Bill C-300 (Historical)

Corporate Accountability of Mining, Oil and Gas Corporations in Developing Countries Act

An Act respecting Corporate Accountability for the Activities of Mining, Oil or Gas in Developing Countries

The purpose of this enactment is to promote environmental best practices and to ensure the protection and promotion of international human rights standards in respect of the mining, oil or gas activities of Canadian corporations in developing countries. It also gives the Minister of Foreign Affairs and Minister of International Trade the responsibility to issue guidelines that articulate corporate accountability standards for mining, oil or gas activities and it requires the Ministers to submit an annual report to both Houses of Parliament on the provisions and operation of this Act.

[Glen Pearson, Liberal, London North Centre, ON]

Thank you, Chair.

Ms. Simons, the committee knows about my own past history and involvement in Sudan. This conversation about Talisman always drives me a little bit crazy. I've been there a lot. It's no worse under the Chinese than it was under Talisman. I think that's a specious argument.

Without Bill C-300, what Talisman went through was gruelling. It went through a 7% share drop. It divided the country as a result of its own lack of expertise in knowing what to do in the country. It didn't heed the government's advice when the government of the day gave it advice not to do it.

My concern is not so much with what everybody is talking about here, but that within Canadian society we had teachers' federation groups delisting from Talisman. We had all sorts of other NGOs and we had companies speaking out against Talisman. It actually created a rift within Canadian society, and I am concerned about that.

We had no place to go to in the end to actually find out what was going on, to find out who was actually obeying the standard and who wasn't. I wonder, since you were part of the Harker report--and I'm aware of its work--if you could speak to that comment about its effects on Canada.

[John Rafferty, NDP, Thunder Bay—Rainy River, ON]

Mr. Nash, let me stay with you for a question.

If Bill C-300 is a bad bill, but some kind of CSR strategy is important, as you indicated in your remarks, how should we pursue a CSR strategy without this bill?

[James Lunney, Conservative, Nanaimo—Alberni, BC]

Thank you, Mr. McKay--on your own time.

There has been speculation that if the measures that have been discussed a little bit already come in, the measures in Bill C-300, which really start with a punitive approach, it might take a while, given the time and the legal uncertainties, for anybody to sort out exactly what's happened in the extraterritorial setting.

First of all, let me just ask simply, is the possibility that companies might reconsider relocating headquarters something that you might see on the horizon?

[Laureen Whyte]

One of the most important things we've learned in working with first nations in B.C. in particular is that where there is a great deal of fluidity in terms of jurisdiction, decision-making, issues management, and all kinds of things--and we have been working in that area for quite some time now--what has become quite apparent to us is that only in partnership can we succeed in anything that we do in the communities.

I think there are also a couple of other considerations to take into account here.

When people say there would be some credibility attached to a Canadian company that would be regulated by the Canadian government overseas, people question that statement and whether or not the fact that the Canadian government is regulating something means it's going to provide a solution for a community that's going to address its needs. Specifically, first nations here have pointed to that in conversations about Bill C-300. I don't think we can say internationally that we've figured this out in a way that keeps communities whole and protects their human rights and their dignity.

So there are questions to be asked in that regard, but I think the other thing that's really important is that our experience, certainly with first nations, is that there are components that are done on a collaborative basis, where we learn from each other, and there are components that have a legal element to them, and they're both at play. They're effective together. We work with that.

The problem I have with Bill C-300 is that we've been working very hard on this issue for quite some time now and we're very close to seeing the results of John Ruggie's work. Our CSR counsellor is consulting with us extensively to try to build some kind of Canadian framework that makes sense for us, that does have that operational detail. I really don't think you can regulate things effectively without looking at the operational detail.

We've been doing this for only a few years. This isn't an area of practice that we have a lot of experience with in terms of managing it to a good outcome. It does take some time. That's what we spend a lot of our time on as an association: helping people to understand how they manage this stuff on the ground.

[James Lunney, Conservative, Nanaimo—Alberni, BC]

Thank you, Mr. Chair.

