Thank you very much, Mr. Chair, for the opportunity to speak before you on an issue that has been very important to the Mining Association.
For the last two years, we've spent an enormous amount of effort and resources in working with our partners here, Publish What You Pay, to design what we feel is an appropriate approach to implementing mandatory disclosure for payments to governments from extractive companies in Canada.
As you're aware, the resource revenue transparency working group published the framework that we feel played an enormous role in bringing us all to the point where we are today. We're able to discuss a piece of federal legislation to see that this is implemented and lives up to the Prime Minister's commitment that he made at the G-8.
By and large, we think that the act is very true to the recommendations that were made by the resource revenue transparency working group, and we support that. When we envisioned this, we first designed our recommendations to fit in with security regulation, and now we're discussing a piece of federal legislation.
There are a few areas that our framework didn't quite address in the same way that this act, under criminal law, addresses some of the issues. I specifically want to speak to a couple of areas, one being the way in which fines and penalties are addressed in the act, and then I want to talk quickly about the equivalency provision, if I have time.
When we envisioned this, it was under security regulation. Securities regulation is a venue that is very used to dealing with this kind of disclosure, and it has enforcement mechanisms that the industry is very comfortable in dealing with. We believe that the purpose of this act is about companies providing greater transparency around the legitimate payments that they make to communities, to help communities hold their governments to account for the best use of that revenue. As such, this is an opportunity for companies to help out in the accountability area.
We want to suggest some amendments to some of the ways in which the fines and penalties are dealt with. We prepared a note that we weren't able to get translated in time, so you don't have it in front of you today. I have English copies that I can share afterwards. We will get it translated as quickly as we can and provide it. However, I want to read through some of the changes that are most important to us to get them on the record, if you'll bear with me.
The first thing we want to do is under proposed section 24 of the extractive sector transparency measures act. There are a number of fines proposed for different offences related to the non-reporting, to reporting in error, and then organizing your payments to avoid reporting. We actually want to propose that these fines be increased. They're currently set at $250,000. For proposed subsections 1 and 3, the offences of non-reporting, and the section related to organizing payments to avoid reporting, we believe that these should be increased to a maximum of $1 million, and the reporting in error should be doubled, to $500,000.
Consequently, we are asking that the committee consider removing wording in the fourth proposed subsection, which states, “under this section is committed or continued on more than one day, it constitutes a separate offence for each day on which the offence is committed..”. We'd like to see that deleted. We'd like to see the following proposed section 25 related to personal liability to officers and directors deleted too.
The closest analogy we can come to in terms of the daily offence is that there's not a lot of precedent for disclosure obligations in criminal law. The government has drawn from safety and environmental regulations, which often have continuing harm every day that an offence is in process. This does not have that continuing harm. When you report an error or fail to report, the harm is done at the time the offence is committed. We don't believe the harm continues day after day, so we are suggesting that a one-time fine is appropriate here.
We draw a comparison to the Lobbying Act, which is also a transparency-related and disclosure-related legislation and doesn't contain similar provisions around daily offences.
We'd also like to add a third paragraph to proposed section 26, a paragraph (c) that would read “no person or entity is to be found guilty of the offence relating to a breach of section 9”—this is the section that requires entities to report on their payments—“if the payments reported by the person or entity are reasonably accurate in the context of the total amount paid by the person or entity to the applicable payee in a given reporting period”. This just sets a reasonableness test in terms of the accuracy of the reporting.
The way the legislation is written now, companies are obligated to report down to the dollar in terms of accuracy and to be accountable for that. There's a due diligence defence contained in the act, however, the typical due diligence process that a company would have in this area is around their audit practices. Company audit practices are calibrated to address a material level of significance and that is a very different level from what we're talking about here where you need to be accurate down to the dollar. So our typical audit practices are not equipped to provide that due diligence approach in this particular case.
The other area that we wanted to address is around the equivalency provision. When we first started working with Publish What You Pay, a foundational principle was a strong equivalency element that would allow companies to avoid duplicate reporting in different jurisdictions such as reporting the same data in Europe or under the Dodd-Frank Act in the U.S.
Our belief in the way proposed section 10 of this act is written is that it enables the minister to enact equivalency at the minister's discretion. It says the minister may determine that requirements of other jurisdictions are acceptable. We would like to see that amended to the minister “must determine”. There are some conditions contained in this clause so it's not an absolute obligation, but it would go a long way to giving us comfort that this regime will remain consistent with the global standard that is emerging around the reporting of payments.
The precedent for that we believe is found in CEAA 2012, the Canadian Environmental Assessment Act, where there's an equivalency provision that finds that at the request of a province that has a comparable environment assessment regime the minister must find equivalent.
I'm hoping that you will take those under consideration, and given the amount of work that we've put into this over the last two years and how we've contributed to being very constructive and getting Canada to a point that it can show leadership we hope that will carry some weight in causing you to consider our suggestions here today.