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THE ARGUMENT

Canada: Tax Haven for the World’s Extractive Sector

Canada promotes stock-market speculation on the mining industry’s controversial activities throughout the world – and makes sure the industry is legally protected. The Toronto Stock Exchange, the government of Ontario that supervises its operations, and the government of Canada have spared no effort to transform the capital of Canada’s largest province into the extractive industry’s world administrative, financial, and legislative nerve centre. Naturally enough, a swarm of professionals concentrated in Toronto – corporate lawyers and academic apologists, geologists and geological instrument manufacturers, bankers, brokers, and financial advisers – hope to sell their services to the industry. This pool of expertise makes it possible for Toronto to promote itself internationally as a city with a “business climate” highly favourable to the international mining industry.

The TMX Group (Toronto Stock Exchange [TSX] and TSX Venture Exchange [TSXV]), and more generally Canada as a jurisdiction, have obvious attractions for the industry. Every year since 2007, the value of transactions on the Toronto Stock Exchange has reached $350 to $450 billion,1 and between 2007 and 2011, Toronto provided the mining sector with $220 billion in equity financing – more than one-third of the world’s total.2 The TSX in this regard is far ahead of its closest rival, the London Stock Exchange (LSE), which claimed 11.6 percent of the world total in 2011,3 boosted essentially by the registration in London of Glencore. In 2011, the TSX and TSXV handled 90 percent of the shares issued by mining companies throughout the world.4

According to Canadian government sources, the head offices of more than 75 percent of the world’s mining exploration or operating firms are located in Canada,5 and almost 60 percent of them are registered on the TSX,6 even though their capital is not necessarily Canadian in origin. In fact, the capitalization of many of these entities comes from Australia, Belgium, Sweden, Israel, the United States, or from tax havens such as the Virgin Islands. Strangely enough, many mining exploration firms registered in Toronto do not hold a single mining claim on Canadian soil.

As a financial centre, Toronto provides the world’s extractive industry with six substantial advantages. First, the TSX makes it easy for investors to speculate. Second, through generous federal and provincial tax incentives to the extractive sector, Canada specifically encourages investors to put money in mining companies. Third, Canadian lawmakers and political leaders have clearly demonstrated that they have no intention of interfering with Canadian-registered corporations accused of abuse or even crime outside Canadian borders. Fourth, the legal right to “reputation” has a history of taking precedence over the legal right to “freedom of speech,” which means that critical voices in Canada are often threatened with costly libel suits. Fifth, rather than remaining neutral, the Canadian government acts as the industry’s advocate before Canadian public opinion. Sixth, the Canadian mining industry abroad benefits from the active assistance of Canada’s diplomatic services and development agencies.

Any mining concession obtained anywhere in the world, even under the most dubious circumstances, is considered worthy of listing on the Toronto exchange. As the world’s mining capital, the Toronto exchange is permissive in the extreme; and the information disclosure rules applying to companies listed on the TSX are ambiguous enough that they encourage greater speculation than do stock exchanges in the United States, for example. Canadian legislation underwrites investment in mining through the awarding of substantial fiscal incentives while it makes civil and criminal legal action against companies very difficult. These “advantages” have made Canada into a key platform for the extractive sector, which, from the Toronto Stock Exchange, controls a global spectrum of exploration and operation activities that generate record profits, often at the cost of serious humanitarian and environmental consequences.

Particularly over the past two decades, Canada has emerged as a judicial and regulatory haven for the world’s extractive industry. The country’s jurisdiction provides unofficial cover for corporations that may be involved in shameful controversies abroad.

1. Unlimited Speculation on World Resources

First in the substantial advantages Canada provides to the world’s extractive industry is unlimited speculation on world resources. In attempting to deal with market crises and scandals that have regularly arisen in Canada during the twentieth century, Canadian stock exchanges repeatedly have been faced with a problem equivalent to squaring the circle. How do they persuade companies in search of risk capital to register with them, while at the same time protecting investors against the abusive claims to which they are exposed in the absence of an effective outside authority such as a government regulatory agency? Smooth talkers try to drive up the “value” of shares in the eyes of investors; meanwhile, investors hope to invest in projects of substance. The stock exchange’s balancing act is all the more unconvincing in that the actors involved have contradictory interests. Yet only the good faith of these actors can ensure that institutional rules are followed: they are supposed to be “self-regulated.” Often mentioned by the various special-interest groups involved in the process, “self-regulation” is in fact the only distinguishing factor between the functioning of the stock exchange and that of a casino.

Resources or Reserves: A Fortunate Ambiguity

The spectacular Bre-X fraud which began on the Calgary Stock Exchange in 1997,7 as well as several suspect cases on the ultra-permissive Vancouver exchange, showed how pointless were the regulations in effect on Canada’s stock exchanges and how feebly they were applied. Until the late 1990s, companies listed on Canadian stock exchanges were given complete freedom to shroud the true nature of their assets in dense fog. In their reports, for example, they were not required to distinguish between “reserves” (precise estimates of quantities of actually exploitable ore in a deposit) and “resources” (gross estimates of the ore of a claim). By publicizing figures that represented “resources” rather than “reserves,” they were able to inflate the potential of the deposits on which the share value of their offerings was based, attracting investors to business opportunities that appeared lucrative but were illusory. The “qualified person” responsible for validating information provided by companies listed on the stock exchange was not subject to the slightest degree of supervision by a professional corporation; public regulatory agencies were both indulgent and negligent; and fraudsters enjoyed a high degree of impunity, as the public learned in July 2007 when Bre-X vice-president John Felderhof, accused of insider trading and publishing false news releases, was acquitted by a Superior Court of Justice in Toronto.8

In the early 2000s, after the Bre-X scandal, the Toronto Stock Exchange became the central exchange for Canadian-registered mining stocks. (Today, the extractive companies known as the “majors” are listed on the Toronto Stock Exchange, now part of the TMX Group after the merger of the Montreal and Toronto exchanges, while the “juniors” appear primarily on the TSX Venture Index, a capital market made to measure for cash-strapped companies that emerged in 1999 from the ashes of the Calgary and Vancouver stock exchanges.) In response to sharp international criticism, the TSX adopted a more rigorous descriptive and supervisory methodology. New measures were introduced: more stringent standards for disclosure (proposed in July 1998 and in force by February 2001);9 standards and guidelines for valuation of mineral properties (published in February 2003);10 and revised and updated mining standards guidelines (effective December 30, 2005).11 These new standards required Canadian mining companies to make a clear distinction between “resources” and “reserves” and to include this information in documents released to the public. The new guidelines also defined a number of technical obligations concerning the nature of a company’s investments, including in what way a “qualified person” might accept, or propose the acceptance of, the information made public by a company.

From then on, rather than being presented in a uniform manner, the ore discovered in a deposit was to be broken down into categories and subcategories, ranging from those with the most detailed criteria to those with the least. One would think that this would make it possible to obtain a clearer understanding of a given company’s assets. However, data on the “resources” a deposit may contain, even before a decision has been made to exploit it, are now presented as “inferred,” “indicated,” or “measured,” depending on the quality of the information used to assess their quality. “Reserves” now refer to the ore that may actually be extracted from a mine as indicated by a preliminary feasibility study that outlines the methods and applicability of a production plan. Reserves are in turn broken down into the subcategories of “probable” and “proven” reserves. The difference between the two lies in the affirmative nature of the conclusions of a study. In the case of “probable mineral reserves,” it is asserted that exploitation “can be justified,” whereas in the case of “proven mineral reserves,” exploitation “is justified.”12

However, the problem is precisely the continuity between deductions regarding quantity made based on “resources” and the groping preliminary statements made based on “reserves,” and this is what has raised concern among international investors. What do statements about reserves really mean? Are they supposed to indicate that we know when, where, and how minerals can be effectively extracted in a profitable manner? But so many factors are involved, and are liable to change, that in fact no judgment is possible. Estimates must continuously be adjusted to take into account real extraction costs, the real mineral content of soils, and above all, the commodity’s price fluctuations.

Consequently, the boundary between what are really estimated reserves and what should be viewed strictly as resources constantly shifts. Scott Wright, online analyst for Zeal Intelligence and an expert on this issue, admits he has had problems sorting out the wide spectrum of data provided by gold-mining companies. “Maybe this land was surveyed and/or tested in the past, but the market price of gold was so low it was not as economically feasible to extract as it was for the mine next door. But with the rising price of gold, and because the juniors believe gold prices will continue to rise, this deposit is now feasible or will be in the near future … The price of gold now or in the near future will pay for us to dig a little deeper.”13

These contingencies not only make it impossible to come up with sound empirical assessments; they also tend to muddle definitions, as what may be categorized as inaccessible resources one day, depending on price speculation or on certain technological costs, the next day may be listed as reserves that “may justify” exploitation. So much uncertainty makes all such notions highly unreliable when it is time to evaluate a project’s potential. The estimates provided in the valuation letters of experts and geologists − little better than modern-day letters of exchange − are highly subjective. We find ourselves in the realm of circumstantial “opinions” used to justify the broadest possible interpretation of the word “reserves” as subsumed under the term “resources.” These kinds of shifting calculations have enormous potential to generate false or misleading results.

