Gary Nash is a former Assistant Deputy Minister at Natural Resources Canada and former CEO of the International Council on Metals and the Environment. His remarks were made recently to a Parliamentary committee during hearings on Bill C-300. He may be reached at 613-748-0142 or GNash@rogers.com.
The purpose of Bill C-300 is “to ensure that companies engaged in mining, oil or gas activities and receiving support from the government of Canada act in a manner consistent with international environmental best practices and with Canada’s commitments to international human rights standards.”
Provisions in the bill allow any person anywhere to register a complaint with the Ministers of Foreign Affairs and International Trade against a Canadian company that may not have adhered to various international human rights and environmental norms, principles, conventions or standards in a developing country.
Ministers, in turn, will then consider and possibly examine the complaint to decide within eight months whether the complaint is valid or if the complaint is frivolous. In either case, ministers will publish the results of their decisions in the Canada Gazette (not exactly a widely publically read document in Canada or abroad).
The sanctions to be applied against a guilty company are the withdrawal of any support for the project in question given by Export Development Canada (EDC) as well as a withdrawal or avoidance of any investment by the Canada Pension Plan (CPP) in the shares of the company.
While few would dispute that the intent of the bill is laudable, its enactment will create very serious issues for federal governments in Canada and indeed will diminish the contribution to Canada from overseas investment by our mining industry.
The bill is to apply to the activities of the exploration industry of which Canada can be said to be the world centre. However, given the high risk nature and generally small size of these companies, they do not draw on Export Development Canada (EDC) funds nor receive investments from the CPP. Consequently, the sanctions in the bill are meaningless in regard to the activities of the exploration industry. On the other hand, Canadian mining companies, which are estimated to have less than 200 mining projects in developing countries today, could be subject to the sanctions.
But to what mining projects will the provisions of the bill apply? Does it apply to projects of foreign-owned companies investing through a Canadian subsidiary? To those of foreign-owned companies simply listed on the Toronto stock exchange who invest abroad? To joint ventures where Canadian mining companies have greater, equal or minority interests? Will the other joint venture partners be investigated in any examination?
Being a private member’s bill, financial resources are not made available with its passage. In fact, there is no guarantee that any or sufficient funds will be forthcoming from the responsible department or the government. Inadequate funds for implementation with the passage of the bill can only be an embarrassment to Canada.
A notable fault in Bill C-300 is lack of procedural fairness. Unlike an independent regulatory agency, ministerial decisions provide the opportunity for politically-biased decisions which can be said to contravene a court’s definition of procedural fairness. Provisions to reduce potential bias and allow transparency are absent, for example, should the bill have allowed the involved parties to comment on the information and analysis received by the minister during the examination and prior to a decision? Also absent is a provision to allow appeals of a decision.
The bill has not considered that in some countries a complainant to the Canadian minister might be at risk not only from negatively affected local interests but possibly from the person’s own government. What if a government favoured the mining operation or if the government was complicit in ignoring the infraction or rejects the right of any foreign government to interfere in its domestic matters? What are the implications for the Canadian government should the complainant be seriously threatened, harmed or killed?
And what about instances where corruption or blackmail is prevalent in a developing country? Threatening to complain might be used to gain additional funding or a bribe from the company. How will the minister react if the real basis of the complaint is discovered or a competing interest is identified that encouraged the complainant? Should the company be allowed to correct the problem without sanctions?
In the case of corruption in a developing country, complaints might be used by the government in the concerned country to withdraw a mining license from the Canadian mining company. Should this occur, especially if the minister gave credence to the complaint, then what are the consequences for the Canadian government and for Canadian supplier companies?
Will the minister seek and obtain the agreement of the foreign government before undertaking a examination? If that government opposes the review by the minister, will the minister then dismiss the complaint? If not, what will it mean in terms of relations with that government?
