General context, key principles and hot topics
1Identify the highest-profile corporate investigation under way in your country, describing and commenting on its most noteworthy aspects.
In February 2015, the Royal Canadian Mounted Police (RCMP) charged leading Canadian construction and engineering company SNC-Lavalin Group Inc in connection with alleged fraud relating to the construction of a Montreal hospital and alleged bribery of foreign officials in Libya. Following the initiation of the investigation, the company replaced its senior management and board and introduced robust compliance policies and procedures. SNC-Lavalin pleaded not guilty to the charges and, in May 2019, a judge of the Court of Quebec in Montreal determined that the Crown had met the evidentiary burden to commit the company to trial. The case is widely expected to set an important benchmark for corporate criminal liability in Canada.
It was expected by many observers of the matter that the recent enactment of amendments to the Criminal Code introducing deferred prosecution agreements in Canada (known as remediation agreements) would lead to a possible negotiated settlement of the charges. However, the company was informed by the Director of the Public Prosecution Service of Canada in early October 2018 that the prosecution was not prepared at that time to initiate negotiations for a remediation agreement.
In February 2019, a national newspaper in Canada reported that the Prime Minister’s Office had placed improper pressure on the then-Attorney General to intervene in the prosecution so that SNC-Lavalin could secure a remediation agreement. Shortly after the decision to not offer SNC-Lavalin a remediation agreement, the Attorney General was transferred to the Ministry of Veterans Affairs as part of a cabinet shuffle. Although the Prime Minister’s Office disputed the newspaper report, the former Attorney General resigned from cabinet and spoke out against the Prime Minister’s Office during testimony before a House of Commons committee. The Prime Minister eventually expelled the former Attorney General from the Liberal caucus in April 2019 and the matter was front-page news in Canada for several weeks.
2Outline the legal framework for corporate liability in your country.
Criminal law applies broadly to ‘organisations’, including corporations and partnerships. The liability of a corporation is assessed through an evaluation of the actions of its senior officers. ‘Senior officers’ are defined to include a representative who plays an important part in the establishment of an organisation’s activities and, in the case of a body corporate, includes a director, its chief executive officer and its chief financial officer. A ‘representative’ is defined as a director, partner, employee, member, agent or contractor of the organisation.
For offences that require the prosecution to prove fault (apart from negligence), a corporation will be a party to an offence, if, with the intent at least in part to benefit the organisation, one of its senior officers (1) acting within the scope of his or her authority, is a party to the offence, (2) having the mental state required to be a party to the offence and acting within the scope of their authority, directs the work of other representatives of the organisation so that they carry out the act or make the omission specified in the offence, or (3) knowing that a representative of the organisation is or is about to be a party to the offence, does not take all reasonable measures to stop them from being a party to the offence.
For offences that require the prosecution to prove negligence, an organisation is a party to an offence if (1) one of the organisation’s representatives, acting within the scope of his or her authority, is a party to the offence, and (2) the senior officer responsible for the aspect of the organisation’s activities relevant to the offence departs markedly from the standard of care that could reasonably be expected to prevent a representative of the organisation from being a party to the offence.
In addition, there are a multitude of provincial and federal strict and absolute liability offences for which a corporation can be prosecuted but that do not require proof of intent.
3Which law enforcement authorities regulate corporations? How is jurisdiction between the authorities allocated? Do the authorities have policies or protocols relating to the prosecution of corporations?
The law enforcement authorities most frequently encountered by corporations are the Canadian Competition Bureau (which enforces the Competition Act), the RCMP (which typically investigates alleged breaches of the Corruption of Foreign Public Officials Act as well as complex, multi-jurisdictional terrorist financing and money laundering offences proscribed by the Criminal Code) and the provincial securities regulators (which enforce provincial securities legislation). There are no specific policies pertaining to the prosecution of corporations.
4What grounds must the authorities have to initiate an investigation? Is a certain threshold of suspicion necessary to trigger an investigation?
No particular threshold of suspicion is required. However, to take investigative steps that involve compelling the production of documents from the target of the investigation or third parties, the authorities generally need reasonable grounds to believe that an offence has been committed. The one exception is securities regulatory investigations, for which there is no threshold of suspicion necessary for provincial securities regulators to issue a summons.
5How can the lawfulness or scope of a notice or subpoena from an authority be challenged in your country?
Subpoenas are generally not a tool that is available to law enforcement authorities at the investigative stage. There is no way to compel individuals to provide statements, and documents can only be obtained from the target of an investigation through a search warrant. The one exception is securities regulatory investigations, for which provincial securities regulators do have the authority to compel individuals to be interviewed by way of a summons and to compel the production of documents.
A summons from a provincial securities regulator can be challenged through an application to a court to quash the summons. However, such an application would generally need to be premised on a challenge to the regulator’s jurisdiction to issue the summons.
6Does your country make use of co-operative agreements giving immunity or leniency to individuals who assist or co-operate with authorities?
Immunity agreements for individuals who co-operate with authorities are available. They generally involve an agreement by the Crown to refrain from prosecution or to terminate a prosecution regarding an individual in exchange for that individual’s co-operation. The Crown will typically offer an immunity agreement when the individual’s co-operation is of significant value such that it is clearly in the public interest not to hold the individual accountable for criminal activity. In making this determination, the Crown will examine a variety of factors, including:
- the seriousness of the offence at issue;
- the reliability of the individual;
- the reliability of the anticipated evidence;
- the importance of the individual’s co-operation;
- the nature and extent of the individual’s involvement in the offence at issue; and
- protection of the public.
When the Crown determines that an immunity agreement is not warranted, an individual may still receive leniency as a result of co-operating with the authorities. Co-operation with the authorities is a well-recognised mitigating factor during sentencing and so sentencing judges will regularly take co-operation into account when imposing a sentence on an accused. Section 3.3 of the Public Prosecution Service of Canada Deskbook provides guidance on immunity agreements and sets out the applicable criteria in determining whether the Crown should enter into an immunity agreement, discusses the handling of co-operating information providers and distinguishes the role of the Crown from that of the investigating agency in the immunity process.
7What are the top priorities for your country’s law enforcement authorities?