In addition, scientific consulting firms that establish or validate estimates are as completely governed by the profit motive as the mining companies themselves. How, at the risk of losing future contracts, could such consultants ever possibly publish unsatisfactory conclusions? As a result, the consulting firms hired by mining companies may respond first to the requirements of the market, rather than on honest and objective science.

While some investors may be unaware of the confusion between the terms “resources” and “reserves,” or may hope to profit from it, others – including some of the canniest – are made uneasy by, and are particularly wary, of the Toronto Stock Exchange, which they see as a market that plays on ambiguity. “Resources are a loose and thorny word in the mining industry. Measured and indicated resources are a commonly stated way of reporting resources among mining companies globally. Different governing bodies assign this different merit though. Canadian regulations not only require but also recognize these terms as a legitimate base for the potential future bankability of ore reserves in their filings, but the Securities and Exchange Commission (SEC) in the United States does not. Because of this you will find that many of the juniors today trade primarily on foreign stock exchanges, where guidelines are less stringent than those of the SEC.”14 In fact, in the United States, regulatory agencies have shown that it is possible to tackle speculation: they prohibit the publication of any data other than reserves. SEC regulations are “intended to reduce the speculation associated with initial in situ, estimated resources, which are invariably greater than the reserves.”15

In Canada, to these questions of contingency is added a sociological factor − the conflict and scientific debate between geologists and mine planners. Geologists are interested in the potential of given soils, while mine planners focus on production costs. Subcontractors argue with each other within each of these groups, and so many questions arise in the process of establishing the data that, in the final analysis, it is a good deal less than dependable. The methodological preferences of either party can lead to asset over-valuation; and the often gaping discrepancies between pre-feasibility studies and the real costs of project implementation are further evidence of the data’s unreliability. Virginia Heffernan states the obvious when she writes: “Attaching a price tag to a mine property is never easy.”16

Thierry Michel’s documentary Katanga Business (2009) underlines the weakness of the “scientific” precautions certain financial players claim, either naively or abusively, to be taking. The film focuses on a copper mine being reactivated by a group consisting of Canadian investors, George Forrest (the Belgian potentate of the Congo), and Gécamines, the Congolese state mining corporation carved up by Canadian and other companies in the mid-1990s in the course of a massive privatization initiative supported by the World Bank. The company that emerged from this process, Katanga Mining, is listed on the Toronto exchange, where it looks for risk capital. “Risk” would appear to be an accurate description: the documentary film closes with the statement that the recent financial crisis has severely affected mining companies in Katanga, with the price of copper dropping by 60 percent and share prices by 80 to 97 percent.17 Though the film presents multiple points of view − detailed expert assessments from an engineer in good standing, the opinion of an investor (presumably Canadian) who praises what he sees as a “world-class opportunity” for those he represents, and the opinion of George Forrest, who describes copper as a “stable” resource − what is most clear is that valuation has nothing to do with science. It is impossible to ascribe a precise value to a potentially extractable mineral. Stock-market speculation is no less risky than it has ever been. Moreover, the questions raised fall squarely in the public domain, given that pension-fund managers and others whom we hear in the film are actively investing Canadian assets in Katanga.

The Oxymoron: “Self-Regulation”

The new supervisory measures adopted in the early 2000s for Canadian financial markets, such as the standards set out in National Instrument 43-101 Standards of Disclosure for Mineral Projects (NI 43-101),18 have not met with unanimous approval. Though many different mining investors are now more accountable for their activities, some professional groups in the mining sector continue to resist and to challenge the new rules. According to Keith Spence, who co-chaired the committee to develop national standards in Canada, “one of the main challenges of developing valuation standards in the mining business … is the friction between real estate appraisers, who have traditionally dominated the valuation field, and mining professionals, who sometimes resent the use of real estate principles to value mining assets.”19 As a result, years after the Bre-X scandal, some people still express concern about the future impact of these measures, in turn enabling others to advocate a return to greater freedom for the experts who assess deposits. Critics also oppose making experts liable to either civil suit or criminal prosecution based on their recommendations, even though in Canada the risk of legal action against experts is slight. Mining-industry professionals shy away from standardized methodologies, pointing to the deficient nature of the formal procedures currently in force. The proposal to allow experts greater methodological leeway is a way of presenting arbitrariness, which critics pretend to oppose, as the best way to solve the problem of a deficient methodology. The taboo that has lain hidden at the heart of the debate for decades is that of “self-regulation.” Mining-industry professionals and investors are unanimous in their hostility to any government involvement in the valuation process, with constant praise for the key concept of “self-discipline”; and the professional corporations to which experts belong are fully independent. But the concentrated presence in one sector of professionals who are invested with so much power obviously increases the risk of insider trading, influence peddling, corruption, incestuous relationships, and simple back-scratching.

The fact that Canadian financial markets are known throughout the world for their permissiveness makes it even more difficult to believe that these regulations and methods, already inherently deficient, could ever be strictly enforced. Despite its democratic pretensions, Canada has acted to concentrate on its territory all the mechanisms for surveillance of its largest financial and industrial players, not to regulate them in accordance with the rule of law, but to provide them, in the manner of a tax haven, with a political, financial, and legal environment that is as unconstricting and as apathetic as possible. This was one of the main arguments put forward in Noir Canada.20 The TSX, Queen’s Park, and Ottawa, by failing strictly to supervise investors and Canadian-registered companies, have actively contributed to creating for them a space in which everything is possible. The consequences of this generosity are felt even at the international level.

William J. McNally and Brian F. Smith, economists at Ontario’s Wilfrid Laurier University, have shown how badly the Toronto Stock Exchange, and the Ontario Securities Commission (OSC) that supposedly supervises it, apply existing regulations that govern release of information in cases of insider trading. Unlike what is common practice in the United States, many cases are never even investigated. One in eight transactions are said to involve TSX companies buying up their own shares. The OSC budget does not allow consistent monitoring, and incredible as it may seem, the data available to it on a daily basis are less precise and less complete than the monthly data published by the TSX itself. The lack of monitoring is extraordinary, and the weakness of Toronto regulations has raised the hackles even of seasoned investors such as Claude Lamoureux, who denounced their laxness when he was president of Teachers, the powerful pension fund for Ontario public school teachers.21 For people in the know, insider trading in Toronto is child’s play; meanwhile, the general public, lacking information, is in constant danger of losing its shirt. In the rare instances when the guilty are arrested, the sanctions imposed are sometimes less than the profit made on the illegal trade. “Almost half of the purchasing firms fail to report their trades to the OSC.”22

In the United States, following a number of major corporate scandals, including cases such as Enron and WorldCom, in 2002 Washington enacted a bill known as the Sarbanes-Oxley Act on “public company accounting reform and investor protection.” Section 404 of Sarbanes-Oxley requires corporations to exercise internal control over financial reporting in compliance with a control framework established by a normalization agency.23 The adoption of these stricter rules in the United States led Canada to enact what have proven to be only superficial changes to its model of a self-regulating financial sector. In Canada, the permissive approach to which the government had reiterated its commitment in 1994 based on the Dey report24 still prevails. Canada’s utopian idea is that the market will induce brokers and share-issuing companies to behave themselves in order to make their shares credible. “Market and social pressures are supposed to lead companies to adopt governance standards that will contribute to maximizing value,” explains Université de Montréal law professor Stéphane Rousseau.25 Yet Canada has refused to adopt regulations inspired by Section 404 of the American law, a section that is described as “controversial because of the costs it entails.”26 Thus the proposed Canadian regulation on internal control over financial reporting, which dealt with the same issues, did not include a similar constraint.27 Introduced in February 2004 in all jurisdictions except British Columbia, the proposed regulation was withdrawn in March 2006 when Canadian Securities Administrators determined not to proceed with proposed changes.28 Instead, a complementary regulation on corporate governance guidelines establishes a distinction between mandatory disclosures and other voluntary, completely optional disclosures. These optional disclosures are in fact a catalogue of good intentions; for example, the members of a company’s board of administrators ought to be “independent” and should satisfy itself “as to the integrity of the chief executive officer (the CEO) and other executive officers and that the CEO and other executive officers create a culture of integrity throughout the organization.”29

