Evidence of meeting #32 for Foreign Affairs and International Development in the 40th Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was process.
A recording is available from Parliament.
9:45 a.m.
Conservative
9:45 a.m.
Conservative
Jim Abbott Conservative Kootenay—Columbia, BC
Thank you to all the witnesses for being here.
One of the concerns I have is that in your testimony you have not told us specifically which clauses and specifically how Bill C-300 would help. I would suggest, particularly to Ms. Coumans, who is going to be giving us a written submission, which might be very helpful to come from MiningWatch Canada, particularly in light of the testimony that will likely follow, that this committee—and I would say this to all other future witnesses—is probably best served if we have specific references to specific clauses and specifically how it would achieve the objectives that the bill is intended for.
Mr. Janda, I was interested in your testimony about funding sources being stopped.
I need to understand, are both of your organizations at all familiar with the Equator Principles?
For the benefit of the committee, the Export Development Canada signed on to the Equator Principles in 2007. They require financial institutions to sign on and to rank projects by social and environmental risk. They also require borrowers to submit social and environmental assessments and detailed plans for ensuring that risks are mitigated and results are measured. EDC, in this case, will not be providing loans to projects if the borrower cannot comply with these policies.
It seems to me that these are the steps that are called for in Bill C-300, yet as we see, in 2007, the EDC signed on to those principles. So why in the world do we need Bill C-300?
9:45 a.m.
Professor, McGill University, Canadian Network on Corporate Accountability
First of all, with respect to the general point about what difference is made, what the provision in the legislation is that changes anything, we have tried in our report to give you a detailed—almost clause-by-clause—assessment of what is different between the current government CSR strategy and Bill C-300. They're compatible; they can work together. But there is certainly a sense in which Bill C-300 adds a level of transparency and accountability that is not currently in place.
Turning specifically to the Equator Principles and to the implications for EDC, I agree with you that Bill C-300 adds really only a small additional piece to the puzzle. This is not dramatic re-engineering. It says precisely that principles like the Equator Principles and the other principles to which I referred now have to be acted upon by the EDC. They're not just to be taken into account at the outset of a project, but if EDC concludes—and it's held accountable to conclude—that Canadian public moneys are not being spent in a manner consistent with those principles, the funds are to be withdrawn.
That step is implicit, one could argue, in the use of the principles that are now in place. But if I dare say, as a lawyer, I think the specificity is worth having because it places an additional level of accountability onto EDC to the Canadian taxpayer and to Parliament to make sure its moneys are really being used in a manner consistent with the principles. In other words, it's not going to be enough for EDC to say, “Yes, yes, yes, those are principles; we think about them; we thought about them way back then.” There is an ongoing watching brief.
9:50 a.m.
Research Coordinator and Asia Pacific Program, MiningWatch Canada
If I could answer on both the question you posed to me and this question, just briefly—but I will put it in my brief in more detail—if we're just looking at the issues of sanction and remedy, this bill does not deal with remedy. What we ultimately will need in Canada at one point is legal reform so that cases against Canadian companies are not heard in the U.S., which is what's happening right now. So remedy is not dealt with. Sanction is dealt with. The withholding of Canadian public funds or political support is a sanction.
With respect to the Equator Principles, they and the IFC performance standards have both been reviewed from the perspective of human rights, including by John Ruggie, the special representative from the UN, and have been found, as have all voluntary principles out there right now—and they've all been reviewed—to only address a subset of human rights. So they're not comprehensive in terms of their addressing human rights. We've discussed this quite extensively in the round tables, and that's why, in the round table report, we specifically address the main UN documents that address human rights. That's also covered off in Bill C-300. That's actually quite an important flaw in the Equator Principles.
Thank you.
9:50 a.m.
Conservative
Jim Abbott Conservative Kootenay—Columbia, BC
If I may say, Mr. Janda, I have a far more charitable view of the officials at EDC than perhaps you do, of their intentions and of their accountability in a democracy such as we have. I'm not at all on your page on that issue.
9:50 a.m.
Professor, McGill University, Canadian Network on Corporate Accountability
I appreciate that we may not be on the same page, but I think the remarks I made and the analysis of the legislation don't have to do with casting aspersions upon EDC. They have to do with what the formal mechanisms of accountability are. People can do a great job within the existing structure, in principle. Canadian companies can be good companies. EDC can be a good investor. The Canada Pension Plan Investment Board can be a responsible investor. All that is possible, and I attribute good faith to people. But there are moments at which we have to ask ourselves what the accountability mechanisms are, and this is a piece of accountability.
9:50 a.m.
