Prime Minister Stephen Harper announced Wednesday June 12, that Canada is adopting a G8 initiative requiring disclosure of payments by Canadian mining and oil and gas companies to foreign and domestic governments. As a result of this G8 initiative, citizens in resource-rich countries are expected to gain access to information to combat any corruption in their extractive sectors and to demand additional accountability from their governments.
It is expected that the Canadian federal government will consult with the provinces and territories, First Nations and aboriginal groups, and industry and civil-society organizations in developing a framework and setting up a new reporting regime, which would be enforceable by law. Based on some unofficial preliminary estimates, it could take up to two years to implement the new regime. Details relating to how the new regime will be policed and by whom, disclosure methods and timing, and possible fines and other penalties for non-compliance will need to be determined.
The announcement is in line with developments in the industry, which has been working hard on improving transparency. The U.S. and the European Union have already adopted measures requiring extractive firms to report taxes, royalties, fees (including license fees), production entitlements, bonuses, and other material benefits to governments, with the U.S. rules taking effect recently and the EU’s directive not yet having been fully implemented.
In light of the developments, issuers should be aware that they will need to consider how their legal, audit and IT functions will need to adapt to the new regime once it is finalized and implemented. We will continue to monitor and update our clients on any developments relating to the new regime.