Subcommittee on International Human Rights Committee on March 23rd, 2021

[Mairead Lavery]

If I were to reframe your question, it's really around the due diligence practices of EDC, perhaps with a specific focus on supply chains.

This is a framework and approach that EDC has continued to evolve over the years. As I mentioned in my opening remarks, it's one that has been enhanced since 2008 with respect to human rights.

I would say that it is a risk-based approach. We start by looking at the nature of the relationship with the customer. We're looking for risk indicators to indicate if they are in a sector, operating in a specific country, and whether there are specific activities we are aware of in supply chains that we should be watching for.

We would start our due diligence. We would know that we have those flags. Should any of those be found to be the case in our discussions with our client, we would then move into an enhanced due diligence situation that would require us to have a much deeper dive and understanding of the supply chain of the company.

We then discuss it with them. We ask them for evidence. We ask them for copies of their processes. We're really trying to understand their management system for identifying any risks they might have in their supply chain. We would also ask them for any evidence that they are able to produce with respect to any risks that they can prevent or mitigate with respect to supply chains.

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

Is that a certification process? Do you get them to sign, in the same way that an audit would, that the companies you lend to are free of supply chain slavery?

[Mairead Lavery]

Under our environmental and social risk management framework, we arrive with an environmental and social action plan. We would have included those items in the loan documentation, very specifically in our financing operations, and then it's a commitment. We continue with enhanced monitoring throughout the term of the loan to ensure they are living up to any commitments the company has made.

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

Enhanced moderating is not a certification process. A number of stories have been run by The Globe and Mail, the Toronto Star, the CBC about companies you lend to potentially, particularly in China, but elsewhere, that have dubious supply chains.

Do any of those companies fall within your mandate of people you've lent to, and are you concerned about any of the companies that were identified in the press recently?

[The Chair, Liberal, Peter Fonseca]

You have 20 seconds.

[Mairead Lavery]

I don't have the specific names to comment on, Minister McKay, but we consistently apply our due diligence processes, and if we had concerns of that nature we would not be entering into the transactions.

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

Thank you.

[The Chair, Liberal, Peter Fonseca]

Now we'll move over to Mr. Reid from the Conservatives, for seven minutes.

[Scott Reid, Conservative, Lanark—Frontenac—Kingston, ON]

Thank you.

Let's stay with Ms. Lavery, if we could.

How often do you find yourself in the position to reject a request for financing on human rights grounds?

[Mairead Lavery]

Mr. Reid, I should perhaps start by distinguishing the nature of the work we do. A number of our customers are repeat customers, so we have an ongoing relationship with them. Then we have customers who are coming to us for the first time. It's quite a different process for us. We would go through the process and, yes, there are times when we have said no with respect to human rights. We did publish a transparency and disclosure policy in 2020, and we will now be disclosing in our annual report the number of times we turned down transactions, so that's part of our enhanced disclosure activities.

As it relates to—

[Scott Reid, Conservative, Lanark—Frontenac—Kingston, ON]

Just before you get to that, when is that report coming out?

[Mairead Lavery]

It should be becoming public around the end of April or the start of May.

[Scott Reid, Conservative, Lanark—Frontenac—Kingston, ON]

Okay, thank you.

[Mairead Lavery]

As it relates to existing customers, that's a very different type of relationship, and that's what I was speaking about with respect to monitoring. Then it's a very different situation and that gets us into the discussion that the professor was mentioning around leverage and remedy. As a financial institution—and our human rights policy is very clear on this point—we want to understand, is there an item.... If we are made aware of a situation, of course we're going to reach out to the company and start a dialogue with them. We're immediately going to understand if we can use leverage if there is a severe human rights impact to ensure the company is addressing it. It's not an immediate withdrawal of support because that may not help the impacted parties the most. It is an assessment at that point as to whether EDC has enough leverage to make a difference to the remedy.

[Scott Reid, Conservative, Lanark—Frontenac—Kingston, ON]

Thank you.

Mr. Deva, were you here for the first part of the discussion with the minister, or did you not hear that?

[Surya Deva]

I heard the last 20 minutes or so.

[Scott Reid, Conservative, Lanark—Frontenac—Kingston, ON]

Okay.

There was a discussion of a Canadian company, a Canadian-owned mining company operating in Eritrea, in Africa, called Nevsun. They run a mine in a place called Bisha. The accusation has been made and is currently working its way through the Canadian courts that forced labour was used not by the company itself but by a government-owned contractor when the company was being set up.

