Guidance From Canada's First Remediation / Deferred Prosecution Agreement For Foreign Corruption

• Law Firm: McCarthy Tétrault LLP
• Subject Matter: Government, Public Sector, International Law, Criminal Law, Government Contracts, Procurement & PPP, International Trade & Investment, White Collar Crime, Anti-Corruption & Fraud
• Author: Terms Of Trade, Andrew Matheson, John Boscariol, Adam Dobkin and Robin McKechney
• Published date: 16 June 2023

The recent Court-approved Remediation Agreement ("RA"), between the Public Prosecution Service of Canada ("PPSC") and Ultra Electronics Forensic Technology Inc. ("UEFTI"), provides important guidance on procedural and substantive issues for future cases. The agreement ("UEFTI Agreement") arises from charges against UEFTI for bribing Philippine officials to secure government contracts. This case should be reviewed carefully by any organization considering the potential negotiation of an RA to avoid criminal conviction in any settlement of allegations or charges relating to foreign or domestic corruption, fraud, insider trading, money laundering or other offences within scope of this RA mechanism.¹

As the first RA in Canada to deal with offences under the federal Corruption of Foreign Public Officials Act ("CFPOA"), and the second RA since the implementation of this mechanism in 2018, the Quebec Superior Court's decision and findings provide valuable insights into how Canada's RA regime works in practice, including:

• The approval hearing is public by default (subject to any tailored confidentiality, redaction, sealing, or other orders justified in the circumstances). The approval hearing will usually not be held in camera unless the general requirements of s. 486 of the Criminal Code ("CC") are satisfied: excluding the public must be in the interest of public morals, the maintenance of order or the proper administration of justice, or be necessary to prevent injury to international relations or national defence or national security. Settlement privilege concepts alone, without more, do not justify holding an RA approval hearing in camera. However, if a Court refuses to approve an RA, the approval hearing will remain confidential and only the order and reasons declining approval will be published.
• While compensation of victims is a central theme of Canada's new RA regime, an RA that does not provide for victim compensation can receive approval if the Court is satisfied that compensation is not practicable and the other statutory objectives are served by the RA.
• As the Court's assessment of an RA is based on the agreed statement of facts jointly presented by the prosecution and defence, there is little room for third parties to object to the terms or factual premises of a proposed RA. In this case, a third party claimed to be a victim, but was characterized by the parties as being involved in the bribery scheme as a local agent of UEFTI and the Court accepted this.
• When assessing whether the RA should be approved, the Court should consider additional factors, which complement those considered by the prosecutor at the negotiation stage, allowing for a broader contextual analysis of the public interest criterion including "whether the organization remains commercially viable in order to benefit innocent third parties which could impact positively on our national economy" - a notable contrast to s. 715.32(3) of the Criminal Code which prohibits the prosecutor from considering the "national economic interest" when determining whether it is in the public interest to enter into negotiations for an RA that relates to CFPOA offences.
• Though the Court plays a crucial public oversight role at the approval stage in scrutinizing a proposed RA, an approving Court owes a proposed RA considerable deference, in line with the jurisprudence on joint submissions on sentence.

What's an RA? A Made-in-Canada Deferred Prosecution Agreement

For a more fulsome overview of Canada's young RA regime, see our previous posts, Deal or No Deal - Anticipating the First DPA/Remediation Agreement in Canada and Bridges, Bribes and Possible Bargains: Paving the Way for Canada's First Remediation Agreement.

Briefly, an RA - commonly known as a Deferred Prosecution Agreement in other jurisdictions - is an agreement between a prosecutor and an organization facing charges whereby the accused organization admits wrongdoing and agrees to stipulated remedial obligations. In exchange, the prosecutor stays the charges, and eventually withdraws them upon completion of the remedial steps.

Canada introduced its RA regime in 2018, bringing Canada in line with the United States, the United Kingdom and many other countries. In Canada, RAs are available only to organizations, not individuals. Indeed, much of the enforcement action under the US Foreign Corrupt Practices Act, and more recently under the UK Bribery Act, arises in the context of deferred prosecution agreements.

The intended benefits of an RA regime to the prosecution include the encouragement of voluntary disclosure of wrongdoing, cooperation with efforts to redress past misconduct, and self-reform to avoid future misconduct. Defendants benefit from the eventual withdrawal of charges and from avoiding a conviction, which can lead to severe legal consequences, like debarment under Canada's Integrity Regime, which disqualifies a company from domestic government contracts (for a more detailed explanation of this legal consequence, see the third topic in our previous post, Bridges, Bribes and Possible Bargains: Paving the Way for Canada's First Remediation Agreement). A defendant might also reduce reputational harm by actively cooperating with efforts to remediate wrongdoing.

Both...