On October 27, 2010, the House of Commons, on third reading, narrowly voted 140 to 134 against Bill C-300, An Act respecting Corporate Accountability for the Activities of Mining, Oil or Gas in Developing Countries. Few private member bills have in recent times generated as much notoriety as this proposed legislation, which was first introduced in Parliament in February 2009, and survived the end of that Parliamentary session as a result of special rules that apply to private member bills. (See “An Act respecting Corporate Accountability for the Activities of Mining, Oil or Gas in Developing Countries,” February 2010 Mining Review.)
It is clear however that the debate that has ensued on the subject of corporate accountability of Canadian businesses operating in emerging market countries will by no means dissipate with the defeat of Bill C-300 in the House of Commons. Issues concerning social responsibility, particularly in relation to the activities of the Canadian extractive industries, will therefore continue to dominate the agenda of management and corporate board members as well as newspaper headlines.
Bill C-300’s expressed statutory purpose was to ensure that Canadian corporations engaged in mining, oil or gas activities in developing countries would not receive support from the Canadian government, unless they acted in a manner consistent with “international environmental best practices” and Canada’s “commitments to international human rights standards.” It would also have created an investigations process allowing Ministers (of Foreign Affairs as well as International Trade) to receive complaints from within Canada, or a resident or citizen of a developing country, based on allegations of violation of guidelines to be issued by the Ministers relating to corporate accountability standards for the mining, oil or gas activities in developing countries.
A successful complaint would have required the Ministers to publish the findings in the Canada Gazette, and caused transactions between the company and the Export Development Canada to be terminated, investments by the Canada Pension Plan Investment Board in the company to be barred, and consular services to the company by the Ministers of Foreign Affairs and International Trade to be withdrawn.
Concerns expressed in various quarters, as well as by the extractive industries, included the legislation’s shortcomings in the area of procedural fairness for corporations being investigated, application of legally unclear standards by Ministers, and extraterritorial reach into affairs of other sovereign countries. Additionally, a very serious issue for the industry was the incalculable loss of reputation that a corporation would suffer simply by being named in a complaint, even if thereafter the corporation were to be vindicated by the Ministers’ examination. The release by the Ministers of findings of full or partial validity of a complaint, in the absence of the application of judicial or quasi-judicial rules, were also seen as highly problematic and substantially prejudicial to the corporation even beyond any withdrawal of benefits from Canadian government entities. The consequences could include that of potentially laying the ground for adverse measures being taken by the governments of the foreign countries against the Canadian corporation (e.g., withdrawal of licenses, mining concessions, etc).
Federal Government’s CSR Counsellor Initiative
About the same time that Bill C-300 was coming to a third vote in the House of Commons, the Office of the Extractive Sector Corporate Social Responsibility Counsellor (CSR Counsellor) announced on October 20, 2010, that it had launched its process in order to facilitate the conduct of reviews of activities of the extractive industries outside Canada based on IFC Performance Standards, Voluntary Principles of Security and Human Rights, the Global Reporting Initiative and the OECD Guidelines for Multinational Enterprises. The review mechanism is the result of an extensive outreach by the federal government with the extractive industries and other interested parties, with the aim of developing a “fair, credible and useful” voluntary, non-binding mechanism for dealing with complaints about activities of Canadian companies in foreign countries.
Developments in the International Arena
While the debate surrounding Bill C-300 has occupied and received considerable and intense attention in Canada, in the international arena, seminal work in the area of human rights has been underway since 2005. Professor John Ruggie, who was appointed Special Representative of the UN Secretary-General on business and human rights in July 2005, and whose term has already been extended twice, will deliver his final report in June 2011.
His work, based on the framework of “three pillars” of (i) “the state’s duty to protect against human rights abuses by third parties, including those by businesses;” (ii) “the corporate responsibility to respect human rights;” and (iii) “the need for better access to remedy when corporate-related abuses have occurred,” will become the influential work in this area, and lay the foundation for further legal analyses and implementation. Much work has already been done in helping corporations deal with the necessary due diligence required when investing and operating in emerging market countries. In time it is expected that “human rights impact assessments” will become as common as environmental impact assessments. Furthermore, as we have noted elsewhere, such due diligence will be critical to the formulation of a strategy for investing in emerging market countries, along with ethical and legal compliance obligations (e.g., anti-corruption compliance) and investment treaty protection planning (e.g., “treaty-shopping” for the optimal bilateral on regional investment protection treaty).
Finally, we will likely continue to see judicial proceedings being brought in Canadian courts or U.S. courts (under the Alien Tort Claims Act, which has been around for over 200 years but has received far more attention in the past decade), notwithstanding that the proponents of these proceedings have been told by the courts (and have even themselves acknowledged in press releases) that the plaintiffs have no standing or the proper venue for remedies lies elsewhere.
We expect that the various avenues of review of complaints concerning overseas activities of the Canadian extractive industries, either through the mechanism of CSR Counsellor or those that will emanate from the comprehensive framework being developed by Professor John Ruggie, will increasingly dominate future discussions in this critical area.