CHAPTER 1 NEW RESOURCE REVENUE TRANSPARENCY LEGISLATION: AN EMERGING GLOBAL CONSENSUS

• Jurisdiction: Derecho Internacional

International Mining and Oil & Gas Law, Development, and Investment (April 2017)
CHAPTER 1
NEW RESOURCE REVENUE TRANSPARENCY LEGISLATION: AN EMERGING GLOBAL CONSENSUS
Joshua A. Jantzi
David L. Deisley
Stuart M. Olley
Partner, Dentons
Executive Vice President and General Counsel, NovaGold Resources Inc.
Partner, Gowling WLG
Calgary
Salt Lake City, UT
Calgary

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JOSHUA A. JANTZI is a Partner in Dentons' Energy Regulatory and Litigation practice groups with a focus on natural resource development across Canada. Based in Denton's Calgary, Alberta office, Josh specializes in Aboriginal, environmental, constitutional and administrative law. Since having articled as judicial law clerk to the Hon. Mr. Justice M. A. Kelen (Federal Court, retired), Josh has practiced as litigation counsel for 10 years before the Supreme Court of Canada, the Federal Courts, the Tax Court of Canada, and the courts of British Columbia, Alberta and Ontario. As regulatory counsel, Josh has acted before the National Energy Board, Alberta Utilities Commission, and Alberta Energy Regulator. Josh teaches the University of Calgary Faculty of Law annual full-credit Aboriginal law course, and has represented Dentons' energy clients in precedent-setting Crown-Aboriginal consultation cases, most recently before the Supreme Court of Canada in Chippewas of the Thames First Nation v. Enbridge Pipelines Inc., et al., SCC No. 36776, (judgment reserved). Josh presented novel Crown-Aboriginal duty to consult cases reported at 2016 BCSC 34, 2015 FCA 222, and 2012 FC 1336, and other Aboriginal and environmental law cases detailed in his web-profile. Josh has written and presented numerous papers on environmental, regulatory and Aboriginal law issues at legal and industry conferences. Josh sits on the executive of the CBA national energy, environmental and natural resources law section (NEERLS) and vice-chairs the CBA Administrative law section (Alberta, south).

DAVID L. DEISLEY is Executive Vice President and General Counsel of NOVAGOLD RESOURCES Inc., a well-financed precious metals company engaged in the development of mineral properties in North America. At NOVAGOLD, Dave is responsible for all aspects of the Company's legal governance and corporate affairs. With over 25 years of experience in the mining industry in the Americas, Dave has an extensive track record in project permitting, corporate social responsibility, mergers and acquisitions and corporate development. Prior to joining NOVAGOLD, Dave served in positions of increasing responsibility with Goldcorp Inc. from September 2007 to October 2012. At the time he resigned from Goldcorp Inc., he held the position of Executive Vice President, Corporate Affairs and General Counsel for Goldcorp Inc. During his tenure with Goldcorp, Dave led Goldcorp's participation in an industry leading human rights assessment of Goldcorp's operations in Guatemala and the development of corporate human rights policy and practices for that company. Prior to his tenure at Goldcorp Inc., Dave served in progressively responsible capacities with Barrick Gold Corporation, including Regional General Counsel for Barrick Gold North America, and General Counsel in Chile. Dave joined Barrick after 12 years of private practice in the natural resources area with Parsons Behle & Latimer, a Salt Lake City based law firm. Dave obtained his Juris Doctor from the University of Utah, College of Law and his Bachelor of Arts from Brown University.

STUART M. OLLEY is a senior partner in Gowling WLG's Capital Markets and M&A group in Calgary, Head of Calgary's Business Law Group and the National Natural Resources Group and Co-Chair of the firm's Latin America Practice Group. Stuart has worked for a variety of issuers and underwriters in transactions in industries including oil & gas, mining, real estate and technology. He has extensive experience in international financing and merger transactions, including work in investments and acquisitions in Africa, Central and South America, and Asia. Domestically, Stuart has assisted clients in the extractive sector with financings, listings, business combinations, (including contested proxy fights, hostile and friendly take-over bids, and restructuring transactions under the CCAA and the ABCA), corporate governance matters and regulatory compliance. Stuart is a past member of the Securities Advisory Council of the Alberta Securities Commission. He holds a master's degree in law from Osgoode Hall Law School at York University (securities speciality), a law degree and MBA from the University of Alberta, and a bachelor's degree in arts from the University of Toronto. Stuart has served on the board of directors of various public companies and is BV Peer Review rated by Martindale-Hubbell as well as being recognized by Lexpert for expertise in Mining and Corporate Commercial work.

