On July 17, 2023, the Canadian Ombudsperson for Responsible Enterprise ("CORE") released its quarterly report ("the Report") highlighting complaints and inquiries received between April 1, 2023 and June 30, 2023. The quarterly report was released following CORE's July 11th announcement launching two investigations (the "Investigations") into allegations of the use of Uyghur forced labour in the supply chains and operations of two Canadian companies, one in the mining sector and the other in apparel manufacturing. The Investigations were launched along with the release of initial assessment reports which deemed that complaints filed against the two companies (the "Complaints") were admissible under CORE's stated criteria.
The Report and the Investigations are significant developments for CORE, which was created in 2019 to address concerns about possible human rights abuses arising from the operations of Canadian garment, mining, and oil and gas companies outside of Canada. CORE launched its complaint process just over two years ago, and the Investigations are the first to be launched by CORE.
CORE's Mandate
CORE's mandate and role are set out in the Order in Council ("OIC") that created CORE. It mandate includes:
(a) promoting the implementation of the UN Guiding Principles and the OECD Guidelines;
(b) advising Canadian companies on their practices and policies with regard to responsible business conduct;
(c) reviewing complaints that are submitted to it concerning an alleged human rights abuse;
(d) reviewing , on their own initiative, an alleged human rights abuse;
(e) offer informal mediation services regarding complaints; and
(f) provide advice to the Minister of International Trade on any matter relating to their mandate, including issues related to the responsible business conduct of Canadian companies operating abroad.
The Investigations fall within the scope of part (c) of CORE's mandate. The launch of the Investigations are a preliminary step in CORE's process of investigating complaints that it receives. Specifically, the launch of the Investigations is a procedural step pursuant to the OIC and they do not constitute any statement or finding of wrongdoing. As noted above and reinforced in section 5 of the OIC, the Ombudsperson is to be guided by the UN Guiding Principles on Business and Human Rights and the OECD Guidelines for Multinational Enterprises in carrying out the mandate. Furthermore, the OIC notes at section 6 that, "[i]n discharging the mandate, the Ombudsperson is not to create new standards concerning responsible business conduct". Under sections 10, 11, and 12 of the OIC, CORE is entitled to make a number of recommendations related to Canadian companies which have not acted in good faith during the review process, including next steps following the conclusion of a review, or at any time regarding funding provided to companies by the Canadian government. Importantly, CORE's enabling legislation makes clear that CORE does not have the jurisdiction to evaluate or seek any type of corrective action as it relates to Canadian companies' supply chain due diligence processes. Instead, the Ombudsperson's mandate is limited to certain recommendations.
We previously discussed CORE's work in our update on the report they published earlier this year regarding Child Labour in Global Supply Chains.
Prohibitions on Forced and Child Labour in the Supply Chain
Though not directly tied to its mandate, CORE's complaint process was developed following the implementation of a prohibition on the importation of goods made with forced labour to Canada. On July 1, 2020, Canada implemented a ban on goods made in whole or in part with forced labour, which expanded upon the previously-existing ban on goods produced by way of prison labour. This ban is implemented through Canada's Customs Tariff as part of the implementation of the Canada-United States-Mexico Agreement, and prohibits the importation of goods that are mined, manufactured or produced wholly or in part by forced labour, from any country - not just from the United States or Mexico. Canada's Customs Act further prohibits the possession, purchase, sale, exchange, acquisition or disposal of these banned imports.
This import prohibition is being supplemented with the enactment of the Fighting Against Forced Labour and Child Labour in Supply Chains Act (the "Act"), which will enter into force on January 1, 2024. The Act requires entities to report on their human rights due diligence processes to the Minister of Public Safety and Emergency Preparedness. Along with the enactment of the Act, January 1, 2024 will see the coming into force of a prohibition on the importation of goods made wholly or in part with child labour, which will be added to the Customs Tariff alongside the prohibition on the importation of goods made with forced labour. These upcoming changes are discussed at length in our recent legal alert Is your business ready? The Fighting Against Forced Labour and Child Labour in Supply Chains Act comes into force January 1, 2024.
The Report
As noted above, one of CORE's primary tools that it uses to pursue its mandate is its complaint process. CORE receives complaints, determines their admissibility for an initial assessment, and proceeds to an investigation if it is deemed appropriate. Complaints are most commonly deemed inadmissible if the alleged act:
- is outside of the permissible timeframe;
- occurred in Canada;
- was not carried out by a Canadian company; or
- was not a human rights abuse.
Thus, the admissibility for an initial assessment review is a rather perfunctory process and does not reflect any merits of the allegations raised in a complaint.
