David Clarry is a management consultant focused on project development, project financing and business improvement in the mining, energy, and cleantech sectors. His career has included 19 years with the prominent Canadian engineering and consulting firm Hatch Ltd., as a Director in the management consulting and environmental practices. Prior to Hatch David worked for DuPont and General Electric. His expertise includes general business management and project management.
David’s projects have spanned North and South America, Asia, Australia, Europe, the former Soviet Union, and Africa. He brings particular strength in building project teams that integrate technical, environmental, management and financial perspectives. He has led projects for mining and metals companies, equipment manufacturers, utilities, governments, and financial institutions.
Why you need to read this?
Bill C-300, the “Corporate Accountability of Mining, Oil and Gas Corporations in Developing Countries Act”, was introduced as a Private Member’s bill in February 2009 (initially solely to prompt the government to respond to the CSR Roundtable process). While the objective of improving CSR performance is laudable, this bill, written with no consultation with the mining industry, in fact will likely work counter to that objective. There are fundamental flaws in the bill, and its main proponents seem more interested in attacking Canadian mining companies than in improving CSR performance.
In the words of the petition being circulated by the sponsor of the bill “the alleged abuses of human rights and the degradation of the environment by Canadian mining companies is a violation of the principles of fundamental justice …”. This bill ignores the leadership of the Canadian mining industry in CSR.
The bill would require the Ministers of of Foreign Affairs and International Trade to investigate any complaint raised against a Canadian mining company (no evidence required from the complainant, no penalty for frivolous complaints), and requires EDC and CPP to withdraw financing and Foreign Affairs to reduce consular support to any company/project that the Ministers find is acting “inconsistently” with CSR “guidelines.
The bill passed second reading in the House of Commons and is now before the Foreign Affairs and International Development Committee. Following the committee hearings the Bill will be returned to the House for a third vote before it goes to the Senate for a vote. This bill has taken on a political momentum that may well result in the passing of the bill despite its substantial flaws. The proroguing of parliament does not kill private member bills, so the bill will return directly to the committee process when parliament resumes.
This bill risks making Canadian companies lightening rods for frivolous complaints from anti-mining groups, which may drive mining head offices out of Canada. We in the Canadian mining industry need to speak up. Mining companies and organizations are speaking up, but getting little acceptance from the opposition parties supporting the bill. Individuals need to write their MP’s, talk with our friends, and speak-up within organizations we belong to (for example the United Church officially supports Bill C-300, but they only know what they have been told by anti-mining groups).
Join a community of peers who want to tell good news stories about mining companies and share ideas on CSR and Bill C-300 (LinkedIn http://bit.ly/No-to-BillC300_li or Facebook http://bit.ly/No-to-BillC300_fb. Both groups are named (“Support Canadian Mining and CSR – Stop Bill C-300” and can be found by searching on “Support Canadian Mining and CSR”).
1 About The Bill?
The official title of the bill is the “Corporate Accountability of Mining, Oil and Gas Corporations in Developing Countries Act”. Key aspects of the bill are:
- The Minister of Foreign Affairs and Minister of International Trade are to develop guidelines that articulate corporate accountability standards for mining, oil or gas activities. These are to incorporate the IFC’s policy and performance standards on Social & Environmental Sustainability, the Voluntary Principles on Security and Human Rights; “human rights provisions that ensure corporations operate in a manner that is consistent with international human rights standards”
- The Ministers shall receive written complaints regarding Canadian companies engaged in mining, oil or gas activities. These complaints are to identify which provision of the guidelines has been breached.
- Unless they determine the complaint to be frivolous, the Minister receiving the complaint will investigate the complaint. The Ministers are to notify EDC and the CPP Investment Board where they determine that a corporation’s activities are inconsistent with the guidelines.
- The Export Development Act will be amended to state that EDC “shall not enter into, continue or renew a transaction related to mining, oil or gas activities … unless these activities are consistent with the guidelines …”
- The Department of Foreign Affairs and International Trade Act will be amended to state that “with the exception of ordinary consular services available to all Canadian citizens, no undertaking made through a program developed by the Minister in the exercise of his or her powers under this section shall promote or support mining, oil or gas activities, … that are inconsistent with the guidelines …”
- The Canada Pension Plan Investment Board Act will be amended to state “Every investment manager who invests the assets of the Board shall ensure that the assets are not invested in any corporations whose activities have been found by either Minister … to be inconsistent with the guidelines …”
2 What is wrong with the bill?
Certainly CSR is important, and there are certainly opportunities to improve CSR performance on many mining projects. However, this punitive and flawed bill is not the way. Points that have been raised by EDC, CPP, the legal community and the mining industry include:
• The current government is in the process of implementing a CSR Strategy and program for extractive industries. C-300 would hamper the existing initiatives by establishing a parallel, duplicative, and purely punitive procedure.
