How Canada’s New Debarment Policy Impacts Criminal Investigations

On July 3, 2015, the Government of Canada introduced a new and controversial procurement policy with serious repercussions should a company be charged with certain criminal offences.

The Department of Public Works and Government Services Canada’s (PWGSC) Ineligibility and Suspension Policy [1] states that if a person or company is charged criminally, they may be barred (also known as “debarment”) from doing business with the federal government for up to ten years.

For individuals and corporations who do, or want to do, business with the Canadian government, this policy is a game changer. Such companies must now consider if and how they can avoid being charged.

Many companies already take steps to avoid criminal prosecution. But in an increasingly complex business world, where companies have operations globally, the risk of running afoul of the law, both at home and abroad, cannot be eliminated. Recent changes to Canada’s Criminal Code, which have expanded who within a company can create criminal liability for a corporation, have increased this risk.

With this new policy, companies must now consider whether they should proactively engage with the authorities, if a criminal investigation has been commenced. This carries with it considerable risk, including jeopardizing individual and corporate defence positions should charges be laid, or increasing the chance that charges are laid by providing damaging information to authorities. On the other hand, failing to do so can create a situation where a company is debarred from business with the government, simply because it was charged.

The concept of innocent until proven guilty forms no defence to this policy, which remains untested in court. This article covers some of the highlights of the new policy, as it relates to criminal charges.

Overview of PWGSC’s Integrity Regime and Debarment Policy

The new Integrity Regime applies to most procurements issued by PWGSC. It also applies to procurements issued by other federal government departments and Crown Corporations that have entered into Memoranda of Understanding with PWGSC.

In response to a solicitation, bidders must now verify that they and their affiliates have not had any convictions, conditional discharges, or absolute discharges to a range of offences both in Canada and abroad in the past three years.[2] The definition of an “affiliate” includes “everyone”, such as an entity, individual, director, officer, or key employee who has direct, deemed, or indirect control or power to control the bidder or is a third party that has the power to control both the bidder and another entity.[3]

What is remarkable about the Regime is that it applies if and when charges are laid. A bidder may be suspended from being awarded a contract for a period of up to 18 months, subject to renewal, if the bidder is charged with an enumerated offence and throughout the period that a judicial process is underway.[4]

A company could eventually be found innocent of all charges brought against it, but by that time the damage from lost business and reputational impact could be irreversible. The policy becomes even more controversial when considering that debarment will apply even for charges from foreign countries, including those where the justice system is dubious. Canada’s previous debarment policy was applied only following conviction.

If found to contravene the Regime prior to contract award, the bidder or any of its affiliates are deemed “ineligible.” For certain Canadian offences, including frauds against the Crown, the period of ineligibility is indefinite. For the remaining Canadian offences and foreign offences, the period of ineligibility is ten years. Although this period can be varied by an Administrative Agreement between the bidder and PWGSC,[5] there is little discretion permitted.

Non-compliance with the Regime during the period of the contract may result in the cancellation of the contract at the discretion of the contracting officer.[6] In the particular case of non-compliance by a director of a corporation during the period of a contract, cancellation may be avoided if the “individual resigns or is dismissed from the board of directors within a reasonable period of time.”[7]

Criminal Law and Charter Considerations

It is a Charter-entrenched protection in Canada that a person is presumed innocent until proven guilty.[8] This fundamental right has been disregarded by this policy. Also disregarded are principles of natural justice, whereby persons are not deprived of certain rights except in accordance with due process. An open and fair procurement policy is considered a right according to numerous Canadian policies and publications, and is consistent with Canada’s obligations under various international trade agreements such as NAFTA.

It is yet unknown whether such a provision can withstand Charter or other legal challenge. There is no indication if the new Liberal government will revise this policy.

In the meantime, a corporation that does business with the Canadian government should rethink a strategy of remaining silent during the course of an investigation against it or its employees. A more proactive approach may be a better strategy. Each case will depend on its peculiar facts. Time will generally be of the essence. If faced with such a scenario, a corporation is well advised to immediately seek legal counsel with experience in both procurement and criminal matters.

 

[1] Public Works and Government Services Canada, “Ineligibility and Suspension Policy” (18 August 2015) [Policy].

[2] Policy, supra note 1 at Part C – Offences. Includes offences under the Financial Administration Act, RSC, 1985, c F-11; Criminal Code, RSC, 1985, c C-46 [Criminal Code]; Competition Act, RSC, 1985, c C-34; Income Tax Act, RSC, 1985, c 1 (5th Supp); Excise Tax Act, RSC, 1985, c E-15; Corruption of Foreign Public Officials Act, SC 1998, c 34; Controlled Drugs and Substances Act, SC 1996, c 19; Lobbying Act, RSC 1985, c 44 (4th) Supp).

[3] Policy, supra note 1 at Annex: Definitions.

[4] PWGSC, “Integrity Regime,” supra note 3.

[5] PWGSC, “Integrity Regime,” supra note 3.

[6] Ibid.

[7] Public Works and Government Services Canada, 8.70.2, “Compliance with the Integrity Provisions,” (9 September 2015), s (d)

[8] The Constitution Act, 1982, being Schedule B to the Canada Act 1982 (UK), 1982 c 11, s 11(d).

Peter Mantas

Peter Mantas