Foreign Affairs Committee on Oct. 22nd, 2009

[The Chair, Conservative, Kevin Sorenson]

Good morning, colleagues. This is the 34th meeting of the Standing Committee on Foreign Affairs and International Development, on Thursday, October 22.

Today we're going to return to our committee study of Bill C-300, An Act respecting Corporate Accountability for the Activities of Mining, Oil or Gas in Developing Countries. As our witness in the first segment today, we will have, from the Halifax Initiative Coalition, Karen Keenan, the program officer.

Welcome to our committee.

We have to pretty well stop for committee business at 10:30. That was the idea. We have two different witnesses. In the second hour, CIDA will be here. We may go until 9:30 or 9:45 and just see how much time we have.

Welcome, Ms. Keenan. We look forward to your comments. Then we'll have our questions for you.

[Karyn Keenan, Program Officer, Halifax Initiative Coalition]

Thank you.

The Halifax Initiative is a coalition of human rights, environmental, faith-based, developmental, and labour organizations. Our objective is to transform the public international financial institutions to achieve poverty eradication, environmental sustainability, and the full realization of universal human rights.

My work focuses on the operations of public institutions that provide support to the private sector—in particular, the International Finance Corporation of the World Bank group and Export Development Canada. The latter, a crown corporation, is Canada's export credit agency and will be the focus of my comments this morning.

The extractive sector is the greatest recipient of support from Export Development Canada, and the crown corporation has plans to expand its assistance to extractive companies. Export Development Canada does not have a good record in this area. The agency has provided support to a number of mining projects that have generated serious environmental and social impacts for which affected individuals and communities have been unable to access compensation and other remedies.

Perhaps the most infamous case concerns the massive tailings dam failure that occurred at the Omai gold mine in Guyana in 1995. Three years following the disaster, a lawsuit was initiated in Canada by indigenous people affected by the spill. The Canadian court refused to hear the complaint, arguing that Guyana was the appropriate forum for the action. A subsequent case brought in Guyana was also dismissed, leaving the victims without recourse. Several other EDC-supported projects merit attention, including the Bulyanhulu gold mine in Tanzania. Local residents allege that over 50 artisanal miners were killed by Tanzanian troops in order to clear the mining concession to make way for commercial operations.

Indigenous people affected by the PT Inco nickel mine and smelter in Indonesia complain that they have lost prime agricultural land, that the local environment has been contaminated, and that they suffer threats and intimidation by the police.

In 1998 a large cyanide spill took place at the EDC-supported Kumtor mine in Kyrgyzstan. EDC also funded the Marcopper mine on Marinduque Island in the Philippines, where environmental contamination destroyed the source livelihood for local fishing villages. I understand this committee heard testimony earlier this week about that case.

More recently, the EDC-supported Veladero mine in Argentina was the subject of complaint before that country's national ombudsman. The office of the national ombudsman, which is independent of government, is mandated to protect legally sanctioned rights and freedoms, including human rights. Local actors who lodged the complaint regarding Barrick's mine were concerned about its impacts on the San Guillermo UNESCO biosphere reserve. The ombudsman accepted the complaint and in 2008 reported that the mine concession violates several national laws. He called for an immediate halt to mining activity in the reserve.

This year, an Argentinian environmental organization filed a complaint regarding the mine with the Supreme Court. The complainants, who expressed concern that mining operations are causing irreversible damage to local glaciers, asked the court to issue an order for an audit that would assess whether the company is in compliance with national laws.

Intense debate continues among Argentinian parliamentarians concerning the future of that country's glaciers. Last year, President Fernández de Kirchner vetoed legislation designed to protect glacial deposits. The law, which prohibits mining, oil, and gas operations in or around glaciers, received the unanimous approval of Congress.

EDC continues to provide support for Canadian extractive companies that invest in countries with weak regulatory frameworks, inadequate institutional capacity, and poor law enforcement. The crown corporation is currently considering support for a major mining project in the Democratic Republic of Congo, a country plagued by negligible governance capacity, widespread human rights abuse, and brutal conflicts associated with mined materials.

Moreover, EDC recently opened a new office in Lima, Peru, from which it plans to expand support for Canadian extractive companies operating in that country. According to the Peruvian national ombudsman, extractive investments constitute the most important source of social conflict in that country. Community members who resist the entry of foreign extractive companies on their lands are intimidated, beaten, and in some cases killed.

Earlier this year, indigenous people in Peru mounted a major protest regarding the adoption of new legislative provisions that further facilitate extractive operations in their territories. On June 5, the national police attacked the protestors, triggering a violent confrontation that ended with the deaths of over 30 people. The prime minister was forced to resign over the government's handling of the incident, and Congress repealed a number of the contested decrees.

