Skip to content.

Recommendations Issued for Canada’s Mandatory Payment Disclosure Regime

Today, a report entitled Recommendations on Mandatory Disclosure of Payments from Canadian Mining Companies to Governments1 was issued by the Resource Revenue Transparency Working Group, a joint working group comprising non-governmental  and mining industry organizations. This follows the announcement last year by the Canadian government of its intention to require companies in the extractive industries, including mining and oil and gas, to disclose their payments made to domestic and foreign governments.

This Canadian transparency initiative, which follows similar measures being adopted by the United States and the European Union for their extractive industries, has important implications in light of increased legislative and enforcement action under Canada’s anti-corruption regime, including the Corruption of Foreign Public Officials Act (CFPOA) and the Criminal Code. Although the Working Group’s recommendations apply only to mining companies, firms in other extractive industries, including oil and gas, should also be following these developments closely as the government prepares to implement its disclosure regime.

Canada’s Initiative for Mandatory Reporting of Payments to Government

As discussed further in our earlier article, Canada Announces New Initiative for Disclosure of Payments to Governments, in June of last year the Canadian government announced that it would be implementing a mandatory payment disclosure regime for companies in the extractive industries, but provided little detail on the scope, mechanisms and timing of such a system.

Since September 2012, the Resource Revenue Transparency Working Group has been developing a framework for mandatory payment disclosure. The Working Group is comprised of the Prospectors and Developers Association of Canada, the Mining Association of Canada, Publish What You Pay – Canada, and the Revenue Watch Institute.

One of the key elements of their approach is to ensure that there is equivalency with the regimes being implemented in other jurisdictions, particularly the United States and the European Union. With a few exceptions, their recommended framework closely aligns to those other regimes.

Key Recommendations for the Payment Disclosure Regime

Canadian miners should be carefully reviewing the Recommendations in detail. The most significant are summarized as follows:

  1. Public companies only – Mandatory reporting should be implemented through provincial securities regulators (private companies would not be covered); requirements would also apply to foreign companies seeking to raise capital in Canadian markets;
  2. Equivalency – There should be explicit recognition and acceptance of other reporting regimes that are equivalent such that a report filed under those other regimes will be accepted in Canada; the other regimes would include those of the United States and EU;
  3. Scope – All mining companies that are reporting issuers under Canadian securities legislation should be required to report payments related to the commercial development of mineral deposits that are made to any level of government in Canada or abroad;
  4. Subsidiaries and controlled entities – Payments by subject companies’ subsidiaries, directly or indirectly controlled entities and entities over which they have joint control or exert significant influence should also be reported;
  5. Covered payments – Disclosure on a disaggregated and cash basis should be required for profit taxes, royalties, fees, production entitlements, bonuses, dividends, infrastructure payments required by law or contract, and transportation and terminal operation fees;
  6. Two reporting thresholds – A reporting threshold of $100,000, aligned with the U.S. and EU regime, should apply to issuers listed on the TSX; a lower threshold of $10,000 should be set for venture issuers;
  7. Disaggregation by project – Payments should be reported on a project-by-project basis and "project" should generally, but not exclusively, be determined on the basis of legal agreements such as licenses or concessions, consistent with U.S. and EU approaches;
  8. Disclosure form and format – Payment disclosures should be available to the public in full and filed on a separate form on SEDAR annually; information should also include total amount of payments made by category, currency used, financial period, business segment, government that received the payment, and project to which the payment relates; and
  9. Verification, audit and penalties – A verification standard should be determined in accordance with existing securities safeguards and requirements; failure to report or reporting inaccurate information should attract penalties consistent with current provincial securities enforcement regimes and be proportionate to the violation and its impact.

Moving Towards Implementation

The Working Group also encourages the Canadian government to implement the mandatory requirements "in an expeditious manner, while providing reporting companies with the appropriate time to adjust their accounting and reporting systems to comply with the new disclosure regulations."

Companies in the mining and oil and gas sectors should be following developments closely as the Canadian government continues to consider and develop its mandatory payment reporting rules. These reporting obligations, along with the new CFPOA accounting and record-keeping provisions,2 are placing a new and significant emphasis on disclosure and the proper accounting and reporting of payments to government and are expected to play an important role in anti-corruption enforcement in the future.

For further information and assistance regarding these or any other anti-corruption matters please, do not hesitate to contact any member of McCarthy Tétrault’s International Trade & Investment Law Group.

1 See Recommendations on Mandatory Disclosure of Payments from Canadian Mining Companies to Governments (January 16, 2014).

2 The June 19, 2013 CFPOA amendments created separate offences for accounting contraventions in connection with corrupt payments, including concealing bribery in an entity’s books and records. See Significant Amendments Proposed to Strengthen Canada’s Anti-Corruption Regime (February 6, 2013) and Changes to the Canadian Anti-Corruption Regime Are Now in Force (June 20, 2013).