On March 26, 2024, the Canadian Ombudsperson for Responsible Enterprise (CORE) published a final report on its investigation into allegations that a Canadian mining company, Dynasty Gold Corporation (Dynasty), operating in China's Xinjiang Uyghur Autonomous Region (XUAR), used or benefitted from forced labour. Following its investigation, the CORE concluded that the mining company violated internationally recognized human rights and made several recommendations as a result.
This is the first concluded CORE investigation. As described below, the final report is a significant milestone in efforts to scrutinize the foreign operations of Canadian companies, even though it ultimately highlights the limits of the CORE's mandate and fact-finding powers.
In 2018, the CORE was established by the federal government as one of two initiatives to promote Responsible Business Conduct abroad and to hold Canadian companies working overseas in the garment, mining, and oil and gas sectors accountable for human rights abuses.1
As set out in Order in Council 2019-1323 (OIC), the CORE's mandate is to:
In our previous blogs, Bennett Jones has discussed the mandate of the CORE, Canadian Ombudsperson for Responsible Enterprise Launches Human Rights Complaints Process and Canadian Ombudsperson for Responsible Enterprise Launches First Complaint-Based Investigation.
The CORE's investigation into Dynasty followed a complaint filed by a coalition of 28 Canadian organizations (the Complainants) on June 21, 2022, against the company. The Complainants alleged that Dynasty used or benefited from Uyghur forced labour based on its majority interest in the Hatu Qi-2 gold mining project (the Project). The allegations were based on public statements made by Dynasty acknowledging that many ethnicities, including Uyghurs, were part of its workforce on its Project.
On August 1, 2022, the CORE decided that the Complaint was admissible in accordance with Section 6.1 of its Operating Procedures because there was "sufficient information in the complaint to form a reasonable belief that each of the three admissibility criteria was met."
Following a draft Initial Assessment Report (IAR), which the CORE released to the parties for comment in March 2023, the CORE published its final IAR on July 11, 2023 and decided to launch an independent fact finding investigation, supported by a specialized external consultancy with expertise in conducting human rights investigations. The investigation was limited to publicly limited information due to the significant security risks presented by conducting in-person assessments in the XUAR.
During its investigation, the CORE requested information from the parties. In response to the CORE's information requests, Dynasty denied the allegations, claiming to be unaware of allegations of human rights abuses during its operations in the XUAR prior to its exit in 2019. Dynasty further noted that its workers were paid nearly double the local wage, received on-the-job training, and were "happy". Dynasty declined to submit any of the documentation that the CORE requested.
The CORE's investigation uncovered no evidence that Dynasty implemented policies, procedures, or processes establishing a commitment to remediate human rights abuses or, in particular, to assess its involvement in the Uyghur region. In addition, there was no evidence to suggest that Dynasty implemented a responsible exit from its business in the XUAR. Finally, none of Dynasty's assertions with respect to its equitable compensation and treatment of workers were found to be substantiated.
The CORE found, on a balance of probabilities, that a human rights abuse occurred at the Project. The CORE determined that the abuse: (1) impacted the internationally recognized human right to be free from forced labour; (2) occurred after May 1, 2019; and (3) arose from a Canadian company's operations abroad.
The CORE relied on evidence which suggested that Uyghur forced labour likely occurred at the Project. Dynasty's joint venture partners, Western Region Gold and Xinjiang Non-Ferrous Metal, admitted to participating in government-supported labour transfer programs involving Uyghur workers. While Dynasty claimed that it ceased operations in XUAR in 2008, the CORE found evidence indicating that Dynasty subsequently maintained a financial interest and legal disputes over the Project, suggesting an ongoing business relationship.
The CORE held that Dynasty's disregard for the complaint process and casual response to the complaint fell short of the CORE's standard of good faith participation. The CORE found that Dynasty minimally engaged in the process, evidenced by delayed responses to the CORE's initial communications, a failure to provide documents requested by the CORE, failure to participate in meetings, and a failure to the CORE's request for comment on the draft final report.
As a result, the CORE exercised its discretion to recommend that the Department of Foreign Affairs, Trade and Development withdraw current and deny future trade advocacy support to Dynasty and that Export Development Canada refuse future financial support, until such time that Dynasty fulfill the recommendations set out paragraph 94 of the final report.
In accordance with Section 14(1) of the OIC, the CORE will follow up with Dynasty to assess its response to and implementation of these recommendation, following which the CORE will report publicly on its findings.
The release of the CORE's first final investigation report marks another significant moment in the scrutiny of Canadian companies' overseas operations, particularly in regions with known human rights abuses. The CORE's findings underscore the importance of companies operating abroad to maintain robust human rights due diligence processes and evaluate the sufficiency of these processes to prevent human rights abuses. It is also critical for companies to document relevant policies, procedures and analyses to demonstrate their due diligence and the effectiveness of their compliance systems.
The final report also sheds light on the CORE's limited powers to compel testimony and documentary evidence, which impact the thoroughness and efficacy of the investigation. Indeed, the same day that the final report was released, Ombudsperson Sheri Meyerhoffer, released a statement recognizing the challenges created by the CORE's limited powers to compel testimony and documentary evidence when dealing with companies that are uncooperative or unresponsive to investigations. The Ombudsperson called for a review of the CORE's mandate, highlighting the necessity for enhanced powers, enabling it to demand documentation and testimonies from companies. This is not the first time the CORE's lack of such powers has been the subject of public comment. Following a recommendation from the Standing Committee on International Trade in September 2023, the government committed over the next six months to undertake a review of the CORE’s mandate to assess its "effectiveness and progress to date".
In addition, with recent implementation of the Fighting Against Forced Labour and Child Labour in Supply Chains Act (and first reports being due by May 31, 2024), companies that meet the reporting threshold can expect that scrutiny over their supply chain due diligence and monitoring practices will continue.
For further details relating to the reporting requirements, issued guidance, and other important requirements under the Supply Chain Ac, see our previous blogs: From Exploration to Operations: Canada's Forced Labour and Child Labour in Supply Chains Act and Considerations for the Mining Sector, Much-Anticipated Guidance Released on Canada's Forced Labour Reporting Requirements for further details, Canada Introduces Mandatory Forced Labour Prevention Reporting Legislation and What Canada's New Forced Labour Reporting Law (Bill S-211) Means for Businesses.
For further information, including the variety of practical strategies that companies can take to prevent and mitigate the risk of forced labour and child labour in their supply chains, contact a member of Bennett Jones' ESG team, Mining practice group, or International Trade & Investment practice group to discuss.
1 The other initiative is the multi-stakeholder Advisory Body created to advise the federal government and the CORE on responsible business conduct abroad, which is not currently active (https://www.international.gc.ca/trade-commerce/rbc-cre/advisory_body-groupe_consultatif.aspx?lang=eng).