Sun Peak Metals Corp. and United Tegaru Canada - Initial Assessment

Note: all references to the 2011 OECD Guidelines

Summary

1. On September 10, 2022, Canada’s National Contact Point (NCP) received a request for review from United Tegaru Canada (“UTC”), a non-government organization based in Toronto, Ontario. The request for review concerned observance of the Guidelines by Sun Peak Metals Corporation (“Sun Peak”), a Canadian junior mining company focused on mineral exploration projects in Ethiopia.

2. UTC claimed that by operating in Ethiopia – and specifically by paying taxes/licensing fees to the Government of Ethiopia – Sun Peak is or has been involved with and/or contributing to adverse human rights impacts linked to violations allegedly committed by that country’s government in the context of the Tigray conflict (Chapter IV, paragraphs 1 and 2). The Notifier also questioned whether Sun Peak had a policy commitment to human rights (Chapter IV, paragraph 4) and whether the company was undertaking appropriate human rights due diligence (Chapter IV, paragraph 5). The Notifier did not claim that Sun Peak itself had abused human rights in the context of its activities in Ethiopia.

3. During the initial assessment, Canada’s NCP Secretariat held separate conversations and had email exchanges with both parties. UTC and Sun Peak were given the opportunity to provide supporting documentation and clarification, and were invited to fact-check information in this initial assessment.

4. An ad hoc working group comprising officials from Global Affairs Canada and Natural Resources Canada examined the case and formulated a recommendation to the NCP.

5. Based on the working group’s recommendation, the NCP offers its good offices to facilitate a dialogue between the parties on the issue raised in connection with Chapter IV, paragraph 5 (human rights due diligence). 

6. The NCP is not offering its good offices to facilitate dialogue on the issues raised concerning Chapter IV, paragraphs 1, 2, and 4. 

Substance of the specific instance

7. The Notifier, United Tegaru Canada (UTC), is a self-described “non-political, non-religious, non-for-profit” organization based in Toronto, Ontario. UTC was founded in response to the outbreak of conflict in northern Ethiopia in 2020, and advocates for awareness and action regarding the humanitarian and human rights situation in Ethiopia’s Tigray region. UTC was represented by legal counsel in its engagement with the NCP.

8. The Respondent, Sun Peak Metals Corporation, is a Canadian junior mining company listed on the TSX Venture Exchange and headquartered in Vancouver, British Columbia. The company is focused on mineral exploration projects in northern Ethiopia, specifically its “Shire Project”, which comprises four exploration licences covering approximately 900 sq. kilometres. According to the company, Sun Peak’s management team has over 15 years of experience working in the region and is supported by a team of Tigrayan employees.

Notifier’s perspectives

9. The Notifier claims that the Government of Ethiopia has been involved in the commission of serious human rights violations since it initiated military operations in the Tigray region in 2020. In connection with this claim, the Notifier provided the NCP with copies of reports by Amnesty International and Human Rights Watch. The Notifier also provided a copy of a written submission it made in June 2022 to the Subcommittee on International Human Rights of the House of Commons Standing Committee on Foreign Affairs and International Development.

10. The Notifier raises questions regarding the Respondent’s observance of several guidelines in Chapter IV (Human Rights), specifically:

• Chapter IV (paragraph 1): The Notifier claimed that the Respondent is involved in adverse impacts on the human rights of Tigrayans. According to the Notifier, the Respondent has been or is required to pay “additional taxes and other fees” to the Government of Ethiopia in order to pursue its exploration activities. The Notifier says it is reasonable to believe that these taxes/fees have helped enable the Ethiopian government and its armed forces to continue hostilities in the Tigray region and, in that context, to commit serious human rights violations. According to the Notifier, “there are reasonable grounds to believe that any operation by Sun Peak Metals Corp in Ethiopia would adversely affect Tigrayans’ human rights”. [emphasis added]
• Chapter IV (paragraph 2): For the reasons above, the Notifier claimed that the Respondent may be causing or contributing to adverse human rights impacts.
• Chapter IV (paragraph 4): The Notifier claimed that the Respondent did not have a publicly available human rights policy as of September 2022, and that this was reason to question whether it had a policy commitment to human rights as recommended in paragraph 4 of Chapter IV. The Notifier believed that references on the Respondent’s website and in its corporate materials to corporate social responsibility, employee health and safety, and community engagement did not constitute observance of the recommendation in paragraph 4.
• Chapter IV (paragraph 5): The Notifier claimed that it was unable to find any publicly available information about human rights due diligence undertaken by the Respondent in relation to its activities in Ethiopia. The Notifier wrote to the Respondent in February 2022 requesting such information, but did not receive a response. The Notifier acknowledged that the Respondent invoked force majeure on all of its mining licences in Ethiopia and announced a suspension of operations in November 2020. However, the Notifier is concerned that this announcement did not mention whether human rights due diligence would be undertaken in connection with a decision to resume operations. In light of the foregoing, the Notifier questions whether the Respondent has or is undertaking human rights due diligence as recommended in paragraph 5 of Chapter IV. The Notifier also appears to infer a lack of appropriate human rights due diligence simply on the basis of the Respondent’s decision to operate in Ethiopia.