I thank the witnesses for appearing today. All of us around the table recognize that it's an issue on which there is a variety of opinions. We heard them at the table today.

I think it's clear that we all recognize Canada's major role in the world in this regard. Canada has played a role in the development of the guidelines that exist around the world--voluntary guidelines. We have participated in many of the processes and we've encouraged Canadian companies to be involved in all of these: the Equator Principles, OECD guidelines, and IFC guidelines. I believe that EDC was one of the first organizations worldwide to sign on to the OECD guidelines.

We've been working in this direction. We've been through an extensive consultative process here in Canada, a round table process that was collaborative and brought everybody to the table, and we've come up with a strategy. The government has already announced the strategy, out of a collaborative process, to address some of the concerns out there and to enhance our capacity in this area.

Mr. McKay himself was involved in or aware of this round table process that was collaborative and called for an independent counsellor to address these issues. One of our objections with this Bill C-300, one of our concerns here, is the politicizing of this whole agenda by putting it in the hands of a minister.

Regrettably, we would find the kinds of allegations that are not easy to sort out from afar, or to investigate quickly, given the legal uncertainties, and we would be in a position where members could use parliamentary privilege to bash away at a minister, to make unfounded allegations under the cover of parliamentary privilege, with no legal consequences, and at the expense of the Canadian economy and the well-being not only of extractive companies, but of our economy itself.

That is one of the fundamental flaws that I see in the bill. I'm very concerned about it. I think Mr. McKay and others would be wise to consider that. Regardless of which party is in power, that would create a very untenable situation for something that may not be resolved quickly, given the legal uncertainties in the bill.

Having said that, I note that some of the people at the table here have been involved in the collaborative process and have some extensive experience in developing cooperation from conflict, even in British Columbia, my home province, where we have a number of issues with communities, first nations communities in particular.

You made reference to that, Ms. Whyte.

Canada has been developing tremendous expertise in trying to sort out these things. They're not easy to solve domestically, and are certainly even harder internationally, but I wonder if you'd care to expand on the B.C. experience, your organization's experience--it's been around since 1912--your participation in the collaborative process, and some of the lessons that have been learned that might be beneficial.

[Chris Albin-Lackey]

I think the example of the Barrick mine at Porgera in Papua New Guinea is very relevant to this discussion, because it is actually an example of a situation in which there is no real regulatory framework being applied, given the failure by the government of Papua New Guinea to apply its own laws and regulations to the situation.

So what you have, essentially, is a company that says it is applying all of the standards that are incorporated in Bill C-300. Barrick is not yet a member of the voluntary principles on security and human rights, but it says that it applies them in all of its operations. It says that it has a zero tolerance policy for all of the abuses that our research and Harvard and NYU research uncovered there. They say they're doing everything they can think of to combat these abuses, but the fact is that they haven't managed to go as far as they need to go.

I think their failure to do so really does expose the limits of a purely voluntary framework. There has to be some kind of binding regulation to go along with whatever voluntary measures businesses choose to participate in. Even if those voluntary measures are very useful and ought to be encouraged, they're not an adequate replacement for government regulation in and of themselves.

[Tyler Giannini]

I think that fundamentally Bill C-300 sets up a regime that companies should actually be used to. They're used to a regime that has a collaborative approach at the beginning, as Mr. McKay pointed out. Then you'll have some sort of complaint mechanism on the back end when things go wrong.

While companies may not like those sorts of complaints mechanisms, they're actually fairly routine in legal forums, as Professor Simons has pointed out. I think the fears about this are overstated. Actually, there could be a competitive advantage if they embraced this, if they went to countries and to the places where they wanted to invest and said, “We actually embrace these standards and we are going to be good corporate citizens in your country”.

We believe that is the way to build trust with communities so that you don't have problems down the road that can be quite costly in terms of reputation and in terms of actually having to deal with the dissatisfied communities. These sorts of regimes can actually work as a comparative advantage in the long run.

I think that's where our business in human rights is headed and where the special representative, John Ruggie, is headed with all of this.

[Johanne Deschamps, Bloc, Laurentides—Labelle, QC]

I thought you had raised your hand.

Professor Giannini, in your opinion, what is it about Bill C-300 that really frightens the mining companies?

[John Dillon]

Thank you.

It seems to me there are a couple of premises to what Ms. Simons has said, which we fundamentally reject.

The first is the suggestion that when the profit motive somehow conflicts with environmental protection or human rights, companies will always choose to ignore those issues of environment and human rights and look only to profit. Whatever may have been the practice in the past, that is certainly not where Canadian companies and members of the CCCE are today. I fundamentally reject that premise.

Second is that somehow companies choose the location of their operations in order to avoid regulation. Again, that's a premise that I fundamentally reject.

I'm not sure what you've heard from other witnesses, but we're not here today to suggest that Bill C-300 will suddenly lead to all Canadian mining companies moving their head offices offshore. We are, however, concerned about Canadian companies losing out on opportunities to competitors that don't face the kinds of investigations we're talking about.

I don't know what Canadian companies may decide to do about location of investment in the future, but we're not here to suggest that all of those companies are suddenly going to move their head office. We are concerned with the potential impact on a Canadian company, in the very competitive environment our companies face today, when a rival bidder from another country has an opportunity and the government in that developing country is unsure because there's an investigation under way, which, as Mr. Nash pointed out, could take many years to conclude. That is what we're concerned about.

[Johanne Deschamps, Bloc, Laurentides—Labelle, QC]

I have some more questions for you, Ms. Simons.

We have heard testimony suggesting that companies operating in Canada might go overseas if Bill C-300 were to come into force. Is there reason for concern that there could be a mass exodus of Canadian companies leaving Canada for fear of attacks on their credibility?

[John McKay, Liberal, Scarborough—Guildwood, ON]

But no one's arguing that Bill C-300 is the first line of response. You have a CSR counsellor. You have the best practices that the government has set up. There are the PDAC folks who have set up e3 Plus. There's all kinds of educational encouragement to do the right thing.

This bill is in the event that companies ultimately don't do the right thing, and possibly we've had described here a serious failure of human rights standards. So do you still think that there should be no sanctions regime at the end of the day?

[John McKay, Liberal, Scarborough—Guildwood, ON]

But Bill C-300 is a sanctions regime--

[John McKay, Liberal, Scarborough—Guildwood, ON]

Thank you, Chair.

I thank all of you for joining the debate. I appreciate that all of you are on the same panel. Hopefully we can go back and forth with a few ideas.

I also want to thank Mr. Stewart-Patterson for in effect giving a pithy summary of the corporations' position. I thought it would be most useful if I asked those who promote Bill C-300 to respond to some of the assertions you've made in your paper.

For the first assertion, I will direct my question to Professor Giannini: the legislation is based on a flawed premise that assumes that Canadian companies are not to be trusted in their international operations. You made a rather interesting point about companies that investigate themselves. Can you expand on that point, please?

[Dr. Penelope Simons, Associate Professor, Faculty of Law, Common Law Section, University of Ottawa]

Thank you.

Thank you very much for inviting me to appear before the committee.

I'm an associate professor of international law and international human rights law at the University of Ottawa. I also teach corporate law. I specialize in the human rights impacts of extraterritorial corporate activity. I've been engaged in investigation and research in this area for over a decade.

I was a member of the Harker mission that was sent to Sudan in 1999 to independently investigate and report on the alleged link between oil development and human rights violations, particularly the allegations of forced displacement around the oil fields and oil-related development where Talisman Energy, a Canadian company, was operating.

I want to address today three key arguments against the introduction of Bill C-300 that have been raised in testimony. The first argument is that the standards imposed in Bill C-300 are too high and will affect the global competitiveness of Canadian extractive companies. The second argument is that Canadian companies are going to have to relocate to other jurisdictions because of the impact these high standards will have on competitiveness.

