Foreign Affairs Committee on Dec. 3rd, 2009

[Robert Blackburn]

You're suggesting that if there were a past record of abuse EDC wouldn't deal with them. I suspect that's probably true.

[Bob Rae, Liberal, Toronto Centre, ON]

Right.

[Robert Blackburn]

I guess the scenario one can see might involve a company with a perfectly good reputation, like most Canadian companies--I don't think there's any argument about that. A project begins somewhere in the world--say, Madagascar--and it's proceeding and an allegation is raised. The consequence of that allegation down the road, if it were proven, would mean the withdrawal of EDC support, according to this bill.

In the meantime, for an indeterminate length of time.... The Canadian government would presumably then have to go to the government of a given country and say there's a Canadian company and it's alleged that they may have broken some Canadian law--help us investigate that company. The investigation might take place. The minister might decide that the allegation was baseless, but the result would have to be gazetted. Then it would be subject to a legal appeal.

The process would lead to uncertainty about what was going to happen. Why would I want to invest in a project where the financing might fall through partway through, on the basis of an allegation from a competitor that would have liked to have had that contract in the first place?

[Bob Rae, Liberal, Toronto Centre, ON]

Just to be clear, the financing wouldn't fall through because of an allegation, any more than the financing would fall through because of an allegation before the counsellor. The counsellor, under the current rules....

Let's be adults here. The Senate is going to have a Conservative majority in six weeks to two months. Whether this bill will go through or not, we don't know. But a lot of the complaints I hear from the corporate sector about Bill C-300 would be equally directed to what is happening with the counsellor.

I don't hear the corporate sector saying that the counsellor's processes are unacceptable. It's unimaginable to me that EDC would not take into account a conclusion of the counsellor on the conduct of a company. In that sense, the game is up. This question of corporate social responsibility has been resolved. It's clearly in place. Companies that act--

[Robert Blackburn]

Then what's the point of Bill C-300 if it's already done?

[The Chair, Conservative, Kevin Sorenson]

Thank you very much.

Madame Deschamps.

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

Mr. Chair, we are going to share the allotted time because we do not have a lot of time.

My comments are directed at Professor Daviken Studnicki-Gizbert. In your presentation, you said that your research shows that there is conflict in Mexico between communities and mining companies.

Are you able to say whether any complaints have been filed with Canadian consular representatives in Mexico? How were those complaints handled? What tools are available to Canadian representatives in Mexico? How does a complaint proceed? Are most complaints trivial? If not, I assume that complaints made by people knocking on the doors of Canadian representatives have some merit. How are these complaints received? What is the outcome? The offenders are told what to do, but is there also support for the individual or NGO making the complaint?

[Prof. Daviken Studnicki-Gizbert]

You have several questions. The answer to the first question is that to our knowledge, there is only one case of a community or members of a community filing a complaint with the Canadian government. That case is Cerro de San Pedro. I tried to broach the subject in my presentation, but I ran out of time. The community members went to the Canadian Embassy with letters. They contacted the ambassador. This happened three times: in 2007, 2008 and 2009.

In my opinion, the ambassador's silence gave them their answer. There was no investigation or even any follow-up. The community then came to Canada. The people felt it was important to speak to Canadian officials about one of these companies. In their mind, there is a very close link between the companies and the government. This happens all over Mexico and Latin America. Canada's reputation and the reputation of Canadian companies slip a little bit when these complaints are not resolved.

So these people came to Canada. Some MPs offered moral support and made some gestures of support, but in terms of real gestures, there was no mechanism for taking action. In my opinion, the bill that has been tabled here was not made to regulate the industry or interaction between the industry and communities, whether or not those communities suffer harm. It is there simply to regulate the government's response to the question whether the government will continue to invest in companies that can be clearly shown to have been involved in human rights abuses, violation of other rights or inequality. The bill exists solely to assure Canadians that their pension fund managers and the government will not support some companies in some cases. We are talking a minority of cases here. There are 13 cases, one of which has been referred to the Government of Canada.

