Foreign Affairs Committee on Oct. 27th, 2009

[Jim McArdle]

Thank you. I'll answer in reverse order.

We believe that the development of international standards on the human rights side will occur. As I said, we are working with that. We are applying the expertise we've developed the best way we can, but to try to apply a standard that is not clear internationally and not well established, we believe, will put Canadian companies at a significant disadvantage, because a competitor, for example, could lodge a complaint with the ministers and cause a deal to be delayed, could cause a reputational issue, even if it was totally frivolous, all to the advantage of the competitor. We think there are severe disadvantages to Canadian companies being the only ones that would have this applied to them.

We think it will get applied worldwide. I can't speak to China, but I think it will be applied in the developing world through the OECD, and to projects that require international financing probably through the Equator Principles. When these standards become formed and a consensus is reached, we think it will be applied by reputable banks, by export credit agencies, and by countries that care about CSR. But there will probably still always be exceptions.

In regard to the impact on the Canadian companies--and I tried to explain this a bit in my speech--I'll put my hat on as a CEO. I want to borrow money, or I want to have a PRI policy--political risk policy--and I need to know that I have that in place for the entire term of my loan. I need to know that I control whether or not that's the case. The banks that are signing up and providing their money need to know that the large pool of money that's going to be required, both equity and debt, is sufficient to be able to do this project. If EDC comes along and says we have these standards, and nobody else has to apply them, but we do; and they're not really all that clear, but we have to have them; and if they're not met on a decision of somebody external, we need our money back or we're going to yank the PRI policy, the company CEO and the CFO, as well as the other lenders, are going to say, thanks, EDC, that's great, but we're not going to let you be involved in this deal because we can't be sure, no matter how much due diligence we do up front, that something may not happen that will cause a problem.

For example, you could have a mine going and the government changes and decides it wants to take action with its security forces. It comes to the mining company and says, I'm going to take your concession away unless you allow us to use your property to launch strikes. They don't know what to do. They have to work with the country. They look to Canada if we're involved; they look to EDC to help. If we were in that situation, we'd be having to say, we can't help you; we've got to get out.

We really believe there's a strong disadvantage to applying this to Canadians now ahead of the consensus that I believe will be reached and will be applied to many countries and all export credit agencies.

[The Chair, Conservative, Kevin Sorenson]

Mr. Lunney.

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

I'll make it very brief, but I think you've answered the question to a large extent just now and in your remarks to Madame Lalonde.

Part of the concern we have is this transference of responsibility when the host country itself lacks capacity for appropriately regulating and lacks human rights standards compared to anything Canada and most parts of the world adhere to. One of the first pillars in our strategy in Canada is developing, through CIDA, capacity in those nations. I think at this stage if we jump ahead and start imposing standards that might be appropriate in Canada on nations that lack the human rights capacity in the government itself or the capacity to regulate, we can lose opportunities to have this kind of influence.

I don't know whether you can add to what you said, but I think that's my big concern, that the countries themselves...and Sudan was probably a good example, with Talisman, one of the worst human rights abusers. We're all concerned about Darfur, but by pushing a company right out of the country, have we really advanced the cause of human rights in that nation?

[Jim McArdle]

We believe that working with the company to try to remedy a situation and make it as good as it can possibly be is the best method of doing this. There is a huge issue of the transference of responsibility, and companies that go into countries that are less developed have a very difficult time with that. You can think of it as their agreeing to set up a medical clinic or a school, and they become the government. A good company will say, we'll put the infrastructure in place, but we need the local government to pay for the teachers, to pay for the doctors, to get the local government involved to ensure there is an ongoing commitment from the country. There are situations where laws in the country are put in place, and it's clear that they're not going to be able to enforce or monitor them. So there's a natural inclination to say, company, you have to do that.

I think companies that are doing a good job, the types that we support, do that to an extent, but to impose on them an absolute requirement that would mean they'd lose support from us and our ability to work with them and try to remedy situations and make them better, I think, is completely unfair to the companies and puts them in a situation where they will not be able to take chances, they will not be able to go into difficult situations, because they'll never know, no matter how hard they try, whether or not they're going to be accused of doing something and they will jeopardize themselves.