Well-versed in the art of using euphemisms, Rousseau refers to the intention “to regulate governance in a level-headed manner.”30 Under Canadian law, the only restriction is that the corporation is required to ask an audit committee, consisting of three independent administrators, to examine the links between internal and external auditors and to oversee the work of the external auditors. This committee also participates in the process of disclosing information based on the company’s financial statements. In other words, in the absence of a normative framework, the credibility of the financial world rests once again on the degree to which it trusts itself, since only the social agents belonging to the brotherhood of finance are given the right to assess the real independence of actors whose behaviour is dictated by the logic of the marketplace. As ever, the legal basis of the Canadian economy is dictated by the interests of powerful shareholders, rather than those of employees, partners, or communities affected by the economy’s operation. “In Canadian law, the theory of shareholders’ primacy has imposed itself, both in case-law and as a doctrine, as the dominant conception of society’s interest.”31 Finance makes law. The late Raymond Favreau, who served as attorney and scientific adviser for ATTAC-Québec (an association to promote taxation of international financial transactions), pointed out that Canadian judicial authorities have shown surprising complacency with respect to economic crimes. Recent examples are those of Paul Eustace, manager of Portus Alternative Management, or of the Norshield Financial Group.32 Favreau extensively researched the loopholes that make the Toronto exchange’s oversight methods look like a sieve. “In the case of significant economic crimes committed in Canada, if the company involved is listed on a U.S. exchange, the U.S. authorities will often take action,” notes Favreau, who spent decades charting these and similar failings.33

Canadian leniency toward financial crime is an open secret. “Want to be a corporate criminal? Move to Canada” read a headline in the August 9, 2009, edition of the Globe and Mail. In Canada, court sentences for so-called white-collar crime bear far fewer consequences than in the United States. The judicial system moves slowly, and bail conditions are generous. (In the same edition of the Globe and Mail – a conservative newspaper – columnist Lawrence Martin wrote that the Ontario justice system had given a “shining green light” to “patronage as usual” and “dirty politics as usual” by acquitting former Ottawa mayor Larry O’Brien of influence peddling.)

Existing financial regulations and procedures look good on paper. But who actually complies with them, and how can we believe that there is compliance when we know that legal provisions have no real force? According to Africa specialists Jean-Pascal Daloz and Patrick Chabal, a responsible democratic state is defined less by its formal laws and regulations than by the way in which these measures are enforced. Weak states, by contrast, are characterized by the ingenuity with which they play with their legal restrictions, elude sanctions, flirt with the sublegal, take advantage of loopholes, and operate in darkness.34 “What is at issue is not the inadequacy of rules and regulations, but the fact that they are systematically disregarded; from this point of view old and new regulations share the same fate. In other words, rules and regulations are designed as obstacles to be avoided, points of reference around which procedures are invented to develop new relations.”35

In this context, experts in civic morality, tasteful academics, and other duly authorized representatives of “civil society,” despite their good faith, are trapped in a fruitless attempt to control the extractive industry strictly through the adoption of new formal regulations. Their proposals, always “concrete,” are rarely anything more than a decorative flourish on a policy framework that is designed to be ineffectual. Proposals developed as part of “roundtables”36 – or whatever other structure of “good governance” happens to have been established at any given moment – are the product of multiple and sometimes dubious compromises between “social partners”; these proposals are developed by people who never ask whether the government, if it ever were to adopt new regulations, would know how to enforce them or would have any real intention of doing so. “While, intuitively, corporate governance is being enhanced as an instrument to maximize enterprise wealth, it has a long measure to go toward providing consistent and measurable practice.”37 The only true imperative is still the enrichment of private actors.

In any event, it is understood that certain interests will be protected. Disclosure of information on the conditions in which corporations earn profits is a question that should be of concern to any democratically minded person. However, the only considerations that must be disclosed are those based on the interests of corporations or their shareholders. A careful reading of existing regulations shows that nobody is paying serious attention to circumstances such as human-rights violations or environmental, political, social, and fiscal abuses, of which many companies listed on Canadian stock exchanges stand accused around the world. According to continuous disclosure guidelines, which define the obligation to disclose information on securities in Canada,38 managers must keep markets closely informed of the “uncertainties” of their activities with regard to market “performance” criteria; but in the area of “risks” an organization can tolerate with regard to the ecosystem, or the life or political organization of populations, these factors must be reported only if the data is likely to have a “market impact,” or to influence a “reasonable investor” in his or her decision to purchase a stock.

Since the prevailing economic anthropology assumes that our model investor is interested only in gain, a large amount of information on the damage inflicted by extraction projects is suppressed, because it is considered irrelevant to the extreme self-interest of the imagined investor. In fact, in Toronto, the definition of financial information that must be disclosed is strictly based on the narrow concept of “material information,” which “is that which either results or could be expected to result in a change in the market price or value of the company’s stock.”39 The sole determining factors are the criteria adopted by the stereotyped “reasonable” (read: grasping) investor and “market impact.” Those who read between the lines will also understand that the “environmental liabilities” that corporations are required to disclose40 appear in the eyes of “reasonable” investors more as a handicap than as an objective piece of information. New environmental reporting guidelines,41 introduced in October 2010, continue to provide not a single restrictive measure in social or environmental terms.42 Only “risks” on environmental matters must be disclosed with respect to the determining factor, which is the materiality factor that might have an impact on the issuer’s “performance,” meaning its financial performance related to environmental issues mainly with respect to financial issues.43 As for the euphemistic jargon that the business world defines as “corporate social responsibility,” Canada actually “obliges” companies to boast of their feats in this area. “If your company has implemented social or environmental policies that are fundamental to your operations … describe them and the steps your company has taken to implement them.”44 The same holds true for the Global Reporting Initiative, a set of voluntary guidelines for reporting on economic, environmental, and social performance. Canada is thus unable to do more than urge or invite mining companies to maximize the marketing impact of their alleged “social” or “green” investments. Mining companies respond to the invitation in the storytelling mode, relating their social concerns in cloying business-speak, singing the praises of voluntary commitments and programs that may or may not have any real impact in countries where, in any case, the companies are paying almost no taxes.45 “These texts consist of several smaller narratives: here, children are given scholarships; there, a Tanzanian student is supported at a leading Canadian university; somewhere else, we build a primary school. No figures are produced but there are repeated references to individual beneficiaries of the company’s generosity, demonstrating how corporate charity has changed their lives. We also find vaguely worded declarations of principle distantly related to the company’s actual practices,” writes Gaétan Breton, professor of accounting at the Université du Québec à Montréal, in an article on the community commitments of Barrick Gold.46

According to the European Parliament, voluntary measures in the Canadian manner, with their “restrictions” of convenience, are altogether insufficient. In November 2007, it rejected a recommendation by the Brussels-based European Commission to the effect “that voluntary reporting guidelines would be sufficient” in the mining and energy industries – a system that would have mirrored Canadian practices.47

Although some members of “civil society” may find it sufficient to insist that investors show some sensitivity to environmental and social issues,48 this is not enough. What we need to understand is that public or civic figures in Canada are helping to maintain a powerful taboo on one of the key issues of our jurisdiction: that of “externalities,” defined as the consequences of company activities that are not listed on their balance sheet. In some cases, the environmental, social, political, or cultural damage they cause not only has little if any harmful effect on the company, but actually constitutes the way in which the company is able to profit from its reprehensible activities while destroying the environment and bringing disaster to the populations involved. As long as no independent audits are required to assess this kind of damage, there will be no reason to speak of corporate “responsibility” for these companies in Canada.

Reaching New Heights of Permissiveness

Meanwhile in Canada, Canadian financial and political institutions are highly speculative and permissive. Companies whose overriding concern is to promote their share price, without regard for scientific objectivity where their property is concerned, take full advantage of the huge methodological blind spots provided by Canadian legislation, profiting from regulations whose broad areas of ambiguity are exactly designed to favour the speculation they claim to restrict. Corporate marketing does the rest: fancy websites, prospectuses printed on glossy paper, aggressive selling by brokers, and cleverly disguised infomercials in the business press. There are also ways of artificially boosting shares; for example, virtual entities based in tax havens are used to buy and rebuy stocks so that it looks as if the market is interested.49

This explains why speculators themselves, despite all the fulsome remarks they hear about the nobility of self-regulated markets and players, still view the financial market centred on mineral resources as risky, especially where exploration companies are concerned.

