Sun Peak Metals Corp. and United Tegaru Canada - Final Statement

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 OECD Guidelines for Multinational Enterprises (the “Guidelines”) by Sun Peak Metals Corporation (the Respondent), a junior mining company based in Vancouver and focused on mineral exploration projects in Ethiopia.
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. The Respondent provided a written submission to the NCP Secretariat, which was shared with the Notifier.
5. A draft of the NCP’s Initial Assessment was shared with the parties in June 2023. The parties were given an opportunity to review and provide comments. The Initial Assessment was finalized in August 2023 and was published as a separate document (Initial Assessment).
6. Further to its Initial Assessment, Canada’s NCP offered its good offices to facilitate a dialogue regarding the Respondent’s approach to paragraph 5 of Chapter IV (human rights due diligence). The NCP did not offer good offices concerning the issues raised with respect to paragraphs 1 and 2 of Chapter IV of the Guidelines. The NCP also declined to offer good offices on whether the Respondent had a policy commitment to human rights (paragraph 4, Chapter IV). The NCP’s decision on this latter issue was informed by the fact that the Respondent adopted and published a dedicated human rights policy in March 2023.

Good offices

7. Both parties accepted the NCP’s offer of good offices and participated in a dialogue moderated by the NCP Secretariat on October 11, 2023.
8. 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 government forces, were committing human rights violations even following the ceasefire. The Notifier also noted its concerns about what it characterized as atrocity crimes and referred to the work and findings 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.
9. The Respondent provided information about its activities in Ethiopia, including its response to the outbreak of conflict in 2020 and suspension of exploration activities that year, as well as its ongoing monitoring of the situation and approach to due diligence. The Respondent also highlighted some of the key considerations that would inform a decision to resume its exploration activities in the region. The Respondent described its engagement with local stakeholders and affirmed its commitment to local consultations as part of its approach.
10. The Notifier had the opportunity to ask questions of the Respondent. Among other issues, the parties discussed the Respondent’s approach to communicating information about its operations and due diligence activities.
11. Overall, the NCP observed a constructive dialogue that contributed to a greater mutual understanding between the parties and heightened awareness of the OECD Guidelines and how they might continue to inform the Respondent’s activities.
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 emphasizes that a decision to offer (or not offer) good offices does not represent a determination as to whether an enterprise has observed the Guidelines. 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.
14. Both parties were given an opportunity to review and comment on this Final Statement ahead of its publication.

Recommendation

15. The NCP welcomed the Respondent’s decision to adopt and publish a dedicated human rights policy in March 2023.
16. The NCP takes note of the Respondent’s February 7, 2024 news release announcing that the company is prepared to resume work on its Shire Project. The release states that the Respondent’s management has engaged with local stakeholders and completed a “Security and Safety” assessment as part of the company’s preparation in this regard.
17. The NCP welcomes the Respondent’s decision to engage with local stakeholders as part of its preparation to resume its work in Ethiopia. However, the NCP notes that the Respondent’s news release did not refer to human rights due diligence. The NCP recognizes that human rights considerations may have been addressed as part of the stakeholder consultations and “Security and Safety” assessment described in the release. The NCP also recognizes that, according to the company’s statement, “further information about upcoming work programs, including a detailed summary of drill targets, will be forthcoming”.
18. The NCP recommends that the Respondent include more specific information about its human rights due diligence in future public communications and describe how its commitment to “conduct thorough human rights due diligence” (outlined in the company’s Human Rights Policy) has already or is currently informing its preparations to resume work on its Shire Project. The NCP is of the view that greater public communication on this issue could reinforce the Respondent’s approach to recommendations in Chapter III, paragraph 3 (Disclosure) and Chapter IV, paragraph 5 (Human Rights) of the OECD Guidelines.
19. The NCP will follow-up with the parties about this recommendation within 4 months of the publication of this Final Statement. The NCP will publish a statement describing its follow-up.

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