To avoid complicity in the environmental and human rights abuses that are common in these contexts, Export Development Canada must apply robust and transparent environmental, social, and human rights standards to its clients. Currently EDC relies on the International Finance Corporation's performance standards and the Equator Principles. The latter instrument, which was developed by private banks, is largely based on the performance standards. The performance standards are widely recognized as the de facto standards set for multinational companies that invest in developing and emerging markets. However, they suffer from several important debilities. They are weak on human rights. With the exception of labour rights, the performance standards neither reflect nor reference international human rights norms.

The multi-stakeholder advisory group to the national round tables on corporate social responsibility and the extractive industry in developing countries, of which I was a member, recognized this important shortcoming. The advisory group used the performance standards as the basis of the Canadian CSR standards that were proposed for adoption by the Canadian government, but supplemented those standards with international human rights norms.

The second problem with the performance standards and the Equator Principles is that they are discretionary. Export Development Canada is under no obligation to apply them, to enforce them, or to sanction clients who fail to comply. EDC adopted the performance standards through an OECD recommendation that explicitly permits signatories to derogate, at their discretion, from the standards set. Compliance with the Equator Principles is also optional. Under the Equator Principles, companies are required to comply with the performance standards to the satisfaction of the implementing financial institution. Moreover, non-compliance is permitted as long as any derivation from the standards is justified.

No guidance is provided regarding the acceptable threshold for satisfactory levels of compliance or justified derivations from the standards. Bill C-300 remedies these shortcomings. It ensures that EDC's existing standards are consistently applied and supplements them with international human rights norms, to which Canada is a signatory.

This will strengthen EDC's due diligence, steering it away from projects that carry a high risk of generating negative human rights impacts. It will provide EDC clients with valuable guidance regarding their expected standard of operation. Finally, it will ensure that Canada is in compliance with its international human rights obligations in the provision of export credit.

As an agency of the Canadian government, Export Development Canada is bound by Canada's international human rights commitments. Currently there is no mechanism to ensure that its operations are consistent with those commitments. Bill C-300 will also bring EDC in line with recommendations on export credit agencies made by the UN Secretary General's special representative for business and human rights, John Ruggie.

In a report to the Human Rights Council, Mr. Ruggie argues that export credit agencies should require that their clients perform adequate due diligence regarding their potential human rights impacts. According to the special representative, such due diligence will allow these agencies to identify investments that require greater oversight and those where the risk is too great for state involvement.

Following the release of the special representative's report, EDC published a five-paragraph statement on human rights. EDC describes the statement as an articulation of principles. The statement does not provide for the level of due diligence that Mr. Ruggie advocates. It is silent on the issue of whether and how EDC assesses the potential for adverse human rights outcomes from client operations, on what it expects of clients in the area of human rights, and on how it ensures that clients meet those expectations over the life of a project.

I'd now like to speak for a moment about the investigation of complaints concerning EDC client operations. EDC is one of few export credit agencies that has a complaints mechanism. However, the office of the compliance officer has processed just two complaints since it was created in 2001.

Affected communities and some civil society organizations have chosen not to use this mechanism because it lacks independence, transparency, and power. The office is maintained and staffed by EDC. Compliance audits, when undertaken, are internal. Scant information is provided to complainants to explain the officer's findings. Moreover, the crown corporation is under no obligation to adopt any recommendations the officer may make at the conclusion of an audit.

The complaint mechanism established under Bill C-300 remedies these problems. The mechanism is independent of EDC and involves public reporting. Moreover, findings of non-compliance bring consequences. While the complaint mechanism will not provide individuals and communities who are affected by EDC-supported extractive projects with access to legal remedies, which is an issue that deserves the attention of this legislature, it will afford them the opportunity to have their case investigated and may result in a shift in corporate behaviour.

Moreover, the complaints mechanism under Bill C-300 is consistent with the recommendation of the advisory group to the round table process regarding the appointment of an ombudsman. As with Bill C-300, this office was to receive and investigate complaints regarding the overseas operations of Canadian extractive companies.

To conclude, Bill C-300 addresses shortcomings in EDC's due diligence policies and practices and weaknesses in its complaints mechanism. Moreover, the legislation is consistent with consensus recommendations regarding these issues made by the advisory group to the round table process.

The reforms contained in Bill C-300 will help to ensure that EDC no longer funds extractive projects that result in serious environmental and social harm.

Thank you.

[The Chair, Conservative, Kevin Sorenson]

Thank you, Ms. Keenan.