Enforcement authority is divided by subject matter, level of government (federal, provincial or municipal) and geographical jurisdiction. As a result, enforcement priorities vary considerably across the country and by subject matter. In recent years, the RCMP has indicated that it is giving priority to organised crime, terrorism and national security and economic crimes. At the provincial level, priorities have varied, with money laundering attracting greater priority in British Columbia and corruption being a key focus in Quebec.
8Does your country regulate cybersecurity? Describe the approach of local law enforcement authorities to cybersecurity-related failings.
Cybersecurity is regulated through both federal and provincial legislation. At the federal level, the Personal Information Protection and Electronic Documents Act (PIPEDA) applies to federal government organisations and to businesses in provinces that do not have ‘substantially similar’ privacy protections. Under PIPEDA, covered organisations must protect personal information with security safeguards that are appropriate to the sensitivity of the information. The security safeguards must protect the information against loss or theft, as well as unauthorised access, disclosure, copying, use or modification. The Privacy Commissioner of Canada oversees compliance with PIPEDA.
Recent amendments to PIPEDA now require covered organisations to notify the Privacy Commissioner and affected individuals, as soon as is feasible, of breaches of security safeguards involving personal information under the organisation’s control. Organisations are subject to this mandatory reporting regime if it is reasonable in the circumstances to believe that the breach creates a real risk of significant harm to individuals. Organisations that knowingly fail to comply with these provisions are subject to criminal punishment.
The provinces of Alberta, British Columbia and Quebec have legislation in force that is substantially similar to PIPEDA and so businesses in those provinces are subject to provincial legislation.
In addition to federal and provincial legislation, various industry regulators, such as the Mutual Fund Dealers Association and the Investment Industry Regulatory Organization of Canada, also publish guidance documents that set expectations for how regulated entities are to address cybersecurity risk. Further, the Canadian Securities Administrators have notified registered firms in Staff Notice 33-321 (Cyber Security) that registered firms should ensure their compliance systems address the risks of cyber threats and cybersecurity.
In June 2019, Desjardins Group, a leading Canadian banking institution, reported a serious data breach in which the social insurance numbers, names, dates of birth and addresses of 2.7 million customers were compromised. As a result of the data breach, the bank is currently subject to a joint investigation by the Privacy Commissioner of Canada and the provincial privacy authority of Quebec into whether it complied with applicable federal and provincial privacy laws. The Privacy Commissioner of Canada has conducted similar investigations into past data breaches at Equifax Inc in 2017 and VTech Holdings Ltd in 2015, which resulted in findings that both organisations failed to implement adequate security safeguards.
9Does your country regulate cybercrime? What is the approach of law enforcement authorities in your country to cybercrime?
The Criminal Code contains a wide variety of offences that authorities in Canada have historically used to combat cybercrime. The RCMP, which is generally responsible for combating large-scale cybercrime in Canada, distinguishes between cybercrime that involves technology as a target and cybercrime that involves technology as an instrument. In the former category, the RCMP includes criminal offences that target computers or other information technologies, such unauthorised use of a computer and mischief in relation to computer data. In the latter category, the RCMP includes criminal offices that are committed using the internet and information technology, such as fraud, identity theft, intellectual property infringements and money laundering.
In addition to the RCMP, cybercrime offences may be investigated by other relevant federal government agencies and local police authorities across the country. The RCMP typically works in partnership with these other authorities to investigate cybercrime issues that fall within overlapping jurisdictions. For example, the Canadian Anti-Fraud Centre is a combined effort by the RCMP, the Ontario Provincial Police and Competition Bureau of Canada to counter internet and mass-marketing fraud.
In February 2018, the federal government announced the creation of the National Cyber Crime Co-ordination Unit, which aims to coordinate cybercrime investigations across Canada, provide a single national reporting mechanism for incidents of cybercrime and work with Canada’s global partners to combat cybercrime. In that regard, Canada has ratified the Council of Europe’s Convention on Cybercrime (also known as the Budapest Convention) and actively participates in international efforts to combat cybercrime, such as the Inter-American Cooperation Portal on Cyber-Crime.
Cross-border issues and foreign authorities
10Does local criminal law have general extraterritorial effect? To the extent that extraterritorial effect is limited to specific offences, give details.
In general, Canadian criminal law does not apply extraterritorially. Section 6(2) of the Criminal Code provides that ‘no person shall be convicted . . . of an offence committed outside Canada’ unless a specific provision provides otherwise. That said, ‘outside Canada’ has been judicially interpreted in the leading Supreme Court of Canada case (R v. Libman) as lacking a ‘real and substantial’ connection to Canada. In other words, an offence committed outside the territory of Canada could be prosecuted in Canada if there remains some ‘real and substantial’ link to Canada.
Importantly for corporations, many relevant proscriptions contain language that gives them extraterritorial effect. For instance, both the anti-money laundering (AML) provision in the Criminal Code and the terrorism financing provision contain specific language to give them extraterritorial effect. The AML provision prohibits dealing in property acquired as a result of the commission abroad of an act that would be a criminal offence in Canada. A terrorism financing offence is deemed to be committed in Canada when there is a nexus between the underlying terrorist act and Canada, either through the perpetrator or the victim, or if the person who commits the terrorist financing offence is linked to Canada. In addition, bribery of foreign officials in contravention of the Corruption of Foreign Public Officials Act is prosecutable in Canada if the offence is committed by a corporation, firm or partnership that is ‘incorporated, formed or otherwise organised under the laws of Canada or a province’.
11Describe the principal challenges that arise in your country in cross-border investigations, and explain whether and how such challenges depend on the other countries involved.
Cross-border criminal investigations are often hampered by difficulty in obtaining information from foreign sources. Canada has mutual legal assistance treaties (MLATs) with some 40 countries and Canadian legislation allows non-treaty assistance. MLAT requests can be time-consuming and administratively burdensome. Canadian authorities also have enforcement co-operation agreements and memoranda of understanding with counterpart agencies in other countries in matters such as competition law and securities. Informal co-operation also takes place between Canadian enforcement agencies and their foreign counterparts; however, the extent of co-operation is often limited as a result of statutory and policy restrictions on disclosure of confidential information.
12Does double jeopardy, or a similar concept, apply to prevent a corporation from facing criminal exposure in your country after it resolves charges on the same core set of facts in another? Is there anything analogous in your jurisdiction to the ‘anti-piling on’ policy as exists in the United States (the Policy on Coordination of Corporate Resolution Penalties) to prevent multiple authorities seeking to penalise companies for the same conduct?
