Québec Court Tackles Novel Issues During Approval Of The Second Remediation Agreement (a.k.a. Deferred Prosecution Agreement) Under The Canadian Criminal Code

• Law Firm: Davies Ward Phillips & Vineberg
• Subject Matter: Corporate/Commercial Law, Criminal Law, Compliance, Corporate and Company Law, Contracts and Commercial Law, White Collar Crime, Anti-Corruption & Fraud
• Author: Mr Léon Moubayed, Derek Ricci, Chantelle Cseh, Guy Du Pont, Louis-Martin O'Neill, Sarah Cormack and Amélie Lehouillier
• Published date: 30 May 2023

The Superior Court of Québec recently published its reasons¹ approving Canada's second remediation agreement under the Criminal Code, Canada's version of a deferred prosecution agreement (DPA). In his reasons, Justice Marc David expanded on the principles applicable to Canada's remediation agreement regime and adjudicated novel questions, including victims' standing to intervene in the proceedings and approval of agreements that neither identify nor compensate victims.

The remediation agreement resolved allegations that Ultra Electronics Forensic Technology Inc. (UEFTI) paid bribes to foreign government officials and falsified records to cover up those bribes in the course of its commercial relationship with the Philippine National Police (PNP). UEFTI owns an advanced ballistics recognition system used by law enforcement agencies to investigate crimes involving the use of firearms. Between 2006 and 2018, sales of UEFTI to the PNP amounted to C$17 million. Local intermediaries received C$4.4 million in commissions from the contract revenue amount.

Notably, the parties were unable to distinguish legitimate expenses from sums destined for bribes. The remediation agreement provided for a total payment by UEFTI of C$10 million in the form of forfeitures, penalties, a victim surcharge and reimbursement of expenses incurred by the Public Prosecution Service of Canada (PPSC) at the implementation stage of the agreement. Although the remediation agreement did not provide for victim reparations, the court held that this was reasonable and justified in the circumstances.

Key Takeaways

Key takeaways from the Court's decision include:

• Parties to a remediation agreement should expect that the approval hearing will be public. If the agreement is not approved it will remain confidential and only the order and reasons for the order will be published. If the agreement is approved, it will become public subject to any confidentiality measures imposed These measures may be necessary, for example, to protect the privacy or safety concerns of innocent third parties or victims, or the fair trial rights of other accused individuals.
• If the agreement meets the public interest and proportionality criteria, the court will apply a high measure of deference to its specific terms. The court's role in the approval process remains significant, however, and parties should be prepared to respond to any concerns expressed by the court, including by amending the remediation agreement or submitting an expanded record.
• If the remediation agreement does not propose reparations to a victim, after the parties have made reasonable efforts to identify any victims, the prosecutor must state the reasons why reparations are not appropriate. The court will then consider the validity of these reasons in deciding whether an agreement should be approved As is the case in U.K. judgments regarding DPAs, the court may approve an agreement without reparations to victims where it is impossible to identify victims or to quantify bribes actually paid.
• Although victims are free to pursue their claims for relief in the civil courts, they will not be granted standing in remediation agreement proceedings. The approval process is designed to be an oversight review of the terms of the agreement, not a full-scale trial.
• An organization's collaboration with Canadian authorities will be viewed positively by the court during its analysis of the proposed agreement. Best practices in this regard may include the implementation of an assistance protocol to preserve the integrity of evidence, facilitate witness interviews and provide access to any internal investigations, or consenting to warrants to seize electronic data and resolution of potential privilege issues outside of court.

A Primer on Remediation Agreements

Terms, Effect and Purpose of a Remediation Agreement

A remediation agreement is an agreement between an accused corporation and the responsible prosecuting authority. Under a remediation agreement, the prosecution agrees to grant the corporation amnesty in exchange for the corporation's adherence to certain terms and conditions. Upon fulfillment of such terms and expiry of the remediation agreement, the relevant charges will be withdrawn (with no criminal conviction). If the corporation does not comply with the terms of the remediation agreement, the charges may be reinstated and the corporation may be prosecuted and ultimately convicted.

A remediation agreement aims not only to sanction criminal conduct and deter wrongdoing but also to create an incentive for corporations to come forward and disclose wrongdoing. Given that investigations of corporate crimes often require significant time and resources, remediation agreements provide an alternative means to address such conduct in an efficient and timely manner, and encourage remediation and compliance. Remediation agreements may also help mitigate unintended consequences for innocent parties, such as blameless employees, customers, suppliers, investors and other stakeholders. For example, these agreements can avoid disqualification in jurisdictions that prohibit corporations and their affiliates from...