Canada is not obliged to follow this policy of permissiveness. In Washington, a series of legislative actions have recently been taken that will force American companies to restrict their commercial involvement in the mining field, particularly in the Democratic Republic of Congo. The Congo Conflict Minerals Act,50 enacted in 2009, prohibits U.S. companies from dealing in minerals from the Congo such as coltan and gold when such economic activity would encourage “illegal armed groups and human rights violations in the eastern Democratic Republic of Congo.”51 Incorporated into the Dodd-Frank Wall Street Reform and Consumer Protection Act,52 which passed Congress and was signed into law by President Barack Obama in July 2010, the law allows U.S. authorities to require that all reports produced by U.S. firms disclose annually the “measures taken to exercise due diligence on the source and chain of custody” of conflict minerals, which are defined as “columbite-tantalite (coltan), cassiterite, gold, wolframite, or their derivatives; or … any other mineral or its derivatives determined by the Secretary of State to be financing conflict in the Democratic Republic of the Congo or an adjoining country.” This wording is similar to the Congo Conflict Minerals Act, which states: “include a description of any instances or patterns of practice that indicate that the extraction and cross-border trade in columbite-tantalite, cassiterite, wolframite, or gold has negatively affected human-rights conditions or supported specific human-rights violations, sexual or gender-based violence, or labor abuses in the eastern region of the Democratic Republic of Congo during the period covered by each report.”53

Section 1504 of Dodd-Frank, the “Disclosure of Payments by Resource Extraction Issuers,” states that mining companies are obliged to publish an annual report of all payments made in countries where they have a presence.54

Critics have said that this bill has been too long in the making, and it focuses too much on exploitation and transactions related to resources without explicitly considering the impact on the war of competition for concessions in Congo. According to Dominic Johnson of the Pole Institute, the Congo Conflict Minerals Act paradoxically may well lead to the disappearance of the legal trade in minerals in the Congo and a new outbreak of conflicts, “as there is much to be gained by obtaining sole control of these areas in time for greeting the international monitors, observers, consultants and regulators.”55 But at least these measures show that a government can set up a regulatory framework for its industry even when that industry is operating beyond national borders.

Toronto, the World Mining Industry’s Nest Egg

Toronto serves the mining industry in two ways. First, it provides the risk capital needed for extraction project start-ups. Second, it makes it possible to raise money on discoveries or promising exploitation prospects.

“Generally speaking, in the mining industry risk capital comes from Canada,” explains, as though it were self-evident, Belgian engineer René Nollevaux in Thierry Michel’s film Katanga Business.56 He is discussing the Kamoto mine owned by Katanga Mining, a consortium registered in Canada, where it raises the risk capital on which it depends. For investors, it’s a casino-style wager, and as at a casino, they hope to make money on their bets. To ensure their luck, intense pressure must be exerted on the South. Katanga Business reports on the controversial evictions of local populations carried out by mining companies operating in the region, on the unemployment and mass migrations of the local inhabitants that follow, and on problems of smuggling and tax evasion leading to significant losses for the state. Shareholders are attracted by optimal returns, and therefore on Bay Street it is seen as bad form to ask whether the Toronto-listed company’s comfortable profit margins are produced at the expense of people in the South.

In financial terms alone, it seems clear that the countries of the South derive no advantage from mining activity. “Around two-thirds of the people living below the poverty line reside in nations rich with extractive resources yet they rarely receive any meaningful benefits from their country’s resource wealth.”57 More generally, according to Ecuadorian economist Alberto Acosta, resource-rich countries of the South suffer from a “curse of abundance,” often experiencing extreme economic vulnerability, rampant corruption, irreversible environmental destruction, repressive regimes, or the outbreak of internationalized civil wars.58

In Congo-Kinshasa, the post-conflict commission set up to analyze mining contracts during the war years (1996 to 2003), chaired by opposition MP Christophe Lutundula, cited many Canadian companies whose share prices rose on the Toronto exchange thanks to one-sided contracts.59 Worse yet, market considerations may have been the cause of war in the first place: the share price of an entity controlled by the Swedish Lundin Group soared from 20 cents to US$3.50 on the TSX when insurgent forces said they would countersign a mining agreement signed some time earlier by the central government they were attempting to overthrow.60 Journalist Nestor Kisenga describes the situation: “These wheeler-dealers earn fabulous short-term profits by speculating on portfolios bloated with unearned contributions” from the largest state-owned mining enterprises. For Kisenga, “It is as though the Congo were a cheap painting bought for next to nothing at a flea market only to be resold in art galleries at its true value as a masterwork.”61

In addition to providing powerful financial leverage for exploration, the Toronto Stock Exchange can also provide instant access to capital when a company makes the right announcements. Concessions obtained in the South are the basis for a game of poker in which huge sums can be earned overnight as soon as investors can be made to believe that a claim is valuable. A mining concession on which the most basic human rights have been violated, or one that has been obtained in wartime from an insurgent force, often becomes, in Toronto, a guarantee of value enabling a moribund share price to soar suddenly. Despite allegations that deposits in the Congo (AMFI [American Mineral Fields Inc.] among others),62 Sierra Leone (DiamondWorks),63 or Angola (Heritage Oil)64 may have been obtained through political corruption, by influence peddling, or by supporting belligerents, speculators remain indifferent to these issues. All that matters is how much the deposit is worth, what the exploration prospects look like, and how much money can be made if the project is developed.

2. Promoting Investment IN Mining

Second in the substantial advantages Canada provides to the world’s extractive industry is promotion of investment in the mining industry. The status of the Toronto Stock Exchange as indispensable purveyor of venture capital undoubtedly is related to the activist approach of the Canadian government. Investors who place their assets specifically in the mining field are provided with enormous tax advantages. One way for Ottawa to channel money toward the extractive sector is the use of flow-through shares, which enable junior firms to transfer to their investors the credits from which they would have benefited had they not already enjoyed tax-exempt status. Many junior resource companies “are in a non-taxable position and do not need to deduct their resource expenses. The [flow-through share] mechanism allows the issuer corporation to transfer the resource expenses to the investor.”65 With respect to exploration expenses, investors can deduct up to 115 percent of the amount invested. Quebec, true to form, is prepared to go much further. In some cases, flow-through share deductions make it possible for investors to deduct as much as 150 percent of the cost of their investment.66

Given that more than a thousand exploration firms registered on Canadian stock markets use flow-through shares, it is clear that governments are experiencing a huge shortfall in taxation revenues. This means that mining exploration activities (often sharply opposed by local populations or taking place in conditions of civil war), and possibly speculation by mining company juniors, are indirectly supported by public funds. The federal government itself, in its 2008 budget, evaluates the fiscal cost of these measures at $60 million a year, on average,67 and this figure does not even include parallel losses incurred by provincial administrations, or other forms of financial support to the extractive industry.

These other forms of financial support include loans and investment guarantees, which the Canadian government provides to companies operating abroad through the Export Development Canada (EDC) and the Canadian International Development Agency (CIDA). The investment guarantees are particularly advantageous when companies go looking for new funds from private institutions: the companies’ capital, and hence, their solvency, is ensured by the government of Canada. Mining companies also benefit from tied-aid Canadian cooperation programs with weakly industrialized countries for major transportation infrastructure projects or hydroelectric dams.

All this is troubling, but what is even more disquieting is that the Canadian public as a whole finds itself in a position of financing Canadian mining companies out of its own savings. As taxpayers, citizens provide the funds for public investment bodies such as the Canada Pension Fund or the Caisse de dépôt et placement du Québec. Canadian citizens also put money into many private (most often mutual fund) investments. Whenever we contribute to retirement funds, buy insurance, invest in RRSPs, or put money in savings accounts at banks or credit unions, we are sending money to be invested on the Toronto Stock Exchange, and a good part of this money will probably end up in the mining industry. These investments are made in companies often named in damning reports such as the Lutundula report for having taken advantage of the chaos prevailing in the Congo in the 1990s to sign one-sided contracts or stake out their position.68

The tragic conflicts that devastated and caused millions of deaths in the Eastern Congo between 1996 and 2003 were all essentially wars for the control of mineral and oil resources. Tens of millions of Canadian dollars were invested in our name, and to our benefit, by companies that stand accused of looting the resources of the African continent and other countries of the South and Eastern Europe for stock-market speculation.69

Alcan, Falconbridge, and Noranda were the companies that pioneered Canadian mining explorations and operations abroad, initially in Latin America and South Africa in the 1960s. The world’s mining companies then became aware of the business opportunities open to them if they registered in Canada, and in order to benefit from the well-known generosity of Canadian institutions, they listed themselves on the Toronto Stock Exchange. There was now a politically legitimate way of plundering the resources of Latin America and Asia, both shaken by repeated financial crises, or of weak African states often caught up in violent armed conflicts. Today, according to the TSX, “Nearly 50% of the 9,300 mineral exploration projects held by TSX & TSXV companies are outside of Canada.”70 Some 185 Toronto-based firms are operating or prospecting in Africa on a total of 684 projects; 286 firms are working on 1,651 projects in Latin America; 315 projects are registered in Europe and Russia; and 1,275 in the United States.71

The financial behaviour of these companies and their shareholders does not really reflect the autonomy of decision-makers in a free-market economy. The Canadian government has structured Canadian laws and regulations to channel investment capital toward the mining industry. Following the Whitehorse Mining Initiative launched by the Mining Association of Canada, in the early 1990s Ottawa won acceptance by a cross-section of representatives of civil society for a program of tax reductions and weakening of mining-industry regulations. The term “good governance” made its appearance at this time, along with all the ethical considerations, “standards,” “incentives,” and ideas of “corporate social responsibility” that generally follow in its wake. Facing the challenges of a recession period, the mining industry was looking for government support and intimated that it could turn the Canadian economy around if Ottawa were to establish an advantageous public policy context.

