Canada’s largest industry and trade association has asked the federal government to insure foreign investors against the risk their projects might be derailed by consultations with First Nations.
The suggestion from Canadian Manufacturers & Exporters, which represents 1,200 companies, was among the farthest-reaching in hundreds made to a once-a-decade federal review of the Export Development Act, which governs the activities of Canada’s export credit agency. Roughly 30 organizations sent written submissions last month, many echoing arguments advanced during the previous legislative review, in 2008. The Department of Global Affairs hired a consulting firm, International Financial Consultants, earlier this year to conduct the review.
Export Development Canada, a Crown corporation, distributes billions of dollars of federal support annually to thousands of Canadian and foreign companies, primarily in the form of loans, guarantees and a variety of insurance products. Most of its services are aimed at fostering outbound trade and investment: For example, EDC already insures Canadian companies against expropriation, violence and other political risks when operating in developing countries such as Colombia, Syria, Libya and Yemen. Canadian Manufacturers & Exporters asked EDC to introduce a similar product, but on Canadian soil: “some sort of guarantee” to foreign investors to protect them from “the risk associated with First Nations consultations as part of larger project approvals.”
Successive court decisions have affirmed the federal government’s duty to consult Indigenous peoples when its actions may adversely affect their rights, and accommodate them if necessary. This still-evolving body of law has imposed significant responsibilities on governments across Canada relating to Crown-sponsored mining, energy, infrastructure and other projects, as well as private-sector projects that require government regulatory approvals. Disputes over the adequacy of consultations can lead to litigation and projects can grind to a halt.
“To a foreign investor who does not understand these complex consultative processes, and has no real way of participating in them, it presents a high risk that dissuades their investment in projects,” Canadian Manufacturers & Exporters wrote in its submission. “EDC, who could be better positioned to understand such situations, could provide assurances to the foreign investor through some sort of guarantee.”
Yet, the federal government itself has had difficulty meeting its obligations. For example, after Ottawa approved an expansion of the Trans Mountain pipeline in November, 2016, the Federal Court of Appeal ruled this year that while Ottawa “acted in good faith and selected an appropriate consultation framework,” it “fell well short of the mark” in the consultation’s final stages. The federal government purchased the pipeline from U.S.-based Kinder Morgan earlier this year, and the expansion project is currently on hold.
Clayton Leonard, a lawyer with JFK Law in Victoria who represents First Nations on consultations on major projects, disputed the assertion that foreign investors can’t participate in consultations. “If you can file a project application in Canada, you have full participatory rights in the consultation process," he said. “There’s lots of successful consultation engagements between foreign resource investors and First Nations. … I concluded seven agreements in the last month of this year on major resource projects, several of which involved foreign investors."
Mr. Leonard also worried that such insurance might undermine the process. “The reason these foreign investors make an effort is because they want to create certainty for their project," he said. Such insurance "may undermine their motivation to do a thorough, meaningful engagement with First Nations.”
“The best insurance in the broadest sense of the word is for any business and any government to respect First Nations rights, title and jurisdiction and the UN Declaration on the Rights of Indigenous Peoples,” the Assembly of First Nations said in a statement. “If Export Development Canada considers providing guarantees and other assurances to foreign investors to secure investment in projects, Canadian taxpayers may be left on the hook for paying compensation for projects that do not proceed due to faulty consultation processes.”
EDC declined to comment on the proposal, as did Global Affairs, the federal department primarily responsible for supervising the Crown corporation.
Although EDC already funds hydroelectric projects, mines and other large projects overseas, other participants in the legislative review called on the federal government to offer more. For instance, in early 2018, EDC established FinDev, a subsidiary mandated to provide development assistance in developing countries; The Business Council of Canada, which represents large exporters, asked Ottawa to use FinDev to fund large-scale projects, a move it said would “make a significant impact on poverty reduction."
The council also asked Ottawa to pump more subsidies into large projects through the Canada Account, a special fund that Ottawa uses to finance high-risk initiatives such as the 2008-09 bailouts of General Motors and Chrysler and the Trans Mountain pipeline. The Mining Association of Canada called on the government to increase EDC’s support for projects in developing countries, a move it said could “maximize EDC’s potential to contribute to Canada’s Feminist International Policy.”
Large private-sector credit insurers that compete with EDC, including Atradius and Euler Hermes, repeated long-standing complaints that EDC uses its government-mandated competitive advantages to crowd out private-sector competitors such as themselves. Several customers, some of whom received federal loans that they say the private sector would not have provided, were pleased with EDC’s service quality; others complained that the Crown corporation favours large, politically important exporters while neglecting small and medium-sized enterprises.
Above Ground, an environmental advocacy group, urged the government to prohibit EDC from supporting “activity that causes or contributes to human-rights violations or significant environmental damage, or that involve corruption.”
Past legislative reviews of the Export Development Act have resulted in incremental expansions in EDC’s mandate. International Financial Consulting is expected to deliver its report to Parliament in March.
Matthew McClearn