I went on behalf of this committee to that mine site and took a look around, along with the Canadian ambassador. One of the things that has been on my mind in thinking of that experience is that when we talk about things like giving the ombudsman power to compel testimony or documentary evidence, I don't see how it would get to a supply chain issue, where all of the documentary evidence is in another country, beyond the power of any apparatus the Canadian government could set up.

For a situation like that one, or any other one where there's a supply chain issue—someone has done something in supplying you with a product, and it's outside of Canada—what kind of remedies, realistically, do you think are available?

[Surya Deva]

I will try to answer this question in two parts The first is what are the possibilities of seeking the evidence from the ground if it is in some other jurisdiction outside of Canada. The second is the remedy part of it.

In terms of how to get it, there are several practices. One possibility could be that the court could request those documents through the Canadian company because these companies have a contract with the suppliers abroad, and in those contracts, it is quite possible for the Canadian company to stipulate human rights clauses and conditions. That would allow this Canadian company based in Canada, over which the court has jurisdiction, to indirectly get these documents, even if it is happening in Africa, Asia or Latin America—anywhere. That is one possibility.

The second possibility is that we can draw from the experience of national human rights institutions that have done some informal collaboration with peers in other jurisdictions. Let's say that the court would like to corroborate with a national human rights institution elsewhere. Then, they can collaborate together, and through that institution, they can get some evidence and facts from the ground, from the victims in those particular situations.

The third possibility is that there could be bilateral agreements between Canada and that particular country, and those agreements should be used by courts to get that sort of information.

I think that is where this dynamic power becomes quite relevant. If the court does not have those powers, it cannot use those multiple options. Having the power is different from using the powers. I should stress this point, because if you have the powers—let us say a stick—then the collaborative approach works more effectively because companies know that if they do not collaborate and co-operate with the court, the stick can be used, but if the court has no stick, then the collaboration does not really work in many hard cases in which companies are not willing to collaborate.

[Scott Reid, Conservative, Lanark—Frontenac—Kingston, ON]

Before you go on, the chair is giving me a signal that I have only 30 seconds left. I did have one further question I wanted to ask you that relates back to your first response.

You indicated that for a Canadian company, for example, we could require them to stipulate certain conditions. That will only work—I think I'm right in saying this—on a go-forward basis. That is to say, it can only work for the creation of future contracts as opposed to reaching back into the past, as would have been the case with the mining company we discussed.

Do you think I'm correct in saying that it only works for the future? That doesn't mean it's not valuable. It just means that it will only work on a go-forward basis to prevent future abuses as opposed to allowing us to reach into past abuses.

[Surya Deva]

I think, even in the past cases, either the contracts can be revised, or the Canadian company could use its leverage to get those documents. It's not impossible to get this information even about the old contracts or the continuing contracts.

[The Chair, Liberal, Peter Fonseca]

Now we are going to be moving to Mr. Brunelle-Duceppe for seven minutes.

[Scott Reid, Conservative, Lanark—Frontenac—Kingston, ON]

Thank you.

[Alexis Brunelle-Duceppe, Bloc, Lac-Saint-Jean, QC]

Thank you, Mr. Chair.

I want to thank the witnesses for their presentations and for joining us today for this important study.

Mr. Deva, many Canadians believe that Canada is a leader in human rights. We certainly aren't the worst in the world, but I'm not sure that we're as good as people think.

In terms of Canadian companies operating abroad, can you tell us how Canada measures up to other countries?

[Surya Deva]

I will confine my remarks to business and human rights, which is a subset of human rights.

I think leadership is about what a country or a company is doing, not what they are saying. In the field of business and human rights, there are significant developments taking place in Europe, where mandatory human rights due diligence legislation is being enacted or access to remedies is being improved. I think Canada is lagging behind on those two elements, in my view, at this point in time, because Canada has not yet enacted anything. I see there is some discussion going on about mandatory human rights due diligence legislation, and the CORE, in my view, is a good step. However, without any powers, the CORE will not be a viable institution to provide access to remedies in a non-judicial setting. There is no point in creating another NCP. When we visited Canada in 2017, we recommended that the CSR counsellor be replaced with something more robust.

[Alexis Brunelle-Duceppe, Bloc, Lac-Saint-Jean, QC]

Mr. Deva, does the current structure of the Canadian ombudsperson for responsible enterprise, or CORE, comply with the recommendations of the United Nations working group on the issue of human rights and transnational corporations and other business enterprises?