[The Chair, Conservative, Kevin Sorenson]

Ms. Lalonde.

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

Good morning, Professor Daviken. You produced a profile which you described as fairly broad. You worked with university students and had access to vast sources of information. You were surprised to find that there are only 13 cases that have become crises. You therefore saw situations that could have generated other crises.

[Prof. Daviken Studnicki-Gizbert]

I do not want to get into all the details of my research, because we could go on forever. Apart from a few regions of Mexico, all of the mining projects are established in areas with a high population density where the people need water and land to survive, which is why I was surprised. An open pit mine is a big deal. It's surprising: we wonder what is going on, we are not exactly sure why there are not more cases.

There is one theory: companies are doing their duty and making sure there is no damage, no threats to communities, and that community relations are good in connection with all of the things that are expressed in the framework of what is called the CSA. That is one theory.

There is another theory: most of the projects we are currently monitoring are not beyond the exploration stage. We are talking 519 projects of all stripes, prospecting and so on. The ones that are operating are a minority. All of the conflicts arise once the mine starts operating. The communities realize what is happening and then there is a response. How does the response come about? That is Ms. Deschamps's question.

Sometimes there are negotiations. I, myself, saw one very interesting case in Mexico. The company manager went to Mexico to negotiate, and the problem was resolved on the spot.

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

Mr. Blackburn and Mr. Gascon, you are speaking on behalf of SNC-Lavalin, which is a huge company. You already have rules. You say that companies are able to regulate their methods themselves, based on their experience. I believe you. Mr. Heaps talked about small companies that move into areas where they can take advantage of the people.

Why do you not think that legislation, which would not only set standards but also make it possible to point fingers, would not help? I personally think that entrepreneurs are extremely clever and will take advantage of certain situations. Some of them have values, others not so much. So, we can act on the way they act.

[Jean-François Gascon]

You raise a good point: you say that companies are able to self-regulate, etc. That is not exactly what we said. We actually said that there are already substantial national and international rules that have to be met. Companies are not necessarily going to be content meeting minimum legislative requirements. Many of them are going to go a lot farther than that.

When we talk about mining operations, we often talk about operations over a period of 10, 20 or 30 years. For that reason, it is important for operators, investors, to develop a good relationship from the outset.

Generally, SNC-Lavalin gets involved in projects at the very beginning when they are at the construction stage, which is a high-risk stage. Generally, there are about five times more workers on site than in the operating phase. This provides an excellent opportunity to develop a model that can then be used by the client.

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

I hate to interrupt you, but do you not think that that may not happen?

[The Chair, Conservative, Kevin Sorenson]

Madame Lalonde, thank you. We're going to cut it off. We're at almost nine minutes.

We'll go to a split between Mr. Goldring and Ms. Brown.

[Peter Goldring, Conservative, Edmonton East, AB]

Thank you, Mr. Chairman.

Mr. Blackburn, all companies want to do better and the intent of this bill, although well-meaning, is problematic. The Canadian mining business has an excellent reputation, nationally and internationally. This has been confirmed by some of the witnesses.

There was a comment that sounded outrageous--namely, that there might be up to a billion complaints that have to be responded to. The language of this bill is instructive: the minister “shall receive complaints” from “any Canadian citizen or permanent resident or any resident or citizen of a developing country”. This implies investigating as well, not merely receiving the information.

Around here, we all know that from time to time we get thousands of pieces of information, inquiries, complaints, and instructions. So it is conceivable that there would be a billion responses to be made. This affects not only DFAIT and EDC, but also your own firms. If there are mass mailings, computer-generated mailings or whatever, they have to be deciphered to see what information there is behind them.

So it's not just the legal system of EDC and DFAIT that would be expanded. This would also affect your own firm. You mentioned that you have 10,000 projects internationally—$7 billion in Canadian business. It was mentioned earlier that the TSX will breathe easier because of Bill C-300. I'd like to know your response. Would you concur that the TSX would breathe easier? What happens to these large numbers of Canadian businesses? Will there be a departure from Canada? The alternative is to insulate yourself from this type of legislation, and the best way to do that is to relocate.

