Canada’s National Contact Point (NCP) recently sanctioned China Gold International Resources Corp. Ltd. (China Gold) for its unwillingness to participate in consultations under the OECD Guidelines for Multinational Enterprises (OECD Guidelines) regarding China Gold’s mining activities in Tibet.

Canada’s NCP concluded that China Gold’s failure to participate in the NCP consultations process will be “taken into consideration in any applications by the Company for enhanced advocacy support from the Trade Commissioner Service and/or Export Development Canada (EDC) financial services, should they be made.” This decision means that in the future China Gold will likely be ineligible for official letters of support, commercial advocacy in foreign markets, and participation in government trade missions. The decision represents the first time Canada’s NCP has imposed such sanctions under Canada’s enhanced Corporate Social Responsibility Strategy for the Canadian Extractive Sector (CSR Strategy). (For a prior Arent Fox alert on Canada’s new CSR Strategy, click here).

As the China Gold sanctions show, extractive companies working in or out of Canada should be familiar with the OECD Guidelines consultation process (also known as the “specific instance” process) and the consequences of non-participation in that process in light of Canada’s new CSR Strategy.

What is the OECD “Specific Instance” Process?

Each country that adheres to the OECD Guidelines must establish a National Contact Point to facilitate the resolution of complaints arising under the OECD Guidelines in specific circumstances. The OECD Guidelines are voluntary principles and standards of responsible business conduct that cover a wide range of issues, including human rights, employment and industrial relations, environment, anti-corruption, and consumer interests. Any interested party that wants to address the business practices of multinational enterprises operating in or from the adhering country’s territory may submit a “specific instance” request to the responsible NCP. The NCP then assesses the merits of the request, seeks to facilitate a resolution of the matter, and issues a final report on the outcome.

In the situation involving China Gold, the Canada Tibet Committee (Committee) submitted a “specific instance” request on behalf of a group of affected communities to Canada’s NCP seeking a review of the company’s mining practices in the Gyama Valley of Tibet. The Committee alleged, among other things, that China Gold’s labor and employment and health and safety practices fell short of the OECD Guidelines, particularly in connection with the death of 83 mine workers living in a mining camp.

What are the Consequences of Not Participating in the Specific Instance Process?

Because an NCP’s final report is typically made public, a company’s failure to participate in the “specific instance” process is likely to be known widely and may result in reputational harm. Failure to participate in Canada’s “specific instance” process in particular may have additional consequences. Under Canada’s enhanced CSR Strategy, companies that fail to participate in Canada’s “specific instance” process will be denied support by the Canadian government in foreign markets.

China Gold’s recent failure to participate in the OECD “specific instance” process triggered sanctions under Canada’s enhanced CSR Strategy for the first time. In particular, Canada’s NCP concluded that China Gold’s conduct would be taken into consideration in any future applications by the company for government advocacy services. Canada’s NCP stated: “As the goal of both the NCP and the CSR Strategy is to encourage improvement in terms of a company’s use and integration of CSR best practices, should the Company [China Gold] wish to be able to access future [advocacy] support of this type, they will need to submit a Request for Review to the NCP, or show good-faith dialogue with the [petitioner].”

Increasingly, the business practices of multinationals are coming under scrutiny through the “specific instance” processes of countries like Canada that adhere to the OECD Guidelines. The sanctions against China Gold demonstrate that a multinational’s failure to participate in Canada’s “specific instance” process may result in significant consequences.