Canada: Canada Seeks Consultation On Extractive Sector Transparency Measures Act Implementation Tools

On August 12, 2015, Natural Resources Canada (NRCAN) posted a notice on its website seeking public input on draft implementation tools (Implementation Tools) it has developed in respect of the Extractive Sector Transparency Measures Act (the Act). As described in our previous blog entries (here and here), the stated purpose of the Act is to foster better transparency to ensure that resource extractive industries support proper development in the countries where they operate, while at the same time making it harder to conceal illicit payments.

Background

The Act was proclaimed into force on June 1, 2015, but as we have previously noted precise guidance on the underlying disclosure obligations has been lacking. It was hoped that regulations enacted under the Act would put meat on the legislative skeleton and provide much needed regulatory certainty. Instead, NRCAN has introduced the Implementation Tools as a practical and illustrative alternative. The Implementation Tools do not constitute prescriptive guidance with the force of law, however.

The upshot is that, while the Implementation Tools may assist a company in satisfying its obligations, companies at all times remain responsible for determining whether and how the Act's provisions apply to them. Regulations appear to be likely only if it becomes clear in practice that a more prescriptive framework is necessary.

What are the Implementation Tools?

The Implementation Tools consist of the following:

  • A guidance document, which provides general information on who is subject to the Act, which entities must report payments under the Act, and what payments should be reported under the Act;
  • A technical reporting specifications document, which provides information on the mechanics of reporting under the Act (including specifying accounting methods, reporting currency, and reporting in-kind payments); and
  • A template for reports under the Act.

Clarifying the obligations of multinational organizations

The Implementation Tools shed some light on several provisions under the Act. Notably, it has been clarified how the Act applies to multinational organizations with Canadian subsidiaries. The Implementation Tools explicitly state:

Businesses that are not subject to Canadian law, but may have subsidiaries operating in Canada are not subject to the Act by virtue of their ownership of or interests in any Canadian subsidiary businesses, even if the subsidiary itself is a Reporting Entity.

A "Reporting Entity" refers to a corporation or other type of business enterprise engaged in the commercial development of oil, gas or minerals, which is also:

  • listed on a stock exchange in Canada; or
  • has a place of business, does business or has assets in Canada and, for at least one of its two most recent financial years, meets at least two of the three thresholds below:

    • has at least C$ 20 million in assets;
    • has at least C$ 40 million in revenue;
    • employs an average of at least 250 employees.

Notably, the Implementation Tools make clear that the asset test is limited to Canadian assets, and that the asset and revenue analysis should be focused on the entity in question and exclude global assets and revenues of a parent company.

Clarifying what counts as the "same Payee" and what constitutes a single "Project"

The reporting obligation is in respect of payments within the same category of payments to the "same Payee", which the Implementation Tools indicate may constitute a series of departments, ministries, or other bodies and agencies. As illustration, if several fee payments are made to the National Energy Board, Environment Canada, and NRCAN, which aggregate above the C$ 100,000 threshold, that series of payments is reportable. To the extent possible, the report should indicate the breakdown among the Canadian governmental bodies being grouped as the same payee.

In addition, as was expected, to the extent payments can be attributed to a specific project, reporting must be done on a project-level basis, as shown on the reporting template. For that purpose, a "project" has been defined as a situation in which operational activities are governed by a single contract, lease, license, concession or similar agreement, or multiple substantially interconnected agreements, which forms the basis for the payment liability to the government. "Substantial interconnection", in the case of multiple agreements, is determined by reference to the degree of operational and geographical integration.

Guidance on the seven categories of reportable payments

The Implementation Tools also provide some additional guidance on the seven categories of reportable payments (taxes, royalties, fees, production entitlements, bonuses, dividends and infrastructure improvements). The Implementation Tools state that companies should look to the substance, rather than the form of payments, in determining if a category is applicable. For example a voluntary or philanthropic payment that relates in some way to the commercial development of oil, gas or minerals, may be reportable. Where a payment could fall under multiple categories, companies must exercise their reasonable judgment to report the payment.

Notably, the Implementation Tools also clarify that a payment for a service which amounts to a commercial transaction with a governmental entity is not necessarily reportable under the Act, as illustrated by the following example:

Payments have been made to the foreign country's army for the provision of security at an oil extraction site. Since the army is providing a service, this payment is treated as a commercial transaction and is not required to be reported.

When a report under another jurisdiction's legislation will be accepted under the Act

Another significant issue addressed by the Implementation Tools is the substitutability of another jurisdiction's reporting requirements. NRCAN has indicated that such assessments will be done for substitute legislation as they arise. In that regard, on July 31, 2015, NRCAN stated on its website that it has been determined that the reporting requirements under the European Union's Accounting and Transparency Directives are acceptable substitutes under the Act. As a result, reports submitted to European Union and European Economic Area member states that have implemented the EU Accounting and Transparency Directives may be submitted to the Minister of Natural Resources as a substitute for a report prepared under the Act. It is generally expected that reports submitted under similar U.S. rules under Section 1504 of the Dodd-Frank Act (SEC Rules) will also be an acceptable substitute, once finalized.

Timeline for comments and initial reporting

NRCAN is accepting comments on the Implementation Tools until September 22, 2015. Following the consultation period, the final versions will be made public. The first annual reports under the Act will be in respect of financial years ending after June 1, 2016, and will be due 150 days after a financial year. As an example, companies with a December 31 year-end will be required to submit their first annual report by May 30, 2017. In addition, reporting of payments made to aboriginal governments or entities will be deferred for a two-year period until June 1, 2017.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions