On September 19, 2018, amendments to Criminal Code came into force establishing for the first time a Deferred Prosecution Agreement (DPA) regime for corporate wrongdoing in Canada. The new regime – labeled “remediation agreements” under the legislation – will finally make available to Canadian authorities DPAs, a commonly-used compliance tool in jurisdictions such as the U.S. and U.K. which has until now been unavailable in Canada.
Purpose of DPAs
A DPA is an agreement entered into between a prosecutor and a company alleged to have engaged in economic crimes. The effect of the DPA is to suspend the outstanding prosecution while simultaneously establishing specified undertakings that the organization must fulfill in order to avoid facing the potential criminal charges. These undertakings often include fines, remediation measures, enhanced reporting requirements or allowing for independent third-party oversight of corporations compliance techniques. Once the accused company has fulfilled the terms of the DPA the charges will be dropped.
Authorities in countries such as the U.S. and U.K. actively utilize DPAs to reduce corporate criminal behavior. DPA regimes help to encourage the voluntary disclosure of misconduct by corporations for criminal activities that may otherwise have remained unknown to regulators, while simultaneously denouncing wrongdoing by holding organizations accountable for their actions. By entering into a DPA, a company can avoid criminal conviction while abiding by strict undertakings that make the organization a better corporate citizen.
Implementation of the regime
The incoming remediation agreement regime, which was created following consultations held by the government toward the end of 2017, will for the first time establish the availability of DPAs in Canada.
To be eligible for a remediation agreement under the regime, the accused must be an organization other than a public body (e.g., a government department), a trade union or a municipality. The remediation agreement can only be entered into for economic offenses, such as bribery or fraud, and not for crimes that result in death or bodily injury, or for conduct that violates the Canadian Competition Act.
In order for the prosecutor to enter into negotiations for a remediation agreement, the following conditions must be met:
- There is a reasonable prospect of conviction with respect to the offence;
- The impugned conduct did not cause serious bodily harm or death or injury to national defence or national security, and was not committed for the benefit of, at the direction of, or in association with, a criminal organization or terrorist group;
- Negotiating the agreement must be in the public interest and appropriate in the circumstances; and
- The Attorney General must consent to the negotiation of the agreement.
Prosecutors will consider a number of factors when deciding whether to negotiate a remediation agreement, including:
- the circumstances in which the offence was brought to the attention of investigative authorities;
- the nature and gravity of the offence and its impact on any victim;
- the degree of involvement of senior officers of the organization;
- whether the organization has taken disciplinary action, including termination of employment, against any person involved;
- whether the organization has made reparations, or taken other measures to remedy the harm caused and to prevent the commission of similar acts or omissions;
- whether the organization has identified or expressed a willingness to identify any person involved in related wrongdoing;
- whether the organization — or any of its representatives — was convicted of an offence or sanctioned by a regulatory body, or whether it entered into a previous remediation agreement or other settlement, in Canada or elsewhere, for similar conduct;
- whether the organization — or any of its representatives — is alleged to have committed any other offences; and
- any other factor that the prosecutor considers relevant.
As well, the corporation would need to:
- accept responsibility for, and stop, their wrongdoing;
- pay a financial penalty;
- relinquish any benefit gained from the wrongdoing;
- put in place or enhance compliance measures; and
- make reparation to victims, including overseas victims, as appropriate.
Remediation agreements under the regime must be approved by a judge, who must be satisfied that the agreement is in the public interest, and the terms of the agreement are fair, reasonable and proportionate.
Going forward under the regime
The new regime establishes an important tool for Canadian regulatory bodies, the availability of which is to the benefit of both enforcement authorities and companies accused of corporate wrongdoing. In particular, the regime provides added incentive for companies to proactively self-report wrongdoing. Companies should maintain rigorous compliance programs, including internal whistleblower reporting systems, and should actively investigate any allegations in order to determine the veracity thereof and whether to report such conduct to regulators. Companies should seek advice from external counsel both during the investigation and in determining whether to self-report any given allegation.