11. The Notifier’s request for review did notclaim that the Respondent itself had abused human rights in the context of its activities in Ethiopia.  

12. The Notifier asks the NCP to “assist by providing a forum for constructive dialogue on these issues”.

13. The NCP notes that the Notifier’s request for review did not raise issues concerning observance of paragraph 3 of Chapter IV.

Respondent’s perspectives

14. The Respondent describes its activities in Ethiopia as purely exploratory in nature and states that it has not engaged in any direct mineral extraction operations there.

15. The Respondent claims that, due to the nature of its activities, there is limited scope for interactions that could lead to the company being involved in human rights abuses. The Respondent says that it has been monitoring the situation in Ethiopia since invoking force majeure on its licences and suspending its operations in November 2020, and that the company has taken measures to ensure the safety and wellbeing of its employees.

16. The Respondent’s responses to the issues raised by the Notifier are summarised below:

• Chapter IV (paragraphs 1 and 2): The Respondent emphasizes that the Notifier has not provided any evidence linking the company to specific human rights violations to which its activities may have contributed. The Respondent notes that it does not pay income taxes in Ethiopia. While it does pay what it describes as “nominal” exploration licence fees to Ethiopia’s Ministry of Mines, payments to the Ethiopian Government have diminished since the company declared force majeure on its licences. According to the Respondent, these payments cannot be considered significant contributions to any alleged violations committed by the government. The Respondent recommends that this issue not be given further consideration by the NCP.
• Chapter IV (paragraph 4): The Respondent said that a commitment to respect human rights was implicit in its Code of Business Conduct and Ethics, which sets out expectations and commitments around ethical behaviour and integrity for the enterprise and its employees. The Respondent acknowledged, however, that it did not have a dedicated human rights policy. Following engagement with the NCP Secretariat, the Respondent reported that work was underway to draft and publish such a policy. The Respondent’s board of directors subsequently adopted and published a “Human Rights Policy” on March 2, 2023.
• Chapter IV (paragraph 5): The Respondent asserted that it has a thorough due-diligence process, which takes into account human rights considerations, and that due diligence was carried out prior to the initiation of its Shire Project. For instance, the Respondent noted that it was required to complete a social and environmental impact assessment as part of its licence application, and that this assessment included consultation with community stakeholders. The Respondent explained that it has a “community liaison officer” who regularly visits all licence areas and consults with the local administration and local people prior to, during, and following exploration work. This liaison officer also acts as the first point of contact for grievances involving the company. The Respondent is of the view that its approach to due diligence has been consistent with the OECD Guidelines, though recognizes the importance of having “components and tools dedicated to covering human rights, in addition to existing processes within its wider due diligence process”. The Respondent noted that it was considering amendments to its corporate processes in this regard. To the extent that there is or has been any non-observance of the Guidelines, the Respondent said that it is being addressed.  

Initial Assessment

17. The Initial Assessment was based on the information submitted by the Notifier and the Respondent, as well as publicly available information.  

18. The Initial Assessment considers whether the issues raised are bona fide and relevant to the implementation of the Guidelines, taking into account the following:

• the identity of the party concerned and its interest in the matter
• whether the issue(s) are material and substantiated
• whether there seems to be a link between the enterprise’s activities and the issue(s) raised in the specific instance
• the relevance of applicable law and procedures, including court rulings
• how similar issues have been, or are being, treated in other domestic or international proceedings
• whether the consideration of the specific issue(s) would contribute to the purposes and effectiveness of the Guidelines

19. This Initial Assessment, and the NCP’s decision to offer good offices, do not represent a determination as to whether or not the Respondent has observed the Guidelines. This Initial Assessment should not be seen as validating to any degree – one way or the other – claims made by either the Notifier or Respondent.