Conservative
9:50 a.m.
NDP
Paul Dewar NDP Ottawa Centre, ON
Thank you, Chair.
And thank you to our guests.
If we could carry on with some of the questions of that round, I'll declare my interest. I obviously support the legislation. If anything, I have lottery envy, because Mr. McKay had his lottery number called before mine and I have a similar bill, so I will be very clear about that.
But in terms of the issue at hand, Mr. Rae did explore the issue of reach and whether or not we were interfering.
Mr. Janda, you're obviously well schooled in what the tools of government are. Would you consider SEMA a tool that is a stick or a carrot? Would you consider the Special Economic Measures Act, which government uses and used in the case of Burma to sanction companies if they invested in Burma—which I fully supported—to be a stick or a carrot?
9:50 a.m.
Professor, McGill University, Canadian Network on Corporate Accountability
Well, it's a stick, but one also hopes its existence can be a carrot in the sense that it sends a signal about what Canadians care about. It allows companies to put procedures in place for themselves to avoid attracting that legislation. I quote a better man than I, who is sitting around the table today, when I say that we're proudest as Canadians when we're setting a standard for the world. I think that's what this legislation can help us do.
9:50 a.m.
NDP
Paul Dewar NDP Ottawa Centre, ON
I mention that simply to enlighten those who say this is going too far, that we are setting up legislation that actually goes beyond the conditions we'd normally have with government's relationship with business. We do this kind of thing already.
My concern is that it's not being underlined that we're trying to move toward comprehension in terms of Canadian standards abroad. We have a Canadian brand, if you will--to use the language of business-- and we want to make sure it's preserved. SEMA is used from time to time, but in my opinion it's not comprehensive. And the rules of engagement are not comprehensive. They're ad hoc, if you will. As I said, I supported it when they were used because that's what we had.
Your point about this idea that somehow, if this is implemented.... A critique on this legislation has been that we're going to have litigation as a result and not compliance. But you point to the fact that there is already litigation out there.
9:55 a.m.
Professor, McGill University, Canadian Network on Corporate Accountability
Right.
9:55 a.m.
NDP
Paul Dewar NDP Ottawa Centre, ON
So wouldn't this legislation actually have the opposite effect? In other words, we could avoid litigation and actually bring people into a space where we all agree on the standards. And for business, it would avoid business being vulnerable to litigation.
9:55 a.m.
Professor, McGill University, Canadian Network on Corporate Accountability
Absolutely.
Why did the mining industry, the prospectors and the mining associations, support the round table? Because it would provide something other than litigation. It would provide a process through which.... Okay, there could be complaints. There would be transparency. But it's the whole argument for ombudsman-style approaches to problems as opposed to heading to the courts. Nobody heads to the court under this legislation. So I think it has precisely that virtue.
9:55 a.m.
NDP
Paul Dewar NDP Ottawa Centre, ON
If you look at our financial investments in extractive industries, we're number one as a country, right? Globally we're number one. I observe that right now there's a lot of litigation going on with big tobacco. I don't know about you, but I'd be worried right now if I owned stock in a mining company. It might not be happening today, but I'll tell you, I've talked to people from other jurisdictions--Mozambique being one most recently--and they're not going to sit back for very much longer when they are seeing economic degradation and human rights abuses. I would think they'd be going to the courts. Would you not see that as a pattern if we don't do something like this soon, that this is going to happen?
9:55 a.m.
Professor, McGill University, Canadian Network on Corporate Accountability
Dare I say that there are some lessons all around us from the rubble of the financial crisis of what it means to think about a problem after the fact rather than before the fact. This is an opportunity for the mining industry and for Canada as a whole to approach a problem before it gets into crisis mode. We have the danger signs; Catherine has referred to them. The danger signs are clear for all to see. This is a key industry in Canada, one in which we have a critical mass and one where we can do something. We can actually influence practice around the world. It makes entire sense for us to be thinking about how to foreclose the problem for the future rather than address it when it arises.
9:55 a.m.
NDP
Paul Dewar NDP Ottawa Centre, ON
I would also observe that when you look at mining abroad, and your point about where we are in terms of the world economy.... In fact, now is the time to put in a foundation of fairness and compliance that everyone agrees on based on the round table, based on the work that was done. Now is not the time, I would argue, to regress. In fact, it's the time to stick with what we've done.
I've mentioned around this table before that when I was in the Congo, it was very clear from the people I was talking to on the ground that they can't do this alone. They need us to pick up the pieces that we can. But they were also very.... And we haven't touched on this, but the smaller companies are the ones they were most worried about. I wonder if either of you have any opinion on that.
