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Initial assessment: EarthRights International & a Myanmar-based CSO and MTI Energy Inc.

Note: This initial assessment makes reference to the 2023 version of the OECD Guidelines.

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Summary

  1. On September 14, 2023, Canada’s NCP received a request for review from EarthRights International and a Myanmar-based civil society organization (the Notifiers) regarding observance of the OECD Guidelines for Multinational Enterprises on Responsible Business Conduct (the “Guidelines”) by MTI Energy Inc. (“MTI Energy”), a multinational enterprise based in Edmonton, Alberta.
  2. The request for review raised questions about a reported agreement by MTI Energy to acquire (via a subsidiary registered in Bermuda) Chevron Corporation’s interest in the Yadana natural gas project in Myanmar.Footnote 1 According to the Notifiers, the Yadana project was at that time a joint venture between the Myanma Oil and Gas Enterprise (MOGE), a Myanmar State-owned enterprise; PTTEP, a subsidiary of the Thai state-owned energy company PTT; and Chevron affiliates.
  3. Myanmar’s military initiated a coup against the country’s democratically elected government in February 2021. The military has since engaged in repression of opposition groups and widespread violence against civilians. Canada and other countries condemned the coup and have called on the military regime to end its violence against the people of Myanmar and to allow democratic processes to resume. Canada and other countries have also imposed targeted sanctions against individuals and entities affiliated with the military regime.
  4. The Notifiers alleged that MTI Energy had “breached the OECD Guidelines” concerning risk-based due diligence (Chapter II, paragraph A.11) in reportedly pursuing the acquisition of Chevron’s interest in the Yadana project. In particular, the Notifiers raised concerns about whether the alleged acquisition would lead to MTI Energy contributing or becoming directly linked to adverse impacts concerning matters covered by Chapter IV (Human Rights) and Chapter VII (Combating Bribery and Other Forms of Corruption). The Notifiers claimed that MTI Energy may have already been contributing or directly linked to adverse human rights impacts caused by the military regime in Myanmar by virtue of allegedly pursuing the acquisition.
  5. The Notifiers also claimed that MTI Energy was not observing recommendations in paragraphs A.15 (meaningful stakeholder engagement) and A.16 (abstain from any improper involvement in political activities) of Chapter II, as well as recommendations in Chapter III (Disclosure).
  6. The Notifiers submitted their request for review concurrently to both the Canadian and UK NCPs (the latter given the reported involvement of a Bermuda-registered MTI Energy subsidiary called “Et Martem Holdings”). Following consultation with the UK NCP, it was decided that Canada’s NCP would be the lead NCP in this specific instance.
  7. The NCP had a call with representatives of EarthRights International on October 4, 2023, to discuss the request for review.
  8. The NCP informed MTI Energy of the specific instance on October 4, 2023, providing a copy of the Notifiers’ request for review, as well as additional background on the NCP and a link to the NCP’s specific instance procedures. A company representative responded by email on October 13. Although MTI Energy acknowledged receipt of the Notifiers’ submission, the company declined to speak with the NCP about the specific instance process or to provide views on the Notifiers’ claims. The NCP invited the company to discuss the NCP process and to provide a response to inform the NCP’s initial assessment. The NCP did not receive a response.
  9. The NCP proceeded to complete an initial assessment. Both the Notifiers and MTI Energy were sent a draft of the NCP’s initial assessment on January 2, 2024. The draft initial assessment included an offer of good offices in relation to some of the issues raised. Both parties were given an opportunity to review, fact-check information, and provide comments back to the NCP. The Notifiers provided written comments to the NCP on January 15. The NCP followed up with MTI Energy and confirmed that the draft initial assessment had been received. The NCP did not receive a response from MTI Energy.
  10. The NCP sent a finalized version of the initial assessment to the parties on March 15, 2024, maintaining the offer of good offices in relation to some of the issues raised. The NCP did not receive a reply from MTI Energy until April 15. MTI Energy’s response followed media reports that Chevron had exited the Yadana project without selling its interest to another party.Footnote 2 MTI Energy did not provide comments on the content of the initial assessment, or on the issues raised by the Notifiers regarding observance of the Guidelines. MTI Energy did not advise the NCP of any factual errors in the initial assessment.
  11. The NCP sent the parties a draft of the present updated version of the initial assessment on October 16, 2024. Both parties were invited to review, fact-check information, and provide comments back to the NCP by November 21, 2024, ahead of its finalization and publication.
  12. As noted above, media reports indicate that Chevron ultimately distributed its interest in the Yadana project to the other joint venture partners and did not sell its stake to MTI Energy. Despite this reported development, the NCP is of the view that some of the issues raised by the Notifiers regarding MTI Energy’s approach to implementing the Guidelines in the context of its alleged pursuit of Chevron’s interest merit further examination, and that an offer of good offices is required to fulfil the NCP’s mandate to further the effectiveness of the Guidelines and its responsibility to contribute to the resolution of issues that arise in relation to the Guidelines’ implementation in specific instances.
  13. As discussed in the initial assessment below, it remains unclear how and to what extent MTI Energy sought to carry out due diligence to identify and address potential risks associated with its alleged pursuit of Chevron’s interest in the Yadana project, and whether the company undertook meaningful stakeholder engagement as part of that process, in line with the Guidelines. The apparent lack of publicly available information from MTI Energy regarding its approach to these issues also raises questions about the company’s implementation of the Guidelines’ recommendations on disclosure.
  14. Further examination of these issues and an offer of good offices appears to have the potential to help resolve issues raised by the Notifiers, and to inform and possibly reinforce MTI Energy’s approach to implementing the Guidelines in the future, thereby contributing to their purposes and effectiveness. Pursuant to the NCP’s mandate and the initial assessment below, the NCP is offering its good offices to facilitate a dialogue between the Notifiers and MTI Energy regarding the following issues:
    • MTI Energy’s approach to the Guidelines’ recommendation concerning risk-based due diligence (Chapter II, paragraph A.11), specifically its approach to due diligence in this specific instance regarding:
      • Risks of potentially contributing to adverse human rights impacts (Chapter IV, paragraph 2)
      • Risks of potentially being directly linked to adverse human rights impacts by a business relationship (Chapter IV, paragraph 3)
      • Risks of potentially contributing to or being directly linked to adverse impacts related to corruption (Chapter VII)
    • MTI Energy’s approach to the recommendation in paragraph A.15 of Chapter II (meaningful stakeholder engagement)
    • MTI Energy’s approach to the recommendations in Chapter III (disclosure)
  15. Based on the initial assessment described below, the NCP has not offered good offices to facilitate a dialogue on the following issues raised by the Notifiers:
    • The issue raised concerning MTI Energy’s observance of the recommendation in Chapter II, paragraph A.16 (abstain from any improper involvement in political activities)
    • Whether MTI Energy contributed to adverse impacts caused by the military regime in Myanmar in the manner alleged by the Notifiers (Chapter IV, paragraph 2)
    • Whether MTI Energy’s operations, products or services were directly linked to adverse impacts through a business relationship in the manner alleged by the Notifiers (Chapter IV, paragraph 3)
  16. This initial assessment, and the NCP’s decision to offer good offices, do not represent a determination as to whether or not the Respondent has observed the Guidelines. This initial assessment should not be seen as validating to any degree – one way or the other – claims made by either the Notifier or Respondent.
  17. This initial assessment and the NCP’s decision to offer good offices should not be interpreted as validating or confirming reports/claims that MTI Energy entered into any commercial agreement involving the Yadana gas project.

