26 March 2018
Ongoing media coverage regarding the sale of a Bombardier jet to the Gupta family in South Africa has triggered an important public debate about the accountability and transparency of Canada’s export credit agency, Export Development Canada (EDC). With Parliament set to review the agency’s governing legislation this year, the timing for such a discussion could not be better.
In response to a Globe and Mail op-ed asserting that public oversight of EDC “is not just scant, it’s non-existent,” EDC recently published a statement in which it defends its “exceptional track record,” arguing that it operates transparently, that it is subject to “multiple levels of government and public oversight” and that it welcomes public scrutiny of its operations.
We offer several observations to further this important debate:
EDC’s client list includes companies that elicit serious concern
EDC notes that its lawsuit to seize the private jet for which it loaned $41 million to a company owned by the Gupta brothers marks the first time it has gone to court over concerns of corruption. However, it’s not the first time an EDC client has been associated with credible or proven allegations of corruption, environmental harm or human rights abuse. In fact, EDC has provided clients with repeat loans in such circumstances.
EDC has vast discretion yet is subject to minimal oversight
The Export Development Act affords EDC a vast measure of independence and discretion. EDC develops its own policies on how it screens potential clients on crucial matters such as human rights, environmental impacts and corruption. While the agency has an independent board of directors, external scrutiny is constrained. The Office of the Auditor General assesses EDC due diligence against “internationally recognized practices” – in other words, what other export credit agencies do. The office does not evaluate whether EDC’s policies and practice actually prevent and mitigate human rights and environmental harms.
Individuals and communities lack recourse regarding EDC when its private sector clients cause them harm. Moreover, while the actions of public decision-makers are typically open to review by Canadian courts, applicable legislation and policy create significant obstacles to obtaining a court review of EDC’s operations. Consequently, an independent review of the agency’s handling of the Gupta file is extremely unlikely.
There is room for much improvement on transparency
In the face of broad discretion, transparency is paramount. Yet EDC discloses only the most basic information about each of its transactions: the date, recipient and beneficiary, jurisdiction, product category and a value range so wide that in some cases it spans $500 million.
EDC does not explain how it applies its due diligence policies when it screens potential clients, nor what it does in response to allegations of wrongdoing that subsequently emerge. In the case of the Guptas, the public cannot access information about EDC due diligence before or after the issuance of the loan.
EDC states that it declines certain transactions on the basis of CSR (corporate social responsibility) concerns. However, the corporation does not disclose how many times it denies applications, which companies are involved or what its concerns are. Contrast this with Norway’s government pension fund, a public institution that publishes a list of companies it will not invest in and a statement outlining its rationale for each exclusion.
To achieve credibility, EDC must commit to greater public disclosure on these matters.
Canada’s human rights obligations necessitate public oversight of the highest order
EDC financing for firms associated with credible or proven allegations of corruption or human rights abuse is a matter of public concern, one that carries implications for Canada’s compliance with its international obligations on human rights. Accordingly, Parliament should consider meaningful legislative reforms to create the highest degree of transparency and accountability regarding the decisions of our export credit agency.