After a two year consultation process, Canada’s new Extractive Sector Transparency Act came into effect in early June. The Act is part of an international effort underway in the EU and the United States aimed at combating corruption, while increasing transparency in the mining space. Dubbed the ‘Publish What You Pay’ initiative, the newly-enacted legislation will take effect at the beginning of a mining company’s 2016 fiscal year, requiring all Canadian owned companies making payouts of 100,000 dollars or more to submit reports no later than 150 days after the end their 2016 year; “This means that entities with a financial year ending December 31 will have to comply for the financial year starting January 1, 2016, and file a report by May 29, 2017, for payments made during 2016,” Eden Oliver of Bennett Jones reports.
As mentioned earlier, Canada’s initiative is part of a widespread effort to hold not only mining companies accountable, but also governments around the world. “The enhanced transparency will help reduce instances of corruption by enabling citizens around the world to hold their governments accountable for how they allocate and spend mining revenues,” the Engineering and Mining Journal recently reported. “It will also help to ensure that these revenues contribute to sustainable development and poverty reduction.”
Financial reports from all extractive companies will be posted on SEDAR, the Canadian Securities Administrators official filing website. Enhanced transparency not only benefits governments, companies and citizens, it also benefits company shareholders. Increased access to financial payments and records allows shareholders to be more informed when deciding to sell or retain shares and can make a miner more attractive to those looking to invest in the resource sector.
With 47 years experience in law including his years as counsel to The Saskatchewan Mining Development Corporation, Regina lawyer Tony Merchant is familiar with the legal requirements involved for company public disclosures and adds insight into the Extractive Sector Transparency Act, stating: “With any new measure, there is an adjustment period and learning curve that is required. While we know that it is mandatory that companies comply with the new act, we are still unaware of what exactly will be made public.”
The list of what must be disclosed is broken into categories including: Taxes, royalties, fees, including rental fees, entry fees, regulatory charges as well as fees for licenses, permits or concessions; bonuses, including signature, discovery and production bonuses; dividends other than dividends paid as ordinary shareholders. A complete list can be found on the Justice Laws website.
While what will be made public remains vague, penalties for non-compliance are firm, “Federal fines can total 250 thousand dollars a day until compliance is met,” Tony Merchant adds. “The Ministry of Resources has also been given extensive investigative tools and can conduct on-site inspections and detailed audits.”
The new act will work in accordance with the 1999 Corruption of Foreign Public Officials Act, an act that criminalizes the bribery of foreign officials. To date, the Corruption of Foreign Public Officials Act has yielded three corporate convictions and is currently investigating 30 more.
The new legislation places Canada ahead of other nations developing the same protocols, securing our status as a global powerhouse in the resource sector.