Substance of the initial assessment

The Notifiers

  1. The request for review was submitted jointly by EarthRights International and a Myanmar-based civil society organization. EarthRights International is a U.S.-based “non-governmental, non-profit organization” concerned with the promotion of human rights and protection of the environment. The Myanmar-based civil society organization asked that its name not be made public for security reasons. EarthRights International acted as the lead Notifier and was the primary point of contact for the NCP.

The Respondent

  1. MTI Energy Inc. (the Respondent) is a company that was based in Edmonton, Alberta at the outset of this initial assessment. A provincial registry search confirmed the company’s status as an active Alberta corporation with an Edmonton office address. Media reports indicate that the Respondent may be active outside of Canada.Footnote 3
  2. In February 2023, media outlets reported that Chevron had agreed to sell its interest in the Yadana gas project in Myanmar to “Et Martem Holdings”, reportedly a wholly-owned subsidiary of the Respondent based in Bermuda. Chevron had previously announced its intention to exit from Myanmar in January 2022. In April 2024, media outlets began reporting that Chevron had decided to exit the Yadana project without selling its interest to a third party.Footnote 4

Coup in Myanmar and International Response

  1. In February 2021, the military of Myanmar deposed a democratically elected government and seized control of the country’s governance. Repression of opposition groups and violence against civilians ensued. According to Global Affairs Canada’s Advisory on doing business with Myanmar-related entities: “The military has failed to consolidate power and continues to apply deadly force against the civilian population.”Footnote 5 The coup has been condemned by Canada and other countries, with ongoing calls for the military regime to end its campaign of violence and to allow democratic political processes to resume. Canada and other countries have also responded by imposing targeted sanctions against various individuals and Myanmar entities affiliated with the coup and linked to support for the military’s rule.Footnote 6

Notifiers’ Perspectives

  1. The issues raised by the Notifiers concerned a reported agreement by the Respondent to acquire Chevron’s interest in the Yadana gas project in Myanmar. The Notifiers described the Yadana gas project as a joint venture between the Myanma Oil and Gas Enterprise (MOGE), a Myanmar State-owned enterprise, PTT Exploration and Production (PTTEP) (a subsidiary of state-owned Thai energy company PTT), and the Chevron Corporation (which held its interest in the project via affiliates). According to the Notifiers, the partners in the joint venture at that time held the following respective interests in the project: MOGE (21.8%), PTTEP (37.1%), and Chevron (41.1%).
  2. As a result of the reported acquisition agreement, the Notifiers claimed that the Respondent would become the largest shareholder in the Yadana project, with a 41.1% interest in what the Notifiers describe as the unincorporated joint venture “operating” the gas field, and a 41.1% share in the Moattama Gas Pipeline Company (which operates the project’s export pipeline). Based on documents disclosed to EarthRights International during past litigation involving Unocal (a Chevron affiliate involved in the joint venture), the Notifiers claimed to know the terms that underpinned the joint venture as of 2005 and believed these terms would likely govern any prospective involvement by the Respondent.  
  3. The Notifiers claimed that by assuming the rights and obligations of Chevron, the Respondent would take on a “substantial role” in overseeing the joint venture that operates the gas field, as well as the Moattama Gas Pipeline Company. While PTTEP might remain the operator of the project, the Notifiers claimed that the Respondent would nonetheless have “substantial oversight powers” and the ability to influence important decisions, including around payments made to the MOGE. According to the Notifiers, the Respondent would owe payments to the MOGE under the arrangement and these payments would be made by PTTEP on the Respondent’s behalf. The Notifiers said that funds paid to the MOGE would have been at high risk of being used to fund the military regime’s violations of human rights and/or otherwise lost to corruption. The Notifiers believed that the Respondent would be contributing to or at least directly linked to these adverse impacts if it entered the joint venture without taking appropriate mitigation measures.
  4. In this context, the Notifier raised the following issues concerning the Respondent’s observance of the Guidelines:
    • Chapter II, paragraph A.11 (due diligence): The Notifiers questioned whether the Respondent had carried out appropriate due diligence to identify, prevent and mitigate actual and potential adverse impacts associated with its reported agreement to acquire Chevron’s interest in the Yadana project, particularly risks of adverse impacts associated with human rights and corruption. The Notifiers said they had been unable to find any evidence of due diligence undertaken by the Respondent.