Double jeopardy and similar principles apply in Canada to limit the criminal exposure of a defendant that has already been convicted in another jurisdiction of a relevant offence. To determine whether such principles apply, a Canadian court will typically assess whether the foreign offence and the Canadian offence at issue have a sufficiently close legal nexus (i.e., elements of the offences) and factual nexus (i.e., factual basis for the offences).
There is no analogous policy in Canada to the ‘anti-piling on’ policy that exists in the United States.
13Are ‘global’ settlements common in your country? What are the practical considerations?
14What bearing do the decisions of foreign authorities have on an investigation of the same matter in your country?
Canadian enforcement authorities do not, as a general matter, defer to the findings of foreign agencies (absent a double jeopardy issue where the same matter has been definitively determined by a foreign court). That said, Canadian authorities will consider both the fact of and the outcome of foreign investigations when determining priorities for case and resource allocation.
Economic sanctions enforcement
15Describe your country’s sanctions programme and any recent sanctions imposed by your jurisdiction.
Canadian sanctions are imposed under five statues:
- the United Nations Act, whereby Canada implements sanctions mandated by the United Nations Security Council, which are consistent across UN Member States;
- the Special Economic Measures Act, whereby Canada maintains unilateral measures against certain foreign states in cases where a grave breach of international peace and security has resulted or will result in a serious international crisis, a foreign state commits gross and systematic human rights violations, a foreign state or foreign public official is responsible for or complicit in significant acts of corruption, or where an international body, of which Canada is a member (other than the United Nations), recommends for its members to enact economic measures against a foreign state;
- the Justice for Victims of Corrupt Foreign Officials Act, whereby Canada may impose measures against foreign nationals who are responsible for, or complicit in, gross violations of human rights or corruption;
- the Criminal Code, which enables Canada to sanction terrorist entities, including those not listed by the United Nations Al-Qaeda and Taliban Regulations or the Regulations Implementing the United Nations Resolutions on the Suppression of Terrorism; and
- the Freezing Assets of Corrupt Foreign Officials Act, which allows Canada to freeze the assets or restrain the assets of politically exposed foreign persons believed to have misappropriated or acquired property improperly.
Sanctions are implemented by the government in the form of statutory regulations. The measures imposed on specific states, organisations and individuals may take varying forms, such as arms and related material embargos, asset freezes, export and import restrictions, financial prohibitions and technical assistance prohibitions.
Canadian sanctions measures are in force against the following states: Central African Republic, Democratic Republic of the Congo, Eritrea, Iran, Iraq, Lebanon, Libya, Mali, Myanmar, Nicaragua, North Korea, Russia, Somalia, South Sudan, Sudan, Syria, Ukraine, Venezuela, Yemen and Zimbabwe. Schedule 1 of the Justice for Victims of Corrupt Foreign Officials Regulations lists all designated individuals, which include individuals from Russia, Venezuela, Myanmar, South Sudan and Saudi Arabia. Canada has enacted measures under the Freezing Assets of Corrupt Foreign Officials Act against Tunisia and the Ukraine.
Global Affairs Canada is generally responsible for the administration of Canadian sanctions and works with other agencies in enforcement matters (notably the RCMP and the Canada Border Security Agency).
16What is your country’s approach to sanctions enforcement? Has there been an increase in sanctions enforcement activity in recent years, for example?
There has been increased scrutiny of compliance with sanctions measures by Global Affairs Canada.
17Do the authorities responsible for sanctions compliance and enforcement in your country co-operate with their counterparts in other countries for the purposes of enforcement?
Yes, Global Affairs Canada co-operates with its counterparts in other countries to enforce Canadian sanctions measures.
18Has your country enacted any blocking legislation in relation to the sanctions measures of third countries? Describe how such legislation operates.
Canada has enacted the Foreign Extraterritorial Measures Act (FEMA) in relation to the extraterritorial measures of foreign states. FEMA prevents Canadian individuals and companies from complying with foreign laws in Canada and authorises the Canadian federal cabinet to issue orders to block or otherwise counter the effects of foreign extraterritorial measures in Canada.
The only foreign extraterritorial law blocked under FEMA is the United States embargo against Cuba, which is comprised of a range of statutory measures, including the United States Liberty and Democratic Solidarity (LIBERTAD) Act of 1996 (the Helms-Burton Act). Canadian companies, including Canadian subsidiaries of US companies, are prohibited from complying with the Helms-Burton Act, creating the potential for significant intra-company conflict between Canadian subsidiaries and their US parents.
On 2 May 2019, the United States lifted the suspension of a private right of action under Title III of the Helms-Burton Act. This suspension now permits US nationals to bring civil claims for treble damages against foreign businesses and individuals for trafficking in property confiscated by the Cuban government after the 1959 revolution. Under FEMA, judgments of US courts until Title III are not enforceable in Canada and Canadian defendants may counter-sue in Canadian courts to recover any losses suffered from a Title III judgment.
19To the extent that your country has enacted any sanctions blocking legislation, how is compliance enforced by local authorities in practice?
Under the Foreign Extraterritorial Measures (United States) Order, Canadian corporations are required to give notice to the Attorney General of:
any directive, instruction, intimation of policy or other communication relating to an extraterritorial measure of the United States in respect of any trade or commerce between Canada and Cuba that the Canadian corporation, director or officer has received from a person who is in a position to direct or influence the policies of the Canadian corporation in Canada.
Canadian corporations who commit an offence under FEMA are subject to fines not exceeding C$1.5 million or imprisonment for a term not exceeding five years.
Before an internal investigation
20How do allegations of misconduct most often come to light in companies in your country?
Allegations of misconduct come to the attention of enforcement authorities and corporate management through a wide range of sources. Whistleblowers, internal or compliance audits and media reports are frequent sources of both internal and government investigations. In 2015, the Ontario Securities Commission (OSC) adopted a whistleblower policy to award up to C$5 million to persons who report securities law violations. In the first two years after the whistleblower policy came into effect, the OSC received approximately 200 tip-offs and it made its first three awards under the policy in February 2019 (totalling C$7.5 million).
21Does your country have a data protection regime?