Suppose that a mining company obtains a court decision in a developing country which finds it innocent of an environmental infraction. Then suppose certain persons or interests in that country or in Canada are not satisfied with the court’s decision and subsequently submit a complaint to the minister. Would that complaint be accepted for review or automatically rejected?
What will be the position of the minister if the infraction was caused by a contractor to the company? Could the minister’s decision lead to sanctions against the contractor or to the company as well? Mining companies engage a number of engineering and other firms in the construction of their operations – many, but not all, are from Canada.
If the Canadian government decides in favour of the Canadian company, will it have created political opposition or negative feelings towards Canada and other Canadian interests in that country? If it favours the local or other interests, in spite of the company’s agreement to correct the problem, then the government has helped injure the reputation of the company and its potential access to other opportunities that could have provided additional trade and other benefits for other local communities as well as Canada.
Since companies prefer certainty with regard to funding and insurance, the potential sanctions of this bill will clearly encourage these companies to seek such support from other than at EDC causing some embarrassment to the government. Using EDC provides some pressure on the mining company to use Canadian suppliers of services and goods. Indeed, it has been estimated that for every dollar a Canadian mining company invests abroad, Canada receives a minimum of two dollars and often much higher depending upon the country in which the company invests.
It is not clear if there will be criteria for determining what is a significant infraction? Would one infraction require EDC to withdraw support for the company forever? Is correcting or the intent to correct the problem sufficient to maintain funding, insurance and government support? That the punishment should fit the crime is an important principle that needs consideration.
Bill C-300 provides for complaints of a social-human rights nature, which need to be well defined for decision-making purposes, e.g. alcoholism, family breakup, crime, working conditions, hiring practices, etc. To correctly assess the impact on social changes in a community, a baseline study is usually required to know whether there was an increase in social problems that can be related to the mine. Also, if there is more than one industry in the area, how will the minister distinguish who is at fault or who has the larger fault?
Overall, what will be the measurable standards based on human rights principles or guidelines? There has been work for the past four years and still ongoing at the United Nations on the same issue. The 12 months in the bill provided for the minister to establish corporate accountability standards pertaining to human rights guidelines is likely unrealistic.
A case by case review can be costly and lengthy. It could very well require in-depth, technical on-site expertise and the likely agreement of the host government especially if there are significant number of complaints, which is very likely with the passage of this bill. If the minister cannot meet the eight month or even an extended legal deadline, then what will be the consequences, in addition to a possible restriction of new mining investment with less supplier opportunities and benefits for Canada? Will there be need for a formal investigation to determine if the complaint is frivolous, especially if the criteria are not specific enough to avoid the need?
If Parliament approves the bill that provides for extraterritorial application of Canadian law, what are the consequences if it conflicts with provisions with developing country law or regulations, e.g. treatment of tailings, levels of discharge, and if the domestic law was legitimately not intended to accord with international human rights, social or environmental standards or guidelines?
How will the government react if other governments also decide on a similar bill allowing examinations of complaints against its mining companies. A number of foreign mining companies operate in Canada, from South Africa, China, India, Russia, etc.. Would the government of Canada welcome the involvement of the United Kingdom or China in such a review of complaints against their companies? What will be the international consequences if countries having adopted similar legislation, all apply their legislation extraterritorially?
Withdraw Bill C-300
Finally, the report of the Foreign Affairs Advisory Committee to the roundtables established a few years ago is, in part, the inspiration of this bill. However, the committee acknowledged that there were a number of issues that still needed clarification and a proper analysis. Consistent with the concerns by the committee, consideration should be given for the establishment of an expert group to evaluate the outstanding issues, including the complications for the government raised above. As well, it could also consider the necessary measurable standards, procedural guidelines and decision making roles to improve corporate performance that helps maintain a positive image of Canada and its mining industry abroad.
Simply stated, taking into account all the above uncertainties, the bill should be withdrawn and an all-party recommendation be initiated for an alternative way forward at this time.