    • Chapter II, paragraph A.15 (meaningful stakeholder engagement): Based on their own engagement with local civil society organizations, the Notifiers claimed that the Respondent had not engaged with any “community representatives in the project area or project area of influence”. The Notifiers also claimed that the Respondent had been unresponsive to outreach by a local civil society organization about the transaction. On this basis, the Notifiers questioned the Respondent’s observance of Chapter II’s recommendation for enterprises to engage with relevant stakeholders in relation to planning and decision-making for projects or other activities that may significantly impact local communities.
    • Chapter II, paragraph A.16 (abstain from any improper involvement in political activities): The Notifiers claimed that openly contemplating and/or entering a business relationship with MOGE under the prevailing circumstances was tantamount to recognizing the military regime as the Government of Myanmar in a context where the military’s claims to be the legitimate government were – and remain – highly disputed. According to the Notifiers, this constituted “improper involvement in political activities”.
    • Chapter III, paragraphs 1 and 2 (disclosure): The Notifiers claimed that there had been a total absence of disclosure by the Respondent regarding its operations and the reported agreement to acquire Chevron’s interest in the Yadana gas project. Given the Respondent’s apparent lack of an operating website and public disclosure of information about its operations, the Notifiers questioned its approach to the Guidelines’ recommendations on disclosure.
    • Chapter IV, paragraph 2 (contributing to adverse human rights impacts): The Notifiers claimed that the Respondent had already potentially contributed to adverse human rights impacts by virtue of its alleged “decision to treat the junta as a legitimate government”. The Notifier said this had provided the military regime with “reassurance” that its activities would not deter international investment and had thereby contributed to adverse human rights impacts caused by the military. The Notifiers further claimed that if the Respondent acquired Chevron’s interest in the Yadana project, PTTEP would make payments to MOGE on the Respondent’s behalf, and that these funds would be used to fund human rights violations committed by the military regime. The Notifiers said it was unclear whether the Respondent intended to or had undertaken due diligence regarding these risks, including taking measures to avoid or mitigate any contributions to adverse impacts (Chapter II, paragraph A.12; Chapter IV, paragraphs 2, 5).
    • Chapter IV, paragraph 3 (directly linked to adverse human rights impacts by a business relationship). The Notifiers alleged that the then joint venture partners (Chevron, PTTEP) were already contributing to adverse human rights impacts by “treating the junta as the Government of Myanmar” and by “enabling payments and refusing to take steps to divert gas revenues away from the junta”. The Notifiers claimed that by reportedly agreeing to “step into Chevron’s shoes”, the Respondent had already become directly linked to adverse human rights impacts through a business relationship. The Notifiers questioned whether the Respondent had exercised any leverage to mitigate those adverse impacts, or whether it had undertaken due diligence with respect to being further linked to adverse impacts if/when the alleged acquisition was finalized (Chapter II, paragraph A.13; Chapter IV, paragraphs 3, 5).
    • Chapter VII (not engage in any act of corruption). The Notifiers said that the military had illegally seized public offices and was misappropriating State funds – including payments to the MOGE – for their own purposes. The Notifiers claimed that by entering the Yadana joint venture, the Respondent would risk becoming implicated in this corrupt activity. Even if the military could be considered the legitimate government of Myanmar, the Notifiers claimed there were still significant corruption risks associated with being in a joint venture with the MOGE. The Notifiers said that there was “no accountability for revenues paid by extractive companies operating in Myanmar and a long history of the Myanmar military engaging in corrupt practices and misappropriating public funds generated by this sector.” In support of this assertion, the Notifiers cited assessments by governments and international organizations highlighting the corruption risks associated with Myanmar State-owned enterprises, especially in the natural resources sector.
  5. The Notifiers asked the NCP to offer good offices, with the aim of resolving the issues raised and helping “align MTI Energy’s conduct with the OECD Guidelines”.

