Canada Sees Its Second-Ever Remediation Agreement

The Superior Court of Quebec (Court) recently published its decision approving Canada's second-ever remediation agreement. The decision and the terms of the remediation agreement provide important insights into the process of negotiating and approving remediation agreements, as well as benchmarks for what penalties and compliance obligations organizations can expect when resolving Canadian criminal prosecutions related to foreign corruption through a remediation agreement.

Remediation agreements are similar to deferred prosecution agreements in the United States and United Kingdom. They provide an alternative process for an organization accused of certain criminal offences to resolve charges against it by agreeing to certain penalties and/or ongoing cooperation and compliance obligations without entering a guilty plea.

Background

The accused is a Canadian company (Company) that develops and supplies technology used by law enforcement to investigate and prosecute crimes related to firearms. It operates in Canada and abroad.

Between 2006 and 2018, the Company engaged local agents to act as intermediaries to develop a business relationship with the Philippine National Police. As part of this arrangement, the Company was accused of paying bribes to government officials through local agents and falsifying its records to cover up the bribes. Specifically, the company paid the local agents approximately C$4.4-million in commissions. Out of the C$4.4-million, the local agents disbursed approximately C$3.3-million as bribes. During the same period, the Company received contracts from the Philippine National Police valued at approximately C$17-million.

The RCMP learned of the Company’s conduct and launched an investigation. On September 21, 2022, the RCMP announced that it had charged the company and its executives for violations of the Corruption of Foreign Public Officials Act (CFPOA) and the Criminal Code. That same week, after nine months of negotiations, the Company announced that it had reached a remediation agreement with the Public Prosecution Service of Canada (PPSC) to resolve the charges.

Judgment

Remediation agreements negotiated between an accused and prosecutors are subject to court approval. Pursuant to Canada's remediation agreement regime set out in the Criminal Code, a court must be satisfied of the following before approving a remediation agreement:

• The organization is charged with an offence to which the agreement applies.

• The agreement is in the public interest.

• The terms of the agreement are fair, reasonable and proportionate to the gravity of the offence.

After a detailed consideration of these factors, the Court approved the terms of the remediation agreement between the Company and the PPSC. The terms only apply to the Company and not to the executives who were also charged. The remediation agreement resolves two charges of bribing Filipino foreign public officials contrary to the Corruption of Foreign Public Officials Act and one charge of defrauding the Filipino government contrary to Section 380 of the Criminal Code. Pursuant to the terms of the remediation agreement, the company will pay C$10-million and be subject to compliance measures for four years.

Key Takeaways

Organizations seeking information about Canada's remediation regime can learn important lessons from this judgment.

1. Deference to the jointly submitted remediation agreement. Citing case law from the Supreme Court of Canada about exercise of judicial deference toward approving joint sentencing agreements submitted in the conventional criminal context, the judge held that courts should apply similar deference to the terms of remediation agreements negotiated between an accused and prosecutors. Among his reasons, the judge explained that:

   • The terms of the remediation agreement were the result of nine months of "arduous" negotiations.
   • The terms of the agreement were "consistent with achieving the stated purpose of encouraging the voluntary disclosure of wrongdoing", which would encourage organizations to "resort to the remediation agreement regime if they are confident that the terms of an agreement will be approved by the court."
   • The court's role in approving or denying a proposed agreement is limited to the facts presented by the parties. The court is not able to independently gather and confirm outside facts.
   • Remediation agreements allow victims to receive compensation, deprive organizations of unjust benefits, spare the criminal justice system of long and complex litigation, and provide investigators access to valuable evidence to prosecute individuals involved in the wrongdoing.

   This case demonstrates that judges will defer to the parties' agreement subject to the exceptions listed above. Courts, however, can still express concerns with the arrangement and request that the parties respond, in turn, either by amending the proposed agreement or submitting additional facts. Such revisions occurred in the first Canadian remediation agreement and in the case at hand.

2. Victim compensation is not always required: Throughout the judgment, the Court expressed the importance of reparations to victims of the accused's criminal conduct. However, the remediation agreement did not identify or compensate victims. Under the circumstances, the PPSC and the Company jointly submitted that no victim was identifiable. There was no evidence of who received the bribes or that the bribes resulted in economic harm. The Court accepted those facts and concluded that it was not possible or feasible to identify, notify, or indemnify victims of the Company's criminal conduct.

3. Third parties cannot intervene as victims during the approval process. During the remediation agreement approval process, the agent intermediary filed a written application as an intervener to argue its claim for compensation as a victim of the corrupt conduct. The Court dismissed the agent's application on the grounds that third parties do not have standing to participate in the remediation agreement approval process. The Court grounded its decision in the language of the Criminal Code, which expressly limits approval proceedings to the prosecution and accused and noted that allowing participation by third parties could potentially derail the approval process and hinder the related criminal trial of the Company's executives.   

4. Benchmarks for penalties. The Company was ordered to pay a total of C$10-million, which represented approximately 60% of its gross sales in the Philippines. This includes a forfeiture of the estimated value of the bribes paid to the Philippine National Police (C$3.3-million), a criminal penalty (C$6.6-million) and a victim surcharge calculated in accordance with the Criminal Code (C$660,000). The Company is also obligated to adhere to compliance undertakings and retain a third-party auditor. For three years, the auditor will test and report to the PPSC on the operational effectiveness of the Company's anti-bribery and corruption compliance program.

For further information, please contact:

Mark Morrison, K.C.       +1-403-260-9726
Michael Dixon                 +1-403-260-9786
Iris Fischer                       +1-416-863-2408
Liam Kelley                      +1-416-863-3272
John Fast                          +1-416-863-4270
Simon Seida                    +1-514-982-4103
Robel Sahlu                     +1-403-260-9604
 
or any other member of our Business Crimes, Investigations & Compliance group.