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A new form of transparency is coming to the Canadian mining industry, and it will be compulsory. The industry is offering broad support to an initiative called Publish What You Pay, and it’s bound to become mandatory now that Prime Minister Stephen Harper has stated that Canada will align its mining rules with similar transparency initiatives that have been passed in the United States and the European Union.
The concept is simple. Canadian companies will be required to disclose the amounts resource companies pay to any level of government, anywhere in the world. Industry broadly supports the idea in the hope that it will level the playing field in dealing with different governments around the world. There’s also a belief that transparency will reduce or eliminate opportunities for corruption, and enable local communities to see whether mining is benefiting them.
“What the Canadian government is attempting to do is encourage good disclosure globally of what is paid to governments,” says Sander Grieve, head of the mining practice at Bennett Jones LLP in Toronto.
“The driving theory behind it is to ensure that where ever you have material expenditures, there’s transparency so citizens can see where this money is going,” adds Sarah Powell, a partner with Davies Ward Phillips & Vineberg LLP in Toronto.
While the goals are broadly understood, there’s actually no legislation on the table that explains how this new process would work. The first step will be consultations on how to draft the new rules. Until then, Canada’s only official position comes from a statement the prime minister made on June 12 that commits Canada to this new transparency. “Canada will establish new, mandatory reporting standards for payments made to foreign and domestic governments by Canadian extractive companies,” Mr. Harper said.
“It was a bit of a surprise,” says John Boscariol, an international trade practitioner with McCarthy Tétrault LLP in Toronto. Until now, the Harper government has not been a keen advocate of mandatory publish-what-you-pay measures, he says.
Despite the apparent regulatory vacuum, it’s not hard to guess what the Canadian regulatory regime might look like. Whatever Canada sets up is bound to resemble the transparency provisions in section 1504 of the U.S. Dodd-Frank Act. (A U.S. federal court earlier this month vacated the provision, but that ruling may not prove permanent if the SEC changes the way it enforces the section.)
Indeed, many Canadian mining companies already comply with Dodd-Frank because they have dual listings in Canada and the United States.
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