According to the Report, CORE is currently addressing twenty-one complaints at all stages of the process. Of those twenty one, sixteen (more than 75%) are focused on the garment industry. The Report shows that the majority of complaints continue to be in the initial assessment stage, while the Investigations are the only complaints to have reached that stage to date.
The Report identifies five new complaints that were brought to CORE in the last quarter, one of which was deemed inadmissible for falling outside of the permissible timeframe. The remaining four are evenly split between the garment and mining industries and target operations in China, Honduras and Chile. These four complaints continue to be assessed for admissibility.
Interestingly, the Report also notes that CORE received one hundred new inquiries (defined to include requests for information about filing a complaint or requests to file a complaint about an issue that is clearly outside the CORE's mandate) in the previous quarter, significantly eclipsing the number of actual complaints that CORE received. It appears that there may be increased interest in CORE's complaint process, perhaps because of CORE's deeper engagement with the press. That said, the increased in inquiries could also be caused by the inherently ambiguous "investigation" process the CORE undertakes, and a general lack of understanding regarding the scope of its mandate or its processes.
Investigations
As noted above, the Investigations are the first to be launched by CORE. We discuss the Investigations below, both of which address the alleged use of forced labour of the Uyghur minority in China.
Mining Sector
This Complaint against a Canadian mining company pertains to an operation they co-own with a Chinese state-owned enterprise in Northwest Xinjiang and alleges that this mine uses or benefits from Uyghur forced labour. The Complaint originates from a complainant coalition made up of twenty-eight Canadian civil society organizations, primarily focused on human rights protections for Muslim and Uyghur peoples. The company denies the allegations in the complaint, and claims that they have not been in operational control of the mine since 2008. Importantly, in order for CORE to investigate a complaint, the alleged abuse had to have occurred after May 1, 2019 or, if it commenced before that date, the abuse must be ongoing past that date.
Garment Sector
This Complaint stems from alleged business relationships between a Canadian company and six Chinese apparel manufacturers reportedly involved with Uyghur forced labour and "re-education" camps, based in large part on a report published by the Australian Strategic Policy Institute. The Complaint was filed by the same twenty eight organizations as the prior Complaint. The company denies the allegations, citing two reports which describe their supply chain due diligence processes in detail and directly address the allegations in the report from the Australian Strategic Policy Institute.
CORE's Procedure and Next Steps
As noted above, the Investigations are among the initial steps taken by CORE after receiving a complaint. As discussed in detail in the CORE's Guidance on its Operating Procedures, upon receiving a complaint, CORE makes a decision as to whether it meets the admissibility requirements. It then engages in an initial assessment to attempt to resolve the complaint through "information sharing, dialogue and facilitated negotiation". If this process is unsuccessful and the parties do not agree to mediation, CORE launches an investigation - as it has done in both of these cases. This appears to be an iterative process.
The next steps in both Investigations will consist of joint fact-finding with the agreement of the parties, or independent fact-finding where joint fact-finding is not possible or is limited. This review process could take several months or even years. A public report is required for ongoing reviews every twelve months.
Throughout the review, the Ombudsperson is entitled to make a number of recommendations, including a determination that the allegations are founded or unfounded. Furthermore, the review may be terminated at any time. At the conclusion of the review, CORE will be required to submit and publish a report on their findings. This report may include recommendations to the Canadian company that is subject to the investigation, such as financial compensation, a formal apology, and changes to the company's policies. CORE may also refer the matter to a regulatory agency or law enforcement at any time during the course of its review if it has reason to believe an offence has been committed.
Conclusion
The Investigations may be part of a larger change in Canada's posture on enforcement of its forced labour supply chain laws, which up to now has been relatively inactive, especially in comparison to its most important trading partner, the United States.
The Investigations will provide insight into CORE's investigative process under its relatively untested mandate. Notwithstanding the outcome of the Investigations, they serve as a key reminder for Canadian businesses that may have any potential connections in their supply chain to Xinjiang, China, or other locations in the world with high prevalence of forced and/or child labour on the importance of robust due diligence policies around supply chain compliance management. Canadian businesses, particularly those in the garment, mining and oil and gas industries should be reviewing their due diligence processes to ensure they have adequate visibility throughout their supply chain to address possible complaints and ensure they are in compliance with both existing and forthcoming regulatory regimes addressing forced and child labour in supply chains.
With deep expertise in international trade and regulatory matters, including dealings with CORE, the McCarthy Tétrault International Trade and Investment Law Group is uniquely positioned to advise Canadian businesses on matters related to supply chain diligence and preparing for possible investigations and other enforcement action by regulatory agencies such as CORE and the Canada Border Services Agency who has primary responsibility for the enforcement of these supply chain laws at the border. We invite you to contact us for further information.
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