We do have EDC, and with all due respect to my friend, Mr. Abbott, I like what EDC is doing, but it can't make legislation; we can. We want to ensure that its practices are actually ones that everyone follows and they are bought into by everyone.
But the smaller companies are an issue. I just wonder how this legislation would touch on that, and hopefully improve the behaviour of smaller companies that are affecting the reputation of larger Canadian companies, responsible companies, abroad.
9:55 a.m.
Conservative
The Chair Conservative Kevin Sorenson
We're already over the seven minutes and we're at 10 o'clock, so please be very brief and concise.
10 a.m.
Professor, McGill University, Canadian Network on Corporate Accountability
Very briefly, poor performance by one can affect the reputation of all, and this legislation extends to all. It also means that industry associations will start investing in this problem.
10 a.m.
Conservative
The Chair Conservative Kevin Sorenson
Thank you very much.
According to the clock on the wall and the light and the bells that are sounding, our hour is up. We thank you both for appearing before our committee today. We'll just suspend for one moment to allow our other guests to take their spot at the table.
Thank you very much.
10 a.m.
Conservative
The Chair Conservative Kevin Sorenson
I call the meeting back to order. In the second hour we have Mr. Gordon Peeling, president and chief executive officer of the Mining Association of Canada. We're certainly pleased to have him here.
We have designated a few minutes for committee business. My understanding is that the one motion that was presented just this past week has been withdrawn. Is there still a pressing need to move into committee business? We have a very short order in that we have to pass a motion in our committee to extend the meetings on the bill that we're debating this morning, Bill C-300, for 30 days. That passed our steering committee and it just calls upon this committee to have the motion. We'll do this later on. Maybe we'll go to 10:50 or whatever; we'll try to keep it to 45 minutes.
Mr. Peeling, welcome. I noted that you were present for part of the discussion in the first hour. We thank you for coming today. You can have approximately ten minutes as an introduction and then field some questions.
October 8th, 2009 / 10 a.m.
Gordon Peeling President and Chief Executive Officer, Mining Association of Canada
Merci beaucoup.
I'm Gordon Peeling, president of the Mining Association of Canada. I do represent the national organization of the mining industry, which represents the major producers of base metals, precious metals, diamonds, iron ore, steel-making coal, uranium, and oil sands, and also the integrated smelting and refining of metals. As well, we represent another 50 suppliers of engineering and environmental technology, service providers, and financial and small companies in the pre-production phase of development.
As an organization, we have a mandatory CSR program for our producing members, called “Towards Sustainable Mining”, which is mandatory for domestic operations. It's still voluntary for international operations. I'll come back to the strength of that a little later.
I'll also mention that I was a member of the advisory group for the CSR round table process. As noted by the earlier witnesses, yes, we did sign off. I personally signed off on it.
I want to talk about the round table and its process for a minute just to remind or inform those who didn't take part in this process about what transpired. When we started, there was obviously considerable mistrust and quite different starting points on the nature of finding a solution and making progress.
For many elements in civil society--and forgive me for generalizing--there was an immediate call for sanctions and remedy through extraterritorial application of Canadian law. For industry, there was a sense that improvements were required but that what was needed was an enabling environment that would help industry deal with very complex on-the-ground situations and help improve performance.
Out of those two end points over the course of the round tables, and in hearing from many experts like Mr. Janda, came some remarkable common ground. The advisory group report of recommendations to the government may have dragged all of us beyond our comfort zones at the end, or beyond where we thought we would end up, but that probably indicates that we were pretty much getting to the right point.
Let me turn now to a couple of those key outcomes, because they do bear on our views on Bill C-300. The round table recommendations did not embrace extraterritorial application of Canadian law or a legislative solution. The approach was a policy framework that was enabling for improved performance of industry and for assistance in capacity building for developing countries' governments, a key point for industry.
The “ombuds” type of function was housed within this policy framework, not within a legislative construct. It was at arm's length from government, and there were very specific reasons for doing that: because they didn't raise some of the issues that members have pointed to around this table.
From our perspective, capacity building was key to treating the disease as opposed to band-aiding the symptoms. If governments had the capacity to enforce environmental regulations, protect their citizens, live up to their international obligations on human rights and indigenous rights, and collect and redistribute taxes, including investing in social and institutional infrastructure, we would probably have nothing to talk about today.
Hence, for us, the most important part of the government response is the commitment to the extractive industry's transparency initiative and the voluntary principles on human rights and security, and a commitment to multilateral and bilateral processes to improve governance and capacity in developing countries as they struggle to manage the resource development process. That was all part of the round table recommendations, which we did sign off on.