Canada has privacy laws at both the federal and provincial levels. The Personal Information Protection and Electronic Documents Act applies to federal government organisations and to businesses in provinces that do not have ‘substantially similar’ privacy protections. Canada does not have a broad data protection law equivalent to the European Union’s General Data Protection Regulation.
22To the extent not dealt with above at question 8, how is the data protection regime enforced?
Contraventions of privacy laws are generally enforced through complaints to and investigations by commissioners appointed federally or provincially.
23Are there any data protection issues that cause particular concern in internal investigations in your country?
Canadian privacy and data protection laws have not been impediments to internal investigations to date.
24Does your country regulate or otherwise restrict the interception of employees’ communications? What are its features and how is the regime enforced?
There is no bright-line rule about whether an employer may monitor the communications of its employees on company-owned devices. An employee’s contract of employment and company policies will typically provide that an employee’s company computers, tablets and mobile phones are the property of the company and therefore may be monitored by the company without notice to the employee. If an employee has provided prior consent by signing such documents, courts will generally find that the employee’s reasonable expectation of privacy is diminished.
Organisations that are covered by PIPEDA, or provincial privacy laws in Alberta, British Columbia or Quebec, are subject to additional restrictions regarding the collection and use of personal information, which can include information about topics such as an employee’s health or financial situation. Although the various privacy laws differ in some respects, under the strictest of laws, an employee’s prior consent in the form of a contract of employment or signed company policies will generally permit the employer to monitor employee communications that contain personal information.
Dawn raids and search warrants
25Are search warrants or dawn raids on companies a feature of law enforcement in your country? Describe any legal limitations on authorities executing search warrants or dawn raids, and what redress a company has if those limits are exceeded.
Search warrants are a feature of law enforcement in Canada.
Generally, a warrant to search a particular location may only be issued where there are reasonable grounds to believe that the search will yield evidence of the commission of an offence. The search warrant will outline the parameters of the search, including the date, time and the specific location (or locations) to be searched. An application for a search warrant must be supported by affidavit evidence establishing the requisite grounds.
If the requisite grounds for the search are lacking, or the parameters of the search authorised by the warrant are exceeded, the search will be unreasonable, in violation of Section 8 of the Canadian Charter of Rights and Freedoms (the Charter), which protects both individuals and corporations from unreasonable searches and seizures. At the investigative stage, an application to quash a search warrant can be brought after the search has been executed (there is usually not an opportunity to bring the application beforehand because the target of the search will typically only become aware of the search at the time the warrant is executed). If the application is successful, the fruits of the search may be returned to the party from which they were seized. If a prosecution is initiated, it is also possible to have evidence obtained from an unlawful search excluded pursuant to a pretrial application brought under Section 24(2) of the Charter.
26How can privileged material be lawfully protected from seizure during a dawn raid or in response to a search warrant in your country?
When a search warrant is being executed, the target being searched (or its legal counsel) may make a claim of privilege over privileged documents. In such circumstances, the documents will be sealed in an envelope and provided to the clerk of the local superior court. The investigating authorities and defence counsel may then negotiate a review process for the privileged records.
If the search warrant authorises the seizure or imaging of a computer, the target being searched (or their legal counsel) can still make a claim for privilege. A variety of methods may be used to review the computer data to protect the privilege. For instance, an officer not involved in the investigation may review the seized or imaged data to segregate the privileged records.
27Under what circumstances may an individual’s testimony be compelled in your country? What consequences flow from such compelled testimony? Are there any privileges that would prevent an individual or company from providing testimony?
Section 11(c) of the Charter provides for a right against self-incrimination. It stipulates that any person charged with an offence has the right not to be compelled to be a witness in proceedings against that person.
Section 13 of the Charter also provides for a right against self-incrimination. It protects a testifying witness from compelled incriminating evidence that he or she provided being used against him or her in any other proceeding (except in a prosecution for perjury or for giving contradictory evidence). This protection is different from that afforded by the Fifth Amendment in the United States, under which a witness can refuse to testify.
A subpoena must be obtained to compel the attendance of a witness. For a judge to issue a subpoena, the party seeking the subpoena must be able to establish that the witness would probably, or is likely to, have material evidence to give.
Whistleblowing and employee rights
28Describe the whistleblowing framework in your country. What financial incentive schemes exist for whistleblowers? What legal protections are in place for whistleblowers?
Under the Criminal Code, it is an offence for an employer to discipline, demote or dismiss an employee in retaliation for that employee providing information to the authorities about a violation of federal or provincial law, or to threaten to do so. It is also an offence to do any of these things in an attempt to dissuade the employee from providing information to the authorities.
In addition, in recent years the provincial securities regulators in three provinces (Ontario, Quebec and Alberta) have introduced whistleblower programmes. Each of these provides various protections to whistleblowers who engage in protected activity, including assurances of confidentiality and anti-reprisal measures. For example, under the Ontario programme, employment agreement provisions that preclude an employee from engaging in whistleblowing activity are automatically void.
The Alberta and Ontario whistleblower programmes also provide a civil right of action for whistleblowers who have experienced reprisals. For example, under the Ontario programme, employees who engage in protected whistleblowing activity have a private right of action against companies that take reprisals. In any suit brought under the private right of action, the typical burden of proof is reversed such that the company must demonstrate that it did not take a reprisal against the employee. Remedies in such an action include the employee’s reinstatement and payment to the employee of two times the amount of remuneration that the employee would have been paid but for the reprisal.
Of the three provincial whistleblower programmes, only the Ontario one offers monetary awards for information regarding misconduct. Under the Ontario programme, a whistleblower can receive up to C$5 million for submitting information about potential securities misconduct that leads to an enforcement action. In the first two years after the programme launched, the Ontario securities regulator received approximately 200 tip-offs and, in February 2019, it made its first three awards under the programme (totalling C$7.5 million).
29What rights does local employment law confer on employees whose conduct is within the scope of an investigation? Is there any distinction between officers and directors of the company for these purposes?
As a general matter, employees do not have any particular rights under employment law that govern how the company must interact with them during an internal investigation. However, if an employee is a whistleblower, the employee may have rights under local law against the company taking reprisals against him or her for the whistleblowing activity.