We will go into the first round of questioning. I am going to be fairly strict on the time today. We do want to leave about half an hour for committee business.

We have one guest in the second hour, so maybe we'll have one round of seven minutes each and then proceed to our next round.

Is that fair?

Mr. Patry, please.

[Bernard Patry, Liberal, Pierrefonds—Dollard, QC]

Merci beaucoup.

Thank you, Ms. Keenan.

Ms. Keenan, according to clause 5 of the bill, standards are supposed to be included in the government's guidelines “that articulate corporate accountability standards for mining, oil or gas activities”.

What types of standards should be included, according to you, and how will these differ from existing international standards such as the OECD guidelines for multinational enterprises or the United Nations Global Compact?

[Karyn Keenan]

I'm sorry, but you're referring to paragraph 5(2)(d), is that right?

[Bernard Patry, Liberal, Pierrefonds—Dollard, QC]

Yes.

[Karyn Keenan]

That's “any other standard consistent with international human rights”. Well, the standard articulated in paragraphs 5(2)(a) to (c) is quite comprehensive. If the IFC's performance standards and accompanying guidance notes, the voluntary principles, and provisions that include the full complement of our international human rights obligations are included, that would be extremely comprehensive.

Paragraph 5(2)(d) could include other international treaties to which we're a signatory. Perhaps it could include environmental treaties, because paragraph 5(2)(c) specifically speaks to human rights. I'm thinking of things like the treaties around biodiversity and those concerning climate change and so on that wouldn't necessarily be considered in paragraph 5(2)(c), but that have a bearing on these projects.

Some provisions in those treaties might be covered off in the performance standards, but likely some wouldn't, so that could include environmental treaties. Apart from that, I think the standard that's articulated is quite comprehensive.

[The Chair, Conservative, Kevin Sorenson]

Mr. McKay.

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

The environment in which Bill C-300 was put forward was, if you will, a bit of a vacuum. The vacuum was that there was no response to the round tables, the bill came on, and then the government responded with the CSR counsellor. The CSR counsellor has a mandate, many things of which are quite good and are helpful in this area.

So what we're essentially left with is the last two yards out of the hundred yards. I'd be interested in your comments on how you see Bill C-300 interacting with the CSR counsellor.

[Karyn Keenan]

I think that's a fair characterization. I think the government response includes some elements of the advisory group report that are central, that are key to reforming policy in this area, but it's an incomplete response. And in particular, in the context of my presentation, it's incomplete regarding the provision of services to extractive companies.

The Canadian government provides a range of services to companies, and currently there are no mechanisms in place to ensure the provision of those services is done in a way that's consistent with our international obligations, particularly regarding human rights. That in itself is a breach of international law. Canada has an obligation to protect human rights, and part of that obligation, as explained to us by the UN treaty bodies, is to pass legislation that protects citizens from the operations of third parties, including companies.

This bill provides those extra two yards, particularly in this area around the provision of government services, and ensures there is a legislated basis to review potential government clients and those operations are consistent with our international obligations.

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

The most significant deficiency in the government's response is the inability of the counsellor to independently commence an investigation, or even complete an investigation once commenced, because it's dependent on the consent of the corporation involved. It's a rather glaring omission, yet Bill C-300 would fill that gap.

What is your view on a counsellor who effectively has no ability to investigate?

[Karyn Keenan]

I don't think it's a worthwhile endeavour.

I'm in contact almost on a daily basis with communities impacted by Canadian extractive operations. They're my partners and my colleagues. There was a lot of anticipation, a lot of excitement, around what the government's response would be to the round table process. A number of those colleagues were expert witnesses who participated in the round table process, and there is great disappointment with the response in that sense.

Communities and civil society organizations in the south have rightly asked me and other Canadian colleagues what the point is of bringing a complaint. Why would they bother going to the trouble of marshalling scarce resources, their time, to document concerns and then present them to this counsellor when they know there is no obligation on the company to participate?

I agree with you that there is great disappointment worldwide that this is an optional mechanism for companies, and for that reason the bill is extremely important.

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

Apparently last Tuesday this committee received some rather devastating testimony about a particular Canadian company. So if you run that CSR counsellor alone over that particular fact situation, would you anticipate that any kind of investigation would actually be done into that situation?

[Karyn Keenan]

If I were counsel for Barrick, I would advise against participating. I don't know what your advice would be.

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

It does seem a little obvious.

The final question has to do with those companies that are concerned about the unfairness of the procedure and that they somehow or other will be exposed to guidelines they don't understand or procedures where they don't know what the evidence might be, pro and con, or the standards of evidence, etc. What would your response to those companies be?

