Canada acts like a supplicant, like in the case of US Steel breaking promises regarding laid off workers. The word of corporations is meaningless, they must put up bonds for thousands or millions of dollars to back up their promises. And to clean up oil wells, mines and factories.
Ottawa must start playing hardball with foreign investors (external - login to view)
It's shocking government has to defend itself against foreign multinational
By Diane Francis, Financial Post June 18, 2010
The BP blowout fiasco and a recent Canadian court case involving U.S. Steel are cautionary tales for Canada.
The BP oil spill may end up causing billions of dollars in damage, and the U.S. government is coming down hard on the company and pushing the transnational giant into setting aside US$20-billion in escrow to compensate victims.
Also this past week, a Canadian Federal Court gave Ottawa permission to continue with its lawsuit against U.S. Steel over broken promises it made to Investment Canada not to lay off Canadian workers in return for permission to buy Stelco.
It's shocking that the Canadian government would have to defend its authority, sovereignty and constitutionality in its own court against a foreign multinational. U.S. Steel said the Investment Canada Act was not constitutional. The court said otherwise.
It's the latest example of why Canada and our provinces must stop being Queen's Scouts. We have a nice country here to do business, lots of resources, and we should be playing hardball with foreign investors. And backing up the agencies that extract requirements such as Investment Canada.
There should have been no avenue for U.S. Steel to attack our government's sovereignty or Investment Canada's authority. If that isn't the case, then more powerful legislation should be put into place. This is a very worrisome situation, especially in light of the eagerness of Ottawa to sell off anything to anybody from anywhere.
Which brings me to BP.
Resource extraction is well regulated in Canada by governments. Better than Louisiana's inept system. Miners must post millions to remediate lands after their operations end in most jurisdictions. No such requirement is the case in some provinces and offshore. Governments rely on insurance, but as the BP blowout situation shows, the insurers and corporations don't have a clue as to potential liabilities.
Here's what our governments should examine: Are millions set aside in case of a blowout by a foreign company in Canada offshore or onshore? Are we allowing operations without sufficient assets to undertake risky projects? Are we allowing players into Canada whom we cannot collect money from if they walk away, as happened recently in Alberta involving Chinese companies?
Here are a few suggestions for new rules:
- Investment Canada must be sacrosanct. Its authority must be upheld legislatively so that it cannot be attacked.
- Investment Canada must be tougher. For instance, U.S. Steel and anyone else getting permission to buy anything in Canada should have to hand over a performance bond so any legal or other costs (at home or elsewhere) will be defrayed and won't cost Canadian taxpayers a dime. The Stelco case is horrible: Canadian taxpayers will spend millions making a multinational do what it promised to do and compensate Canadian workers.
- Foreign investors should be allowed to buy Canadian assets or corporations only from countries where we have an extradition treaty, a tax treaty (to avoid tax evasion or transfer pricing shenanigans) and a right for Canadian workers, suppliers and customers to sue for damages and collect funds from that foreign country. If that eliminates lots of potential foreign investors, so be it.
- Finally, we should not allow any foreign entity to buy any Canadian assets in Canada unless Canadian investors can buy, and be protected, in their countries. I call this investment reciprocity, and it should be law in this country and others with the rule of law.
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