Review of the integrity and revocation of the AMP authorization: Key factors to consider

The Autorité des marchés publics (AMP) is the government body responsible for overseeing the granting of public contracts in Quebec. The AMP also administers the Register of firms authorized to contract and the Register of entreprises ineligible for public contracts (RENA).

On June 2, 2022, the Act mainly to promote Québec-sourced and responsible procurement by public bodies, to reinforce the integrity regime of enterprises and to increase the powers of the Autorité des marchés publics (Bill 12) came into force and the Act respecting contracting by public bodies (LCOP) underwent significant changes.¹ In particular, these changes were intended to increase the AMP's powers of oversight in the area of integrity, and to introduce a system for rehabilitating enterprises that have, in the AMP's view, committed certain integrity breaches.

The consequences of revoking the authorization to contract and subcontract with a public body (Authorization) can be significant. An enterprise registered in the RENA may not bid on tenders or enter into a public contract or sub-contract for five years.²

As of June 2, 2022, enterprises that fail to meet the AMP's high standards of integrity following a review process can now, on a case-by-case basis, avoid a listing on the RENA by adopting specific corrective measures.

Following a review of recent case law on this topic, in this publication we will address some key elements for enterprises to consider when receiving a notice of examination of their integrity (Notice of Examination) or facing revocation of their Authorization, in order to take appropriate action.

Procedural fairness in the Notice of Examination of Integrity

The AMP can now audit the integrity of any enterprise in a contractual relationship with a public body, regardless of whether it holds an Authorization, including those party to a public contract or sub-contract, involving an expenditure below the public tender threshold determined by the government under section 21.17 of the LCOP.

Enterprises subject to the AMP's integrity audit powers may have corrective measures imposed on them.³ In such a case, the third paragraph of section 21.48.2 of the LCOP stipulates that the AMP must indicate to the enterprise covered by the Notice of Examination any information likely to demonstrate a breach by the latter of integrity requirements.

The court recently analyzed the criteria concerning the content of the Notice of Examination in Neptune Security Services inc. v. Autorité des marchés publics⁴ (Neptune).

In this decision, the court recognizes that the third paragraph of section 21.48.2 of the LCOP creates legitimate expectations of the enterprise with regard to the Notice of Examination's contents. Thus, the AMP must disclose any information likely to demonstrate a breach by the enterprise of the integrity requirements, and not only that which demonstrates a breach or that the AMP retains in its analysis. This criterion must be interpreted broadly, to ensure the enterprise is aware of all the facts of which it is accused.⁵

The Superior Court recognized in Neptune that the AMP had committed a breach of procedural fairness by not communicating to Neptune all the information it held when the Notice of Examination was issued.⁶

It should, however, be noted that the AMP is not under any obligation to inform the enterprise of how its audits and its examination are progressing.⁷

The AMP may impose corrective measures before revoking the Authorization

Sections 21.36, 21.48.4 and 21.48.6 of the LCOP now enable the AMP to promote the rehabilitation of enterprises whose integrity may have been compromised. Once the examination was completed and when the AMP concludes, in a notice of revocation, that an enterprise does not meet the high standards of integrity⁸, it can give the enterprise the opportunity to comply and rectify its failure to comply by imposing the necessary corrective measures.

The AMP has the discretionary power to determine whether an enterprise can benefit from corrective measures, when it believes these measures will resolve the problems identified and raise the enterprise's integrity. If the AMP’s audits reveal that the breaches observed stem from a systemic integrity problem within the enterprise, or that the integrity of several of its officers, directors or shareholders is challenged, the AMP may revoke the Authorization without proposing corrective measures. Each case will, however, be dealt with on its own merits.⁹

In Neptune, the Superior Court reviewed the scope of these new provisions of sections 21.36, 21.48.4 and 21.48.6 of the LCOP. At the end of its analysis, the court confirmed that section 21.48.4 of the LCOP grants the AMP a discretionary power to propose or not propose corrective measures. In certain situations, the AMP may consider that no corrective measures would be likely [translation] “to enable the enterprise to meet the integrity requirements.”¹⁰  

It should be pointed out that if the AMP considers that corrective measures would enable an enterprise to remedy its failures to comply, it is then up to the AMP to describe them. In other words, although the enterprise may comment on the matter, it is up to the AMP to determine which corrective measures should be implemented.¹¹

Filing an application for judicial review

The AMP's decision to revoke an Authorization following an integrity review is final and not subject to appeal.¹²  

The only way to challenge it is to file an application for judicial review with the Superior Court within a reasonable period. Thirty days is generally recognized as a reasonable timeframe.¹³ The Superior Court will then be able to assess (i) whether the AMP failed in its duty to act fairly in the process leading to the decision and (ii) whether the AMP's decision is correct or reasonable, as the case may be.

We note that the courts recognize the AMP's expertise in integrity and act with deference to its conclusions.¹⁴ The role of the court hearing an appeal for judicial review challenging the reasonableness of an AMP decision is therefore not to decide whether the AMP made the right decision, but rather to determine whether that decision has the characteristics of a reasonable decision, which means the applicant enterprise must demonstrate the unreasonableness of such a decision.

In Entreprises JRMorin inc. v. Autorité des marchés publics,¹⁵ handed down before Bill 12 came into force, the enterprise that was the subject of an integrity review by the AMP was involved in a dispute with the Commission de la construction du Québec (CCQ). However, for the purposes of its analysis, the AMP had confined itself to the CCQ's position, without assessing its merits or considering the enterprise's ground for dispute.

