In previous posts, from April, 20 2015 and June 2, 2015, we reported on the federal Extractive Sectors Transparency Measures Act (“ESTMA”) and the requirements it imposes on companies to report certain types of payments made to governments. ESTMA requires reporting companies to report payments made to specified “payees” — governments in Canada and foreign states (along with certain other bodies established by those governments) — in any of seven categories:
- taxes, other than consumption taxes and personal income taxes;
- fees, including rental fees, entry fees and regulatory charges as well as fees or other consideration for licences, permits or concessions;
- production entitlements;
- bonuses, including signature, discovery and production bonuses;
- dividends other than dividends paid as ordinary shareholders; and
- infrastructure improvement payments.
A company must report payments to a government that total $100,000 or more in any financial year in any category. Each company must, no later than 150 days after its financial year-end, provide the federal Minister of Natural Resources with a report disclosing reportable payments made during that financial year. The report must also be made public.
Section 29 of ESTMA states that it does not apply to payments made to “Aboriginal governments” during the two year period after ESTMA came into effect. This delayed implementation was intended to provide additional time for consultations with Aboriginal groups. As ESTMA came into force on June 1, 2015, reportable payments to Aboriginal governments made on or after June 1, 2017, will have to be included in ESTMA reports. This may present challenges for reporting companies.
First, ESTMA does not define “Aboriginal government,” and does not use the term in the definition of “payee.” ESTMA’s focus is on payments that are attributable to governments’ ownership of resources and to governments’ power to tax or regulate reporting companies. Some Indigenous groups — such as Indigenous groups that own land and have law-making powers under modern treaties — would very likely be “Aboriginal governments” and therefore “payees” under ESTMA. This may be less clear in other cases, such as Metis groups that are organized as societies and that do not own land or have law-making powers. Reporting companies will therefore have to consider whether any given Indigenous group is a “payee” under ESTMA. If not, payments to that Indigenous group would not be reportable under ESTMA, even if they may otherwise fall within one of the seven reportable payment categories.
Second, the application of ESTMA to payments under impact benefit agreements (or similar agreements) with Indigenous groups is unclear. Not all payments outlined under impact benefit agreements will fall within reportable ESTMA payment categories. Companies will therefore have to review existing impact benefit agreements with Indigenous groups to assess whether payments required under those agreements fall into any of the seven reportable payment categories. Payments under impact benefit agreements that do not fall within the seven reportable payment categories do not have to be reported, even if the Indigenous group is a “payee” under ESTMA. It is the substance of a payment, not whether it was made pursuant to an impact benefit agreement or other arrangement, that governs whether it is reportable. As a result, companies will have to review payment obligations to determine whether they are in substance reportable payments.
Finally, having to report payments to Aboriginal governments will add to the compliance workload for companies, as they will have to assess whether payments are reportable, and if so will have to track and report on those payments.