Identity of the party concerned and its interest in the matter

20. The Notifier is an organization with an interest in and mandate related to the humanitarian and human rights situation in Ethiopia. The Notifier would appear to have a clear interest in observance of the OECD Guidelines by the Respondent, an enterprise that has been active in Ethiopia and in the Tigray region.

Whether the issues are material and substantiated

21. In assessing whether the issues raised are “material”, the question is whether the issues raised have clear and meaningful relevance to the Guidelines. 

22. In assessing substantiation, the question is whether the issues raised are based on a plausible and coherent interpretation of events, supported by a reasonably compelling and credible evidence base. The available information does not have to prove conclusively, or even on a balance of probabilities, that certain events occurred or that the enterprise acted in a particular way. This reflects the preliminary nature of the initial assessment, and its objective of determining whether the issues raised merit further examination, namely through dialogue under the good offices of the NCP.

23. The NCP’s assessment of whether the issues are material and substantiated in no way asserts that events occurred in the way alleged by the Notifier, nor is it a determination as to whether or not the Respondent has observed the Guidelines.

Issues raised concerning Chapter IV, paragraphs 1 and 2 (adverse impacts on human rights)

24. Paragraph 1 of Chapter IV calls on enterprises to avoid infringing on the human rights of others and to address adverse human rights impacts with which they are involved. Paragraph 2 calls on enterprises to avoid causing or contributing to adverse human rights impacts within the context of their own activities. The Notifier claims that by paying taxes and/or licence fees to the Government of Ethiopia – and effectively, by simply operating in Ethiopia – the Respondent may be involved with and/or contributing to the human rights violations allegedly committed by that country’s government.

25. It is important to note that the Guidelines call on enterprises to avoid, and failing that, to address adverse impacts – including on human rights – which they cause or contribute to “through” or “in the context of” their “own activities” (paragraph A.11 of Chapter II, paragraph 2 of Chapter IV). As commentary paragraph 14 notes, “the Guidelines concern those adverse impacts that are either caused or contributed to by the enterprise”. This commentary further elaborates that “contributing to” an adverse impact should be interpreted as making a substantial contribution, and should not include minor or trivial contributions.

26. The language of the Guidelines and accompanying commentary suggests that the payment of taxes/licence fees to a government is not alone sufficient to substantiate a claim that an enterprise is contributing to or is involved with adverse impacts linked to violations committed by that government. In this case, and on the basis of the information provided, there is little to substantiate the claim that the Respondent is “contributing” to or “involved” with the alleged adverse impacts, as understood in the Guidelines, especially given how remote those alleged impacts appear to be from the Respondent’s own commercial activities.

27. The Guidelines do not call on enterprises to avoid operating in a jurisdiction due to the fact that the relevant State may be failing to protect human rights. Chapter I, paragraph 2, as well as Commentary paragraph 38, recognize the possibility that enterprises may find themselves operating in jurisdictions where domestic laws or regulations conflict with the principles and standards of the Guidelines, and/or where the State is acting contrary to international human rights obligations. In those situations, enterprises are asked to seek ways to honour the principles and standards of the Guidelines (including respect for international human rights), to the fullest extent which does not place them in violation of domestic law.  

28. This reflects the distinction between the State’s duty to protect human rights and the enterprise’s responsibility to respect human rights, and speaks to the Guidelines being concerned more with how multinational enterprises operate, not where they operate (and to which governments they must therefore pay taxes or licence fees). Issues around the ultimate use of State tax revenue will typically not be material to the Guidelines.    

Issues raised concerning Chapter IV, paragraph 4 (policy commitment to human rights)

29. Paragraph 4 recommends that multinational enterprises have a policy commitment to respect human rights. Commentary paragraph 44 elaborates on the content and nature of such a commitment.