[Robert Blackburn]

Who can speculate about how many complaints there'll be? Our concern is that this is an additional layer on top of what Mr. Rae has said is a system that is already in place. There are international bodies as well.

[Peter Goldring, Conservative, Edmonton East, AB]

But this instructs to respond.

[Robert Blackburn]

Yes, that's right. That's the difference in this case. It's a burdensome and unnecessary legal and sanctions process that is being put in place. If you are a company that's going to develop a project in a difficult part of the world, you minimize your risk. This raises the level of uncertainty, so you go elsewhere. You base yourself elsewhere to develop that project.

I can't imagine that it would be a great boon to the TSX. But I don't know how many complaints and investigations would be launched. What would the effect be on Canadian mining companies, or oil and gas companies? Who can predict? I would disagree strongly that it would have a positive effect. But as to how negative would it be, who can tell?

[Lois Brown, Conservative, Newmarket—Aurora, ON]

Thank you, Mr. Goldring, Mr. Chair.

Were any of you consulted on the creation of this bill?

[Robert Blackburn]

No, and my understanding is that despite the long industry and NGO consultation that led to the CSR counsellor policy of the government, there was no consultation in advance of this bill. Occasionally we see a complaint on the Internet that we've never heard of, let alone responded to. It has never been brought to our attention.

[Lois Brown, Conservative, Newmarket—Aurora, ON]

That has been our experience in these investigations. We're still waiting for someone to come forward who says that he has been consulted on the creation of this legislation.

Mr. Blackburn, you told us that you have 10,000 projects and 22,000 employees, internationally. You're not a mining company—you provide services to mining companies. You also said that you are often prepared to take an equity stake in a project being initiated by one of the extractive industries. What criteria do you use to assess whether you're going to make the investment? Would you still invest if there were a complaint under this legislation?

[Robert Blackburn]

When we invest, as I tried to say, it's usually a fairly small investment. The Madagascar case, Ambatovy, is a good case of mine. We're a five-percent investor there, and it's a good project for us, a very rich deposit in a country that's welcomed that investment, and it aligns our interests with the interests of Sherritt, which is our Canadian client, and the other Japanese and Korean partners in the investment.

If it were a problematic case, if there were allegations of some kind of abuse, of course we wouldn't invest. We wouldn't be involved.

[Lois Brown, Conservative, Newmarket—Aurora, ON]

You say you've got a five-percent investment in Madagascar. Can you talk about the benefits that are happening in Madagascar as far as employment? How many people do you have employed on that project?

What is it doing to the standard of living of your employees?

[Jean-François Gascon]

At the beginning, following a request from the Government of Madagascar, there was a very strong request to create a maximum of jobs, providing, as much as possible, knowledge transfer and capacity-building at the same time. As SNC-Lavalin, as a service provider but also taking a small equity participation in the project, we designed a program 15 years ago for other projects being developed in southern Africa. The program was called LRDI. That stands for local resource development initiative.

The program had three pillars. The first pillar was a labour training program to raise the employability of the local population, which trained 6,100 local employees and contributed significantly to the percentage of local workers on the overall manpower of the project. I indicated to you that at the peak of construction, there were 10,000 workers on the project at the same time. Eighty-five percent of them were locals, a number we've never reached before.

The second pillar of the program was a local procurement and SME development program, where we designed the project to maximize packages to be tendered locally. We trained local companies on how to submit winning proposals and whenever possible we also provided capacity-building, mentorship, management and technical training programs, and thousands of hours of support to the local companies that had contracts with us, because we saw it was important for a 27-year-long project to build around the project with the local economy and build the local suppliers.

The third pillar was a very important program working with development organizations in the region, especially in agriculture, because farmers would want to sell their products to the project. We needed to prepare meals for thousands of workers every day so this program was intended to maximize the benefit, and it is today one of SNC-Lavalin's best practices.