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Canada’s National Contact Point: Final statement on East Africa Metals Inc. and United Tegaru Canada

Note: This final statement should be read in conjunction with the NCP’s initial assessment, published as a separate document.

1. On September 10, 2022, Canada’s National Contact Point (NCP) received a request for review from United Tegaru Canada (the Notifier), a non-government organization based in Toronto. The request for review concerned observance of the Organisation for Economic Development and Co-operation (OECD) Guidelines for Multinational Enterprises (the “Guidelines”) by East Africa Metals Inc. (the Respondent), a junior mining company based in Vancouver and focused on mineral exploration projects in Ethiopia and Tanzania.
2. The Notifier’s request for review raised issues concerning paragraphs 1 and 2 of chapter IV (human rights) of the Guidelines. Specifically, the Notifier claimed that by paying taxes/licensing fees to the Government of Ethiopia, the Respondent was or had been contributing to adverse human rights impacts allegedly caused by government forces in the context of the Tigray conflict. The Notifier also questioned whether the Respondent had a policy commitment to human rights (chapter IV, paragraph 4), and whether the Respondent was undertaking appropriate human rights due diligence (chapter IV, paragraph 5). The Notifier did not claim that the Respondent itself had abused human rights in the context of its activities in Ethiopia.
3. The Notifier asked the NCP to provide a forum for constructive dialogue on these issues.
4. The NCP Secretariat held separate meetings and email exchanges with both parties. A draft of the NCP’s initial assessment was shared with the parties in November 2023. The parties were given an opportunity to review and provide comments. The initial assessment was published as a separate document.   
5. Canada’s NCP offered its good offices to facilitate a dialogue regarding the Respondent’s approach to paragraph 4 (policy commitment to human rights) and paragraph 5 (human rights due diligence) of chapter IV (human rights) of the Guidelines. The NCP did not offer good offices concerning the issues raised regarding paragraphs 1 and 2 of chapter IV of the Guidelines. 

Good offices

6. Both parties accepted the NCP’s offer of good offices and participated in a dialogue moderated by the NCP Secretariat on February 29, 2024.
7. During the dialogue, the Notifier explained its mandate and interest in the situation in Tigray, and expressed its concern and belief that armed forces in the region, including Ethiopian and Eritrean military forces, were committing human rights violations, even following the ceasefire. The Notifier also noted its concern about what it characterized as alleged atrocity crimes in the region, including genocide, and referred to the work of the International Commission of Human Rights Experts on Ethiopia. The Notifier emphasized the need for enhanced human rights due diligence by enterprises active in the area given the conflict situation.
8. The Respondent noted that it had not conducted on-the-ground exploration activities in Ethiopia since 2017, when an exploration programme associated with its Adyabo property came to an end. The Respondent explained that it had entered a partnership with another company to develop mining projects at the property. Under this arrangement, the Respondent has a 30% net profits interest in the mining projects. The other company holds the remaining 70% interest and will be responsible for financing mine construction and for any future mine operations. The Respondent has a 70% interest in another exploration project in Ethiopia.
9. The Respondent outlined several of its corporate social responsibility activities, including initiatives to support local education and reforestation. The Respondent also described its engagement with local stakeholders in Tigray as part of due diligence related to its earlier exploration activities, as well as more recent engagement in the region to maintain awareness of developments and to get local perspectives on the evolving situation.
10. The parties discussed the Respondent’s approach to communicating information about its operations and due diligence activities to local stakeholders and to the public more broadly. The parties also exchanged perspectives on human rights due diligence regarding business relationships and how the Respondent’s policy commitment to human rights informs its relations and engagement with business partners.
11. Overall, the NCP observed a constructive dialogue that contributed to a greater mutual understanding between the parties, as well as heightened awareness of the OECD Guidelines and how they might continue to inform the Respondent’s activities.

Conclusion

12. The NCP thanks both parties for their engagement in the specific instance process and participation in the dialogue. The NCP considers the good offices phase concluded.
13. The NCP welcomes the Respondent’s December 2022 update to its Code of Business Conduct and Ethics, which states that the “corporation, its employees, contractors, and other stakeholders” are expected to “uphold the highest standards of human rights in all our operations” and references the OECD Guidelines as a source of guidance in this regard. The NCP invites the Respondent to consider how its policy commitment to respect human rights might be further developed and elaborated on, particularly to support and guide ongoing implementation of human rights due diligence.
14. The NCP recommends that the Respondent communicate more about its human rights due diligence and wider responsible business conduct activities, as appropriate to the scope and nature of its operations. The NCP is of the view that greater public communication about these activities could reinforce the Respondent’s approach to recommendations in chapter III (disclosure) and chapter IV, paragraph 5 (human rights) of the OECD Guidelines.
15. The NCP recognizes that the Respondent may not have the same capacities as larger enterprises. The NCP also acknowledges that the disclosure recommendations in the Guidelines are not intended to place unreasonable administrative or cost burdens on enterprises. Nevertheless, the Respondent should still consider how it can observe the Guidelines’ recommendations around disclosure of information related to responsible business conduct information and human rights due diligence activities “to the fullest extent possible” given its size and capacities (chapter I, paragraph 6).
16. The NCP also recommends that the Respondent give ongoing consideration to how its policy commitment to human rights and expectations in that regard are communicated and fulfilled in the context of its business relationships. Ongoing attention to this issue may be especially relevant given the Respondent’s evolving commercial activities and business relationships. The NCP recommends that the Respondent consult chapter II (paragraph A.13) and commentary paragraphs 17 and 23-26 of the Guidelines, as these may provide helpful guidance on this issue. The NCP emphasizes that the Guidelines’ recommendations on human rights due diligence extend to an enterprise’s business relationships (chapter II, paragraphs A.11, A.13; chapter IV, paragraph 5; commentary paragraph 50).
17. The NCP will follow up with the parties about its recommendations within 6 months of the publication of this final statement. The NCP will publish a statement describing its follow-up.
18. The NCP emphasizes that its assessment of the issues raised, decision on whether to offer good offices, and its recommendations do not represent or reflect a determination as to whether the enterprise observed the Guidelines in this specific instance. The NCP’s initial assessment and final statement should not be seen as validating to any degree – one way or the other – claims made by either the Notifier or Respondent.
19. Both parties were given an opportunity to review and comment on this final statement ahead of its publication.

