Foreign Affairs Committee on June 3rd, 2010

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

But Bill C-300 is a sanctions regime--

[Laureen Whyte]

What I'm suggesting is that sanctions not be the first line of response, that there be--

[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?

[Laureen Whyte]

I believe there should be sanctions at the end of the day.

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

So, then, you would agree with Bill C-300 at the end of the day?

[Laureen Whyte]

No. I'm not agreeing with Bill C-300 at the end of the day. What I'm saying is that there is I think the most consensus we've ever had on a lot of these issues emerging through the work that the UN special representative is doing.

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

Finally, let me just ask Mr. David Stewart-Patterson a couple of questions here, particularly with respect to what I would respectfully suggest is backpedalling on the part of the companies.

As you well know, in 2007 there was a round table report, which had in it the phrase I've read to Ms. Whyte and which included that in the event of a serious failure, and when steps to bring the company into compliance have failed, government support—financial and non-financial—for the company should be withdrawn.

Why are the companies backpedalling at this stage since they've already agreed that a sanctions regime within the ombudsman framework is acceptable?

[David Stewart-Patterson]

I wasn't involved in those particular discussions, so I can't speak to what went into that.

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

But a lot of your companies were. Talisman was one of the participants. I don't understand the backpedalling.

[David Stewart-Patterson]

I think what's important to address here is that we're taking a concept of corporate social responsibility and trying to turn it into a matter of law. I think Professor Simons made the point that CSR gives one a competitive advantage. It is something that companies do inherently on a voluntary basis, because doing what's right is good for business. Doing what's right means going beyond what is required by law or regulation. It's inherently a voluntary activity.

In the past, when we've come up against issues of people's expectations having risen over time, whether in dealing with environmental standards or in aboriginal consultations--these are two examples--then we have changed the law to change what is required as opposed to what is encouraged.

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

But only after much kicking and screaming on the part of...

[David Stewart-Patterson]

No, but the point is what I'm trying to get at here. I mean, the essence of this bill is to try to turn corporate social responsibility, which is inherently a voluntary activity, into a new vehicle for changing what is required, for raising the minimum that is required by law.

I think if you want to change the law, you change the law. If you're trying to encourage companies to do more of the right thing, to go beyond what is required, then you have to think of how we encourage, as opposed to how we force people to comply. I think that's the issue Ms. Whyte was talking about.

[The Chair, Conservative, Dean Allison]

Mr. McKay, we're over time now. We'll get back to you in another round, I'm sure.

Madame Deschamps.

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

Ms. Simons, could you tell me what you think of what Mr. Stewart-Patterson has just said?

[Dr. Penelope Simons]

Thank you.

This idea that somehow corporate social responsibility can't become a part of law...I mean, corporate social responsibility has always been the initial way of developing expectations and norms that can then become legally entrenched.

The point is that if you leave it to companies to do the right thing... Under corporate law in most countries, corporations are required to act in the best interests of the company, and this requires them to ensure that they actually make a profit. Where you have a conflict between corporate social responsibility activities and profit, you're going to end up with them following the profit requirement. So you do need to bring this type of activity into law in order to ensure that corporations comply with human rights.

This gives corporations benchmarks against which they can measure their activities and actions. It gives them guidance on what they need to do.

[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?

[Dr. Penelope Simons]

As I said in my testimony, I think there's always a concern that companies will use corporate structures to try to move to different jurisdictions or avoid regulation.

My point is that with extractive companies, I think there are a significant number of incentives for them to stay in Canada, not least of which is the fact that Canada has a lot of incentives to encourage mining and mining activity within its own borders. It's important for companies that want to engage in mining to be located here in Canada.

There are a number of other reasons that I can go through again if you want me to. However, we have experts here--different engineers, banking experts, and insurance experts--all of whom have tailored groups that operate and provide technical advice, financial support, or legal support to these companies, whatever their expertise may be.

This is also an argument that is now being made in Australia by mining companies: now that there's this threat of introducing the super tax, they're all going to relocate somewhere else. Does that mean they're not going to mine in Australia anymore? Australia is a country of huge natural resources. There may be a few companies that do relocate, but I think the majority of them will not, for the reasons I've outlined.

[John Dillon, Vice-President of Regulatory Affairs and General Counsel, Canadian Council of Chief Executives]

Mr. Chairman, can I just respond to a couple of those points?

[The Chair, Conservative, Dean Allison]

Yes.

[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 thought you had raised your hand.

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

[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]

My next question goes to Mr. Albin-Lackey or Ms. Knuckey.

When we listen to your testimony and read your reports in which you describe human rights violations by some companies, we can conclude that certain companies are delinquent overseas and we need ways or legislation in order to sanction them. Looked at another way, is the government response to the round table reports—a response that was somewhat timid in that it proposed voluntary measures—sufficient to allow us to proceed against delinquent companies? Like it or not, some companies are delinquent and most companies are not models. But there are always exceptions to a rule. That is what we are discussing today.

So what do we do to stop those companies committing these atrocities overseas?

[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.

[The Chair, Conservative, Dean Allison]

Thank you very much.

Just before we go to Mr. Lunney, I have a quick question.

I can appreciate that the abuses that go on there are really not tolerable, no matter what, but when you have countries that can't enforce that, where does the line get drawn between the company that's responsible for security forces and the country that really lacks the ability because of the culture of the country?

We're not talking about countries like Canada, where there are rules of law, etc. How much of this, in your opinion, Ms. Knuckey, is the responsibility of the company and how much of it is because of a lack of governance in the country?