Deferred prosecution agreements (DPAs) have been commonly used in the U.S. for the resolution of foreign bribery violations for well over a decade now. Yet, other countries are only now slowly starting to adopt the practice in an effort to increase the tools available to prosecutors to tackle white-collar crime.
Canada is the latest country to introduce the DPA as an instrument to combat economic crime. The option of negotiating DPAs, locally known as ‘Remediation Agreements’ (RAs), for offenses of the Criminal Code and the Corruption of Foreign Public Officials Act (CFPOA), became available to prosecutors on September 19th, 2018 following amendments to the Criminal Code.
However, being granted a Remediation Agreement instead of a court battle is never assured. Just last week it was announced that SNC-Lavalin, an engineering and construction giant based in Canada, was not invited by Canadian prosecutors to negotiate an agreement over bribery allegations involving Libya from before 2012, leaving the company subject to several additional years of scrutiny as it has to fight the charges in court. The day the announcement was made, SNC-Lavalin’s stock price plummeted by 14 percent.
In light of this, CCOs should expect uncertainty over the use of these instruments as foreign jurisdictions, including Canada, start adopting DPA-like instruments.
A Popular but Controversial Instrument
Deferred Prosecution Agreements have been used by prosecutors in the U.S, where they originated, for some 15 years now.
In the last couple of years, a number of other countries have adopted DPA-like instruments:
- The United Kingdom introduced DPAs in 2014 following the passage of the Crime and Courts Act 2013
- France introduced DPAs as part of the passage of its Sapin II Anti-Corruption Act
- Australia is working on draft legislation to introduce DPAs
- Singapore incorporated DPAs into its Criminal Procedure Code that entered into force March 2018
- Argentina established a DPA regime that came into force March 2018
From a corporate perspective, a DPA carries significant benefits; FCPA charges can be resolved much more expediently compared to a years-long court battle and the company avoids facing a formal criminal indictment along with the commonly associated reputational cost.
However, DPAs have also proven to be controversial. Some critics argue that they reduce the deterrent effect of a prosecution, and are used as a means of expediency by enforcement agencies which use the instrument to coerce corporations into accepting DPAs as a way to buy themselves out of years-long scrutiny.
Requirements for Canada’s Remediation Agreements
While it will take some time for the Canadian practice concerning Remediation Agreements to crystallize, there are a few features that compliance personnel should be aware of.
In Canada, a judge will have to conclude that the Remediation Agreement is ‘in the public interest’ and that the terms are ‘fair, reasonable, and proportionate to the offense’ before an agreement can be finalized. Courts will also have to consider community impact statements and reparations for victims in their reasoning. This contrasts with U.S. practice where a judge is formally involved in the conclusion of a DPA, but in practice, the Government Accountability Office found in a report that judges are in practice “generally not involved in the DPA process”.
In order for an organization to be eligible for an RA, the Criminal Code instructs prosecutors to consider, among others, whether the organization has taken steps to remedy the harm and whether culpable individuals have faced disciplinary action. Robust internal investigations and other internal remediatory steps should also work in an organization’s favor.
Whether an organization self-reported is another consideration to determine eligibility, but not a prerequisite. Remediation Agreements can also be granted in relation to conduct that pre-dates the implementation of the regime.
Canada Refuses to Offer an RA to SNC-Lavalin
In light of the criteria set out above, the refusal of the Public Prosecution Service of Canada (PPSC) to invite SNC-Lavalin to negotiate a Remediation Agreement is notable. It is unclear why the firm was not given this opportunity. The PPSC only commented to CBC News that "the [director of public prosecutions] has determined that the criteria were not met."
SNC-Lavalin, in turn, responded by saying it “strongly disagrees” with the government’s position, while highlighting that it has built a “world-class ethics & compliance framework” in recent years. On October 19th, the company took the unusual step of taking out full-page ads in four major Canadian newspapers in a bid to rally public support for the company’s cause by framing the issue as one of national interest.
However, prosecutors are explicitly forbidden by the Criminal Code to consider the national economic interest, the identity of the organization, and the potential effect a prosecution may have on Canada’s relation with other states.
Due to the tight-lipped nature of Canada’s Public Prosecution Service, it is hard to know at this point why precisely SNC-Lavalin was refused a chance to negotiate a mediation agreement. One possibility is that the PPSC wants to set the bar high for companies wishing to qualify for an RA.
What CCOs should take away from these nascent developments, is that while the introduction of Canada’s Remediation Agreement regime is a welcome development, companies remain dependent on the discretion and willingness of prosecutors to actually use these instruments.
From the standpoint of the CCO, the prudent thing to do within his or her control is to invest in and implement a solid compliance program that can serve as a defense to any bribery allegations and heighten the chance a Remediation Agreement will be offered, if the need arises.