Resource World Magazine

EPILOGUE David D uva l New transparency regulations long overdue T he federal government has announced new mandatory reporting standards for Canadian extractive companies, including mining and oil and gas firms, in an effort to improve transparency regarding payments made to foreign governments. The decision follows a number of high-profile, international, bribery scandals that have engulfed at least two Canadian companies, Griffiths Energy International Inc. and Niko Resources Ltd. Griffiths and Niko both ended up paying multi-million dollar fines, the former after admitting to bribing Nouracham Niam, the wife of Chad's former Ambassador to Canada, Mahamoud Adam Bechir, under the guise of a $2 million consulting agreement. The payment was found to have violated Canada's Corruption of Foreign Public Officials Act and after admitting to the offence, Griffiths was fined $10.3 million. The company expected Niam to use her position to influence the Chad government to support its effort to gain the right to explore two blocks of land in Chad. The company eventually acquired the two oil blocks it had sought in Southern Chad and the $2 million payment was made to Ms. Niam a month later in February 2011. Calgary's Niko Resources was fined $9.5 million for bribing Bangladesh's state minister for energy and mineral resources, AKM Mosharraf Hossain, who was subsequently forced to resign. Bangladesh is ranked among the most corrupt nations in Asia and the president of Niko's Bangladesh subsidiary, at the time, Qasim Sharif, told Canada's then ambassador the country, David Sproule, that these type payments were simply "a cost of doing business." Niko admitted to bribing the government minister to ensure the company would get a gas purchase and sales agreement from the 46 www.resourceworld.com Bangladesh government, as well as ensuring it would be treated fairly in relation to compensation claims against the Niko for two blowouts at one of its gas fields. Given the competitive forces that often require some form of gratuity to get business done in what in most cases are so called "developing countries," one could make a case that they were perhaps a bit too transparent in their dealings for the simple reason that they got caught. Canadian companies have been global leaders in offshore resource development and you can bet this type thing has been going on for decades, mostly through local proxies who can easily mask payments to corrupt officials, leaving no trace back to their funding sources. The United States has also introduced measures to make it difficult for corporate entities to secure investment opportunities in foreign jurisdictions by bribing government officials. Under Section 1504 of the United States Dodd-Frank Act, publiclylisted companies are compelled to disclose payments made to a foreign government or the Federal Government for the purpose of the commercial development of oil, natural gas, or minerals. However, old habits die hard and the American Petroleum Institute is in fact suing the US Securities and Exchange Commission, arguing that these disclosures disadvantage US companies against their foreign competitors. The issue of transparency is obviously a critical one for resource-rich countries that hope to reap the full benefits of their natural resources. In many developing countries, much of the revenue from resource extraction is going into the pockets of corrupt government officials while ordinary citizens attempt to survive in poverty. Canada's Resource Revenue Transparency Working Group states, "Transparency is a critical tool for ensuring the more than one billion people in resource-rich countries reap the full benefits of their natural resources," adding that, "Mandatory reporting standards require operating companies to publish the amounts they pay to government, disclosure that gives citizens the information they need to hold their governments accountable for the use of resource revenues." Mining and oil and gas companies have rarely had any qualms about investing in politically corrupt areas if they see a chance to make a buck. Among the worst areas on the planet is the Democratic Republic of the Congo where several companies have had their assets expropriated by corrupt government officials, many of whom were no doubt recipients of gratuities from these same companies. The activities of Canadian companies in such areas have been a national embarrassment and some government-imposed investment discipline is long overdue. Ironically, the federal government itself has benefited indirectly by funding many of these companies' operations through organizations such as Export Development Canada (EDC), the country's export credit agency. Under the agency's loan provisions, Canadian resource companies are required to commit to purchasing plant and related equipment for their operations from Canadian sources. (This is one of only a few Crown corporations that has ever made money). The new reporting regime would be enforceable by law and many listed companies will no doubt face increased legal, audit and related costs as they adapt to the new regulations – an added burden that few companies can afford. The new regulations should provide additional security for the EDC, perhaps enhancing its profitability. n JULY 2013

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