Regulating Canadian Companies Abroad: 2015 Federal Election Primer

Who wins the 2015 Federal Election may not only impact Canadian businesses at home, it may also affect the way Canadian companies conduct business abroad. The current Conservative Federal Government has been increasingly regulating Canadian corporate conduct in transactions and business activities abroad through its Corporate Social Responsibility (CSR) policy and legislative initiatives targeting global corruption.

The Conservative Government has favoured voluntary over mandatory mechanisms to encourage adherence by Canadian companies to International CSR standards. Over the past 24 months, the Conservatives have also implemented legislative initiatives to extend Canada's reach in combatting corruption in international business.

For their parts, the NDP and Liberals, meanwhile, have criticized the Federal Government for not going far enough and have been advocating instead for a larger role for Canada in investigating, enforcing and penalizing Canadian companies that fail to adhere to recognized (voluntary) CSR standards overseas.

This bulletin summarizes the approaches of each of the Conservatives, Liberals and NDP and examines what we might expect from them should they form the next Federal Government after the vote on October 19, 2015.

CSR Policy – Enforcement of CSR Standards

Conservative Party

CSR policy in Ottawa has concentrated in particular on the extractive sector although it has more recently expanded its focus to the ready-made garment sector in the aftermath of the collapse of the Rana Plaza garment factory in Bangladesh.

CSR for the extractive sector made political headlines in Canada with Liberal MP John MacKay's Private Member's bill– Bill C-300 - Corporate Accountability of Mining, Oil and Gas Corporations in Developing Countries Act. Among other things, the Act would have made binding voluntary CSR Guidelines and require the Minister of Foreign Affairs and Minister of International Trade to investigate and then report on any complaint brought against a Canadian resource company operating in developing countries. Bill C-300 was narrowly defeated at third reading on October 26, 2010 with thirteen Liberals and four NDP members not in attendance at the vote.

In the aftermath of Bill C-300, in 2009, the Federal Government launched its first CSR Strategy - "Building the Canadian Advantage: A Corporate Social Responsibility Strategy for the Canadian Extractive Sector Abroad".

This CSR Strategy was criticized by the Opposition Parties as ineffective and "toothless" for its emphasis on voluntary and collaborative initiatives over mandatory mechanisms. A specific sticking point for the Opposition parties was the Government's decision to move forward with a CSR Counsellor and a voluntary dispute mechanism process rather than a CSR "Ombudsman" with the power to mandate participation, investigate complaints alleging abuses, and impose penalties.

After a review of its CSR Strategy, on November 14, 2014, the Federal Government announced its second and "enhanced" CSR Strategy renamed "Doing Business the Canadian Way: A Strategy to Advance Corporate Social Responsibility in Canada's Extractive Sector Abroad".  One of the key changes from the previous CSR Strategy was to introduce consequences to non-compliance with CSR standards and non-participation in dispute resolution processes.

The revised CSR Strategy Government of Canada expressly links diplomatic and economic support for Canadian companies operating overseas to compliance with recognized CSR standards. Canadian companies risk losing trade commissioner services and other government support oversees if they do not participate in the CSR Counsellor's Office or Canada's National Contact Point (OECD Guidelines for Multinational Enterprises) dispute resolution processes.

In addition, the new CSR Strategy adds to its list of endorsed CSR Guidelines, (i) the United Nations Guiding Principles on Business and Human Rights (UNGP), an international human rights framework that delineates expectations of corporations to address the human rights impacts of their operations internationally; and (ii) the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas.

NDP and Liberals

For the NDP and Liberals the enhanced CSR Strategy does not go far enough. Both parties continue to advocate for a CSR Ombudsman with powers of investigation and enforcement to oversee the activities of Canadian mining, oil and gas companies overseas.

NDP MP, Ms. Ѐve Péclet, (Pointe-de-l'Ile) introduced Bill C-584 An Act respecting the Corporate Social Responsibility Inherent in the Activities of Canadian Extractive Corporations in Developing Countries that called for the creation of an Extractive Sector Ombudsman. Bill C-584 was defeated at second reading on October 1, 2014. In contrast to Bill C-300, all MPs voted along party lines with the NDP and Liberal MPs supporting the Bill (albeit with some MPs expressing reservations with the content of the Bill) along with Green Party leader Elizabeth May. Conservative MPs voted against the Bill.

Bill C-486 – An Act respecting corporate practices relating to the extraction, processing, purchase, trade and use of conflict minerals from the Great Lakes Region of Africa (defeated on September 24, 2014) was introduced by NDP MP and Foreign Affairs Critic Paul Dewar to require Canadian companies that use tin, tungsten, tantalum or gold in their products to undertake supply chain due diligence. In debating the Bill, Conservative MPs indicated a concern with legislated mandatory due diligence.  

