Large-scale mining, oil and gas extraction is dirty business. Extractive projects often pit investors, extractive companies and national governments against communities and indigenous groups who seek to protect land and resources that support their livelihoods. In their quest for profit, some governments and extractive companies cut corners on environmental protection and are complicit in human rights violations.
Canadian extractive companies have been implicated in controversies around the world–from California to Sudan to Guatemala. Yet the Government of Canada provides support to the extractive sector, often without assurances to the public that a project will not harm the environment or violate human rights. In some cases, the government has supported projects after well-documented human rights and/or environmental abuses have been revealed.
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There are at least eight ways that the Government of Canada supports Canadian extractive companies working in foreign countries:
Export Development Canada (EDC) has provided significant amounts of funding to extractive companies through loans and guarantees (insurance). In 2005, it provided $2.54 billion in total commercial loans and guarantees to the energy sector. Now EDC is looking to expand into China's extractive sector, a country with one of the worst mining safety records in the world and a long track record of human rights abuses.
As a member of and shareholder in the Multilateral Investment Guarantee Agency (MIGA), Canada indirectly provides insurance for questionable projects–including those managed by Canadian companies. In October 2004, Canada's Anvil Mining Ltd. provided logistical support to the army in the Democratic Republic of Congo to help suppress a small-scale rebel uprising. According to the UN, the military committed a number of serious human rights violations including alleged summary executions of civilians. The next year MIGA provided $13.6 million in insurance for the project to RMB International (Dublin) Ltd. and Anvil Mining Ltd.
Canadian ambassadors have promoted the interests of Canadian mining companies to generate business in their host countries. For example, on November 4, 2004, a national newspaper in Guatemala released a survey that indicated 95.5 percent of people living near the Canadian-owned Marlin mine opposed the operation. On the same day, in the same newspaper, the Canadian ambassador to Guatemala, James Lambert, published an article citing the benefits of mining for some 200 indigenous communities in Canada. The article cemented the perception among Guatemalan civil society that the current ambassador was more interested in promoting Canadian mining interests in the region than human rights.
For more than a decade, Canada's TVI Pacific Inc. has intimidated and harassed an indigenous group and local community in the Philippines, sometimes through the use of paramilitary security forces. These forces have been implicated in blockading the free movement of community members, even on roads outside the concession site, forcibly evicting families on the concession site, and destroying houses. They have also fired shots at community members who oppose the mining project. TVI Pacific received funding from the Canadian Embassy in Manila for a development project that benefited women whose immediate families were TVI employees. Although the Canadian Embassy was aware of the violence and human rights abuses associated with the mining project, and the controversy caused by the TVI directed development project, it twice extended financial support for the income-generating project.
In 2001, the Presbyterian Church of Sudan filed a suit in a U.S. court under the Alien Tort Claims Act claiming that Talisman Energy Inc. was involved in crimes such as ethnic cleansing, enslavement, kidnapping and rape in Sudan. In 2004, the Canadian Embassy in Washington submitted a diplomatic letter to the Federal District Court via the U.S. Department of State. The letter, which pushed to have the suit rejected, called the case "an infringement in the conduct of foreign relations by the Government of Canada" that would have a "chilling effect" on Canadian firms trying to use trade to support the peace process.
The Canadian International Development Agency provided technical and financial support through its Energy, Mining and Environmental Project to redraft Colombian mining legislation. The revised 2001 Mining Code (Law 685/01), which was adopted without consultations with potentially affected indigenous communities, creates investment conditions that are extremely favourable to foreign companies. The Code weakened a number of existing environmental and social safeguards and created financial incentives including dramatically reduced mining royalties and taxes.
By supporting investor-state provisions in regional trade agreements, the Canadian government discourages the development of legislation that protects the environment and public welfare. In 2003, the State of California passed legislation that required metallic mining sites near indigenous sacred areas to be restored to pre-mining conditions through backfilling. Glamis Gold Ltd., a Canadian company acquired by Goldcorp Inc. in 2006, owned a mine in California that was affected by the new legislation. Glamis sued the U.S. government under the North American Free Trade Agreement, demanding $50 million in compensation for anticipated loss of profit as a consequence of the new regulatory provisions. The case continues.
In 1998, Manhattan Minerals Corp. joined the Team Canada trade and investment mission to Latin America. The following year, the Peruvian government granted mining concessions in the town of Tambogrande to Manhattan, overriding legal provisions that prohibit such development near international borders. The local community rallied to protest the gold mine, holding a referendum in which virtually all voters opposed the mine. The referendum, which played a vital part in halting the project, has since been replicated by other communities threatened by mining projects.
These Fact Sheets highlight several ways that the Government of Canada supports Canadian extractive companies working in foreign countries. It also describes the due diligence that the government undertakes before deciding whether to support an investment for some (but not all) forms of support and explains why this assessment process is often inadequate. Finally, it identifies steps that the Government of Canada could take to improve corporate practice in the mining, oil and gas sectors.
Due diligence is a financial term that describes the research and analysis done by a company before entering into a business transaction. Here, the term refers to the assessment process undertaken by government before supporting a proposed project.
The process seeks to: