Exporting Dispossession?

On September 27, 2009, local Mayan community leader Adolfo Ich Chamán—an outspoken critic of mining impacts on his community—died during violent clashes near his home in El Estor, Guatemala. In a suit brought before the Ontario Superior Court, Ich’s widow alleges that he was snatched, beaten and ultimately shot by private security personnel employed by the nearby mine. The project in question, a nickel open-pit mine, had been acquired the year prior by Canadian company Hudbay through its purchase of yet another Canadian company, Skye Resources. The acquisition and the project were taking place within a politically charged context of land disputes with local communities and the broader historical context of violent dispossession of Mayan communities in this Central American country. In pressing her suit, Ich’s widow joined two other claims against Hudbay now in the Ontario courts, regarding the shooting of another local man that same day and the alleged gang rape of eleven women during evictions in January 2007. Based on Hudbay’s own investigation, the Toronto Stock Exchange–listed company asserts on its website that allegations of abuses by its Guatemalan subsidiary personnel are “without merit,” and sold the property to a Cyprus-based Russian mining company in 2011.

The activities of Canadian mining companies have generated much debate over the past decade. This is an important issue, given that Canada hosts approximately 75 percent of publicly listed mining companies in the world. Environmental and human rights complaints from local communities in several developing countries led to the organization of a national roundtable on extractive industries in 2007, and motivated the introduction of (the narrowly defeated) Bill C-300 that would have introduced federal government guidelines for corporate conduct and independent examination of complaints. Following the defeat of Bill C-300, debate has continued regarding the best approach to improve extractive sector practices and accountability for the overseas activities of Canadian mining companies.

In Imperial Canada Inc.: Legal Haven of Choice for the World’s Mining Industries, Alain Deneault and William Sacher wade into this controversial terrain. Their book seeks to explain the links between Canadian mining finance and both domestic and overseas mining activities. Why are Canadian companies linked, as the authors argue, to negative consequences in so many mining communities around the world? The answer, according to the authors, lies in Canada’s permissive regulations, advantageous tax structure for mining companies, unusually strong anti-libel protections for mining companies and active government support for the industry (each of which is explored in a separate chapter). This combination, as detailed in Imperial Canada Inc., draws speculative investment capital into one of the most environmentally and socially decried industries in the world.

Deneault and Sacher further argue that this phenomenon has deep historical roots: Canada’s unparalleled position in the world of mining finance reflects its own history as a resource-based colonial venture. Indeed, the authors argue, according to the book’s back cover, that “rather than turning away from the imperial ambitions of its mother country, Canada has actively embraced, appropriated and perpetuated them.” Tracing this exploitative pattern back to the British North America Act of 1867, they argue that the antiquated and deeply inequitable but highly profitable Canadian model of resource extraction is now actively promoted overseas to ensure the most crucial variable of the mining industry: “worldwide resource access.” In essence, argue the authors, Canada is exporting not only commodities, but also an economic and regulatory model of dispossession.

Of particular interest to Deneault and Sacher is the role of finance in enabling Canadian predominance in the global mining sector—a cornerstone of what the back cover terms a “customized trading environment that supports speculation, enables capital flows to finance questionable projects abroad, [and] provides government subsidies.” The book sketches out this broader financial landscape, and also provides a detailed and convincing explanation of why so many mining companies (of all sizes) flock to Canada, listing on the Toronto Stock Exchange—despite not holding mining interests within our borders. Indeed, the authors note that by 2011 the TSX channelled one third of global equity financing for mining ventures (three times as much as the runner-up, the London Stock Exchange) and handled 90 percent of the shares of mining companies throughout the world.

The book, furthermore, extends into the multiple ways in which the Canadian government seeks to promote “Canadian” mining interests overseas, whether it is in the form of ad hoc diplomatic support for mining companies in their dealings with local authorities (for example, to resist contract cancellation or renegotiation by the host government) or through foreign investment protection agreements tailored for extractive ventures (through, for example, sidelining environmental impacts in host countries).