The federal government adopted a new mining policy in 1996, and several provincial governments followed its lead in order to promote the rapid development of their mining industry. It turned out that they were just in time to take advantage of political realignments taking place in Africa, and elsewhere in the South, after the fall of the Berlin Wall. In central Africa, a major turning point was the fall of dictator Mobutu in what was known then as Zaire, an event that touched off a headlong rush for Congolese mineral resources. The Canadian government did not merely encourage Canadian financial investment specifically in the mining sector. It also demonstrated its belief that it was responsible for supporting the Canadian mining industry abroad, for ensuring the industry’s market capitalization (which meant attracting foreign investment), and for making these actions legitimate in the eyes of its citizens.

Because Canada, as a state completely dedicated to its extractive industry, has induced its citizens to participate in the extractive economy, Canadians today are now seeing their assets grow, financing their retirement, and accumulating consumer goods based on the controversial activity of mining companies held responsible, in documents from credible sources, for looting and polluting the countries of the South; often in these documents, the activities of the mining companies are viewed as the direct cause of war in these countries. In the 1990s, children in the Great Lakes region of Africa were handed Kalashnikovs to guard or seize deposits of coltan needed to produce millions of video-game consoles given as gifts to children in the West.

Around the World: Mining Laws Based on Canada’s Example

All over the world, Canada can claim responsibility for the appearance of a new generation of mining codes. These codes provide corporations and shareholders with the same generous provisions as the Quebec and Ontario mining codes: negligible taxes, full socialization of costs, disregard for customary and native rights, contempt for environmental issues, absence of regulations governing corporate behaviour, and the list goes on. Particularly in countries with a developed mining sector, whenever new, neo-liberal rules of “good governance” were imposed on the population, at the same time a legal, financial, political, and human resources framework was established to suit the needs of the extractive industry. Canada has been active in drafting a number of these mining investment policies in countries in the South, including Colombia, Botswana, Zimbabwe, Guinea, and Zambia. Mining-industry companies, 75 percent of which are registered in Canada according to official sources,72 were also invited to participate in drafting these policies, while the World Bank consulted eighty firms to have a clearer view of the Eldorado that these indebted states would soon become. An explosion of Canadian mining investment has taken place in recent years: it reached a high of $12.5 billion in 2011.73

The new mining codes that Canada has exported throughout the world – partly through the Canadian government’s influence on agencies such as the IMF and the World Bank – all share one troubling characteristic: in contrast to earlier formal and informal codes in many of these countries, the new rules do not explicitly recognize the right of Aboriginal peoples to exploit the resources of their traditional lands, where they often carried out artisanal small-scale mining linked to local capital. Instead, public authorities are set up to “solve” the thorny issue of the ancestral presence of indigenous peoples on these lands, by subordinating it to the interests of Western corporations.

According to Amnesty International, Canada exerted intense diplomatic pressure to convince countries of the South to join it in opposing the 2007 UN Declaration on the Rights of Indigenous Peoples.74 It is perhaps not surprising, then, that Canada should show no concern when a country draws up a mining code without any consultation with its indigenous peoples. This is what happened in Colombia in 2001, even though the redefinition of “indigenous territory” was a violation of Colombian law. The new Colombian code modified the redistribution of benefits from the extractive sector so that they no longer need to be paid to local (Aboriginal) communities.

Canada intervened directly in the Colombian restructuring process. As early as 1996, $11.3 million were given to “improve” the institutional operations of the Colombian ministry of mines and energy and the ministry of the environment. A portion of the funds came from the Alberta-based Canadian Energy Research Institute. 75 CIDA also approved financing in the amount of $241,861 in technical assistance to the Colombian government’s Plan Pacifico.76 Nearly one-third of this amount was paid out to Ottawa-based Radarsat International Inc., which in conjunction with the Canadian Space Agency markets a satellite technology for analyzing soil and subsoil relief.77

Ironically, according to international financial institutions, tax revenues – to be reinvested in “development” – are supposed to be the chief advantage of the “reforms” imposed on mining countries in the South. But the new mining codes that have proliferated there during the past century provide very substantial tax advantages for mining investors. Even to calculate royalties and tax payments to be included in contracts, countries of the South are forced blindly to trust the production forecasts of mining professionals, yet they generally have no prior experience of the financial speculation characteristic of the extractive industry and are unable to estimate future earnings. In any case, whatever amount is owed to the state, it is clear that substantial sums contrive to evade tax authorities, given the absence of even the most elementary governmental supervision of the mining companies’ operations.

In Ghana, for example, where Canadian firms hold half of all mining concessions, the latest version of the mining code is completely unfavourable to the government in practically every area where it might have expected to garner tax revenues: equipment to be used in mining installations is tax exempt; expatriates pay no fees when they transfer funds abroad; in order to buy equipment, investors are allowed to deposit 25 percent of their income, or more, in a foreign currency account. As a result, in Ghana the mining sector does not seem to account for more than 2 percent of the country’s GDP.78

In Tanzania, a report entitled A Golden Opportunity? underlines the shortfall faced by the government as a result of new tax laws for the mining industry enacted in the late 1990s. The authors state that “the combined loss to Tanzania of a low royalty rate, unpaid corporation tax, and tax evasion is at least US$400m over the past seven years” and that “the concentration of gold mining in the hands of large multinational companies at the expense of artisanal small-scale miners has put 400,000 people out of work.”79

In the Democratic Republic of Congo, the mining code stipulates that only 4 percent of a mine’s “operating capital” (their costs, not the value of the materials they extract) shall be returned to the government in the form of royalties, which is less than half the rate of neighbouring countries where royalties are already low.80

With the minimal regulations embodied in the mining codes, mining countries in the South are unable to collect the tax revenues that would enable them to support economic development projects or foster the growth of their own industrial sector. Meanwhile, Canada or other organizations involved in funding “development” are underwriting Canada’s own powerful extractive industry. Not only do Canadian pension funds invest in Canadian mining companies, but agencies such as Export Development Canada and the Canadian International Development Agency, as well as a variety of one-off initiatives designed to “help” the African continent, also tend, in fact, to support the industry’s expansionist aims.

In addition to the investment guarantees that we mentioned earlier, Export Development Canada provides the extractive industry with insurance, and political risk is one of the threats against which companies are protected. As one analyst explained in 2009: “EDC has been making substantial efforts to broaden and market its presence in the mining sector, and its Political Risk Insurance product is part of that strategy. The EDC coverage protects against a variety of threats ranging from political violence, currency conversion or transfer restrictions and foreign government non-payment or repossession threat.”81

Export Development Canada has financed and insured politically high-risk projects in countries such as Madagascar, DRC, Tanzania, Eritrea, Congo-Brazzaville, and Mauritania. The case of Madagascar is one example of a controversial project. In 2009, Canadian interests, including natural-resource company Sherritt and engineering heavyweight SNC-Lavalin, held a 45 percent interest in the Ambatovy open-pit mine in the Toamasina region. Export Development Canada’s contribution was worth $400 million in the form of insurance against the political risks engendered by the project: mining companies had insured themselves against the consequences of the fact that the population of Madagascar was angry.82

Since 2001, Export Development Canada’s decisions with regard to projects have been related to environmental policies. However, the Canadian Network on Corporate Accountability notes the persistence of many blind spots: “EDC still lacks sufficient levels of transparency to ensure accountability. The corporation does not disclose its due diligence process for proposed projects, or reveal the specific standards that a project is deemed to have met. Besides, EDC does not require companies to consult with communities that would be affected by proposed investments.”83

Now that the private sector is immune – thanks to Canadian taxpayers – to the political responses of populations confronted on a daily basis with corrupt dictatorships, who will still genuinely care about the fate of these people?

Thanks to another unexpected source of financing, the extractive industry was able to count on $100 million from the Canada Investment Fund for Africa (CIFA),84 set up with public funds by Jean Chrétien after the creation by Western countries of the New Partnership for Africa’s Development (NEPAD). CIFA’s capital was allotted to projects in DRC, Nigeria, Rwanda, Senegal, South Africa, and Tunisia. Exploration company Banro Corporation, for example, received millions of dollars in public funds in support of their projects in Eastern Congo, in the heart of the war-torn African Great Lakes region.

