The Government of Canada recently introduced the Extractive
Sector Transparency Measures Act which imposes reporting
standards for payments made by Canadian extractive companies
(mining/oil and gas) to foreign and domestic governments including
to Aboriginal entities. This Act will solidify Canada's
international commitment to deter and detect corruption and is
intended to align Canadian reporting requirements with those of the
United States and the European Union. The Act is expected to come
into force by June 2015.
The Act applies to any entity, including controlling entities,
engaged in the commercial development of oil, gas or minerals. The
"commercial development" includes exploration, extraction
and the acquisition or holding of a permit, licence or lease or any
other authorization to carry out the exploration or extraction of
oil, gas or minerals. For the Act to apply, the entity must
(a) be listed on a stock exchange in Canada; or (b) have a place
of business in Canada, do business in Canada or have assets in
Canada and, for at least one of its two most recent financial
(i) have at least $20 million in assets;
(ii) have generated at least $40 million in revenue; or
(iii) employed an average of at least 250 employees.
Payments to be Reported
Each entity that is subject to the Act must report all payments
to foreign and domestic governments, including to Aboriginal
entities, made in relation to the commercial development of oil,
gas or minerals that are at least in the prescribed amount for a
particular category of payment, or, where no amount is prescribed,
Such payments include:
(a) taxes, other than consumption taxes and personal income
(c) fees, including rental fees, entry fees and regulatory
charges as well as fees or other consideration for licences,
permits or concessions;
(d) production entitlements;
(e) bonuses, including signature, discover and production
(f) dividends other than dividends paid as ordinary
(g) infrastructure improvement payments; or
(h) any other prescribed category of payment.
The entity must report to the applicable Minister no later than
150 days after the end of each of financial year and publicize its
report. Where the reporting requirements of another jurisdiction
achieve the purposes of the reporting requirements under the Act,
the Minister may determine that the reports used in other
jurisdictions are acceptable substitutes.
Penalties for Non-Compliance
A person or entity that fails to comply with the reporting
standards, knowingly makes false or misleading statements, or
structures payments in such a way as to avoid the reporting
requirements is subject to a fine of not more than $250,000.
Further, any officer, director, agent or mandatary of such an
entity that directed, authorized, assented to, acquiesced in or
participated in the commission of the offence, is a party to and
guilty of the offence and liable on conviction to the
A number of issues will require clarification in the coming
months prior to finalization of the Act including:
The applicability of the Act to payments to Aboriginal entities
will be delayed for a two-year period. Concerns have been raised
that the disclosure of payments and benefits to Aboriginal entities
might hamper future negotiations between industry and Aboriginal
groups. The two year delay is consistent with a number of comments
raised during the consultation process.
The initial transparency effort in the U.S. was vacated by the
United States District for the District of Columbia in July of
2013. The Securities and Exchange Commission announced that it
expects to issue new rules by March 2015. If these new rules differ
substantively from the Act, the Government of Canada may revisit
The Act does not provide any exemptions from disclosure
including in the case of conflict with statutory or contractual
confidentiality or other restrictions. This is an issue of serious
concern for industry and could be addressed through regulations
under the Act.
The Act does not currently provide for projectlevel disclosure
but does provide that the Minister may require such reporting.
Project-level reporting has been a key issue in the transparency
regime in other jurisdictions.
The Act provides that the information must be made public, but
does not say how or what information will be publicized.
We expect the Government of Canada to provide further
clarification on some of these issues in proposed regulations or an
administrative guidance document before the Act comes in force.
The content of this article does not constitute legal advice
and should not be relied on in that way. Specific advice should be
sought about your specific circumstances.
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Canada is a constitutional monarchy, a parliamentary democracy and a federation comprised of ten provinces and three territories. Canada's judiciary is independent of the legislative and executive branches of Government.
The Government of Alberta recently announced a number of policy changes that will impact the Alberta Electricity Market, composed of its generators, transmitters, distributors, retailers, electricity consumers and wholesale electricity market.
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