Additional Issues Raised by the Notifier with the NCP

20. After receiving the NCP’s initial assessment, the Notifier raised questions and a new issue with the NCP in relation to this specific instance. The NCP seeks to address these below.

Decision not to offer good offices on issues raised concerning chapter IV, paragraphs 1 and 2

21. The Notifier questioned the NCP’s decision not to offer good offices regarding the issues raised in connection with paragraphs 1 and 2 of chapter IV. To recall, the Notifier claimed that the Respondent had been or was contributing to adverse impacts allegedly caused by government forces by virtue of paying taxes and other State-imposed fees incidental to its operations. According to the Notifier, “any operation” of the Respondent in Ethiopia would see it “contribute” to adverse impacts allegedly caused by government forces.
22. The NCP declined to its offer good offices on this issue. As noted in the NCP’s initial assessment, the use of tax revenue is essentially an issue of government policy. Duly paying taxes and other fees required under local law cannot be considered a “contribution” to adverse impacts potentially connected with government spending decisions. The Guidelines recognize that the first obligation of enterprises is to obey domestic law (chapter I, paragraph 2). The Guidelines also underscore the importance of enterprises contributing to the public finances of host countries by making timely payment of their tax liabilities (chapter XI, paragraph 1). The NCP does not see the Guidelines calling on enterprise to avoid such obligations in particular circumstances. As noted in chapter I, the Guidelines “should not and are not intended to place an enterprise in situations where it faces conflicting requirements.” The fact that paragraph A.10 of chapter II does not apply to chapter XI (taxation) further reinforces the principle that paying taxes is not an area where enterprises face the risk of “contributing” to adverse impacts covered by the Guidelines.
23. Ultimately, the Notifier’s interpretation of the Guidelines suggests that multinational enterprises necessarily “contribute” to any adverse impacts caused by governments to which the enterprises pay taxes or other State-mandated fees incidental to their operations. In the NCP’s view, this interpretation would create an unduly expansive and unworkable expectation for enterprise accountability that is incompatible with the purposes and intent of the Guidelines.
24. The Guidelines do recognize the possibility of an enterprise “contributing” to adverse impacts caused by a “State entity”. In these situations, enterprises are indeed called upon to cease or prevent their contribution and to use leverage to mitigate any remaining impact to the greatest extent possible. For the reasons outlined above, the NCP does not see this recommendation as relevant to the issue raised by the Notifier. Even if this were not the case, it was still unclear how the payments cited by the Notifier would have represented a “contribution” by the Respondent “through” or in the “context of its own activities” to the adverse impacts allegedly caused by government forces. The concept of “contribution” in the Guidelines connotes a certain proximity between the enterprise’s activities and the alleged adverse impacts that was not evident based on the available information.

Alleged link to adverse impacts through a business relationship

25. After receiving the NCP’s initial assessment, the Notifier raised a new issue by asserting that the Respondent’s operations, products, or services were directly linked to the adverse impacts through a “business relationship” (chapter IV, paragraph 3) with the government, apparently embodied in its payments of taxes and licensing fees. The Notifier claimed that the Respondent should attempt to exercise leverage to influence the Government of Ethiopia to prevent or mitigate the adverse impacts allegedly caused by its armed forces. The Notifier asked the NCP to offer good offices to facilitate dialogue on this issue.
26. The NCP takes note of commentary paragraph 14 of the Guidelines, which states that “business relationships” can include “relationships with… State entities directly linked to the [the enterprise’s] business operations, products or services”. However, the NCP does not see how the payment of taxes and other mandatory fees – “imposed by the State” according to the Notifier – would constitute a “business relationship” within the meaning of the Guidelines. The term “business relationship” implies arrangements of a discretionary and commercial nature. This does not seem to describe the relationship between the Respondent and local government in this instance.
27. The NCP believes it would be inconsistent with the purposes and coherence of the Guidelines to conflate the concept of a “business relationship” with an enterprise’s general adherence to local laws and regulations, including the payment of taxes and other State-imposed fees incidental to its operations. Accordingly, the NCP did not offer good offices on this issue.

Timeline

September 10, 2022 Notifier’s request for review received

October 4, 2022 Call between the NCP Secretariat and the Notifier

October 24, 2022 Respondent is informed of request for review

November 25, 2022 Call between Respondent and NCP Secretariat

November 17, 2023 NCP approves draft initial assessment

December 26, 2023 Final comments received from the parties

February 29, 2024 Facilitated dialogue between the parties

April 2, 2024 NCP approves draft final statement

April 5, 2024 Draft final statement shared with the parties

May 16, 2024 Approved final statement shared with the parties