30. The issue of whether the Respondent has a policy commitment to respect human rights is material to the Guidelines. While the Respondent initially acknowledged that it did not have a dedicated policy expressing its commitment to human rights, in March 2023 the Respondent’s board of directors adopted a corporate “Human Rights Policy”. Among other things, the policy includes a commitment to conduct “thorough human rights due diligence to assess, minimize and manage potential human rights impacts of its activities”. Even if this issue may have been sufficiently substantiated at the outset of the specific instance, there no longer appears to be a compelling basis for the question to be a dedicated topic of further discussion under the NCP’s good offices.

Issues raised concerning Chapter IV, paragraph 5 (human rights due diligence)

31. Paragraph 5 calls on multinational enterprises to carry out human rights due diligence as appropriate to their size, the nature and context of operations and the severity of the risks of adverse human rights impacts.

32. The issue raised by the Notifier is material to the Guidelines. However, it is important to note that the mere fact that an enterprise operates in a region or context where human rights risks might exist is not itself sufficient to substantiate a claim that the enterprise has failed to undertake appropriate human rights due diligence.

33. In this instance, the Notifier indicates that it has information and perspectives (aside from those concerning taxes or licensing fees paid to the Ethiopian government) that may be relevant to human rights due diligence in Ethiopia by entities such as the Respondent. For its part, the Respondent has adopted a new human rights policy and has expressed a commitment to continuous improvement in its due diligence activities, including human rights due diligence. In the context, there appears to be a sufficient basis to merit further dialogue between the parties on human rights due diligence. It is important to note that this does not represent a finding that the Respondent has failed to observe the Guidelines.

Whether there seems to be a link between the enterprise’s activities and the issue raised in the specific instance

34. There seems to be a link between the enterprise’s activities and the issues raised concerning observance of Chapter IV paragraphs 4 and 5. There does not seem to be a meaningful link between the enterprise’s activities and the issues raised in reference to paragraphs 1 and 2.

The relevance of applicable law and procedures, including court rulings

35. Neither of the parties referenced laws, procedures, or court rulings that would be relevant to this specific instance.

How similar issues have been, or are being, treated in other domestic or international proceedings

36. Neither of the parties indicated the existence of parallel proceedings that would be relevant to this specific instance.

Whether the consideration of the specific issue would contribute to the purposes and effectiveness of the Guidelines

37. Chapter IV (paragraphs 1 and 2): Consideration of whether the Respondent’s payment of taxes or licensing fees in Ethiopia is contributing to or involves it with adverse human rights impacts allegedly caused by that country’s government would not contribute to the purposes and effectiveness of the Guidelines. As noted above, the NCP does not consider this issue sufficiently substantiated or material to the Guidelines. Here, the NCP also takes note of the OECD Investment Committee’s response to the substantiated submission by OECD Watch regarding the Australian National Contact Point (2018), particularly the Committee’s comment at paragraph 42:

• It is important that NCPs carefully distinguish the enterprise responsibility to respect human rights and the due diligence requirements that accompany that from the broader State duty to protect human rights. The role of the NCP is to address the former but not to address the latter.

In the present case, the NCP is of the view that the issue raised by the Notifier is essentially one of government policy (use of tax revenues) and the State’s duty to protect human rights, and not the enterprise’s responsibility to respect human rights.

38. Chapter IV (paragraph 4): Following outreach about this specific instance by the NCP Secretariat, the Respondent developed, adopted, and published a human rights policy. In this context, the NCP does not see dedicated consideration of this specific question making a meaningful contribution to the purposes and effectiveness of the Guidelines.

39. Chapter IV (paragraph 5): The NCP is of the view that facilitating a dialogue between the parties on human rights due diligence – particularly one that helps to inform and possibly strengthen the Respondent’s approach to addressing the recommendation in paragraph 5, and to implementing its newly articulated human rights policy – has potential to contribute to the purposes and effectiveness of the Guidelines.

Conclusion

40. The NCP offers its good offices to facilitate a single session of dialogue between the Notifier and Respondent regarding human rights due diligence. This would provide an opportunity for the Respondent to share information about its new human rights policy and for the parties to exchange perspectives on potentially relevant considerations for human rights due diligence in relation to the Respondent’s Shire Project and mineral exploration activities in Ethiopia (Chapter IV, paragraph 5).

41. The NCP is not offering its good offices to facilitate dialogue on the issues raised concerning Chapter IV, paragraphs 1, 2, and 4.

August 11, 2023