The NDP have also advocated for binding compliance mechanisms to ensure supply chain accountability for Canadian manufacturing companies that manufacture products in developing countries. Following the factory building collapse in Bangladesh, the NDP initiated a study at the House of Commons Standing Committee on Foreign Affairs and International Development. While no official report was published, MP Paul Dewar posted an unofficial summary prepared by the NDP of what it took as the findings and recommendations based on the testimony provided. One of the recommendations of the NDP report was to explore options for binding compliance mechanisms for supply chain accountability in the Canadian clothing industry.

Anti-Corruption, Anti-Bribery, Transparency and Government Procurement

In the area of anti-corruption and transparency also subject to the CSR Strategy, Prime Minister Harper moved forward with concrete legislation. The Conservative Party has also imposed more stringent rules governing its supply chain with its revised Integrity Framework.

Corruption of Foreign Public Officials Act (CFPOA)

On June 19, 2013, legislation amending Canada's CFPOA received Royal Assent. The amendments help address the criticism that Canada has not done enough in the fight against bribery in international business. In addition to increasing the maximum penalty and creating a new "books and records" offence, the CFPOA has extended jurisdictional reach. Canadian authorities can now prosecute bribery based on Canadian nationality regardless of where the person is living or where the bribe took place. Previously, Canadian law enforcement was required to establish a "real and substantial link" between the offence and Canada.

Extractive Sector Transparency Measures Act

The Government had been criticized for its failure to implement revenue transparency legislation. John McKay introduced a revenue transparency private member's bill on February 26, 2013 - Bill 474 - An Act respecting the promotion of financial transparency, improved accountability and long-term economic sustainability through the public reporting of payments made by mining, oil and gas corporations to foreign governments. The Bill dubbed the "Sunshine Bill" was defeated at second reading on April 9, 2014 after the Government had announced its intention to introduce its own revenue transparency legislation.

This Government legislation came into effect as of June 1, 2015. All resource companies subject to the Extractive Sector Transparency Measures Act, must report all covered payments (including taxes, royalties, production entitlements) it makes to governments, both domestically and internationally, including payments made to government agencies and other bodies carrying out governmental functions. The Act includes a two-year deferral in its application to payments made to Aboriginal governments in Canada. The Federal Government has stated that further consultations will be held with Aboriginal governments and organizations regarding the application of the reporting requirements on payments made to these groups.

Integrity Regime

Under the Federal Government's Integrity Regime, most recently revised on July 3, 2015, a supplier will be debarred from doing business with the Government of Canada if it or members of their board of directors is convicted of or discharged (absolutely or conditionally) in the last three years of a listed offence, whether the offence took place in Canada or overseas. The listed offences include money laundering, bribery and falsifying books and records. This 10-year ban can now be reduced by five years if the supplier can show that it has cooperated with legal authorities or undertaken remedial actions to address the offence. The Federal Government may also suspend a supplier from bidding on government procurement contracts for up to 18 months if the supplier has been charged with, or has pleaded guilty to, a listed offence.

Polls to Watch

As Ministers of Natural Resources and International Trade, respectively, Greg Rickford and Ed Fast, have promoted the Government's CSR Strategy. Both Fast, MP for Abbotsford (British Columbia) and Rickford, MP for Kenora (Ontario) are expected to be re-elected, although Rickford is in a tighter race.

Lois Brown is the Conservative Candidate for Newmarket-Aurora, first elected as Member of Parliament for Newmarket-Aurora in 2008 and re-elected in 2011. As Parliamentary Secretary to the Minister of International ‎Development and member of the House of Commons Standing Committee on Foreign Affairs and International Development, Brown has been increasingly a Conservative spokesperson on CSR Policy. Like Fast and Rickford, Brown is expected to hold her seat.

MP and NDP Foreign Affairs Critic, Paul Dewar has been the most vocal advocate for greater Canadian oversight and regulation of Canadian companies' international activities within the NDP Caucus. Paul Dewar is the NDP MP and current candidate for the Ontario riding of Ottawa Centre. Dewar, first elected to the House of Commons in 2006, is expected to be re-elected in 2015.

NDP Wayne Marston, the NDP's Critic for Human Rights and Vice Chair of the House Subcommittee for International Human Rights has also been vocal on CSR issues, particularly the CSR Counsellor's Office. Marston was first elected in 2006 and is again the NDP candidate for Hamilton East – Stoney Creek. In a closer race, Marston is expected to be re-elected.

Since Bill C-300, John McKay has retained the highest profile on these issues in the Liberal Caucus. MacKay is MP for Scarborough – Guildwood. First elected in 1997, MacKay has gone on to win the riding in 2004, 2006 and 2008. John MacKay is expected to hold his seat.

Marc Garneau, the Liberal critic for Foreign Affairs, International Trade and La Francophonie, has profile in CSR-related issues. Marc Garneau has served as the Member of Parliament for the downtown Montreal riding of Westmount—Ville-Marie since 2008, winning that election by over 9000 votes. He was re-elected to the House of Commons in the 2011 federal election by only 642 votes. Garneau is the Liberal candidate for the new riding of Notre-Dame-de-Grâce–Westmount, which he is expected to win with more than 50% of the popular vote.