[The Chair, Conservative, Kevin Sorenson]

Thank you, Mr. McArdle.

Mr. Dewar.

[Paul Dewar, NDP, Ottawa Centre, ON]

Thank you, Mr. Chair, and thank you to our guests.

I will just comment on the sports analogy, which I always stay away from because they can get confusing. I think our job here is not to be cheerleaders or players, it is to be referees. That's what we do. We are referees, if you will, and that's what legislation is about. I would suggest that is our role around this table.

I have a quick question to EDC. Once you've been in agreement with a company, have you ever withdrawn your support because of concerns around corporate social responsibility? If so, which ones?

[Jim McArdle]

Unfortunately, I won't be able to provide specific examples. I'm trying to think from my experience whether there were any where that was the situation. We are very careful when we go in at the beginning; we do a tremendous amount of due diligence.

[Paul Dewar, NDP, Ottawa Centre, ON]

I appreciate that.

Don't get me wrong, I laud what EDC is doing.

[Jim McArdle]

I appreciate that.

[Paul Dewar, NDP, Ottawa Centre, ON]

I was just asking DFAIT and other officials about this, and they sent a note that they weren't aware and thought it would be best to ask you.

[Jim McArdle]

There's nothing that leaps to mind, where we've thrown up our hands and walked away.

[Paul Dewar, NDP, Ottawa Centre, ON]

I'm not saying you walked away; I'm asking whether you have principles that you want to ensure are active.

I'm just asking the simple question of whether there has been a situation in which you were involved with a company and withdrew your support because of its activities. You are saying that as far as you are aware you don't know of any case.

[Jim McArdle]

With respect to withdrawal, I think not. But there are many, many cases where we've worked with the company to make a situation better.

[Paul Dewar, NDP, Ottawa Centre, ON]

Absolutely.

[Jim McArdle]

We believe that is the right way to go.

[Paul Dewar, NDP, Ottawa Centre, ON]

I appreciate that.

I want to comment on your comments that suggest there's a fait accompli with regard to the legislation. If we go down this path with Bill C-300, you said that because of some of the clauses in the bill and the intent of the bill--I'm not sure if you would say one or the other--your concern is that there would be a chilling effect of sorts.

I'm wondering why you say that. On the one hand, you're saying you have engaged working on the IFC principles--and I laud the EDC for doing this. The bill refers to those. It says the government has a whole year to establish the guidelines. I just wonder if you want to correct the impression that this is a done deal. You acknowledged that in clause 5 in the bill there's a process to talk to partners, and obviously the people who have a role to play in that would be the EDC.

[Jim McArdle]

I acknowledge there is the one-year period.

There are some drafting issues in that the rules apply instantly even though there's a year to develop the rules, but I'm sure that could be fixed.

[Paul Dewar, NDP, Ottawa Centre, ON]

Easily.

[Jim McArdle]

Our concern is that it has taken a long time to get where we are with human rights, and we don't think that clarity could be achieved in the time period. That's why we're working--

[Paul Dewar, NDP, Ottawa Centre, ON]

So based on the ongoing work that you and others are doing, and that other jurisdictions have worked on--I gave examples of that in previous meetings--like Norway and others, within a year you don't think we could establish appropriate guidelines that you could follow? Is that your evidence today?

[Jim McArdle]

That is what I'm saying.

[Jim McArdle]

For example, John Ruggie has been working on it for several years. The UN thought he would come up with an answer this year, but when his report came out he said he was getting there but he wasn't there yet.

[Paul Dewar, NDP, Ottawa Centre, ON]

I'm talking about Canada and our approach on a piece of legislation. You're basically saying we couldn't do this within a year.

[Jim McArdle]

I don't think we could do this within a year.

[Paul Dewar, NDP, Ottawa Centre, ON]

That's interesting.

The other issue I want to touch on are the vexatious types of complaints, the frivolous. You acknowledge there is a clause for that in the bill.