Contracting with public bodies in Quebec

How to overcome obstacles in the authorization process.

Contracting with public bodies in Quebec

Following the discovery of certain corrupt practices in Quebec’s construction industry, the province’s government introduced the Integrity in Public Contracts Act in 2012. Under the act, an enterprise must now obtain authorization from Quebec’s Autorité des marchés financiers before competing in a public call for tenders or in an award process for contracts over a certain monetary threshold entered into with the government, its agencies or Quebec municipalities. The AMF is the body mandated by the government to regulate Quebec’s financial markets and assist consumers of financial products and services. It will issue an authorization if the enterprise meets prescribed standards of integrity regarding the conduct of its business. The AMF’s authorization is valid for three years, whereupon it must be renewed.

The act will be phased in over several years. Currently, the following monetary thresholds for authorization apply at the provincial level: $5 million for construction contracts and subcontracts or public-private partnership agreements; and $1 million for service contracts and subcontracts entered into pursuant to a call for tenders.

The City of Montreal has also set the following thresholds: $100,000 for contracts or service contracts for the construction, reconstruction, demolition, repair or renovation of roads, waterworks or sewers; $100,000 for contracts for the supply of bituminous compounds; and $25,000 for subcontracts directly or indirectly related to the foregoing contracts.

In the case of Quebec enterprises, the application must be filed online through the AMF. Foreign enterprises must submit their application in paper form.

The enterprise must appoint a respondent to complete the application process on behalf of the enterprise and send the required documentation, with whom the AMF will communicate. The respondent must be a director or officer of the enterprise.

In its application, the enterprise must state whether it has been prosecuted for or convicted of certain offences. A foreign enterprise must provide a good conduct certificate regarding its criminal and penal court record. The enterprise must also provide audited financial statements for its latest fiscal year, as well as an attestation that it has filed the returns and reports required under applicable fiscal laws.

On the organizational side, the enterprise must disclose any relevant governance measures it has implemented. It must also provide a chart indicating the enterprise’s structure, shareholders, subsidiaries and parent companies, including the relationships between the different entities and their percentages of voting shares.

Once the AMF receives the application documents, it will require the applicant to disclose the business relationships it has with natural persons and other entities. This is the final step of the process, following which the AMF will solicit the opinion of the associate commissioner for audits and decide whether or not to issue an authorization.

This process seeks to ensure the enterprise, its directors and any related entities have not been convicted of certain offences and meet the standards of integrity the public is entitled to expect from a party to a public contract or subcontract.

The AMF’s decisions are final and without appeal, although they may be contested through an application for judicial review by the Superior Court of Quebec. Before officially refusing to issue an authorization, however, the AMF will communicate with the enterprise and indicate the reasons for the refusal in a prior notice. The enterprise then has 10 days to submit additional documentation or written observations. It is possible for the enterprise to obtain an extension in certain circumstances. In some cases, the AMF will require corrective measures. If the enterprise complies, the AMF will issue the authorization.

Our firm recently advised an international client that  the AMF had initially refused to issue an authorization to, as certain members of the corporate group had committed offences in foreign countries. The client, however, had not committed any offence. We worked extensively with the client and the AMF, providing it with a comprehensive independent expert’s report on, inter alia, our client’s governance, ethics and anti-corruption practices. We also provided an affidavit by the client’s Canadian chief executive on various relevant matters. The AMF issued an authorization to our client after a thorough review of our submissions and the client can now participate in public calls for tenders in Quebec.

Gerry Apostolatos and Caroline Dunberry are lawyers with Langlois lawyers in Montreal.


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