On 23 October, the government of Canada introduced its draft Extractive Sector Transparency Measures Act (the bill), which will impose mandatory reporting requirements for entities engaged in the “commercial development of oil, gas or minerals” (exploring, extracting, or having permits to do so) in Canada or elsewhere or that control an entity that is so engaged. The bill’s purpose is to implement Canada’s international commitments to participate in the fight against corruption in the extractive sector. The government intends to establish mandatory reporting standards for the extractive sector by June 2015.
The initiative is part of a larger global trend towards greater transparency and accountability within extractive industries. In the US, the Securities and Exchange Commission is developing mandatory reporting requirements for the extractive sector pursuant to section 1504 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The EU is establishing requirements through its Accounting and Transparency directives. The UK announced in August that under the Accounting Directive it will require extractive companies to publicly disclose their payments to governments from 1 January 2015.
The bill will require certain entities to file a report disclosing payments they or their subsidiaries made to any Canadian or foreign government totalling at least C$100,000 (or other prescribed amount) for the following payment categories: (a) taxes, excluding consumption taxes and personal income taxes; (b) royalties; (c) fees, including rental fees, entry fees and regulatory charges as well as payments for licences, permits or concessions; (d) production entitlements; (e) bonuses, including signature, discovery and production bonuses; (f) dividends, excluding those paid to governments as ordinary shareholders; (g) payments for infrastructure improvements; and (h) any other prescribed category of payment.
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Eden Oliver is a partner, Claire Webster is an associate and Daniel Cipollone is an articling student at Bennett Jones LLP, a law firm with offices in Calgary, Toronto, Edmonton, Ottawa, Vancouver, Washington DC, Dubai and Doha, and a representative office in Beijing.
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