corporation itself. That means those involved in illegal actions still face jail time and heavy fines if convicted.
Mark Andrews, QC, a partner at Fasken in Vancouver, says he doesn’t think the Canadian public has a proper understanding yet of the “very real and heavy consequences, both financial and otherwise, of agreeing to a DPA.”
The concern is after the public blowout over SNC, Canadian prosecutors may be hesitant to use the new regime for fear of controversy. In the US, where they’ve been used since 1992, there were at least 24 agreements negotiated in 2018, with $8.1 billion recovered by regulators, according to Gibson Dunn & Crutcher LLP.
Levin warns if Canadian authorities unduly limit their use and instead rely upon criminal prosecutions — which are slow-moving in Canada with prosecutors challenged to win convictions — the objective of remediation will be frustrated and Canada will pay the price.
“In an internationally competitive environment where Canada wishes to attract foreign investment, it is not helpful to have a less attractive Canadian criminal law regime than our major trading partners.”
Things may be especially tough for resource companies, which are forced to do business where the reserves are — often countries where bribery and “facilitation fees” are the norm. But any breach of the Corruption of Foreign Public Officials Act may render the Canadian company ineligible for consideration of a DPA.
“It really affects the mining industry and international oil and gas industry in particular,” says Grant Zawalsky, a corporate practitioner and managing partner of Burnet Duckworth & Palmer LLP in Calgary.
“It’s more important than ever that companies that do business internationally have strong controls in place that create a strong audit trail. You have to be very, very careful who you take as a local business partner. You can’t outsource bribery. Especially with this new DPA regime, if you go out of bounds, the stakes are very serious.”
Serious enough that SNC-Lavalin went to the Federal Court of Canada apply for judicial review of the decision not to offer it a DPA.
In SNC-Lavalin Group Inc., SNC-Lavalin International Inc., and SNC-Lavalin Construction v The Director of Public Prosecutions, handed down in January, the court tossed out the application.
“The principle of independence requires that the attorney general act independently of political pressures from government and sets the Crown’s exercise of prosecutorial discretion beyond the reach of judicial review,” wrote Justice Catherine Kane.
Robert Staley, a litigator at Bennett Jones LLP, says the decision sends a clear message that input from the government in deciding whether to negotiate a specific DPA is not welcome, despite the public-interest component.
“The court says there’s a high degree of discretion in determining whether or not to confer this,” Staley says. “The decision also talks about the Constitutional independence of the attorney general in making these decisions and whether or not to interfere. The case says basically it’s going to be very difficult to interfere with the exercise of prosecutorial discretion in these agreements.