The time has now arrived. A mechanism is finally in place in Canada that will allow for a better process to resolve criminal offences for corporations.
In response to a consultation that ended in November 2017, the federal government introduced legislation amending the Criminal Code to allow for remediation agreements (better known as "deferred prosecution agreements") to address corporate criminal wrongdoing. The amendments to the Criminal Code received Royal Assent on June 21, 2018 and are coming into force on September 19, 2018. The remediation agreement regime will permit prosecutors to negotiate remediation agreements for certain criminal offences of an economic character, if it is in the public interest to do so. Offences of an economic character include, among other things, bribery, frauds on the government, municipal corruption, fraudulent manipulation of stock exchange transactions, secret commissions, and laundering the proceeds of crime. If an organization voluntarily agrees to enter into a remediation agreement and a judge approves it, the organization will be required to comply with the obligations imposed under the agreement in return for a stay of the charges.
Elements of Canada's Proposed Regime
The remediation agreement regime is intended to:
- denounce wrongdoing and provide reparations to victims and the community;
- impose proportionate penalties that deter further wrongdoing;
- ensure companies entering into a remediation agreement implement corrective measures and develop a compliance culture within the organization;
- promote voluntary disclosure of criminal wrongdoing; and
- reduce the negative collateral consequences for those not responsible for the wrongdoing, such as innocent employees.
To qualify for a remediation agreement, the Attorney General must consent to the negotiation of the agreement, and the prosecutor must be of the opinion that:
- there is a reasonable prospect of conviction with respect to the offence;
- the act or omission did not cause and was unlikely to have caused serious bodily harm or death, or injury to national defence or national security, and was not committed in connection with a criminal organization or terrorist group; and
- negotiating the remediation agreement is in the public interest and is appropriate in the circumstances.
In determining whether a remediation agreement is in the public interest and is appropriate in the circumstances, the prosecutor must consider any relevant factor, including whether the organization self-reported, the culpability of senior management, actions taken by the organization in response to the act or omission, and whether the organization had previously entered into another agreement (in Canada or elsewhere) for similar acts or omissions.
A remediation agreement must include, among other things:
- a statement of facts;
- an admission of responsibility for the act or omission;
- an obligation on the organization to cooperate in any investigation, prosecution, or other proceeding in Canada relating to the act or omission, and to provide any further information that the organization becomes aware of that will assist in identifying individuals involved in the wrongdoing;
- an obligation that the organization pay a financial penalty;
- an obligation to pay reparations, including restitution to any victims, if applicable;
- ongoing reporting obligations regarding implementation of the remediation agreement; and
- a term that breaching the remediation agreement may lead to a recommencement of proceedings.
Optionally, a remediation agreement may include an obligation that the organization establish a compliance program, and that an independent monitor be appointed to report to the prosecutor on the organization's compliance with the program (or compliance with any of the other agreed upon obligations).
Before staying the proceedings against the organization, the Court must approve the remediation agreement. It will only do so if the remediation agreement is in the public interest and the terms of the agreement are "fair, reasonable and proportionate to the gravity of the offence."
If the remediation agreement is approved by the Court, the statements made by the organization in the statement of facts and admission of responsibility can be used against it in any civil or criminal proceedings relating to that act or omission. Once an order is obtained by the prosecutor declaring that the terms of the remediation agreement have been successfully completed, no other proceedings may be initiated against the organization for the same offence.
Similar Regimes in Other Jurisdictions
While the U.S. has had a policy-based deferred prosecution agreement regime in place since the early 1990s, many other countries have only recently implemented their own regimes. For example, the U.K. introduced its regime in February 2014, France did so in November 2016, and Australia followed suit in December 2017.
Canada's remediation agreement regime will be comparable to the statute-based regime in place in the U.K., and different from the U.S. regime in one fundamental respect - an agreement entered into in Canada will require judicial approval to ensure that it is in the interests of justice and its terms are fair, reasonable, and proportionate. This differs from the U.S. regime, which allows prosecutors to enter into a deferred prosecution agreement at their own discretion; a feature that has been criticized for its lack of transparency. Inevitably, an agreement that is destined to be scrutinized by a judge will be given more careful consideration by the prosecutor to ensure that it is the appropriate tool to be used in the circumstances, which ultimately benefits the public. On the other hand, there is less certainty for the accused when the agreement is contingent on judicial approval. Indeed, the judicial approval aspect of the Canadian regime could result in a reluctance to self-report. Without a clear guaranteed outcome, the risk associated with self-reporting may be perceived as simply being too high.
The success achieved in the U.S. under its deferred prosecution regime suggests that the remediation agreement regime in Canada could be successful for Canadian prosecutors as well. The regime in the U.S. has been used by the Department of Justice to great effect by making it easier for prosecutors to proceed against accused in questionable cases. This has led to a substantial increase in revenue generation from financial penalties in white collar crime cases. The marked increase in criminal resolutions against organizations in the U.S. has caused some critics there to suggest that the deferred prosecution agreement regime is akin to a tax on organizations that has unfairly impacted innocent accused organizations, including those which self-report out of an abundance of caution.
The Decision to Self-Report
The more rigorous judicial oversight in Canada's regime may address some of the criticisms levelled against the U.S. regime. However, judicial oversight also adds a level of uncertainty. Although there are protections built into Canada's regime regarding the use of information disclosed in the course of negotiations, once the process of self-reporting has begun and the existence of criminal wrongdoing has been disclosed, there will presumably be no ability to put the genie back in the bottle. Without a particular guaranteed outcome, the incentive to self-report may not be great enough in many circumstances.
Deciding to enter into a remediation agreement may create some internal tension within organizations by potentially putting the directors at odds with the senior officers. The prospect of entering into a remediation agreement will be attractive for the directors, because it will likely be in the best interests of the organization to obtain a stay of criminal charges in order to avoid a prolonged prosecution. However, the prospect of entering into a remediation agreement may present uncertainty for senior officers, who could be in greater personal jeopardy than the directors. Since the final remediation agreement will oblige the organization to assist in identifying other people involved in the act or omission, senior officers who may have played a role in the wrongdoing will likely resist any suggestion that the organization self-report.
Nevertheless, it is likely that many organizations will choose to enter into a remediation agreement with the hope of obtaining a stay of the charges and avoiding the risk of a lengthy prosecution and subsequent criminal conviction. In light of the government's poor track record to date in prosecuting white collar crime, organizations will have to weigh their options carefully before admitting responsibility and entering into a remediation agreement. Over time, the track record of such resolutions and the acceptance of them by the courts will make this assessment somewhat easier for organizations and their counsel facing the difficult decision matrix of whether to self-report.