One can imagine the criticisms of Imperial Canada Inc. Canada is a major commodity exporter, and many Canadians celebrate oil and gas, metals and minerals as the bedrock of Canada’s economic performance and the guarantor of future prosperity. Promoters of the mining companies listed on the Toronto Stock Exchange (many of which were listed on the Vancouver Stock Exchange before their merger) will argue that both listing companies and investors find in Canada many positive qualities: political stability, efficient market mechanisms, highly qualified personnel and one of the world’s best-regulated banking sectors. From this perspective, Canadian involvement in the mining sector is beneficial.

Proponents of Canada’s mining industry would also point to the government’s supportive measures designed to help companies and host authorities avoid future incidents and secure greater benefits for local communities—mostly through its “Building the Canadian Advantage: A Corporate Social Responsibility Strategy for the International Extractive Sector.” While rarely at the helm, the government has also been involved in significant international regulatory initiatives. Ottawa has been a major supporter of the Kimberley Process, which, despite its inability to broaden its mandate beyond narrowly defined conflict diamonds to environmental and human rights concerns, has nonetheless brought greater transparency and allowed governments to tax the sector better. Canada is also among the largest funders of the Extractive Industries Transparency Initiative, which has made major inroads in bringing greater transparency (and possibly accountability) in revenue flows between companies and governments.

Canada, however, is not yet an implementing member of the scheme, in contrast to Norway and the United States. Last year the Canadian government announced the creation of a university-based Canadian International Institute for Extractive Industries and Development mandated to reduce poverty in developing countries through more efficiently taxed and managed extractive sectors [disclosure: the reviewer participates in this institute]. Taken together, these initiatives demonstrate, proponents would argue, that the government is taking seriously its responsibilities in the global mining sector. And, overall, transparency is increasing.

Critics, however, point out that many of these initiatives are voluntary, even though some, such as the EITI, are backed by mandatory disclosure legislation in implementing countries. Furthermore, some argue that these initiatives largely serve as mechanisms for companies to protect corporate reputations through, for example, certification schemes that leave many issues unaddressed such as broad human rights concerns, “prior, free and informed consent” by local communities and the maximization of local beneficiation (fair taxation) in host countries. Moreover, they point to disappointment with the concrete impacts of the Office of the Extractive Sector Corporate Social Responsibility Counsellor, which requires company consent to pursue its dispute resolution role (rather than independent investigation), as well as with the termination of government funding for the Centre for CSR Excellence in March 2012 and the resignation of key civil society organizations’ representatives from its executive committee a year later.

Greenwashing or genuine corporate social responsibility? Denault and Sacher are clear in arguing the former. Indeed, they are two of the most strident critics of the Canadian mining industry, their previous book Noir Canada: Pillage, corruption et criminalité en Afrique having led Barrick Gold in 2008 to launch a lawsuit against the authors and their publisher, Écosociété. The case inspired much debate in Canada and abroad on the topic of the strategic lawsuit against public participation, a type of lawsuit (generally for libel or defamation) “intended to silence, intimidate, or punish those who have used public forums to speak, petition, or otherwise move for government action on an issue” of public interest or social significance. The case was eventually settled out of court in 2011, while Écosociété’s motion to stay an action for libel by Banro Corporation in an Ontario court was denied by the Supreme Court of Canada.It is very interesting to note that the government of Quebec passed in 2009 an Act to Amend the Code of Civil Procedure to Prevent Improper Use of the Courts and Promote Freedom of Expression and Citizen Participation in Public Debate, the only province in Canada to enact such protection.

No sooner had Talonbooks, the publisher of Imperial Canada Inc., announced the book’s publication in 2010 than it received a letter from Barrick’s lawyers suggesting litigation if it printed anything about the company without prior approval from the company. Some contributors withdrew at that stage, and the book was postponed and has been reconfigured over the past two years to focus less on individual mining companies and more on the historical and institutional context supporting the Canadian mining industry. Nevertheless, this is clearly contentious terrain.

