Feds toughen, expand list of integrity regime offences

Friday, January 11, 2019

The federal government’s changes to the integrity regime, which came into force on Jan. 1, 2019 to help ensure it does business with ethical suppliers in Canada and abroad, could well be a wake-up call for business.

“In the last five years, there’s been a sense of complacency in the online world regarding the integrity regime,” Ken Jull, counsel at Gardiner Roberts LLP, says. “People are saying that they’re not going to get convicted of the serious criminal-type offences that lead to disbarment, so why worry about it? That’s not a good thing.”

It’s not as if the previous debarment scheme, which excluded businesses from obtaining government contracts and was intended to ensure integrity, lacked punch. The conviction of one of a number of enumerated offences (“integrity offence”) under the Criminal Code, the Competition Act and the Income Tax Act can lead to a 10-year ban on dealing with the federal government. “Good behaviour” in the sense of co-operating with the authorities and instituting remedial action can reduce the sanction to five years.

Public Works and Procurement Canada also has discretion to disbar if a charge has been laid, even in the absence of conviction.

But while the previous list of integrity offences was limited to crimes found in criminal and quasi-criminal federal statutes and included bribery, collusion, bid-rigging and other fraud-related crimes, the expanded program will also catch contractors who violate certain provincial statutes; foreign civil judgments for misconduct; debarment decisions of provinces, foreign jurisdictions and international organizations.

As well, the list expands the regime into areas such as human trafficking, violations under the Canada Labour Code and federal environmental offences.

From a rights perspective, however, things don’t look so good.

It’s bad enough that the scheme will continue to feature the possibility of debarment without actual conviction, it will now extend to conviction on offences punishable by administrative monetary penalties (AMP).

The difficulty is that the procedural rights available to litigants exposed to conviction for AMP-punishable offences are unclear. Disclosure rights, rights to an oral hearing and appeal rights are all up for grabs until the courts have pronounced on them.

Jull believes that the expansion has come about partly because the Canadian track record on getting convictions for “integrity offences,” many of which require the “beyond a reasonable doubt” standard of proof, is hardly robust.

On most AMP offences, however, the standard of proof falls to a balance of probabilities and in recent years, AMPs have become an increasingly common feature of sanctions available under Canadian business statutes.

In 2015, the Supreme Court of Canada, in its 4-3 decision in Guindon v. Canada 2015 SCC 41, held that AMPs do not offend constitutional rights because they are not criminal in nature and do not lead to the imposition of true penal consequences. Try that reasoning on a business person who’s been told he or she can’t deal with a prime customer for 10 years. But however that may be, Guindon shifted the arguments about the constitutionality of AMPs to a due process analysis that is still ongoing.

Fortunately, with its recent split decision in Interpaving Limited v. City of Greater Sudbury [2018] O.J. No. 3502 — one from which the Court of Appeal denied leave to appeal — Ontario’s Divisional Court filled a significant gap in the limited judicial guidance that was available to how public entities should handle disbarments.

Using its authority set out in a procurement bylaw, Sudbury excluded Interpaving, a road paving company, from bidding on future projects for four years. After receiving notice of the disbarment, Interpaving met with the City twice and made written submissions challenging it, but the City persisted. The company then sought to strike both the decision and the bylaw. The Divisional Court upheld both, but in doing so imposed a duty of procedural fairness, albeit a limited one, on the City. The majority also ruled that in this case, any unfairness had been cured by the subsequent reconsideration.

On the bright side as well, the new integrity regime does introduce a feature that may take away some of the sting accompanying its expansion: thankfully, the amendments do away with the draconian automatic ineligibility period of 10 years and allow new flexibility for companies involved in more minor offences.

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