Apart from whistleblower protections, if an employee is treated unfairly and subsequently demoted or dismissed, that treatment may be a factor in wrongful termination proceedings instituted by the employee. Also, employees may be found to have a reasonable expectation of privacy in relation to their personal use of company computers, tablets and mobile phones. This expectation of privacy may preclude the company from voluntarily turning over the contents of these devices to law enforcement authorities for their use in a criminal investigation of the employee.
30Do employees’ rights under local employment law differ if a person is deemed to have engaged in misconduct? Are there disciplinary or other steps that a company must take when an employee is implicated or suspected of misconduct, such as suspension or in relation to compensation?
An employees’ rights under local employment law do not differ, and there are no particular steps that need to be taken by the employer, when an employee is implicated in, or suspected of, misconduct.
31Can an employee be dismissed for refusing to participate in an internal investigation?
It may be possible to dismiss an employee for refusing to participate in an investigation, particularly when the contract of employment imposes a duty on the employee to participate in an investigation.
Commencing an internal investigation
32Is it common practice in your country to prepare a document setting out terms of reference or investigatory scope before commencing an internal investigation? What issues would it cover?
There is no mandatory process for conducting internal investigations in Canada. Independent investigations often begin with a document or work plan that sets out the subject matter and scope of the investigation. The work plan will generally evolve as the investigation progresses and its evolution is typically the subject of discussion between the investigators and the corporate authorities instructing the investigation.
33If an issue comes to light prior to the authorities in your country becoming aware or engaged, what internal steps should a company take? Are there internal steps that a company is legally or ethically required to take?
Internal reports of potential illegal conduct should be passed on to management and, depending on the nature or severity of the conduct, to the board of directors. If a company lawyer becomes aware of certain types of misconduct, he or she may be obliged by local ethical rules to report that misconduct to management or the board, or both. The relevant corporate authority should consider whether immediate remedial action is required and consult counsel prior to deciding on the appropriate course of action, which can involve an internal investigation conducted by company personnel or an independent investigation by outside investigators. It is generally prudent to conduct a review and investigation of potential illegal conduct under the guidance and direction of counsel to preserve privilege on behalf of the corporation and to avoid inadvertent waivers of privilege before the scope and severity of the potential misconduct can be determined.
34What internal steps should a company in your country take if it receives a notice or subpoena from a law enforcement authority seeking the production or preservation of documents or data?
Note that such orders are only used against third parties and not the target of an investigation. If served with a preservation demand, a preservation order or production order, a company should immediately take steps to preserve and produce (as applicable) the data subject to the order.
If a company is unable to comply with the terms of the order in the time prescribed, the company may apply to the court to vary or revoke the order. Such an application may assist the company in obtaining more time to comply with an order (which can be broadly drafted) or address concerns about privileged documents. Notice of this application must be made to the officer named in the order within 30 days of the day on which the order is made.
35At what point must a company in your country publicly disclose the existence of an internal investigation or contact from a law enforcement authority?
The obligation of a corporation to publicly disclose an internal or government investigation of illegal conduct varies according to a wide range of factors, including whether the corporation is private or publicly traded, the business activities of the corporation and the type of conduct in question. Public companies have disclosure obligations under Canadian securities laws with respect to ‘material information’. Whether specific information regarding potential misconduct rises to the requisite level of materiality depends on several factors, both qualitative and quantitative. In certain sectors (e.g., financial services, consumer health and safety, and government procurement), companies are subject to legal or contractual obligations to disclose certain types of misconduct. In other instances, particularly those that have the potential to affect consumers, early public disclosure may be prudent for reputational reasons.
36How are internal investigations viewed by local enforcement bodies in your country?
As a general rule, Canadian enforcement agencies welcome the efforts of corporations to address wrongdoing by officers, directors and employees, including conducting internal investigations. However, the posture towards internal investigations varies immensely from agency to agency and is affected by the safeguards that the company adopts to preserve the integrity of the internal investigation and the evidence collected.
37Can attorney–client privilege be claimed over any aspects of internal investigations in your country? What steps should a company take in your country to protect the privilege or confidentiality of an internal investigation?
Yes. Both attorney–client privilege and litigation privilege may attach to work-product produced in an internal investigation. Attorney–client privilege will protect communications made in furtherance of the provision of legal advice. Litigation privilege will attach to documents where the ‘dominant purpose’ of creating the document was anticipated or ongoing litigation. Neither attorney–client privilege nor litigation privilege will attach to documents that predate the investigation, or transcripts or factual summaries of interviews of employees or third parties not directly involved in instructing the lawyers conducting the investigation.
It is prudent to clearly define who the client is at the outset of the mandate (e.g., the corporation alone, the corporation and certain senior officers or a special committee of the board of directors) and who will be instructing the lawyers on behalf of the corporation. Documents should also be marked as ‘solicitor–client privileged’ or ‘litigation privileged’ and their dissemination should be restricted to the individuals directly involved in instructing the lawyers. Also, the client may choose not to have interviews recorded or verbatim transcripts prepared, but instead have their lawyers prepare impressionistic memoranda over which a tenable claim of litigation privilege may be made.
38Set out the key principles or elements of the attorney–client privilege in your country as it relates to corporations. Who is the holder of the privilege? Are there any differences when the client is an individual?
Attorney–client privilege applies to communications between an attorney and a client that are (1) expected to be confidential and (2) in furtherance of obtaining legal advice. The attorney–client privilege is held by the client and can only be waived by the client. This is the case irrespective of whether the client is a corporation or an individual. Privileged communications are shielded from disclosure indefinitely.
39Does the attorney–client privilege apply equally to in-house and external counsel in your country?
The fact that the lawyer giving legal advice is in-house (as opposed to external) counsel is irrelevant. A communication will be privileged if it is in furtherance of obtaining legal advice. Privilege will not attach to communications when in-house counsel is providing business advice. Also, over-circulation of a document by in-house counsel can result in a finding that the communication is not privileged because it was not intended to be kept confidential.
40Does the attorney–client privilege apply equally to advice sought from foreign lawyers in relation to (internal or external) investigations in your country?
Although the law on this issue is not settled in Canada, courts will generally apply the law of the forum to issues of attorney–client privilege. On that basis, when advice is sought from a foreign lawyer in relation to foreign law, attorney–client privilege will attach if the requirements of local law for the privilege are satisfied. Specifically, the communication between the foreign lawyer and the client must be made with the expectation of confidentiality and in furtherance of obtaining legal advice.