I. Introduction

When we submitted the proposal for this paper in mid-2016, the future of transparency initiatives around the world seemed quite clear. Europe and Canada had implemented legislation that required disclosure for companies in the extractive sector and the U.S. had tabled provisions in the Dodd-Frank Act that would require similar disclosure for U.S. based corporations. Various non-governmental groups like the Extractive Industries Transparency Initiative¹ (EITI) and the World Bank had broad based support for global programs of payment disclosure in the extractive sector. We anticipated that our paper would provide a review of the various legislative schemes highlighting some differences in approaches and looking at the Canadian experience in 2016, the first disclosure cycle under Canada's new Extractive Sector Transparency Measures Act ("ESTMA") legislation.

With President Trump's reversal of section 1504 of Dodd-Frank, and a seeming decline in U.S. leadership on global anti-corruption, the future for transparency initiatives is less clear and it seems that once again we will be embroiled in a debate about whether the benefits of transparency legislation in the extractive sector outweigh its perceived costs. With this in mind, we have expanded the scope of this paper to examine the disclosure experience in those jurisdictions that have adopted transparency legislation and to briefly consider once again the arguments against payment disclosure in light of this experience. Finally, we discuss the Canadian approach to transparency in the extractive sector, as set out in ESTMA, and compare that approach to those adopted in other jurisdictions.

II. The International Landscape

The United States

Discussion of the so called "resource paradox" ("resource curse" or "paradox of plenty") dates back to the 1950s and 1960s as academics observed that "countries with an abundance of natural resources, specifically non-renewable resources like minerals and fuels, tend to have less economic growth, less democracy, and worse development outcomes than countries with fewer natural resources."² In response to these observations, various organizations began to suggest greater disclosure of payments made to governments by companies in the extractives sector. The rationale being that with this disclosure, citizens would at least be able to see how much resource revenue was being paid to their governments and where impropriety occurred, it would be more apparent.

In this way, the move to greater global transparency can be understood as an evolving part of the global fight against corruption and bribery in commercial transactions. Bribery and corruption have long been problematic in international transactions. In response to this challenging issue, the U.S. Government passed the Foreign Corrupt Practices Act (FCPA) in 1977.³ The FCPA prohibits the payment, offer of payment, or gift to a foreign official in order to obtain or retain business in that country. Almost

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immediately however, U.S. companies complained that the FCPA resulted in a decline in competitive advantage for U.S. companies operating internationally. The U.S. Commerce Department estimated that American businesses lost $11 billion between 1994 and 1995.⁴ In response, the U.S. government pursued an aggressive campaign to persuade other countries to adopt measures to address international bribery and corruption. This effort led to the adoption of a number of international accords and laws, including: the Inter-American Convention Against Corruption (IACAC) in 1996;⁵ the establishment of the OECD Working Group on Bribery in International Business Transactions in 1994 which led to the adoption of the OECD Convention⁶ in 1997; the Corruption of Foreign Public Officials Act in Canada⁷ in 1999 and the United Nations Convention Against Corruption⁸ in December 2005. Against this backdrop of anti-corruption legislation, transparency initiatives were viewed as a further step to combat corruption and inappropriate payments by forcing open disclosure in a manner that allows NGOs and private individuals to see what payments have been made to government entities.

In 2008, U.S. Senator Lugar in his capacity as a Ranking Minority Member of the Senate Foreign Relations Committee had staff prepare a report titled: "The Petroleum and Poverty Paradox: Assessing U.S. and International Community Efforts to Fight the Resource Curse."⁹ The report included a comprehensive review of the experience of over 20 resource rich countries. The report makes the interesting observation:

While the "resource curse" damages U.S. foreign policy and humanitarian interests abroad, it also negatively impacts Americans at home. Social unrest, buoyed by perceived injustice in expenditure of oil revenue and use of oil as a currency of conflict, destabilizes the reliability of oil supplies. Resulting tightening of global markets and attachment of a risk premium to oil price inflate prices at U.S. gas pumps and results in a massive wealth transfer out of the United

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