The third argument I want to address is one that was raised in testimony by Mr. Dade, from FOCAL. It is that if we impose such high standards on Canadian companies that they will be forced to withdraw from certain projects, Chinese companies will take their place, and, in the end, because Canadian companies do such good corporate responsibility work, the local people will be worse off under the regime of the Chinese companies.

In terms of the first two arguments, we heard these types of arguments in the 1970s when the government began to introduce environmental regulations. These are now law, and businesses continue. We heard them when issues arose requiring consultation with aboriginal people before undertaking extractive activity on their traditional territories. The requirement of consultation and accommodation is now entrenched in our constitutional law, and it is also now a requirement under the new Ontario Mining Act. The extractive industry has continued to flourish. It has continued to be very profitable despite these regulatory developments.

The first argument is that the standards are too onerous in Bill C-300 and that Canadian companies will therefore suffer a debilitating competitive disadvantage if Bill C-300 is enacted. The bill requires Canadian companies to comply with the IFC performance standards, with the voluntary principles on security and human rights, and with human rights provisions that are to be determined. These provisions are to ensure that these companies operate in a manner that is consistent with international human rights standards.

Well, Canadian extractive companies already have to comply with the performance standards. The IFC and the OECD countries' export credit agencies, including Export Development Canada, claim they already apply the performance standards to those companies seeking financial support.

All major Canadian extractive companies are funded by financial institutions that subscribe to the Equator Principles, such as the Royal Bank of Canada, Scotiabank, and Export Development Canada, and these institutions also claim to apply their performance standards to borrowers. The voluntary principles on security and human rights have been endorsed by the Canadian government and have also been adopted by major extractive companies, including Talisman Energy.

All companies that seek Export Development Canada's support will already be subject to human rights screening for the impacts of their project. EDC claims to take human rights into account in its decision on whether or not to fund a project.

In its “Taxation Issues for the Mining Industry: 2009 Update”, the Canadian Intergovernmental Working Group on the Mineral Industry stated, “Corporate social responsibility...activities are believed to be vital to ensure the competitiveness of industry”.

The other point that I'd like to make is that OPIC, one of the export credit agencies of our biggest trading partner, is now required by an amendment that was made to the Foreign Assistance Act in December 2009 to issue “a comprehensive set of environmental, transparency and internationally recognized worker rights and human rights guidelines with requirements binding on the Corporation and its investors”.

These standards are to be no less rigorous than the performance standards among others, so Bill C-300 is not such a great extension. This is happening in other places as well, and in particular in the U.S.

It's becoming a significant competitive disadvantage for Canadian companies not to comply with high environmental and human rights standards. You remember the issue of Pacific Rim in EI Salvador; El Salvador has recently banned all metal mining in the country because it is concerned about the environmental impacts of the gold industry and other industries on their water supply. Bill C-300 will help to redress this bad press. These standards are already being complied with, so there is no reason for these companies to be saying that they're too high.

The second argument is that the competitive disadvantage is so great that Canadian companies will have to move to other jurisdictions. Companies do relocate their headquarters, and corporations often make changes to their structures or use complex corporate structures to avoid domestic regulation, so will the enactment of Bill C-300 cause large numbers of Canadian extractive companies to move out of Canada? This is doubtful, and it's doubtful for a number of reasons.

The first point is that Canada is home to over 75% of the world's largest mining and exploration companies, and this is not just by chance. There are important reasons that mining and exploration companies are headquartered or otherwise present in Canada. Canada is resource-rich in oil, natural gas, potash, uranium, nickel, copper, gold, and diamonds and has some of the highest mineral exploration activity in the world within its own borders.

Mining in Canada is a lucrative business. The corporate operating profits in the Canadian mining industry were at $9.1 billion in 2008; that's double what they earned in 2007. Mining companies are able to raise billions of dollars on the Toronto and Vancouver stock exchanges. These two exchanges are the world's largest source of equity capital for mining companies undertaking exploration and development.