Turning more directly to the government response, this may be where we have some differences of opinion amongst the advisory group in our process, but our expectations were not of the kind that thought we would get everything recommended in the report. Very few reports of this kind--indeed, even royal commissions--get everything they recommend.
In our view, the government response is directionally correct. And it is a starting point. We always have to start with those first steps, build upon them, learn from them, and make improvements as we go along. This we see as a first step, not an end point.
The Mining Association of Canada is committed to work in good faith with government and other interested partners to see this successfully implemented. It does put Canada in a leadership position. The path of progress starts with that first step, as I noted, and this, in our view, is an important first step. The government's recent announcement on the counsellor position, in just the last few days, adds further substance to that commitment.
Now let me talk a bit about Bill C-300. From my perspective, Bill C-300 takes us back to the divisive beginning of the round table, something I thought was behind us. From our perspective, the bill is not in keeping with the spirit or intent of the round table report. Also, at its very core, Bill C-300 is based on creating a legislative and punitive approach to corporate accountability that ignores the need for an enabling environment to improve performance.
By creating legislation, the bill also introduces many issues such as, in one sense, in our view, not demonstrating any sensitivity to intruding into the sovereign right of other governments to manage resource development to meet their national needs. MAC member companies remain committed to respecting sovereign right of governments as best placed to make the difficult choices in responding to their societal needs while managing the development of their resources.
There is also the confusion arising as it relates to standards out of Bill C-300, which, in our view, does not bring clarity to the question of standards but serves to add a new and possibly confusing perspective from Canada. MAC supports the federal government's commitment to the extractive industries transparency initiative, the EITI; the voluntary principles on human rights and security; and a commitment to multilateral and bilateral processes to improve governance capacity in developing countries.
Canadian companies need to operate on a level playing field with their competitors, and there are a wide range of international guidelines and standards that provide appropriate reference points for the CSR-related processes and issues.
The IFC is referenced, but the IFC already applies to us, as it does to everyone else. That in essence is a level playing field, but the IFC standards, you have to understand, weren't meant to be the equivalent of a regulatory requirement. That's an important point that maybe we can discuss further in the question and answer time.
On human rights, the Secretary-General of the UN has charged his special representative, John Ruggie, to interpret state obligations of international conventions on human rights for application at the corporate level. He has completed the first part of his work in three years and is in the midst of a further two-year assignment to bring down that detail into the corporate sphere of how a corporation should act to respect human rights that have been written on a state-to-state international convention basis.
That is why, even in the round table process, we did create space, because we all agreed that it was a gap that was, with the intention of Ruggie's work from the UN level, to be filled and to provide some guidance to companies as to how best to respect human rights in that regard. But that indicates that we're not at an end point in this process. Industry is still digesting the first part of Ruggie's report. It is trying to improve its complaint mechanisms itself and is waiting for the next stage in Ruggie's report.
In our view, Bill C-300 misses this dynamic. The bill makes no distinction between trivial and substantive compliance issues. They both presumably result in CPP selling off whatever shares it may have with those corporations and the loss of EDC financing.
The bill creates a huge disincentive to acquiring foreign assets by Canadian resource companies, because if there are problems they are inheriting as a result of past actions of the previous owner, they may well have no time to bring that performance up to standard should a complaint be launched and within eight months of some determination that results in sanctions.
So we see here damage without a lot of balancing aspects to the bill, and the reputational damage can be serious. Yet there are no appeal mechanisms in the bill, and we're not even sure what the evidentiary rules will be.
I want to turn to EDC for a moment. EDC support flows through to Canadian service providers. In other words, when Canadian mining companies engage EDC for a loan action, loan agreements, etc., often that money is a direct flow-through to the purchase of Canadian engineering services, service providers of technology, etc. What then does the EDC decision result in? A breach of all those contracts? Once that litigation starts, what company then would, in the future, seek EDC support? How could the supplier rely on it? Who knows whether that breach of the company might be trivial or substantive?
Now just let me talk about Canadian direct investment abroad in the minerals and metals area. Statistics Canada indicated that, at the end of 2008, $66.7 billion had been invested as Canadian direct investment abroad from this sector since 1990, and that was an $11 billion increase from 2007. These numbers are huge relative to official aid flows from Canada and they do much good. They create jobs. They lead to business development, local training, health services improvements, education, improvements in local areas. In our view, this bill puts certainly some of that at risk. So we do have very specific concerns about Bill C-300.
I want to tell you about CSR. We do recognize the voluntary challenges there, absolutely. We have not been idle in the field of CSR, and we have had a program in place for quite some time, albeit mainly with a domestic focus. We have always had the international aspect in mind, but it was getting our own house in order first and then turning attention to some of the international issues. At the end of the day, industry does recognize that you can't have one operating ethic in Canada and a different operating ethic outside of Canada.
TSM is a condition of membership. I'll just say what other people say about TSM. Five Winds is a major international organization that specializes in sustainable development processes. It initially did a contract for the Canadian government to look at a number of CSR processes across the retail council, forest products, etc. We were not included in that, so we asked them to include us. Our results are that we exceed best practice and we're consistent with best practice in all areas. In other words, we have no elements that are below best practice.
The Canadian Business for Social Responsibility recently profiled 11 different frameworks, ranging from the global compact to the OECD guidelines to the global reporting initiative to the IFC performance standards. CBSR--and this was done without our knowledge--ranked TSM the highest, as “more prescriptive, more guidance and stricter compliance provisions”. We are committed to continued evolution of this program with our members, just as we are committed to work with governments, the NGO community and others, to improve performance in all these areas, particularly environmental and human rights, social matters related to benefits to local communities, etc.
At the end of the day, though, we do respect the sovereign right of governments as the best place to make the difficult choices in responding to societal needs while managing the development of resources. We endorse the development of a policy framework that would enable improved industry performance and provide a capacity building for developing countries. We endorse a policy approach that is directed towards finding solutions through mediation, discussion, fact-finding, and problem solving. This was described in the CSR round table report, in which we think the counsellor position takes us some way along that line, as did the national contact point, in its first work.
Thank you.
10:15 a.m.
Conservative
The Chair Conservative Kevin Sorenson
Thank you very much, Mr. Peeling.
We'll proceed to the first round.
Mr. Patry.
10:15 a.m.
Liberal
Bernard Patry Liberal Pierrefonds—Dollard, QC
Thank you, Mr. Chairman.
Thank you, Mr. Peeling. You signed the round table report on behalf of mining companies. The report advocates introducing an ombudsman with extensive powers.
I have two brief questions. Firstly, would you support the introduction of an ombudsman?
Secondly, how do you perceive the differences between what could be achieved by an ombudsman—as defined by the round tables—and what would be achieved by an advisor such as Ms. Evans, who has just been appointed by the government, but who to my mind has no power?
10:15 a.m.
President and Chief Executive Officer, Mining Association of Canada
Yes, I have some comments, and I'll start with the round table recommendation.
It was for an arm's-length position that had an advisory body of industry and NGOs to it, but you have to understand that function was placed within the context of fact-finding, and it had a mediative process, where it tried to bring people and find ways to move forward and make progress and bring companies into compliance--and for the sake of argument over detail, let's just say IFC standard is the primary body of that--and in its findings it would work with the company and other parties to identify gaps in areas for performance improvement. Companies would be given additional time to bring their processes to meet those requirements. There would be another review 12 months down the road, and the company would report on its progress. It may not have all the elements in place, but if it was getting close, then it would be given more time. Only at the end, if you had companies and no progress was being made, if you had companies that just simply did not wish to make progress or address these realities, then, yes, there were consequences. But it was a very balanced process.
Now, the ombudsman's office or the complaints office administration within the IFC standards looks at it from their process. The IFC standards are written, very generally, to be applied in a hundred different countries, and the environmental aspects are to be applied in everything from desert conditions, water shortage, to tropical rainforest situations. So they have a level of generality, and when you take them to the concept of a regulatory requirement, black and white, CSR, Bill C-300, you're either in full compliance or you're not, trivial or otherwise, and that's a very difficult process to do.
I don't think the bill recognizes just how difficult this is going to be to turn this into a quasi-regulatory requirement, which is why we really wanted to bring that process of working together with companies to get the performance in place.
In regard to the current counsellor position, yes, the government didn't respond, obviously, in its entirety. But even the Mining Association of Canada—take away the fact that I was part of the advisory group and I put my name on the report—when it supported the round table report did note this, because there was the offer and recognition within the round table report that clearly the parties would have to get together in some ongoing dialogue to work out the details of how that office would function, and the devil is in the details, as to whether it's balanced and is perceived to be fair by all parties and the access is appropriate, etc.
Again, that had a process to make sure the details would work out and appropriately recognize the concerns of all parties. In our view, this process in Bill C-300 did not have that type of engagement.
10:20 a.m.
Liberal
Bernard Patry Liberal Pierrefonds—Dollard, QC
In Bill C-300, Mr. McKay's bill, there are many problems, as you just mentioned, but what is the main problem that you see?