East Africa Metals Inc. 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. The request for review concerned observance of the Guidelines by East Africa Metals Inc. (“East Africa Metals”), a Vancouver-based junior mining company focused on mineral exploration in East Africa, including Ethiopia.
2. UTC claimed that by being active in Ethiopia – and specifically by paying taxes/licensing fees to the Government of Ethiopia – East Africa Metals 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 Tigray conflict (Chapter IV, paragraphs 1 and 2). The Notifier also questioned whether East Africa Metals 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 East Africa Metals itself had abused human rights in the context of its activities in Ethiopia.
3. As part of its initial assessment, Canada’s NCP Secretariat held separate conversations and had email exchanges with both parties. UTC and East Africa Metals 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 issues raised in connection with Chapter IV, paragraphs 4 (policy commitment to human rights) and 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 and 2.

Substance of the specific instance

The Notifier

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.

The Respondent

8. The Respondent, East Africa Metals Inc., is a junior mining company headquartered in Vancouver, British Columbia. The company is incorporated under the Canada Business Corporations Act and is listed on the TSX Venture Exchange. The company describes itself as a “mineral exploration company focused on the identification, acquisition, exploration, development and/or sale of base and precious metal resource properties in the Federal Democratic Republic of Ethiopia and the United Republic of Tanzania.”
9. In a published Interim Management Discussion and Analysis (MDA) document covering the three-month period ended June 30, 2023, the Respondent noted that its major mineral property interests include the “Harvest Property” in Ethiopia, which hosts the Terakimti Gold Heap Leach Project. The MDA noted that the Respondent’s wholly owned subsidiary, Tigray Ethiopia Holdings Inc., has a 70% interest in Harvest, with the remaining 30% held by Enzana Mining Development PLC. The MDA also noted that the Respondent held a 30% equity interest in Tigray Resources Incorporated PLC, which has two projects in Ethiopia involving the “Adyabo Property”.
10. The MDA also noted the following:
    
    The Company declared Force Majeure rights on all mining and exploration extension licenses in Ethiopia in response to both COVID travel restrictions (March 2020) and the regional conflict (November 2020). The declaration of Force Majeure suspends any and all obligations in mining and exploration license agreements and protects the Company’s assets. Recent developments and the initiation of peace talks have encouraged management to believe the region will re-open for commercial operations in the short to medium term. The Company’s primary objective in Ethiopia during the next 12 months is to maintain readiness and be prepared to engage the mine development and exploration agendas immediately upon receiving confirmation the Ethiopian Ministry of Mines has declared the Tigray region secure for renewed commercial operations.

Notifier’s perspectives

11. 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.
12. 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 connection with its exploration licences. 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 East Africa Metals TSX in Ethiopia would adversely affect Tigrayans’ human rights”.
    • 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): Based on a search of publicly available material, the Notifier claimed that the Respondent did not have a publicly available human rights policy as of September 2022, and that this is reason to question whether it has a policy commitment to human rights as recommended in paragraph 4 of Chapter IV.
    • Chapter IV (paragraph 5): The Notifier says that the Respondent did not respond to a February 2022 letter from the Notifier expressing concern about human rights in Tigray. While the Notifier’s submission to the NCP highlighted information published by East Africa Metals related to corporate social responsibility, (e.g., the Respondent being awarded “Most Responsible Miner in Africa” by Capital Finance International in 2020), it also noted that the company had made no mention of human rights in statements regarding the prospective resumption of activities in Ethiopia. On this basis, the Notifier claims there are reasonable grounds to believe that the Respondent has not completed human rights due diligence in relation to its activities in Ethiopia.
13. The Notifier asks the NCP to “assist by providing a forum for constructive dialogue on these issues”.
14. The Notifier’s request for review did not make any claims regarding alleged human rights abuses committed by the Respondent itself, or linked directly to its exploration activities.
15. The Notifier’s request for review did not raise issues concerning observance of paragraph 3 of Chapter IV.

Respondent’s perspectives

16. The Respondent shared some perspectives with the NCP Secretariat in conversation and by email. The Respondent emphasized that it had not had any “active operations on the ground in Ethiopia since 2017” and that it had sold the majority interest in two of its Ethiopian projects to a development partner who would have exclusive rights to develop and operate the permitted mines. The Respondent noted that the company was negotiating the sale of a third permitted mine in Ethiopia when travel restrictions were put in place, putting that process on hold. The Respondent also emphasized that, as a publicly listed company, it is required to adhere to a disclosure standards that exceeds those set out in the Guidelines.