The Toronto Stock Exchange and the Toronto Stock Exchange Venture Exchange list 10 times more public mining companies than any other exchange in the world. In 2009, these two exchanges traded 79.1 billion mining shares and raised $22.2 billion in equity capital. Canada's insurance, banking, legal, and engineering industries have specialized groups that are tailored to providing, respectively, insurance, financing, legal advice, and technical mining support to mining corporations.

Other resource-rich countries such as Australia and China are actually considering introducing resource taxes. China wants to introduce a 5% tax on crude oil, coal, and natural gas sales, and Australia is introducing a “super profits tax” on windfall profits of resource companies. Other countries in Africa, Asia, and Latin America have also considered windfall taxes and, in some cases, have actually implemented them.

Canada, on the other hand, has no such tax. On the contrary, Canada has a number of advantageous tax incentives to encourage investment in domestic mining. Flow-through shares, for example, allow investors to write off 100% of their exploration expenses being passed down, and the federal government's program of super flow-through shares gives an additional 15% tax credit for grassroots exploration.

As you can see, there are significant incentives for extractive companies to remain in Canada.

The final point I want to address is this argument that when Canadian companies pull out of countries, the Chinese will then fill the void and the people will be worse off.

In his testimony, Mr. Dade from FOCAL stated that it was a mistake to put pressure on Talisman to withdraw from Sudan and that Talisman had moved to address the human rights issue with a very rigorous and serious corporate social responsibility program. He said, “The investment is being controlled by the Chinese. The people in the communities are, if anything, worse off than they were before. This is a scenario that has a possibility of repeating itself throughout the hemisphere.” This is the argument of constructive engagement--better us than them.

First--I won't go into any detail, and I'm happy to answer questions on this--Talisman's self-regulation efforts in Sudan were very weak and deeply flawed. They claimed they had engaged the Government of Sudan and made progress on human rights issues, but there was no independent evidence to support this argument. In fact, the human rights situation deteriorated while Talisman was operating in Sudan.

The other point that's important is the distinction that needs to be made between corporate accountability and corporate social responsibility activities. Talisman claimed it was a force for the good, and this is misguided, okay? Its community development works, the hospitals, the schools, and the wells, those corporate social responsibility activities it was doing for the communities, were located in garrison towns. These were towns that were held by the government in rebel-controlled areas. They were not accessible to ordinary persons who were in or near the concessions and they contributed to the Government of Sudan's counter-insurgency strategy.

A company that claims to support human rights and to be guided by the Universal Declaration of Human Rights can't legitimately argue--at least out loud--that philanthropy can be an excuse for engaging in or being complicit in egregious violations of human rights. This is the point about the constructive engagement argument. Some situations exist where corporations can't be neutral actors, and no argument can be made that it's better to have a Canadian company there, being complicit in human rights violations, than to have another company. As a matter of good public policy, we need standards and an accountability mechanism.

I would like to address one more argument if I have time. This is the argument that Bill C-300, if it is enacted, will violate the sovereignty of developing states. As an expert in international law, I need to clarify this misunderstanding.

International law gives states extensive authority and capacity to regulate the conduct that takes place outside of their territory, that is, in the territory of other states. Canada may regulate the activity of its corporate nationals: any companies that are incorporated in Canada or headquartered in Canada.

In fact, Canada does already regulate the activities of its nationals extraterritorially in a variety of circumstances. It has done so in a number of circumstances: for instance, to implement treaty obligations, such as the convention against torture, the Rome Statute of the International Criminal Court, and certain anti-terrorism laws.

But it has also extended its criminal jurisdiction where no treaty obligation was in place. So before the protocol to the Convention on the Rights of the Child came into place, Canada had already regulated the engagement of Canadian nationals abroad in sexual activities with children and in child prostitution. That had already happened.

In addition, common law civil liability also applies extraterritorially, so this is an absolute possibility under international law. Enacting this bill does not violate the sovereignty of developing states.

One final very short point is that the argument has been made in witness testimonies on Bill C-300 that the investigation mechanism will promote vexatious and spurious claims that companies will not be able to refute. Companies are already being tried in the court of public opinion, because there is no effective forum for assessing the validity of these claims. Companies need a credible and objective forum to promote dispute resolution and to help them to avoid and resolve conflict. Bill C-300, the mechanism that is proposed, could provide such a forum.