To support the strongest possible assertion of attorney–client privilege, it is best practice for domestic counsel (rather than the client) to undertake any communication with foreign lawyers during an investigation. In this way, the communications with the foreign lawyers are protected by privilege just as any other third-party and expert assistance engaged by counsel for the purposes of conducting the investigation.
41To what extent is waiver of the attorney–client privilege regarded as a co-operative step in your country? Are there any contexts where privilege waiver is mandatory or required?
With the exception of provincial securities regulators, Canadian enforcement authorities do not generally request waiver of privileged information, and waiver of privilege is not generally required to obtain credit for co-operation. However, some agencies (particularly the RCMP) can be sceptical of extensive privilege claims even when they are well-founded. It is prudent in RCMP investigations of such matters as foreign corrupt practices, procurement fraud, sanctions and export control violations, to consider whether appropriate waivers of specific privileged information may be beneficial to the corporation.
42Does the concept of limited waiver of privilege exist as a concept in your jurisdiction? What is its scope?
The concept of limited waiver of privilege exists in Canada, but the circumstances in which a corporation can successfully assert that it intended a limited waiver are uncertain. Although the precise contours of the limited waiver doctrine are unclear, when the production of privileged information is required by statute, and the privileged information is produced for that purpose, the doctrine of limited waiver will apply.
43If privilege has been waived on a limited basis in another country, can privilege be maintained in your own country?
If the preconditions for the assertion of privilege exist, and it is clear that only a limited waiver for a specified purpose was intended, privilege could possibly be maintained in Canada.
44Do common interest privileges exist as concepts in your country? What are the requirements and scope?
Common interest privilege does exist in Canada. Common interest privilege may be invoked if a party voluntarily discloses a privileged document to another party who has a common interest in the subject matter of the communication or in the litigation in connection with which the document was created. For common interest to exist, the parties must share a common goal, seek a common outcome or have an identical and shared interest. The common interest does not need to exist at the time the privileged document is created, so long as the common interest exists at the time the document is disclosed.
45Can privilege be claimed over the assistance given by third parties to lawyers?
Yes, as a general rule, third-party and expert assistance engaged by counsel for the purposes of conducting an investigation, such as forensic accountants and investigators, data recovery services, translation services and document review, is covered by privilege.
46Does your country permit the interviewing of witnesses as part of an internal investigation?
Yes. Witness interviews are generally a key part of internal investigations.
47Can a company claim attorney–client privilege over internal witness interviews or attorney reports?
Internal witness interviews may be covered by litigation privilege, provided that the interviews are for the dominant purpose of existing or contemplated litigation. Because litigation privilege does not protect underlying facts from disclosure, a successful assertion of privilege can only be made regarding impressionistic summaries prepared by the lawyer. Attorney–client privilege will also attach to interviews of key individuals involved in instructing the lawyers.
Reports prepared by lawyers as part of an internal investigation may also be attorney–client privileged, provided that (1) the report is delivered in the context of a attorney–client relationship, (2) the report is prepared for the purpose of providing legal advice, and (3) the report is prepared and delivered with the expectation of confidentiality.
48When conducting a witness interview of an employee in your country, what legal or ethical requirements or guidance must be adhered to? Are there different requirements when interviewing third parties?
It is generally considered prudent to give an employee an Upjohn-type warning, although the issue of whether such a warning is required has not been considered by a Canadian court. In addition, if an employee is to be interviewed by a lawyer on behalf of the employer, local ethical rules require the lawyer to make it clear that he or she is acting on behalf of the employer and not for the employee, and if the employee subsequently seeks legal representation, the lawyer cannot interview the employee except with the express consent of the employee’s lawyer.
49How is an internal interview typically conducted in your country? Are documents put to the witness? May or must employees in your country have their own legal representation at the interview?
Documents may be put to the witness. The interview may be recorded, but the recording will not be privileged. Employees should be advised that the interviewing lawyer acts for the employer and so the employee may seek their own legal representation. If the employee retains a lawyer, they cannot be interviewed except with the express consent of the employee’s lawyer. Such an interview would generally take place in the presence of the employee’s lawyer.
Reporting to the authorities
50Are there circumstances under which reporting misconduct to law enforcement authorities is mandatory in your country?
There is no general obligation to report misconduct to law enforcement authorities. However, companies in certain sectors (e.g., financial services, consumer health and safety, and government procurement) are subject to legal or contractual obligations to disclose certain types of misconduct to the appropriate authorities.
51In what circumstances might you advise a company to self-report to law enforcement even if it has no legal obligation to do so? In what circumstances would that advice to self-report extend to countries beyond your country?
A company might be advised to self-report if it is likely to receive credit for doing so and the underlying misconduct is likely to come to the attention of law enforcement. Formal credit for co-operation programmes have been established by the OSC for securities regulatory offences and by the Canadian Competition Bureau for offences under the Competition Act. Other agencies may have also been known to give credit or decline to prosecute in the case of self-disclosure, for example in matters involving economic sanctions, export controls and foreign corruption. With recent legislation that provides for deferred prosecution agreements, it is possible that the circumstances under which voluntary self-reporting would be advisable will expand. The Public Prosecution Service of Canada has not entered into any such agreements to date.
52What are the practical steps you need to take to self-report to law enforcement in your country?
Both the OSC and the Canadian Competition Bureau provide guidance in respect of how to self-report under their credit for co-operation programmes.
Under the OSC programme, an organisation will, typically through counsel, contact the staff of the OSC to self-report and offer its co-operation. The staff will generally require the organisation to disclose particulars of the conduct at issue, including by forwarding documentation, providing fact witnesses for interviews and responding to the staff’s questions. An organisation’s co-operation under the programme can result in the staff agreeing to take no enforcement action against the organisation, a settlement agreement in which the organisation makes no admissions of liability or a reduction in sanctions.
The Canadian Competition Bureau self-reporting regime comprises two programmes: the Immunity Programme and the Leniency Programme. Under the Immunity Programme, organisations that are the first party to self-report a competition offence may be eligible under the programme for complete immunity from prosecution. To benefit from the Immunity Programme, an organisation must provide complete, timely and ongoing co-operation to the Bureau at its own expense. Under the Leniency Programme, organisations that are not the first party to self-report a competition offence may be eligible for leniency in sentencing as long as they have terminated their participation in the activity at issue, agreed to plead guilty to the offence at issue, and agreed to co-operate fully and in a timely manner with the Bureau.
Responding to the authorities
53In practice, how does a company in your country respond to a notice or subpoena from a law enforcement authority? Is it possible to enter into dialogue with the authorities to address their concerns before or even after charges are brought? How?
The company is likely to approach the authority conducting the investigation to understand the allegations. Discussions may be entered into to assess whether there is information the company can provide that will enable it to avoid a prosecution, either because the information refutes the allegations or establishes that a prosecution is not in the public interest (i.e., because the company has undertaken an internal investigation and subsequent remedial action).
54Are ongoing authority investigations subject to challenge before the courts?
In theory, investigations can be challenged through an application for judicial review of administrative action. Such an application is likely to be successful only if the law enforcement agency undertaking the investigation clearly lacks the lawful authority for doing so.
In a recent high-profile example, engineering company SNC-Lavalin Group challenged by way of judicial review the decision of prosecutors not to offer it a deferred prosecution agreement (also known as a remediation agreement) for charges of bribery of foreign government officials. SNC-Lavalin sought to have the court compel prosecutors to negotiate a remediation agreement with the organisation in good faith. In a March 2019 decision, the court refused the application, concluding that the decision not to offer a remediation agreement falls within the ambit of prosecutorial discretion and so is not reviewable.
55In the event that authorities in your country and one or more other countries issue separate notices or subpoenas regarding the same facts or allegations, how should the company approach this?
As a first step, local counsel should be retained in both jurisdictions and counsel in each jurisdiction should serve as the contact point for the local authorities. Counsel may then wish to make enquiries directed at determining whether the action is coordinated, taking care not to reveal that they are the subject of the investigation in the other jurisdiction if prohibited from doing so under local law. If it is confirmed that the action is coordinated, it would be prudent to consider whether a consistent disclosure package can be negotiated. If prohibited from revealing the existence of the investigation, it is likely that this can only be done through the agency in the locality that prohibits revealing the existence of the investigation. Generally, in Canada, there is some scope for negotiation around what is to be produced, even if there is a court order compelling production.
56If a notice or subpoena from the authorities in your country seeks production of material relating to a particular matter that crosses borders, must the company search for, and produce material, in other countries to satisfy the request? What are the difficulties in that regard?
Yes. A production order would apply to information in the company’s control anywhere in the world.
57Does law enforcement in your country routinely share information or investigative materials with law enforcement in other countries? What framework is in place in your country for co-operation with foreign authorities?
Canadian law enforcement agencies can share information with foreign agencies pursuant to various arrangements, both formal and informal. For example, information can be provided to a foreign agency through a formal mutual legal assistance request managed by the International Assistance Group of the federal Department of Justice. Certain agencies also have formal arrangements with their foreign counterparts that provide for information-sharing and assistance (e.g., the Competition Bureau has co-operation agreements with the US Department of Justice and Federal Trade Commission, the European Commission and other foreign competition authorities). The provincial securities commissions have memoranda of understanding with the US Securities and Exchange Commission that authorise information-sharing in specific circumstances. Other agencies (including the RCMP) have close relationships with foreign enforcement agencies and can contact their counterparts for assistance and information that is not confidential or otherwise restricted by the relevant foreign government.
58Do law enforcement authorities in your country have any confidentiality obligations in relation to information received during an investigation or onward disclosure and use of that information by third parties?
Yes. Disclosure will be restricted to parties facing a criminal or regulatory prosecution arising out of the investigation. Disclosure to third parties, such as in a class action, will generally only be made pursuant to a court order.
59How would you advise a company that has received a request from a law enforcement authority in your country seeking documents from another country, where production would violate the laws of that other country?
Canadian enforcement agencies are familiar with foreign data protection laws that restrict disclosure of information. While referencing those laws is important in the discussion of production expectations and timing, it is often useful to obtain a foreign legal opinion to determine whether the foreign law prohibits the disclosure of the precise information that is being requested by Canadian authorities.
60Does your country have secrecy or blocking statutes? What related issues arise from compliance with a notice or subpoena?
Canada does not presently have a traditional blocking statute that prohibits disclosure to foreign authorities or persons except as permitted by treaty.
61What are the risks in voluntary production versus compelled production of material to authorities in your country? Is this material discoverable by third parties? Is there any confidentiality attached to productions to law enforcement in your country?
Confidentiality will attach to information that is compelled and information that is produced voluntarily. When information is produced voluntarily, a company is generally precluded from challenging the admissibility of that information as evidence in a subsequent prosecution against it at the instance of the regulator. Disclosure to third parties, such as in a class action, will generally only be made pursuant to a court order.
Prosecution and penalties
62What types of penalties may companies or their directors, officers or employees face for misconduct in your country?
Companies face fines, probation, disgorgement and debarment. Directors, officers and employees face fines, probation, disgorgement and imprisonment.
63Where there is a risk of a corporate’s suspension, debarment or other restrictions on continuing business in your country, what options or restrictions apply to a corporate wanting to settle in another country?
The federal government maintains an integrity regime that provides for suspension and debarment of suppliers of goods and services to the government of Canada if they have been charged with or convicted of designated offences in Canada or in a foreign jurisdiction. Designated offences include fraud, corruption, price-fixing and bid rigging and other economic crimes. The integrity regime provides for mandatory debarment for 10 years if a company has been convicted of a designated offence. The debarment can be reduced by up to five years if the company enters into an administrative agreement with Public Services and Procurement Canada (PSPC). Suspension and debarment are discretionary if an affiliate of the company is charged or convicted in a foreign jurisdiction, and depend on a determination by the PSPC as to whether the Canadian company had any role, or participated, in the foreign offence. Companies can, in certain circumstances, avoid suspension pending trial by entering into an administrative agreement with the PSPC to implement or maintain agreed compliance measures.
Quebec and New Brunswick are the only provinces to maintain a similar suspension and debarment regime. The Quebec regime is administered by the provincial securities regulator and applies to both private and publicly traded companies. The New Brunswick regime applies to prospective provincial government suppliers and predicated on convictions of enumerated offences, including economic crimes and foreign corrupt practices.