Although this dispute with the CCQ had been settled out of court, the court found that AMP had relied solely on the CCQ's arguments and on the advice received from the Associate Commissioner for Audits of the Permanent Anti-Corruption Unit. In particular, the court criticized the AMP for failing to consider or even mention in its examination the enterprise's ground for dispute in its litigation against the CCQ.¹⁶ 

Since the new provisions of the LCOP came into force, Neptune is the only judgment by the Superior Court on the merits, or on the legality, of an AMP decision. On September 3, 2024, the Court of Appeal dismissed the motion for leave to appeal from this judgment. The court ruled that Neptune had not demonstrated that the challenge to the reasonableness of the AMP's decision qualified as a [translation] “question of principle, […] new question, […] question of law that is the subject of conflicting case law, […] question of general scope or […] situation requiring the correction of an intolerable injustice,” namely, the cases giving rise to a hearing on the merits on appeal.¹⁷

The courts will have an opportunity to revisit the AMP's decisions in light of the new rehabilitation regime, as some of them are already being challenged before the courts.¹⁸

Application for a stay of execution of the decision rendered by the AMP

The application for judicial review does not automatically stay the AMP's decision.¹⁹ Enterprises wishing to avoid the consequences of revocation of their Authorization on current contracts should apply to the Superior Court for a stay of execution, an exceptional measure rarely granted.

Enterprises wishing to obtain a stay must demonstrate the following three elements²⁰:

• the appearance of right, i.e. a serious issue to be debated or the apparent weakness of the AMP's decision;
• the existence of serious or irreparable harm if the stay is not granted; and
• the balance of convenience favours the enterprise over public interest in preserving integrity.

When it comes to questioning a public body's decision, the majority of case law considers that the requirement of the appearance of right must be analyzed more rigorously, since this decision has a presumption of validity.²¹

In Neptune, the stay was granted because the scope of section 21.48.4 of the LCOP had not yet been the subject of judicial debate. The court considered the issue serious and deserved to be examined in greater depth.

However, on September 20, 2024, in Déneigement Na-Sa²², the court dismissed the motion for a stay, which was based on the same ground, in light of the Court of Appeal's recent comments on the interpretation of section 21.48.4 of the LCOP, and held that the test relating to the appearance of right had not been met.

Last September, the challenge to the constitutionality of paragraph 6 of section 21.28, and of section 21.48.9 of the LCOP was also not accepted by the Superior Court as grounds for granting a stay.²³

The principle of absence of additional evidence

An application for judicial review of an AMP decision is not an opportunity for an enterprise to rely on facts or documentation that were available but not submitted to the AMP at the time of the examination of integrity.²⁴

In other words, the evidence pleaded by an enterprise before the Superior Court must be the same as that brought to the AMP's attention at the time of its examination.

We would like to emphasize here the importance for the enterprise having its integrity examined by the AMP to provide all the documentation and justifications it deems necessary to convince the AMP of its compliance with the standards of integrity. Otherwise, this documentation cannot be used later, except in exceptional circumstances.

Additional evidence may exceptionally be authorized by the court if it is intended to achieve one of the following three objectives:

• demonstrate that general information is likely to help the court understand the issues in dispute;
• demonstrate procedural flaws that cannot be detected in the AMP file and that would allow the court to assess the legality of the AMP decision; or
• demonstrate the total lack of evidence available to the AMP to conclude that the decision was unfavourable to the enterprise.²⁵

Admission of additional evidence is rarely granted. In Excavation National inc.²⁶ , the court refused to allow the production of affidavits and examination of AMP representatives. The court considered that it was in a position to rule on whether or not to set aside AMP's decision without receiving this additional evidence. All the facts enabling the court to analyze the legality of AMP's decision were contained in the documentation in the file.²⁷

We note that this issue was also addressed in Neptune. However, the facts of that case illustrate a rather peculiar situation that led the court to authorize Neptune's trustee in bankruptcy to produce additional evidence discovered after the hearing on the application for judicial review. Neptune and the trustee did not have this evidence at their disposal at the time of the AMP's examination, which was in the latter's possession prior to the Notice of Examination being provided. The court considered that this evidence enabled it to assess the legality of the decision rendered by the AMP.²⁸

The public nature of information provided to the AMP as part of an application for judicial review

An enterprise that challenges the AMP's decision in court should expect the information it has provided to the AMP in the context of its examination of integrity to become public. This is an application of the principle of open proceedings.²⁹

To be exempt, the enterprise must demonstrate that a sealing order for certain information is necessary to rule out the presence of a serious risk to an important public interest. The three-prong test is defined by the Supreme Court in Sherman (Estate) v. Donovan.³⁰ The Superior Court analyzed this issue in Neptune.³¹ Neptune argued that publicly disclosing its financial and commercial information, the number of its contracts in progress, the terms and conditions of its contracts and its agreements with other enterprises could harm its commercial interests and cause it to lose business opportunities. The court considered that this information was considered in the private domain and concerned only the enterprise itself, and that its disclosure therefore did not pose a serious risk to the public interest in confidentiality.

The mere fact that disclosure of the information “may cause loss of business opportunities or harm to commercial interests” of the enterprise will not be considered sufficient.³²

Conclusion

In light of the foregoing, it is crucial for enterprises operating in the sphere of public contracts to take thoughtful action as soon as they receive a Notice of Examination, or following receipt of a notice of revocation, as the case may be, and to properly document their files. The actions taken on these occasions will be decisive for the remainder of the process and for the decision to be rendered by the AMP. Enterprises would do well to establish a specific internal procedure regarding their communications with the AMP, and to consult with legal counsel in order to protect their rights. We also encourage enterprises to adopt up-to-date current internal control measures in the area of contract management, in order to avoid, upstream, risks of infringement of the principles of integrity.

The authors would like to thank Camille Charlebois, articling student, for her contribution to preparing this publication.