Thank you very much.

[Chris Albin-Lackey, Senior Researcher, Human Rights Watch, Harvard Law School]

My name is Chris Albin-Lackey. I'm a senior researcher with Human Rights Watch. We investigate and document serious patterns of human rights abuse in more than 80 countries around the world.

Less than two weeks ago, I returned from a month-long visit to Papua New Guinea. I travelled there to determine whether previously reported patterns of abuse by security forces around the mine at Porgera are accurate and, if so, whether they're a continuing problem. In fact, those abuses are a continuing problem, and they are also a very clear example of why the modest but meaningful regulations set down in Bill C-300 are so important.

I spent the bulk of my time in Porgera in the communities around the mine. I interviewed dozens of people who had been apprehended while trespassing on mine property--mostly people who eke out a living by scavenging for gold-bearing rock on the vast waste dumps around the mine. I also interviewed officials from Barrick Gold, community leaders, government officials, police officers, and mine security guards. We'll publish a full report of our findings and recommendations later in the year.

During our research, I found that the mine faces enormous security challenges, exacerbated by the failure of the Government of Papua New Guinea to maintain law and order in the area. PJV directly employs a sizable private security force to protect the mine and its employees, and we don't dispute the need for guards at that site. Our findings also indicate that Barrick does appear to be taking at least some serious measures to try to exercise stricter oversight over their security personnel and to respond appropriately to abuses that are brought to the attention of company officials.

Nonetheless, I documented serious allegations of continuing violent crimes by some security officers in 2009 and 2010. We documented several recent cases in which security guards appear to have used unnecessary or excessive force when trying to apprehend illegal miners and other individuals who were trespassing on mine property, but the most serious recent abuses that we documented were several gang rapes allegedly carried out by mine security guards, many of whom previously served as police officers. These brutal crimes mirror patterns of abuse that are all too common among the ranks of Papua New Guinea's police force, in which sexual violence is widespread.

Most of the alleged rapes adhere to a common pattern. The victims were women caught trespassing on the mine property by PJV security guards. In each case, the perpetrators told the women that if they tried to complain about the rape, they would be arrested on trespassing charges that carry heavy fines or jail time.

Victims of abuse by PJV guards told me that they did not know of any viable way of reporting these abuses. The police are feared rather than trusted, a problem that's compounded by the fact that most of the victims were committing the criminal offence of trespassing at the time they suffered the abuses.

For victims of sexual violence, the situation is even worse. Many fear reporting rapes because of a powerful social stigma that can often ruin a woman's life. None of the victims I interviewed knew who within the company they could complain to if they wanted to, and it does not appear that Barrick has made adequate efforts to establish clear and safe channels for such complaints.

Despite some important measures taken by Barrick, our research shows that incidents of serious abuse are still slipping through the cracks and that those cracks may be very wide. Barrick itself has not been transparent about the specific efforts it is making. The company has thus far not been able to provide us with specific information about the measures it has put in place to control and respond to abuse and has not allowed us to meet with the company officials who are most familiar with these issues. We hope this will be resolved as our dialogue with Barrick moves forward.

We do recognize that a big part of the problem is that the Government of Papua New Guinea provides no meaningful law enforcement around the mine other than the current deployment of mobile police squads that are largely supported by the company itself. The government also exercises virtually no meaningful oversight or regulation of the company security force.

This means that Barrick, like other companies operating in Papua New Guinea, is forced to rely almost entirely on its own mechanisms to monitor and discipline company security personnel. The example of Porgera shows that in a challenging and largely unregulated environment this task is simply too great for companies to accomplish on their own.

While robust standards set by companies themselves are important, they must be accompanied by robust government regulation. If that regulation is not present where companies operate, then it should be present here at home.

Canadian companies that are serious about respecting human rights in their operations abroad should welcome the additional scrutiny and the additional guidance that Bill C-300 would provide.

Thank you very much.