Canada has announced its intention to introduce new legislation mandating the disclosure of payments made
mining companies to domestic and foreign governments. This article provides an overview of the new requirements.
Prime Minister Stephen Harper made this announcement on
June 12, 2013 just days before the G-8 Lough Erne Summit, where transparency will be one of the main topics of discussion.
The Canadian government is expected to conduct consultations with key stakeholders before implementing the new
The international movement towards disclosure
Canada’s announcement follows on the heels of many recent initiatives seeking to impose disclosure requirements on
the extractive industry. Legislation mandating disclosure has already been adopted in the United States and the
European Union, while Switzerland has announced its intention to do the same.
In the United States, section 1504 of the Dodd-Frank Wall Street Reform and Consumer Protection Act requires that
resource extraction issuers publish the payments they make to domestic and foreign governments for the commercial
development of oil, natural gas and minerals. The United States Securities and Exchange Commission released rules
implementing the legislation in August of 2012.
Likewise, the European Union has voted in favour of legislative reporting requirements for oil, gas, mining and forestry
companies. Pursuant to this directive, European companies will be legally required to publish any payments
exceeding €100,000 that are made to governments at home and abroad.
In Switzerland, the government approved a motion tabled by its Foreign Affairs Committee that called for establishing
disclosure laws similar to those already enacted in the United States. The new Swiss legislation may apply to both
extractive activities and commodity trading.
Recently released recommendations for new legislative reporting requirements
Stakeholders are already urging the Canadian government to ensure that its disclosure requirements align with those
already adopted in other jurisdictions.
On June 14, 2013, the Extractive Resource Revenue Transparency Working
Group (the Working Group) released a recommended framework for Canada’s new legislative disclosure
The Working Group was formed in September 2012 by the Mining Association of Canada, the
Prospectors & Developers Association of Canada, Publish What You Pay-Canada and the Revenue Watch Institute.
Its draft framework will likely be considered by the government in establishing the new Canadian disclosure
As one of its key recommendations, the Working Group urges the Canadian government to incorporate equivalency
mechanisms in its disclosure regulations. It stresses that a globally consistent reporting standard will be easier for
mining companies listed in multiple markets to comply with.
The Working Group’s framework is based on consultations that were undertaken with industry, civil society,
government officials and various experts. In addition to its recommendation regarding equivalent reporting regimes,
the Working Group also offers suggestions as to the appropriate venue for implementation, the scope of reporting,
required payment categories and payment reporting thresholds.
It suggests that the upcoming disclosure requirements be implemented through current provincial securities
Although the Working Group acknowledges that this implementation strategy restricts the mandatory
requirements to public companies, it stresses that the regime will benefit from the experience that Canadian securities
administrators already have in receiving and managing disclosure filings.
Suggested disclosure regime
The Working Group also recommends that disclosure be required for payments made by “covered companies,” which
includes the company itself, its subsidiaries and any other entities under its control.
According to the draft framework,
various forms of payments will be disclosed, including profit taxes, royalties, fees, production entitlements, bonuses,
dividends, infrastructure payments as required by law or contract, transportation and terminal operations fees, as well
as fines and penalties. The framework also proposes the inclusion of two reporting thresholds to accommodate both large and small issuers.
The recommended threshold for issuers listed on the TSX is $100,000, while a second threshold of $10,000 is
recommended for TSX Venture issuers. The Working Group suggests that the new legislation would best achieve transparency by not including any
exemptions to the reporting requirements. Although there is no specific penalty for non-disclosure included in the
Working Group’s framework, it does recommend that the penalty be consistent with those used to enforce provincial
securities disclosure requirements.
Over the coming months, the Working Group is inviting stakeholders to submit their written comments and feedback on
the draft framework, which will be considered prior to the final endorsement of the framework in November 2013.
Comments must be submitted by September 1, 2013.
Author: Andrew Godfrey