Natural Resources Committee on Nov. 18th, 2014

[Geoff Regan, Liberal, Halifax West, NS]

Let me ask you about the aboriginal aspects of this. Groups like the Chiefs of Ontario and the Mennonite Central Committee and others have expressed deep concern with the application of these standards to our aboriginal entities in Canada. In fact, there have been calls to remove payments to aboriginals from the reporting standards or to at least delay the application beyond two years to, say, five years, or once you've had a situation where first nations, government, and industry have had an opportunity to work together to develop comprehensive guidelines and come to agreement on them.

Why isn't that happening? What would be wrong with doing that?

[Mark Pearson]

Well, when we went out to do our consultations, engagement and information sessions with stakeholders over the past year, we heard from industry that because these payments are oftentimes included in impact benefit agreements with aboriginal organizations, they felt it would be useful to defer that particular item so it could be discussed more appropriately with aboriginal communities. When we talked to the aboriginal communities, they felt it would be helpful to do more outreach, to actually go to the communities, explain the situation, to make it clear that the obligation is not on the aboriginal governments to report but rather on the reporting entity or the industry to report those payments. At the Energy and Mines Ministers' Conference in August, provincial and territorial energy and mines ministers also supported the idea of deferring the payments for two years to allow further discussion with aboriginal organizations.

What we are planning to do over the winter months is to go out to the aboriginal communities across the country to talk about the legislation and inform them of how this will work, so that we are prepared after the two-year deferral or two years after the act comes into force. The payments will then be reported by those entities and we'll all be on the same page.

We indeed have listened to what we heard from aboriginal organizations, from industry, and from our provincial and territorial counterparts. I think that even civil society would support this—I'm sure you'll be hearing from them—to ensure we can move the legislation forward in a timely way and bring in those payments once we've done our due diligence on engagement and information to the aboriginal communities.

[Geoff Regan, Liberal, Halifax West, NS]

When you speak of going out to these first nations over the winter, there are a lot of first nations who could be impacted by this.

How many first nations are you planning to meet with over the course of the winter, and what resources have been assigned to provide for that? I know from my own experience that when you add a lot of consultations it costs money. What resources have been made available for this, and how many first nations?

[Mark Pearson]

We are planning to go across the country to visit with first nations communities. We are developing the plan now. We haven't finalized our plan or our budget, but we do plan to do a comprehensive engagement.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Regan.

We go now for five minutes to Mr. Trost, and maybe there will be a couple of minutes for Mr. Leef.

[Bradley Trost, Conservative, Saskatoon—Humboldt, SK]

Thank you, Mr. Chair. I'll get to it fairly quickly here.

In consultations and readings about this legislation, one of the questions that has been brought up is the level of detail as far as reporting. You could have a level of reporting that says $1 million to the government of X, Y, Z country, but that may not break down the Jaguar car that went to the minister, the Rolex watch that went to the official, etc.—all the stuff in there—along with the proper payment to the government.

Could you explain how much detail is going to be required and how it's actually going to break out the corruption? That's what we're trying to get at here. It's great if it's reported, but you could have a talented accountant or person who is covering it up. Honest people will report everything, but we're trying to go after the dishonest people who will to try to work around this.

Explain to me how the details are going to make it more difficult for the dishonest people to hide their illegitimate payments.

[Mark Pearson]

Okay.

As I noted earlier, the threshold is $100,000, and that's broken down by categories of payment. The payment categories are taxes, royalties, fees, production entitlements, bonuses, dividends, and payments for infrastructure improvements. Those are the broad categories.

The way it's going to work is that if $100,000 is paid in one of these categories, or more, either in one payment or a series of payments over the course of the year, then the entity is required to report on those payments. As I said earlier, this is aligned with what is happening in the European Union and the U.S.

With this alignment, we're hoping to have quite the global reach, not only within Canada, because it will apply to publicly listed companies as well as medium and large private companies, but globally, in an aligned way.

In terms of deterring corruption, by making that information available it allows citizens around the world to be informed of those payments and to hold their governments to account on what has happened to the money.

[Bradley Trost, Conservative, Saskatoon—Humboldt, SK]

Okay. I get how the different categories would then help the companies, and the companies aren't going to want to be shaken down. Also, I understand why you might want a $100,000 threshold, because you'd have too much paperwork for the problem. But how does one, then, get at—how should we put this?—the petty corruption? If, instead of paying off the top guy a million bucks a year I'm then going to pay off a lot of small guys $50,000 to $75,000 a year, I slide right under that threshold. Are we just moving it down to a different level rather than dealing with it?

[Mark Pearson]

I'm going to ask my colleague Ekaterina to respond to that.

[Ekaterina Ohandjanian, Legal Counsel, Legal Services, Department of Justice]

The purpose of the legislation and the design of the actual details of implementation are measures to shed light on payment practices. Should there be evidence or suspicion of corruption, then that's a different step that takes place, and an investigation takes place to address the issue as a criminal matter.

For purposes of the act, we have built in certain safeguards by way of requirements to make sure that payments to individuals that relate to their public capacity are then attributed to the government that receives the payments. The onus is on the industry to report those payments. Then we have offences in the act that say, “thou shalt not do creative transaction design in order to avoid the rules”. We have a strict liability offence against failing to report, and other attribution rules. There are mechanisms.

[Bradley Trost, Conservative, Saskatoon—Humboldt, SK]

I see where you are going. With 45 seconds to go, can I ask one last question?

There's always a question about how much you put in the legislation and how much you put in the regulations to organize later on. Some of the NGOs have put to me that we should have been more detailed in the legislation and left less to the regulatory approach. Now, I understand drafting is a complicated thing. Why did the department feel we didn't do a more prescriptive drafting into the legislation? Why was somewhat more of what to do left to the minister's discretion and to regulations?

[Ekaterina Ohandjanian]

It's the government's view that the policy and its enforceability hit the mark in terms of how enforceable it is, because if you take a careful look at the legislative framework, it's all linked together. It becomes a legislative requirement. The detail requirements are fixed administratively but they become a legal requirement, because the minister specifies.... Industry is on notice. It becomes an offence if you don't comply with the act in its entirety, which brings in certain detail requirements that the minister specifies.

One of the key reasons we went administratively was that we were trying to ensure that our industry was not disadvantaged as compared to the industry of the U.K., E.U., and U.S members. We need to have that flexibility to react quickly to ensure that our report meets the requirements of the other jurisdictions' reports. It's suited to an evergreen kind of approach, because it deals with how you comply, whereas the substantive obligation on what you comply with is in the act.

[The Chair, Conservative, Leon Benoit]

Thank you, Ms. Ohandjanian.

We go now to Mr. Leef for two minutes.

[Ryan Leef, Conservative, Yukon, YT]

Thank you, Mr. Chair.

I have a note that says that payments of $100,000 or more would be reported, and that the amount is more in some categories. Is that accurate, or is the threshold a little bit higher in some categories, and if so, what categories would they be?

[Mark Pearson]

No, I outlined the categories. Once payments—either one-time payments or a series of payments—hit the $100,000 threshold, they have to be reported. There's just one threshold.

[Ryan Leef, Conservative, Yukon, YT]

I was just confused about it being $100,000 or more generally and not $100,000 or more in some categories. Fair enough.

You mentioned there are strict liability offences and that “you shall not try to get around the rules”. Also, as you mentioned, there'd be different investigative means and mechanisms if there was evidence that somebody was trying to get around those payment rules. It draws back to the $100,000 category. I know you've talked about parity with other nations to make sure Canada is on an equal playing field and we have that consistency, which makes a lot of sense. Do we know the rationale around the $100,000? It would seem to me that in some locations $100,000, or just under that, could seem like a pretty significant payment, and in other areas it might not be that significant.

During Mr. Cameron's chairmanship, did they indicate how they initially came up with that $100,000?

[Mark Pearson]

No. The U.S. was the first out of the blocks, and they used a $100,000 threshold. Then the Europeans followed suit with 100,000 euros, and then for us, to try to align, it was $100,000 Canadian.

[Ryan Leef, Conservative, Yukon, YT]

On a global scale, we're a little bit lower at present-day dollar prices.

[Mark Pearson]

What I can say is that when we consulted with industry, some of our larger companies said the threshold should be much higher, for example, $1 million. They said even $100,000 for them is quite granular. Some of the smaller junior companies said maybe $10,000 would be appropriate, because $100,000 is too high. We felt that by landing on $100,000 it was generally consistent and aligned with international practices. If companies want to report to a lower level, they certainly can do that on a voluntary basis.

[Ryan Leef, Conservative, Yukon, YT]

Thank you.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Leef.

Thank you to all of the witnesses from the Department of Natural Resources, the Department of Justice, and the Treasury Board Secretariat for being here today for an abbreviated time. I think you've given us good information and we do appreciate that.

We will suspend the committee until we can get the witnesses for the next panel to the table. Again, thank you very much.

[The Chair, Conservative, Leon Benoit]

We'll reconvene the meeting with a new panel of witnesses.

From Atomic Energy Canada Limited we have Dr. Robert Walker, president and chief executive officer; and Jonathan Lundy, acting president, chief transition officer, corporate head office. Also, from Canadian Nuclear Laboratories we have Dr. Robert Walker, president and chief executive officer. That's not a mistake; there are two different institutions in the transitional period. I don't know if you get twice the pay. If you want to comment on that you can certainly do that, but probably not.

From the Professional Institute of the Public Service of Canada we have Jonathan Fitzpatrick, president, Chalk River professional employees group; and Vince Frisina, vice-president, Chalk River professional employees group.

Welcome to you all and thank you very much for being here today.

I'll look for two presentations here, I assume, starting with Dr. Walker. Go ahead, please, and again, thank you very much for being here today.

[Dr. Robert Walker, President and Chief Executive Officer, Atomic Energy of Canada Limited, Canadian Nuclear Laboratories]

For the record, I get half the pay twice.

[Voices]

Oh, oh!

[The Chair, Conservative, Leon Benoit]

Yes, okay.