The repeal of a U.S. anti-corruption “resource extraction rule,” which passed Congress late last week, leaves Canadian companies with much tougher reporting rules than their American peers, putting the two countries on divergent paths.
If and when President Donald Trump signs off, U.S.-listed energy and mining companies will no longer be required to disclose taxes and payments made to governments, a move at odds with rules in 30 other countries.
The rule, which took a decade to craft, was finalized in the twilight of Obama’s presidency and slated to take effect next year. But, under the rarely-used Congressional Review Act, recently-enacted rules can be overturned in 60 working days if both houses and the president sign off on it. It has only been successfully used once before.
Trump is widely expected to green-light the reversal, especially given his administration’s decision Friday to undo many of the regulations on Wall Street, put in place in an attempt to prevent a repeat of the 2008 financial collapse.
Mining advocates and civil society groups alike told the Financial Post they are hopeful the move will not undermine global reporting standards.
Ben Chalmers, vice-president of sustainable development aid for the Mining Association of Canada, said he sees no reason the U.S. move would start a trend in the opposite direction among Canadian companies.
“We certainly don’t see that our regulations put us at a competitive disadvantage.”
U.S. energy industry advocates have long derided and lobbied against the rule, included in the 2010 Dodd-Frank act as a means to discourage shady dealings with ethically-questionable governments.
House Majority Leader Kevin McCarthy argued in a recent Wall Street Journal op-ed that it would put American companies at a competitive disadvantage because they’d be required to disclose private, internal data.
“Obviously there will be some disappointment about what’s happened in the U.S. but there should not be an impact on the current entities that are reporting,” said Claire Woodside, director of Publish What You Pay Canada, an organization that promotes transparency in the natural resources sector.
Canadian, Russian, Brazilian, Chinese and European competitors are also subject to stringent reporting requirements, which recognize the so-called “resource curse” for developing countries — in which they are unable to transform resource wealth into economic growth, often due to corruption and poor governance.
“Transparency is still the global standard for other markets that have adopted similar rules,” she said.
“The majority of extractive companies with international operations have a listing on a market that is captured by the law. So by voting for this repeal, they’re unleveling the playing field.”
Woodside said feedback from Canadian extractive companies has suggested they see benefits from following Canada’s 2014 Extractive Sector Transparency Measures Act, which also cover private companies and are modelled after the Dodd-Frank requirement.
The legal obligation acts as a shield for companies because corrupt foreign governments will know companies are forced to disclose their dealings, she added.
Development of mandatory disclosure initiatives in Canada was largely voluntary, with industry groups and civil society working together after realizing transparency was a global trend, with all G8 countries except Canada and Russia building transparency laws in the early 2010s.
Nadim Kara, senior director of policy and programs at the Prospectors & Developers Association of Canada feels the negative impacts of the U.S. decision on the global mining sector will be mitigated because the biggest conglomerates are cross-listed either in Canada or the United Kingdom.
“We don’t think companies will delist in Canada and re-list in the States just to avoid this. That’s ridiculous, that’s not going to happen,” he said.
“Even if the industry saw this as a negative thing it wouldn’t be enough of a negative thing to move, but the fact is the industry doesn’t see it as a negative thing.”
Instead, he added, mandatory disclosure helps Canadian companies tell their story abroad, because they can show local communities just how much they are giving their governments.