64What do the authorities in your country take into account when fixing penalties?
The fundamental principle of sentencing is that the sentence or penalty should be proportionate to the gravity of the offence and the degree of responsibility of the offender. There is a whole host of other aggravating and mitigating factors prescribed by statute and that have been recognised at common law. Among the most commonly considered are whether the company or individual entered into an early resolution, whether they co-operated with the authorities in the investigation, and whether they voluntarily repaid ill-gotten gains or otherwise voluntarily undertook remedial action.
Resolution and settlements short of trial
65Are non-prosecution agreements or deferred prosecution agreements available in your jurisdiction for corporations?
Canada has introduced deferred prosecution agreements (referred to as remediation agreements) as a result of amendments to the Criminal Code that came into force on 19 September 2018. A remediation agreement is defined as ‘an agreement between an organisation accused of having committed an offence and a prosecutor, to stay any proceedings related to that offence if the organisation complies with the terms of the agreement’. Remediation agreements are subject to judicial approval and are available for specified offences, including foreign and domestic corruption, fraud, stock manipulation and insider trading. The Public Prosecution Service of Canada has not entered into a remediation agreement to date.
66Does your jurisdiction provide for reporting restrictions or anonymity for corporates that have entered into non-prosecution agreements or deferred prosecution agreements until the conclusion of criminal proceedings in relation to connected individuals to ensure fairness in those proceedings?
Under recent legislation in Canada that introduced remediation agreements, once a court approves a remediation agreement, that agreement must be published by the court unless it is satisfied that non-publication is necessary for the proper administration of justice. In determining whether to publish a remediation agreement, the legislation provides that the court must consider, among other things, the prevention of any adverse effect to any ongoing investigation or prosecution.
67Prior to any settlement with a law enforcement authority in your country, what considerations should companies be aware of?
Settlements attract deference from courts and regulatory authorities, but they are generally not bound by them. Also, when making admissions as part of a settlement, the admissions should be qualified as being for that purpose and not for any other purpose. Once a settlement is entered into, it is likely that litigation privilege will no longer apply to documents prepared for the purpose of the regulatory proceeding.
68To what extent do law enforcement authorities in your country use external corporate compliance monitors as an enforcement tool?
The use of external corporate compliance monitors has historically been limited to non-criminal regulatory matters. Provincial securities regulators and self-regulatory organisations will sometimes require that a company engage an independent monitor to assist with remediating compliance deficiencies identified as part of a regular compliance review or misconduct investigation. These regulators usually require that they approve the organisation’s selection of monitor and set the monitor’s mandate. The monitor will be given reasonable access to the organisation’s books and records as is necessary to fulfil its mandate and will typically be required to report its observations and recommendations to the regulator.
The 2018 legislation in Canada that introduced remediation agreements may result in an expanded use of monitors in the resolution of criminal matters. Under the new legislation, a prosecutor may require the appointment of an independent monitor for the organisation as a condition of a remediation agreement. The independent monitor is charged with verifying and reporting to the prosecutor on the organisation’s compliance with remedial measures during the term of the remediation agreement. Prosecutors must approve the organisation’s selection of monitor and the organisation is obliged to co-operate with the monitor and pay its costs. Since the Public Prosecution Service of Canada has not yet entered into a remediation agreement under the new regime, no monitors have been imposed to date.
69Are parallel private actions allowed? May private plaintiffs gain access to the authorities’ files?
Yes. In some instances, such as for certain violations of securities regulations or the Competition Act, the applicable statutes provide for a private right of action. Access to the authorities’ files is possible through a court order.
Publicity and reputational issues
70Outline the law in your country surrounding publicity of criminal cases at the investigatory stage and once a case is before a court.
Publicity at the pre-charge stage is generally very limited. Law enforcement agencies will generally not release information voluntarily unless there is a particular investigative objective to be achieved by releasing the information. However, it is possible that the media will be able to gain access to information through court records of applications for search warrants. Although these records are often sealed, an application to unseal them can be brought in high-profile cases (which is often done).
Once a charge has been laid, court proceedings are open to the public and, with few exceptions, the proceedings can be reported by the media.
71What steps do you take to manage corporate communications in your country? Is it common for companies to use a public relations firm to manage a corporate crisis in your country?
Yes. However, corporate communications should be vetted by the company’s lawyers as they are admissible against the company in court proceedings.
72How is publicity managed when there are ongoing related proceedings?
A corporate communications firm may be engaged, but if the company is a party to the proceedings, or could be a party to future proceedings, its communications should be vetted by the company’s lawyer to ensure that they do not compromise the company’s position in those proceedings.
Duty to the market
73Is disclosure to the market in circumstances where a settlement has been agreed but not yet made public mandatory?
A public company will be required to disclose an investigation or a settlement where it constitutes a ‘material fact’ or a ‘material change’ under applicable securities laws.
74Do you expect to see any key regulatory or legislative changes emerge in the next year or so designed to address corporate misconduct?
Canada’s federal government held parallel public consultations in 2017 and 2018 on expanding measures to address corporate misconduct and updating its policies on debarment from public procurement. The consultations resulted in the introduction of remediation agreements (deferred prosecution agreements) in the Criminal Code in September 2018. The consultations also led to the publication in November 2018 of draft amendments to the federal Integrity Regime, which governs eligibility, suspension and disqualification for federal procurement. The amendments propose, among other things, to eliminate mandatory debarment upon conviction of a predicate offence and to leave the period of debarment to the discretion of the Integrity Regime Registrar. The government has indicated that it intends to adopt the amended policy at a future date.
Canada has been broadly criticised by the Financial Action Task Force, and other international and domestic organisations, for its lax anti-money laundering legislation and enforcement. The federal and provincial governments issued a joint statement in June 2019 committing to improving beneficial ownership transparency to combat money laundering and financial crime. The statement contemplates consultations on a public beneficial ownership registry. A timeline for the consultations has not yet been announced.
1 Graeme Hamilton and Milos Barutciski are partners at Borden Ladner Gervais LLP. The authors would like to thank their associates, Alannah Fotheringham, Omar Madhany and Julia Webster, for their assistance with this chapter.