Denault and Sacher are to be admired for their persistence, and for the salient information they provide. Imperial Canada Inc. is at its best when it provides detailed accounts and clearly explains the multiple processes through which mining industries in Canada are supported. However, their tendency to extrapolate from their analysis runs at times the risk of overgeneralization. One of the weaknesses of the book arises from its systematic (and at times simplistic) discrediting of any progressive reforms on the part of mining companies, regulatory authorities or governments. Canadian mining companies have been more transparent than many of their counterparts in other jurisdictions. One of the conclusions of the lead campaigning organization on transparency and accountability, Publish What You Pay, was that transparency on the part of mining companies was relatively high in this country—but that non-governmental organizations were making relatively little use of the information revealed. Certainly more can be done, and Publish What You Pay is now rightly calling for mandatory disclosures in Canada akin to those required from companies publicly listed in the U.S. and Europe: a call supported by major mining associations, but not by petroleum companies nor, so far, by the federal government. Yet it is also the area of accountability in which regulators could do more.

Deneault and Sacher are tenacious and much-needed critics of the Canadian extractive sector. By providing a detailed, historically grounded account of the emergence of mining finance in Canada, they remind us that Canada’s colonial past is not past, but deeply present in the ways extractive industries continue to operate.

But do not read this book expecting a balanced review of the sector. Nor, the authors clearly feel, should this be their objective. Deneault and Sacher’s goal is to politicize debates about extractive industries, by exposing Canada’s colonial present and rejecting the falsehoods of “consensus” and “good governance.” Following the recommendations made by the roundtable on extractive industries advisory group in 2007, for example, they expressed concern in Noir Canada for the capacity of an “ombudsman” to bring Canadian-based companies to account, calling instead for judicial inquiries. The government did not heed the call for an ombudsman, preferring a “counsellor office,” but the Canadian judicial system now seems (finally) to be moving toward filling this gap to ensure accountability with regard to allegations of human rights, as well as corruption, when host country jurisdictions are unlikely to do so. So far only a few cases are being pursued, that of Hudbay mentioned above and of the recently settled case of corruption by Griffiths Energy after the new corporate executive team had discovered and self-disclosed the bribing of the wife of Chad’s ambassador to Canada—through what the Crown and company’s agreed statement of facts describes as a “consulting agreement” for $2 million—in the pursuit of oil blocks in that Central African country (NB Griffiths obtained the blocks, gave shares to embassy personnel reported by The Globe and Mail in January 2013 to be worth more than $20 million, paid the consulting contract and, finally, pleaded guilty to corruption and paid a $10,350,000 fine; neither the corporate officials and legal counsels involved in the consulting contract nor the ambassador and his wife have been prosecuted). Passed in 1999, the Corruption of Foreign Public Officials Act had been so weakly applied that Transparency International, until 2011, listed Canada as a country with “little or no enforcement.” This is now hopefully changing—Canada passed in 2012 into the “moderate enforcement” category—although anticorruption enforcement remains understaffed and investigators recognize the need to tread lightly and carefully given that even rumors of corruption charges against a company can negatively affect its stock prices, and thereby “our pensions”—an often-voiced comment that illustrates how deeply extractive industry interests runs throughout Canadian society.

The main recommendation of Imperial Canada Inc. is for greater awareness of the colonial roots of extractive industries’ conduct, for stronger alternative sources of information on cases of abuses, and for political mobilization to achieve “ethical” and “responsible” investment through not only better regulations but also personal choices about financial investments. The mere existence of this book, and the debate it has inspired, might lead to a final reflection. The fact that Deneault and Sacher have felt the need to act as self-appointed industry watchdogs stems in part from Canada’s relatively weak environmental governance and regulatory frameworks—an issue that is not confined to the extractive sector. In Green Leviathan: The Case for a Federal Role in Environmental Policy, Inger Weibust’s comparison of environmental governance across federal states highlights the fact that Canada’s highly decentralized approach to governance has produced a relatively “light touch” regulatory framework for a broad range of resources. Combined with political factors, this has led to a phenomenon that University of British Columbia political scientist Kathryn Harrison called passing the buck, in her 1996 book of the same name, a phenomenon in which significant regulatory gaps open up between different levels of government.

Deneault and Sacher’s analysis would have benefited from a more coherent contextualization of debates over Canadian mining companies; many of the issues they point to are symptoms of a broader malaise in environmental governance in Canada, which they clearly demonstrate through pointed criticism of practices in their own home province of Quebec. Their book thus underscores the need for a greater degree of objective scholarship, informed debate and stronger accountability mechanisms regarding what will continue to be one of the most controversial issues for Canada in the foreseeable future.