[Karyn Keenan]

The statute includes provisions for an inclusive participatory process for arriving at those guidelines and those procedures, as does any statute of this type, so I don't share that concern.

In addition, it's important to remember that a lot of work has gone into this area. This issue is receiving attention around the world. International multilateral forums, national governments, civil society organizations, and corporations and their associations have spent a lot of time looking at these issues and have developed guidelines, principles, and standard sets. The treaty bodies are an important source of reference for us to help us develop those guidelines. So there are a lot of resources and experts whom we can rely on. And through a participatory process I'm sure we're capable of coming to both procedures and guidelines that will be clear and understandable and fair.

[The Chair, Conservative, Kevin Sorenson]

Thank you very much, Ms. Keenan.

We'll move now to the Bloc. Madame Deschamps.

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

Good morning, Ms. Keenan, welcome to our committee this morning.

Your testimony concerned me when you said that Export Development Canada opened a complaints office in 2001 and received only two complaints.

Did the office follow up those complaints? What was the nature of the complaints? Did they come from organizations seeking to report an irregularity? Why do people now find that this complaints office is irrelevant, that it is not transparent enough, and that they are not well represented in that office? Are they afraid to use the office? The message seems to be that the complaints office is a bit of a sham.

[Karyn Keenan]

One of the complaints that I referred to was lodged by my organization. It was before I started working for the Halifax Initiative, but I'm aware of the case. It concerned a nuclear energy facility, and it was concerned with the review of that project. So it was Export Development Canada's due diligence when it reviewed the project and was making a decision about whether to support it or not.

The reason my organization was discouraged then from launching other complaints, or advising our colleagues who are impacted by EDC projects to launch further complaints, was because of the problems that I enumerated in my comments. That is, it's a very closed, internal process. In fact, I don't believe my colleagues were entirely clear on what the process was. At the end of the process, when we received a response, which was that the corporation was in compliance with its internal policies, that was the only answer we received. We did not receive information that explained how the officer had come to that determination, how they had made that determination, what the investigation consisted of, and so on.

It's very closed, it's difficult to access information, and, as I said earlier, even in the case of an audit that finds there's non-compliance, there's no obligation on the part of EDC to then take that up and make changes. Again, effective community civil society organizations have scant resources, human and otherwise, to take the time and energy to make a complaint before this kind of body, and knowing the chances of there being some impact at the end of the day, on balance it's not a worthwhile endeavour.

That's why we're excited about the mechanism under Bill C-300, because it's more transparent, because it's independent, because the process will be known and understood, the results will be released publicly, and there will be some consequence if there is a finding of non-compliance.

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

In response to the report that came out of the consultations and round tables, the Minister has decided to appoint an advisor, create a corporate social responsibility advisor's office.

In your opinion, is that enough? Will that person have a bigger mandate than the mandate of the complaints office the people at EDC have created? Could this person have more powers?

[Karyn Keenan]

They will, only insofar as they won't be limited to EDC. They will have the power to review any extractive case, not just those cases that receive the support of EDC. But as we discussed, they're hamstrung. Unless corporations grant their explicit consent to participate, no investigation will take place. I think it's important to go back to the advisory group report and remember that it was a consensus report. The presidents and CEOs of the two major mining associations in this country endorsed the idea of an ombudsman who would have the power to compel corporations to participate in investigations. If the heads of industry associations were willing to implement that kind of mechanism, it's a shame that the government has not. Again, I think this bill addresses that shortcoming by creating a complaints mechanism before which companies will be forced to come forward.

[The Chair, Conservative, Kevin Sorenson]

You have another two minutes, Madame Lalonde.

[Francine Lalonde, Bloc, La Pointe-de-l'Île, QC]

Thank you.

Madam, is it possible that the fact that this Act applies only to companies that receive support from the Government of Canada — that is the purpose of the Act — will bring about changes in the attitude of companies toward requests for financial assistance from EDC so that they are not subject in fact to the provisions of the Act? Have you seen any signs that it might actually have that effect?

[Karyn Keenan]

That's a good question. I think in this economic context, companies may be inclined to continue soliciting that kind of support, because it's difficult to get credit from other places. I think also, if companies are as good as their word, this shouldn't pose a problem.

Many of the companies that are currently clients to EDC purport to comply with the performance standards and the Equator Principles. They purport to be corporate leaders in this area, so if the obligation to comply with those standards is suddenly legally mandated, as opposed to something that is in the voluntary realm, this shouldn't pose a problem to them.

For both those reasons, I don't think it should have an impact on the number of clients.

[The Chair, Conservative, Kevin Sorenson]

Thank you.

We'll move to the government side. Mr. Abbott.