Initial Assessment

17. The Initial Assessment was based on the information provided 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 appears to have a clear interest in observance of the OECD Guidelines by the Respondent, an enterprise that has a commercial presence 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.

Issue 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 – when they cause or contribute to such impacts “through” or “in the context of” their “own activities” (paragraph A.11 of Chapter II, paragraph 2 of Chapter IV). As commentary paragraph 14 observes, “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 the enterprise is contributing to or is involved in 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 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 Respondent has a Code of Business Conduct and Ethics approved by its Board of Directors on March 28, 2013, and subsequently amended by the Board of Directors on December 12, 2022. The code is available on the Respondent’s website. The code is “intended to document the principles of conduct and ethics to be followed by the employees, officers…, and directors of East Africa Metals Inc. and its subsidiaries”. Section 7 of the Code (“Human Rights”) reads as follows:
    
    Human rights are fundamental rights and freedoms that all people are entitled to, regardless of race, sex, nationality, ethnicity, language, religion, or any other status. The Corporation, its employees, contractors, and other stakeholders are expected to uphold the highest standards of human rights in all our operations, including taking guidance from OECD’s guidelines (Organisation for Economic Co-operation and Development) to the best of the Corporation’s ability given the limited resources of a junior exploration company working in international jurisdictions.
    
    
31. The issue of whether the Respondent has a policy commitment to respect human rights is material to the Guidelines. While the Respondent’s Code of Business Conduct and Ethics does appear to set certain expectations concerning respect for human rights and observing the OECD Guidelines, the NCP is of the view that there is still a reasonable basis for the Respondent’s approach to paragraph 4 – apparently articulated in its entirety in Section 7 of the Respondent’s Code of Business Conduct and Ethics – to merit further discussion under the NCP’s good offices. This does not mean that the Respondent necessarily lacks a policy commitment to human rights or has failed to meet the recommendation set out in paragraph 4.

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

32. 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. The Notifier claims that there are reasonable grounds to believe the Respondent has not observed this recommendation, citing the alleged lack of any mention of human rights in the Tigray region in the company’s public statements.
33. 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.
34. In this case, the NCP has not found or been made aware of any planned or completed human rights due diligence by the Respondent with respect to its commercial activities in Ethiopia. This does not mean that the Respondent has failed to meet the recommendations of the Guidelines. However, it does suggest a reasonable basis for the issue to merit further discussion under the NCP’s good offices.  

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

35. 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 concerning paragraphs 1 and 2.   

The relevance of applicable law and procedures, including court rulings

36. 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

37. 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

38. 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.
    
    
39. Chapter IV (paragraph 4): While the Respondent’s Code of Business Conduct and Ethics expresses the expectation that the Corporation, its employees, contractors, and other stakeholders “uphold the highest standards of human rights”, the NCP is of the view that further consideration of this issue under the NCP’s good offices could nonetheless potentially help inform and possibly enhance the Respondent’s current approach to the recommendation in paragraph 4 of Chapter IV, and thereby contribute to the wider purposes and effectiveness of the Guidelines.
40. Chapter IV (paragraph 5): The Guidelines recommend that multinational enterprises undertake human rights due diligence in relation to their activities. Commentary paragraph 45 notes that this due diligence entails “assessing actual and potential human rights impacts” and that it is an “ongoing exercise”. At the same time, the Guidelines recognize that the scope and nature of an enterprise’s human rights due diligence may be informed by the size of the enterprise, the nature and context of its operations, and the severity of the risks of adverse human rights impacts.
41. While recognizing the Respondent’s position that it has had no “on-the-ground” operations in Ethiopia since 2017, it still appears to have commercial interests in the country and has expressed an ambition to continue with further mine development and mineral exploration activities there, if and when possible. In this context, the NCP is of the view that a dialogue to inform and potentially help enhance the Respondent’s approach to paragraph 5 of Chapter IV has the potential to contribute to the wider purposes and effectiveness of the Guidelines.

Conclusion

42. The NCP offers its good offices to facilitate a single session of dialogue between the Notifier and Respondent. This would provide an opportunity to share perspectives that may be useful to informing and potentially enhancing the Respondent’s approach to the recommendations found in paragraphs 4 and 5 of Chapter IV of the Guidelines.
43. The NCP is not offering its good offices to facilitate dialogue on the issues raised concerning Chapter IV, paragraphs 1 and 2.

November 17, 2023