Private Member’s Bill in Canada Calls for Disclosure of Payments to Foreign Governments

On February 26, 2013, a private member’s bill was introduced into the Canadian House of Commons that proposes new disclosure requirements regarding payments to foreign governments by mining, oil and gas companies incorporated or resident in Canada.

The private member’s bill (Bill C-474) is similar to rules that the U.S. Securities and Exchange Commission finalized in August 2012 and that require resource extraction issuers to disclose certain payments made to the U.S. government or foreign governments (SEC Rules). Australia is currently undertaking a pilot implementation of similar rules, and a U.K. parliamentary committee recommended in August 2012 that the United Kingdom also implement similar rules.

Bill C-474 would require a mining, oil or gas company incorporated or resident in Canada to submit to the Minister of Foreign Affairs and the Minister of Natural Resources annual transparency reports that disclose all non-negligible payments provided by the company or its subsidiaries to a foreign government.

The annual disclosure report will be made publicly available on the company’s website, and an annual compilation of information from the reports would be made publicly available on the departmental website of the Minister of Natural Resources. The disclosure report is to include statements of total payments made by the company or its subsidiaries, categorized by the foreign government to which the payments were made, the extractive project, the type of payment related to each extractive project and the timing of payments.

Payments would include those made to further mining, oil or gas industry activities and that are not negligible. Expressly included are taxes, royalties, dividends and profit shares, licence and concession fees (including rental and entry fees), production entitlements and in-kind payment, bonuses, provision of infrastructure and other in-kind payments, social payments and transfers, service fees paid in the context of a contractual or employment agreement (including consulting fees), and other prescribed non-negligible material benefits.

The definition of "foreign government" includes an agency or corporation of a foreign government and a foreign public official acting in their official capacities.

Bill C-474 differs from the SEC Rules in several key respects: It is broader in that it applies to payment of consumption taxes, which are expressly excluded from the disclosure requirements of the SEC Rules; the bill expressly applies to social payments, transfers and service fees paid in the context of a contractual or employment agreement, which are not specified in the SEC Rules. In addition, Bill C-474 requires the disclosure reports to be independently audited before submission, whereas the SEC rejected this requirement to avoid significantly increasing compliance costs.

It remains to be seen whether the bill will gain any traction in the House of Commons. We note that Bill C-474 was introduced by the Hon. John McKay, who introduced a private member’s bill (Bill C-300) in 2009 to issue guidelines articulating corporate social responsibility standards for mining and oil and gas companies with operations in developing countries. Bill C-300 was defeated during its third reading in the House of Commons.