• The bill proposes a number of significant penalties triggered by a yes/no determination of whether a company’s activities are “inconsistent” with set of “guidelines”, which are based on sources (IFC, World Bank, etc.) that were not designed as detailed regulations.
• The process of complaints to and investigation by Ministers risks politicizing accusations and doesn’t provide due process for companies
• The bill provides no funding or mechanism for proper investigation of allegations, which will have to take place outside of Canada. (As a private members bill, it cannot commit government funding)
• The process could result in EDC withdrawing financing from a project due to a Ministerial determination of activities “inconsistent” with the Guidelines. This would in turn likely put all project financing in jeopardy, and make EDC financing much less attractive and Canadian companies using EDC financing less attractive as project partners. The bill does not provide for any negotiation of, or time for, a corrective course of action.
• The Bill lacks the substantive guidelines at its heart, as they are to be drafted by the Ministers within twelve months of the Bill’s passage. Enacting the Bill before populating the guidelines creates tremendous uncertainty for companies affected, which could significant impact existing operations, especially in a time of global economic fragility and uncertainty.
• There are no consequences for an individual or group repeatedly filing frivolous or false complaints.
• It is difficult to conceive of an allegation being dismissed by the Minister as “frivolous” simply due to the amount of information that would need to be compiled to make that determination. As a result, the Minister would effectively be forced to investigate each and every complaint made to it. This would lead to a constant state of “investigation” by the Minister of Canadian companies doing business abroad and gross, unwarranted reputational damage to Canadian companies.
• Generally speaking, the measures contained in the Bill are already in place, required and enforced in various other incarnations, such as those imposed by Export Development Canada, the International Financial Corporation and the Global Reporting Initiative. The measures in place now allow these institutions to use their involvement to improve practices, rather than only giving them the option of withdrawing from involvement.
• The Bill proposes new guidelines and standards without regard to the rules and regulations of the sovereign countries in which the investment is occurring. The host countries are important stakeholders that ought to be granted thoughtful consideration in this debate; certainly greater than that evidenced in the Bill.
• There is a complete absence of procedural protection or basic fairness for companies that may be the subject to very serious allegations.
3 What is wrong with the process of developing and passing this bill?
- The development of this bill only included input from anti-mining NGO’s – there was no consultation with industry or development NGO’s.
- The sponsor of the bill, Liberal Member of Parliament John McKay, has made it clear that he does not support the Canadian mining industry:
- The petition available on John McKay’s web site states “Whereas the alleged abuses of human rights and the degradation of the environment by Canadian mining companies is a violation of the principles of fundamental justice …” – he leaps from allegations to concluding that companies have violated “the principles of fundamental justice”
- The extent to which hearings on the bill have accepted anti-mining testimony as fact, rather than identify it as issues to be investigated, indicates the danger of this process providing a platform for publicizing unproven allegations, rather than as an objective process. Anti-mining groups have also used the Committee process, and the protection it provides for defamatory statements, to make outrageous and unsubstantiated allegations about responsible Canadian mining companies.
4 What the implications are?
At a time when Canada needs to reinforce its position as a global centre for the mining industry and mining finance, there is a great danger that this bill would harm these efforts – without actually providing any improvement in CSR. The implications of a bill that places a politicized and punitive process on an area as complex as CRS include:
• Make it more difficult for mining companies to make acquisitions, since acquiring a company or operation that has activities “not consistent” with the guidelines could result in a finding by the Canadian government that the company is not consistent with Canadian law, loss of EDC financing, force divestment by CPP, substantial reduction in consular support.
• Reduce the attraction of Canadian companies as JV / Project partners, as any EDC funding could be withdrawn if the company were found to have acted inconsistently with yet to be defined CSR guidelines, and this bill might make Canadian companies lightening rods for accusations by mining opponents.
• The possibility of driving some mining companies to move head offices out of Canada. This could include “regional” offices of international companies – if a foreign operation is controlled from a Canadian office it could be subject to this law.
• Render EDC financing impractical for Canadian mining companies in developing countries, since uniquely this portion of the financing would be in jeopardy to findings that a company was not acting consistently with the Guidelines. This in turn disadvantages Canadian mining suppliers versus suppliers from countries who’s export financing is more assured and based on a less adversarial assessment of the CSR aspects of projects.
• This, in turn, may harm the mining finance industry in Canada, if there were to be a loss of head offices and a reduction in the ability to use EDC financing and risk management products.