CIDA supports the extractive industry in other, even more unexpected ways. It operates the Industrial Cooperation Program (CIDA-INC), whose stated goal is to provide financial and technical assistance to Canadian industrial start-ups in developing countries or countries in transition to a market economy.85 The program is described as the developing world’s single-largest source of credit available to private sector companies; the yearly value of agreements signed under its auspices is estimated at US$12 billion, with oil, gas, and extractive industries holding first rank. In 2004, the World Bank’s International Finance Corporation gave Canada $3 million to be administered by CIDA-INC;86 the purpose of the funding was to underwrite eventual investors in the mining sector, particularly in pre-feasibility and feasibility studies, training, technology transfer, and consulting services.87

Corporate investments also received support from the Canadian government in 2011 when then minister of international cooperation Bev Oda, pretending to believe that the development of the Canadian mining industry leads to poverty reduction and improved standards of living for people living near mining sites, used “development aid” funds to create a program supporting the mining industry. The stated goal was “to reduce poverty in Colombia, Peru, Bolivia, Ghana, and Burkina Faso” by funding the activities of civic organizations such as World Vision, Plan Canada, and the World University Service of Canada.88 The “partners” with whom these organizations were said to be “working” – Barrick Gold, Iamgold, and Rio Tinto Alcan – were hardly lacking in financial resources. Further, the minister made her announcement, not to desperately poor populations, but at the Devonshire Initiative CEO Summit. Some of Canada’s most scrupulous actors in the field of international cooperation, such as the general Coordinator of the Andean Indigenous Organizations (CAIO), Miguel Palacin Quispe, were highly critical of this alliance; Quispe wrote that Canadian mining corporations of this kind “are the source of many conflicts because of the dispossession of lands, destruction of water sources, and the ignoring of international rights.”89

Who benefits from this kind of international “development aid”? In Madagascar, according to local residents, Rio Tinto’s titanic iron-ore mine is causing both ecosystem disruption and major social and economic problems. Further, the ore extracted in Madagascar is then processed in Sorel, Quebec. The process of extracting the ore, which benefits the company and a small number of people working in Quebec, is funded by the World Bank, once again to the detriment of people in the South.a90

3. Providing Firms with Legal Cover

Third in the substantial advantages Canada provides to the world’s extractive industry is legal protection for mining firms. Canada can be relied upon to provide, unofficially, full political and legal cover to companies registered in its jurisdiction even when these companies are facing well-established and documented allegations of abuse. Many documents, including those produced by two United Nations agencies, the UN High Commissioner for Human Rights and the UN Committee on the Elimination of Racial Discrimination (CERD),91 deal with the exceptionally serious impact of the extractive industry in the countries of the South.

A report from the United Nations High Commissioner for Human Rights on the violation of basic human rights in the Congo between 1993 and 2003 implicates transnational mining companies in these violations.92 During this decade, the simmering conflict between the rebel forces of the Alliance of Democratic Forces for the Liberation of the Congo, backed by Uganda and Rwanda, and the regime of long-time dictator Joseph Mobutu flared into open hostility. Yet rebel leader Laurent-Désiré Kabila was able to rely on support from the mining companies to build up his war chest. “During the AFDL’s advance on Kinshasa in 1996, before it had even formed a government, Kabila was allocating mining concessions to private companies. Many of these transactions were conducted illegally.”93

Employees of Anvil Mining are among the Canadian individuals and corporations mentioned in the report. “An Australian-Canadian mining company was accused of supplying the army with logistics and transport during its military operation.”94 The military trial that found them not guilty remains controversial.

In 1998, Kabila arbitrarily reviewed the mining concessions he had granted. For example, the 82,000-square kilometre exploration concession which former president Joseph Mobutu had given Barrick Gold in 1996 – a contract countersigned by Kabila soon after he overthrew the government and became president95 – was suddenly reduced to 55,000 square kilometres.96

Kabila’s dissatisfied political allies, Rwanda and Uganda, were frustrated by his inconsistency and there were attempts to overthrow him, allegedly with the help of commercial partners; the allegations often mention the Canadian junior American Mine Fields Inc. (AMFI), now known as Adastra, which was later acquired by First Quantum Minerals.97 The war resumed, and among its beneficiaries were private corporations able to profit from a world of chaos.

The 2010 UN High Commissioner for Human Rights report notes: “During the second war, foreign companies rarely controlled the source of the minerals or other goods they were purchasing, and sometimes paid the armed groups directly ... In a number of cases, foreign or multinational companies were directly involved in negotiations with perpetrators of serious human-rights abuses, paying armed groups or providing them with facilities or logistics in order to exploit natural resources.”98 As early as 2002, however, a report by the UN Panel of Experts on the Illegal Exploitation of Natural Resources and Other Forms of Wealth of the Democratic Republic of Congo included a list of companies in violation of OECD codes of behaviour.99 The report invited certain jurisdictions, Canada being implicitly among them, to investigate the activities of multinational corporations and mineral exploration firms in the African Great Lakes war zone between 1996 and 2003. The number of dead as a direct or indirect consequence of this war is estimated at five million people.100

In their report, the UN experts lay particular emphasis on the short-term exploitation of resources in wartime, stating that “the Governments of the countries where the individuals, companies, and financial institutions that are systematically and actively involved in these activities are based should assume their share of the responsibility. The Governments have the power to regulate and sanction those individuals and entities. They could adapt their national legislation as needed to effectively investigate and prosecute the illegal traffickers.”101 In the same paragraph, they refer to OECD guidelines for multinational corporations, which “offer a mechanism for bringing violations of them by business enterprises to the attention of home Governments, that is, Governments of the countries where the enterprises are registered.” The UN experts conclude: “Governments with jurisdiction over these enterprises are complicit themselves when they do not take remedial measures.”102

Canada is implicitly targeted by this last assertion. Five companies identified as Canadian − First Quantum Minerals, Harambee, International Panorama Resources, Melkior, and Tenke − are named in the report as having violated OECD guidelines on corporate ethics; four other companies established in Canada are also named in connection with entities they control elsewhere in the world. Thus AMFI and Kinross are identified as American, Banro is presented as South African, and the Lundin Group is identified with a tax haven (Bermuda).103

From a wider perspective, the UN experts help us understand that the OECD guidelines provide a relevant basis for criticizing the role of any other Canadian corporation that does business in the region. Though it cannot be presumed that they have actively and systematically exploited minerals – only an exhaustive investigation could tell us if this were the case – the very fact of economic partnerships with powers involved in hostilities in the region places them in potential violation of the principles set forth in these reports. The OECD holds that a company must “refrain from seeking or accepting exemptions not contemplated in the statutory or regulatory framework related to environmental, health, safety, labour, taxation, financial incentives, or other issues” and “abstain from any improper involvement in local political activities.”104 In a context of total war such as the one prevailing in the Congo, no regulatory framework of this kind could be enforced, and conditions for doing business in an ethical manner were entirely absent.

The UN reports led to parliamentary investigations in the Congo,105 in the United Kingdom,106 and in Belgium,107 and have been the basis of countless academic or journalistic works of investigation. In fact, an avalanche of public documents justifies serious questions about the role of Canadian actors in the Congo during this period.108

If Canada had even the slightest intention of following UN recommendations and regulating its industry, by the mid-1990s – which is when war began in the Congo – it would have found in the points listed above good reasons to investigate extractive sector companies registered within its jurisdiction, especially since the minimal ethical guidelines suggested by the OECD assume the existence of a regulatory structure and of local government.109 Canada had even more reason to take an interest in these companies when, at the end of the bloody conflicts of 1996 to 2003, a Congolese commission was set up to review mining contracts signed during the war; this body criticized all of the contracts between the Congo government and transnational corporations that it examined during its first round of analysis.110 (The Congolese authorities later accepted a number of these contracts, sometimes because they lacked information about the commercial or political involvement of the actors in the circumstances of the conflict.) However, even though several of the corporations cited by the commission were Canadian, “the Canadian government didn’t investigate.”111 True to form, Canada’s political “authorities” chose to adopt a low profile, opened no investigation, and abstained from any judicial measures whatsoever, leaving the public with nothing more than scattered testimony, nongovernmental reports, and other documents circulating at the international level among journalists, researchers, or observers, on the alleged indirect participation of Canadian corporations in the conflict. In its official response to the United Nations, Canadian diplomacy stated that OECD guidelines are strictly “voluntary.”112

This debate is more than a dispute over facts. It deals primarily with what is actually meant by critical notions such as “responsibility,” “influence,” and “participation.” Those who believe financial investors are exempt from these three terms eliminate any serious consideration of historical facts. Even an approach as cautious as that of London-based Global Witness arrives at a similar conclusion: any company that allows access to destabilizing forces who are “illegally” exploiting resources becomes involved in the conflict, and this is even more obviously true of companies that agree to take on such “illegal” miners as suppliers.113

Surprisingly, the UN itself failed to follow through on its own investigations. Even Gérard Prunier, a French academic who once served as Barrick Gold’s expert in a lawsuit aimed at Noir Canada,114 acknowledges in his book Africa’s World War115 that the UN came under intense pressure from Western “business partners” in Africa to modify the content of these reports or not to publish them.116 In her book Making a Killing, Madelaine Drohan reports that the corporations cited by the UN in 2002 approached Canadian minister of foreign affairs William Graham to pressure the UN to remove their names from the UN list.117

