Quebec's Integrity in Public Contracts Act

March 12, 2013
Bill 1 or The Integrity in Public Contracts Act (the "Integrity Act") was adopted by the Quebec Government on December 7, 2012. The law amends several other statutes, including the Act respecting contracting by public bodies.

Under the Integrity Act, every enterprise (including a foreign enterprise) that wishes to enter into a contract or subcontract involving an expenditure of public funds with a public body (departments of the Quebec Government, municipalities, school commissions, universities, hospitals, public transit corporations, Hydro-Québec, the Caisse de dépôt et placement, etc.) must obtain the prior authorization of Quebec's Autorité des marchés financiers (the "AMF"). The authorization must be obtained by following a demanding disclosure process that can take two to three months.

Certain provisions of the Integrity Act are intended to guide the AMF in its decision-making process, in particular:

  • The AMF must refuse or revoke any authorization if, in the preceding five years, an enterprise, or its majority shareholder or one of its directors or officers has been found guilty of an offence listed in Schedule I of the Integrity Act. In particular, among the listed offences are certain offences under: (i) the Criminal Code; (ii) the Competition Act; (iii) the Income Tax Act; (iv) the Securities Act; and (v) electoral laws.
  • The AMF must also refuse or revoke any authorization if, in the preceding five years, the enterprise has been the object of a guilty finding by a foreign court for an offence which, if it had been committed in Canada, could have resulted in a prosecution for an offence listed in Schedule I.
  • The AMF may also refuse to grant an authorization or revoke an authorization if it considers that the enterprise fails to meet the high standards of integrity that the public is entitled to expect from a party to a public contract or subcontract. In order to reach such a conclusion, the AMF may examine the integrity of the enterprise, its directors, partners, officers and shareholders and any other persons or entities that directly or indirectly have legal or de facto control of the enterprise.
  • The Integrity Act provides a non-exhaustive list of factors that the AMF may take into account in exercising its discretion, including:
    • whether the enterprise or any of the persons mentioned above has links with a criminal organization;
    • whether the enterprise or any of the persons mentioned above has been prosecuted for an offence contemplated in Schedule I;
    • whether a relevant officer or director was an officer or director of another enterprise when that other enterprise committed an offence contemplated in Schedule I;
    • whether the enterprise is under the control of another enterprise which has been found guilty of an offence contemplated in Schedule I;
    • whether the enterprise or any of the persons mentioned above has been found guilty of any other offence of a criminal or penal nature;
    • whether the enterprise has attempted repeatedly to evade compliance with the Integrity Act;
    • whether a reasonable person would conclude that the enterprise is an extension of another enterprise which would be unable to obtain an authorization;
    • whether the enterprise's activities are incommensurate with its legal sources of financing;
    • whether the structure of the enterprise enables it to evade the application of the Integrity Act.

The AMF's authorization is not required (i) in certain exceptional circumstances, (ii) if urgent action is necessary, or (iii) if the enterprise does not have an establishment in Quebec and the contract is to be performed outside Quebec.

The Government has indicated that implementation of the Integrity Act will be on a progressive basis such that the requirement for authorization will initially apply to any enterprise entering into any construction contract, service contract or public-private partnership contract, or any related subcontract, with a public body, which involves the expenditure of $40 million or more and for which the award process was already underway on January 15, 2013, or commences after that date, as well as certain specific contracts with the City of Montréal even if the latter involve the expenditure of less than $40 million. The Chair of the Conseil du trésor has announced that the Integrity Act will eventually apply to all relevant contracts or subcontracts for which expenditures of more than $1 million are anticipated. An enterprise will have to be authorized by the date on which the relevant contract is entered into or the date on which its contract tender is filed, or, if applicable, by the date specified in the call for tenders. An authorization is granted for a three-year period and must be maintained in good standing for the entire duration of the contract. The AMF can revoke an authorization, even during the course of the contract, if it considers that the enterprise no longer meets the eligibility criteria. In the event an enterprise ceases to hold an authorization during the course of a contract's performance, the enterprise will be deemed to have defaulted in the performance of the contract 60 days after the authorization has expired or has been revoked.

An enterprise must submit an application for authorization to the AMF in prescribed form. The AMF has published a guide for enterprises, and the form and its schedules are available on the AMF's website: http://www.lautorite.qc.ca/en/guide-forms-pc.html.

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