Skip to main content

Government Payment Disclosure: Introduction of the Extractive Sector Transparency Measures Act in the House of Commons

Reading Time 6 minute read


Corporate Social Responsibility Law

The Extractive Sector Transparency Measures Act (the “Act”), which the federal government has inserted as section 377 of omnibus Bill C-43, was introduced in the House of Commons on October 23, 2014.  This is in keeping with Natural Resources Minister Joe Oliver’s March 2014 announcement that Canada was to impose mandatory reporting requirements on mining and energy companies for payments in excess of $100,000 to governments by June 2015.

Although the federal government’s preference was to implement the mandatory reporting standards through provincial securities regulation, they said that if there was no agreement, that they would proceed with federal legislation – and they have.

This announcement follows Prime Minister Stephen Harper’s June 2013 announcement, prior to the G-8 Summit, that Canada would develop new standards to align with initiatives by other G-8 countries (including the US’s Dodd-Frank Act s. 1504 and the EU’s 2013 Transparency Directive Amending Directive) and recommendations made by the Resource Revenue Transparency Working Group in January 2014. 

Last spring, Natural Resources Canada held consultations requesting feedback from stakeholders on various issues.  Sixteen organizations, mostly NGOs and organizations from the extractive industry, submitted feedback.

The following highlights some of the provisions of the Act.

The purpose of the Act is “to implement Canada’s international commitments to participate in the fight against corruption through the implementation of measures applicable to the extractive sector” that are designed to deter and detect corruption, including corruption under the Criminal Code and the Corruption of Foreign Public Officials Act.

Entities that would be subject to the disclosure obligation are those engaged in the development of oil, gas or minerals and making payments related thereto to or for a payee.  “Development” is given a broad scope, encompassing exploration, extraction and acquisition or holding of a permit, licence, lease or other authorization to carry out such activities.

The disclosure obligation and related requirements would apply to all entities listed on a stock exchange in Canada, which corresponds to nearly 60% of the world’s mining companies. It would also apply to those having a place of business in Canada, doing business in the country or having assets in Canada and meeting two of the following three conditions based on its two last financial years: (i) having assets of $20 million in value, (ii) having generated at least $40 million in revenue and (iii) employing an average of at least 250 employees.  The government would be empowered to add, by regulation, other entities that would be subject to the provisions relating to disclosure.  The Act also provides for a transitional period when an entity ceases to meet the aforementioned conditions.

The definition of payee includes governments in Canada and foreign governments as well as any entity that is established to exercise or perform a duty of such governments, therefore including Aboriginal governments or bodies.  Payments made to employees of payees or to entities controlled by them as well as payments due to payees made to other entities are also covered.  In reaction to concerns raised by some First Nations, the government included a two-year delay following the coming into force of the Act before payments to Aboriginal governments would need to be disclosed; a period which should allow the government to consult on the issue with First Nations.

As to the form of payments subject to disclosure, the Act encompasses both monetary and in kind payments falling into one of the following categories: Taxes (other than consumption taxes and personal income taxes); royalties; fees (including rental fees, entry fees and regulatory charges as well as fees or other consideration for licences, permits or concessions, production entitlements); bonuses (including signature, discovery and production bonuses); dividends (other than dividends paid as ordinary shareholders); infrastructure improvement payments and any other prescribed category of payment.

Payments that would need to be disclosed are those falling into the categories that amount, in the aggregate and for the same payee, to at least $100,000 (or such other threshold as may be prescribed by regulation for a given category) for a financial year.  The Act does not provide for calculations on a project basis, although it states that such basis could be part of the Minister’s written requirements.  For purposes of determining the total amount of payments, the value of in kind payment is deemed the cost to the entity or the fair market value if such cost cannot be determined.

The disclosure would be made by way of an annual report setting out the payments made during the last financial year.  Such report is required to be sent to the Minister in charge of the application of the Act (such minister to be designated by the government) no later than 150 days after the end of each of the entity’s financial years.  The form of the report will be determined by the Minister.

Interestingly, the Act grants the Minister the power to determine that reporting requirements from another jurisdiction constitute an “acceptable substitute” for those set out above.  In such case, an entity would be deemed to comply with the requirements if it provides the Minister with the report it has filed with the jurisdiction’s competent authority and meets other conditions the Minister may determine.  This provision is in line with the government’s stated intent to harmonize its standards with those currently in place in other jurisdictions.

The Act also contains provisions that would allow for the filing of one consolidated report only for an entity and its subsidiaries provided that such report contains information with respect to the payments made by the subsidiaries.

In addition to the reporting requirements, the entity would have to make the information prescribed by regulation, or, in the absence of regulation, the report itself, available to the public.  This information would be made public for a period to be determined by regulation, or, if no such period is prescribed, for five years.

The Act grants the Minister general enforcement powers, including the power to order an entity to send him a list of the extractive projects in which it has an interest as well as an audit containing, among other elements, an explanation of how the entity treated the payments.  The Minister would also have the power to enter into agreements with foreign governments for the purpose of administrating or enforcing the Act.

Once enacted, the Act would come into force on the day or days to be fixed by order of Governor in Council at a time currently unknown, although the government’s stated intent is to enact the standards by April 1, 2015.

It will also be interesting to track the implementing regulation, since it has the potential to add or modify important parameters such as the disclosure threshold amount for each category of payments and the information that must be made public.


The Act seems to be designed with enough flexibility to align its requirements with those that are coming out of the US and the EU – which is good news for companies operating in a number of jurisdictions.  Hopefully the coming regulations achieve the goal of alignment.

Originally, there was concern that the required consultation with First Nations in Canada would delay the implementation of this initiative by June 2015, the date the Minister Oliver set as the goal.  Canada has sidestepped this issue by including payments to First Nations in the first instance, but delaying implementation of that requirement for two years to allow for that consultation.

Impact Benefit Agreements (IBAs) and similar agreements are used in Canada and internationally for payments by resource companies.  These agreements typically require payments and other agreement terms to be kept confidential.  However, most include an exception where disclosure of the confidential information is required by applicable law.  Therefore, the implementation method chosen will have to be clear to permit companies that are otherwise bound by confidentiality to disclose payments.

For more information on initiatives relating to transparency measures in the extractive sector, please read our previous bulletins:

FCA consults on the implementation of the Transparency Directive’s requirements for reports on payments to governments for financial years beginning on or after 1 January 2015

Canada Considering Government Payment Disclosure

EU Proposes Regulation Regarding Voluntary Conflict Mineral Disclosure Scheme

Resource Revenue Transparency Report Release

Contact the Author

For more information or to discuss a particular matter please contact us.

Contact the Author



    Receive email updates from our team