When the Law Is Silent

Other UN documents directly implicate Canada in human-rights abuses, with explicit reference to the indigenous peoples of the Americas. In March 2007, the UN Committee on the Elimination of Racial Discrimination specifically recommended that Canada impose stricter regulations and supervision on the mining companies under its jurisdiction. The CERD recommendations focus on the suffering inflicted on indigenous peoples by the Canadian mining industry abroad. “The Committee notes with concern the reports of adverse effects of economic activities connected with the exploitation of natural resources in countries outside Canada by transnational corporations registered in Canada on the right to land, health, living environment, and the way of life of indigenous peoples living in these regions.”118 In the same report, the committee encourages the government “to take appropriate legislative or administrative measures to prevent acts of transnational corporations registered in Canada which negatively impact on the enjoyment rights of indigenous peoples in territories outside Canada.”119 In particular, the committee recommends that Canada “explore ways to hold transnational corporations registered in Canada accountable for these acts.”120

The committee noted that it was waiting for a formal report from Canada on the issues raised. But no report was forthcoming. Instead, Canada chose to reaffirm its extremely permissive regulatory framework and to present it abroad as a model to be followed by other sovereign states. Canada has no intention of showing consideration for the customary property rights of indigenous peoples. As a country that was built on the dispossession of indigenous populations (and that is still stripping them of their possessions today), Canada remained for years one of a tiny handful of states officially to oppose the UN Declaration on the Rights of Indigenous Peoples (which it did not sign until December 2010).121 Of course, a substantial portion of the world’s unexploited petroleum and mineral reserves lie directly beneath the feet of indigenous populations.

All over the world, countless documents from reliable sources show how often indigenous peoples, such as peasant farmers and artisanal small-scale miners, oppose the presence of Canadian mining companies on their lands, whether for exploration or exploitation. Wherever Canadian mining firms are to be found, the same extremely serious allegations are heard: allegations of massive pollution and ecosystem destruction, brutal eviction at the hands of paramilitary forces, corruption, tax evasion, and even the murder of people opposed to mining activity. Hundreds of these denunciations have been aimed at Canadian mining firms, particularly in Latin America and Africa, but also in East Asia and in some industrialized countries.122 The multiplicity of these denunciations lends support to the idea that Canada today is the keystone of a predatory international mining resource system.

Canadian authorities continue to turn a deaf ear; they decline to investigate transnational corporations as long as the allegations made against them “have not been corroborated.”123 And they never will be, for the government never investigates them. The vocal denials of the companies take precedence over all other testimonials.

Canada presents itself as a legal haven for the world’s transnational mining companies. Registered primarily in Canada, they are subject to virtually no supervision of their potential wrongdoing beyond Canada’s borders. Canada provides them with legal, political, and moral cover, while their subsidiaries, enjoying bank secrecy in the Caribbean, rake in the profits acquired by looting Africa and other continents. This means it is almost impossible to get a judgment in Canada, in either civil or criminal courts, against Canadians or Canadian entities that may have committed abuses or crimes abroad.124

The possibility of domestic legal action against abuses that may have been committed abroad is not as utopian a proposition as it might seem. Precedents have been established in Germany and Belgium.125 In the United States, though it is far from adequate and was weakened by legal decisions in 2009, the Alien Tort Claims Act (ATCA)126 allows federal district courts to hear human-rights lawsuits even where the plaintiffs are foreigners and the facts alleged have taken place outside American borders. It is under this law that the Sudanese Presbyterian Church filed suit in the United States against Talisman Energy of Calgary (registered on the TSX), which was accused of complicity in the violation, by the Sudanese regime, of the fundamental rights of civilians living next to the company’s concession. Talisman requested that the American court drop the case, to no avail. New York Southern District Court judge Denise Cote did not declare American courts incompetent to hear the case, ruling that there exists no possibility for human-rights litigation under Canadian jurisdiction.127 Yet the Canadian government brought its full weight to bear in an attempt to influence American justice: “The Canadian government sent a ‘Statement of Interest’ to Cote claiming the lawsuit would have a ‘chilling effect’ on trade by Canadian companies in the Sudan.”128 The American court then chided the Canadian authorities, pointing to a “lack of understanding about the nature of the claims.”129

The Sudan Peace Act,130 a program of sanctions adopted by Washington in 2002 against the Sudanese government to restrict its public investments, also pointed an accusing finger directly at companies such as Talisman. Though it does not apply to the Canadian firm, a representative of Talisman Energy recognized that the Sudan Peace Act focused a great deal of attention on the company.131

While we may rejoice at these measures, they may have unintended negative consequences. Court decisions brought down under the Alien Tort Claims Act, for example, tend to assign a private character to international debates that are political in nature. But in Canada, there is no need even to discuss such a contingency, since no comparable measure exists in Canadian law. In the area of universal criminal jurisdiction, the Crimes against Humanity and War Crimes Act,132 adopted by Ottawa in 2000, opens the door to judging, on the basis of a restrictive list, crimes committed abroad by Canadians. Over and above matters of legal procedure (obstruction of international justice), the law lays down sanctions in such extreme contexts as genocide, crimes against humanity, and war crimes, in relation to murder, extermination, enslavement, deportation, imprisonment and torture, sexual violence, and persecution. However, it allows no recourse for the victims of major economic crimes, of which Canadian bodies corporate or physical may be either the perpetrators or accomplices.

These judicial procedures are, moreover, extremely difficult to enforce. Only the attorney general (the federal minister of justice) can consent to the prosecution of such offences. However, this system contravenes the principle of the separation of powers between the judiciary and executive branch of government. Canadian political authorities have proven reluctant to authorize lawsuits that might cast an unfavourable light on themselves, given their substantial support for Canadian companies abroad. The Canadian International Development Agency backs controversial Canadian mining companies around the world;133 Export Development Canada has used taxpayers’ money to set up an opaque insurance fund that directly benefits these firms,134 while the Canada Investment Fund for Africa finances highly controversial projects on that continent.135

Under both liberal and conservative governments, there is nothing ambiguous about Canada’s official policy with regard to its overseas industries: it is up to the host country to enforce the rules to be applied within its jurisdiction, even if the poverty in which the country is maintained by the international economic system makes it unable to fulfill these functions. Canada has also been doing everything in its power to lessen the scope of the tools that might enable it to seek out irregularities in the way business is transacted by Canadian companies abroad. “With subtle strokes of the pen, it appears that the Conservative government has been systematically changing the language employed by the foreign service, and as a result, bringing subtle but sweeping changes to the traditional Canadian foreign policy,” writes Michelle Collins in Embassy.136 For example, in the world of Canadian international politics, “child soldiers” do not exist; instead, they are vaguely described as “children in armed conflicts.” Moreover, the adjective “humanitarian” finds itself deleted from the concept of “international humanitarian law.”137

However, the relevance of this transfer of responsibility to the host country is refuted by elementary analyses. In 2005, the UN Sub-Commission on the Promotion and Protection of Human Rights reported that crimes committed by private companies in the world result most of the time from complicity, support, partnership, and direct or indirect assistance in the violation of human rights, especially on the part of the host country.138

But Canada does more than ignore these analyses. On the ground in the host countries, not only does Canadian diplomacy put pressure on local authorities, but the mining lobby also throws its full weight into the balance to influence the decisions of political authorities. The former Argentine minister of the environment, Romina Picolotti, admits to having been forced to resign in 2008, following insistent representations by the mining lobby. According to her, as summed up in the Toronto Star: “Barrick, the world’s biggest gold producer, was so successful in convincing the Argentine government to block legislation affecting one of its operations that the cancellation became known as ‘the Barrick veto’.” 139

Filing a complaint is a battle in itself. The case of Cambior, a Quebec-based mining company, shows the de facto immunity enjoyed in Quebec by locally registered mineral firms in relation to abuses committed abroad. In 1995, the collapse of a tailings pond at the Omai mine in Guyana brought about a disaster of unprecedented proportions, contaminating the country’s water system with cyanide and causing grievous harm to the public health of nearby communities as well as the long-term destruction of flora and fauna. A group of 23,000 Guyanese then filed suit against the company in Quebec Superior Court. On August 14, 1998, the court, while declaring itself competent to hear the case, concluded that the Guyanese judicial system had greater competence. In its ruling, the Quebec court raised the lack of a real connection between the victims and Quebec.140 A Guyanese court later declared a mistrial and compelled the citizens’ group to pay the company’s court costs.

