Canadian Government to Withdraw Support from Canadian Resource Companies That Do Not Cooperate with Canada’s CSR Dispute Resolution Processes

The Canadian government has announced that it will withdraw support from Canadian resource companies that decline to participate in dispute resolution processes respecting their foreign operations carried out by Canada’s CSR Counsellor and Canada’s National Contact Point (the committee that deals with implementation of the OECD Guidelines for Multinational Enterprises). Canada’s Minister of International Trade made this announcement on November 14, 2014 in launching Canada’s new Corporate Social Responsibility (CSR) Strategy, which describes a series of steps the Canadian government intends to take to promote corporate social responsibility in the Canadian resource sector abroad. The stated objective is to strengthen Canada’s leadership and earned reputation for excellence in CSR. This latest announcement follows other recent related initiatives of the Canadian government, including proposed new reporting obligations under the Extractive Sector Transparency Measures Act.

The Office of CSR Counsellor was first established by the Canadian government in 2009 as part of its CSR strategy for the extractive sector. The CSR Counsellor has two main roles—to provide CSR advice and guidance to stakeholders in the extractive sector and to carry out review and dispute resolution processes respecting the foreign operations of Canadian companies. The dispute resolution processes have typically been initiated by an NGO or other stakeholder, and companies have been encouraged, but not required, to participate in them. Although six complaints were made to the prior CSR Counsellor before she left the office in 2013, she had little success in mediating them, and companies declined on several occasions to participate in the dispute resolution processes she attempted to initiate. The Canadian government has not yet named a successor.

The new CSR Strategy includes the following two new measures designed to strengthen the dispute resolution process.

First, the CSR Strategy is designed to strengthen the CSR Counsellor dispute resolution process by expressly linking it with the National Contact Point process established by the Canadian government to deal with complaints relating to the OECD Guidelines for Multinational Enterprises. The Guidelines set out voluntary principles and standards for responsible social, economic and environmental conduct by businesses, consistent with domestic and international laws. According to the CSR Strategy, when the CSR Counsellor’s mediation efforts have not been successful, the Counsellor "will encourage and help parties" to refer their issues to the National Contact Point. Canada’s National Contact Point process, which has been in effect since 2000 and is managed by Foreign Affairs, Trade and Development Canada, is generally regarded as more effective than the process established to date by the CSR Counsellor.

Second, while the CSR Strategy still describes these dispute resolution processes as voluntary, it makes, for the first time, the government’s "economic diplomacy" conditional on a Canadian company’s alignment with the CSR Strategy. The government will withdraw trade commissioner and other support from companies that refuse to participate in the dispute resolution process or that are "found not to be embodying CSR best practices." In addition, it states that this "designation" will be taken into account in the CSR-related evaluation and due diligence conducted by Export Development Canada in considering the availability of financing or other support for companies. At the same time, the government will increase support for CSR initiatives in Canada’s diplomatic network and missions abroad to assist Canadian businesses and local communities.

Implications

These changes will make it more difficult for Canadian mining and oil and gas companies to decline participation in dispute resolution processes initiated before either the CSR Counsellor or Canada’s National Contact Point. They may also encourage Canadian and international NGOs to bring more complaints before these bodies. This is likely to impose additional challenges for Canadian resource companies who may be pursued in Canada for actions occurring abroad, even where those matters are or have been more appropriately addressed under applicable foreign laws and dispute resolution procedures. These developments are consistent with recent increased efforts by foreign plaintiffs to bring claims in Canadian courts respecting the foreign operations of Canadian resource companies, as reported in Torys’ August 6, 2013 Mining and Oil and Gas Bulletin. These changes to Canada’s CSR Strategy together with other developments in this area highlight the importance for Canadian resource companies operating abroad to focus on developing long-term community relations strategies and on effectively managing the risks of operating abroad, in accordance with internationally accepted best practices.