In another emblematic case, an association of Congolese law students in Canada, the Association des juristes et étudiants congolais en droit du Canada (AJEC-Canada), unsuccessfully demanded that Canada launch criminal proceedings against Montreal-based Anvil Mining. Charges related to a massacre perpetrated by the armed forces of Congo at Kilwa in 2004, in which seventy-three were killed close to the company’s mining site, and in which the company may have been complicit. The RCMP told AJEC-Canada to ask the federal minister of justice to provide authorization for it to carry out an investigation in Congo-Kinshasa; at the same time, the RCMP warned that it did not have the resources to carry out this investigation. AJEC-Canada’s few exchanges with the federal government or its agencies were by telephone, leaving no paper trail, not even an acknowledgment of receipt.141

On November 8, 2010, Anvil Mining was finally brought to court by a group of DRC citizens, working with the Canadian Association against Impunity, for its alleged role in the Kilwa massacre. However, it seems there will always be a Canadian court ready to turn a blind eye to allegations of atrocities committed elsewhere by Canadian mining companies. On January 25, 2012, the Quebec Court of Appeal overturned the judgment of the Superior Court that allowed the case to be tried in its jurisdiction.142 The court told the parties to return to the DRC, because it offered a more appropriate forum for decision despite the fact that it was a military court that had heard the case there earlier,143 confirming how difficult it is for populations who say they have been harmed by the industry to be heard by the legal system in Canada.144

Hudbay Minerals, a Canadian corporation, has also been sued in Canada for $12 million by Angelica Choc, the wife of Guatemalan activist Adolfo Ich Chamàn, over the death of her husband in September 2009 in Guatemala, where the mining company operates a nickel mine.145 In another case tried by the Ontario Superior Court, three community leaders from Intag valley in Ecuador sued Copper Mesa (formerly Ascendant Copper), as well as the Toronto Stock Exchange, for $1 billion. The three Ecuadorians alleged, on the basis of video evidence, that the company employed the services of a paramilitary organization to expel them violently from their lands. They also claimed to have received death threats. An indicator that the market is quicker to react than the courts, the Toronto exchange in an exchange bulletin issued on January 19, 2010, confirmed that it had removed Copper Mesa from TSX listings. The official reason given: “For failure to meet continued listing requirements of TSX …”146 Nevertheless, in this case Canadian courts once again confirmed Canada’s status as a legal haven. In March 2011, the Court of Appeal of Ontario confirmed a previous decision of the Superior Court and rejected the Ecuadorians’ demand because it presented “no reasonable cause of action.”147

In cases such as these, the international dimension adds a layer of complexity to citizens’ initiatives, both in terms of costs and of competence to hear cases. The chances of success are slender. Palestinian citizens attempted to sue two Montreal-based companies, Green Park and Green Mount, in relation to their activities in Jewish settlements in Palestine, but the case was dismissed in the fall of 2009.148 According to an Oxford University study, Canada has a narrow concept of the territorial limits of judicial competence, allowing private companies to take advantage of the doctrine of forum non conveniens to argue that the Canadian jurisdiction is not qualified to judge cases beyond Canada’s borders, no matter what the involvement of Canadian actors.

Oxford Pro Bono Publico’s critique of Canadian jurisdiction is telling: “The state of Canadian law with respect to corporate social responsibility, and extraterritorial corporate social responsibility in particular, is generally recognised to be insufficient. Few options are available to non-nationals seeking to pursue Canadian corporations in Canada for wrongs committed abroad, excepting general principles of private international law. The instances of extraterritorial criminal responsibility are narrowly provided for, and are clouded with doubt as to whether they apply to corporate activity. As a result, Canadian corporations have been forced to defend their actions before American courts in actions having no connection with the United States.”149

As long as mining companies enjoy near-perfect impunity in Canada, it seems likely that world capital will continue to flow into Canadian financial centres, where it will generate windfall profits at the cost of devastating consequences for local populations.

4. Using the Law to Silence Critics

Fourth in the substantial advantages Canada provides to the world’s extractive industry is legal action against critics. In the South, the mining industry finds invaluable allies among ruling elites in its attempts to subject its critics to prosecution. In the wake of Washington’s “war on terror,” and bowing to American pressure, many governments have adopted laws penalizing legitimate defenders of human rights and ecosystem integrity. Accusations include terrorism, eco-terrorism, sedition, and sabotage, and political leaders are arbitrarily detained. In Canada, where freedom of expression is subordinated to particularly restrictive libel laws and the mining sector looms all-powerful, cases of the legal system being used against critics are legion. In other words, companies can explore and exploit the world’s resources with total impunity as to the conditions in which these activities are carried out, yet it can be extremely dangerous to call attention to the mining industry and its practices or even to discuss the international consequences of its methods.

In recent years, in Ontario, eight indigenous Canadian leaders were sentenced to six months in jail (these sentences were later reduced and the leaders were released after sixty-eight days of detention) for having peacefully demonstrated against platinum and uranium mining projects on their territory. On March 17, 2008, the Ontario Superior Court stated that “the desire of Aboriginal communities to protect their land, cultural heritage and way of life does not supersede a court order granting a [mining] corporation the right to proceed with economic development activities on its land.”150 The First Nations involved had good reason to believe that the authorizations issued by the Ontario ministry of mines to Platinex, an exploration company, and to Frontenac Ventures Corporation, which had already begun operations on their lands, did not comply with Supreme Court judgments regarding their rights.151 The communities opposed to the mining projects on their lands “have proposed a joint panel to investigate what led to these conflicts and recommend new approaches to mineral exploration on First Nations’ lands, but have received no reply from Ontario premier Dalton McGuinty.”152

Nothing seems to be able to stop the mining industry from imposing its peculiar concept of “justice” in these matters. Corporate legal action against a government minister may be undertaken if necessary, as in Romania, where the Canadian mining firm Gabriel Resources filed suit against the former minister of the environment, Attila Korodi, and against the secretary of state, Silviu Stoica, seeking €100,000 in damages.153 The two, by virtue of their public responsibilities, had apparently committed the unforgivable in attempting to protect the existence of Rosia Montana, a two-thousand-year-old village threatened with extinction by an open-pit gold mine described as Europe’s largest. Romanians had done everything they could to block the mine. An NGO, Alburnus Maior, filed suit against the Canadian firm to denounce irregularities in the decision-making process, and in 2008, the departmental Court of Appeal of Alba Iulia declared that the company was in the wrong and that Rosia Montana’s Urbanistic Plans were illegal. But the legal decision had no real effect on the exploitation process. Romania’s minister for the environment and forests, Laszlo Borbely, decided to reinitiate the authorization procedure for the Rosia Montana mining proposal.154

In a slightly different register, the government of El Salvador had refused to authorize exploitation of a gold deposit in the country’s central northern region. The Canadian company Pacific Rim, through its Panamanian subsidiary Pac Rim Cayman LLC, filed a complaint with the World Bank demanding US$77 million in damages from the Salvadoran government.155 The company’s lawsuit was filed under the provisions of the free-trade agreement between the United States and most of the countries of Central America. Reliance on this kind of arbitration, which is becoming more and more common, has been described by French jurist William Bourdon as “a veritable privatization of the legal system, designed to bypass national judges.”156 A similar case is that of the NewGold corporation in Mexico, where the company continues to operate and thus to endanger the historical and environmental heritage of the village of Cerro de San Pedro and its surroundings despite a definitive decision brought down by Mexico’s Federal Tribunal of Fiscal and Administrative Justice, which ruled the company’s operating permits illegal.157

In Canada, it has become risky for university researchers even to discuss the ethical issues raised by documents from international sources on the damage inflicted by Canadian extractive sector companies around the world. Following are some of the fundamental questions that can rarely be addressed:

 How is it that Canadian firms are active in regions where mining resources are the object of local hostilities?

 What is the impact of a Canadian economic presence, and the incentives provided by Canadian companies, on the evolution of conflicts involving many parties?

 Do Canadian firms fund and support parties favourable to their interests, and if so, to what extent?

 To what extent did former Canadian prime ministers Brian Mulroney, Jean Chrétien, and Joe Clark, when they worked for mining and oil companies operating in Africa or Latin America, use the privileged information they might have received in the exercise of their public functions?

 What are the implications of this kind of privatization of public information?

 Why is it so easy for companies to use the Toronto Stock Exchange to register (often for merely speculative purposes) mineral concessions and resources acquired during wars as violent as those in Colombia, Congo-Kinshasa, or Sudan?

 Why, in such cases, do corporations listed on the Toronto Stock Exchange receive financial support from the Canadian government? Why, for example, has Banro received a loan of several million dollars from the Canada Investment Fund for Africa (CIFA), a semi-public entity established to foster development in Africa?

 Why does the Canadian International Development Agency provide financial support to companies whose record overseas raises serious ethical issues, while minimizing the accusations levelled against them?

 How far is Canada prepared to go in exporting its destructive mining-industry “expertise”?

 Why has Canada, without consulting its citizens in any way, encouraged investment in the mining industry to such an extent that citizens who put their savings in government retirement funds, banks, insurance companies, mutual funds, and other public funds have become the accomplices of this highly controversial industry?

And above all:

 What price do people in the South have to pay in order for a share price to rise on the Toronto exchange, bringing large profits to major shareholders and modest returns to small investors? Must dictators be strengthened, civil servants corrupted, ecosystems destroyed, workers suppressed, peasants expropriated, arable land flooded, community leaders assassinated, warlords financed, contracts deposited in Caribbean tax havens, taxes evaded, and Africa looted, for the sole purpose of supporting extractive industries registered in Canada?