Initial assessment

  1. This initial assessment, and the NCP’s decision to offer good offices, do not represent a determination as to whether or not the Respondent has observed the Guidelines. This initial assessment should not be seen as validating to any degree – one way or the other – claims made by either the Notifier or Respondent.
  2. The initial assessment was based on the request for review submitted by the Notifiers, as well as publicly available information.

Communications with the Respondent about the initial assessment

  1. The NCP invited the Respondent to provide views to inform the NCP’s initial assessment. The NCP also provided the Respondent with an opportunity to review and comment on this initial assessment ahead of its finalization and publication.
  2. On October 4, 2023, the NCP sent a copy of the Notifiers’ request for review, as well as background on the NCP process, to the Respondent by email. The NCP invited the Respondent to respond to the request for review. A representative of the Respondent acknowledged receipt of the NCP’s correspondence by email on October 13, though indicated that the Respondent would not be providing comments. The Respondent’s representative noted that the company is “committed to legally compliant, safe, and responsible development of energy resources globally”. The NCP invited the Respondent to discuss the NCP process with the NCP’s secretariat, and again sought the Respondent’s views on the Notifiers’ request for review. The NCP did not receive a response.
  3. On January 2, 2024, the NCP sent a copy of the NCP’s draft initial assessment to the Notifiers and to the Respondent by email, inviting their review and comment. The NCP did not receive a response from the Respondent. On January 22, the NCP sent a copy of the draft initial assessment document and a covering letter to the primary agent for service for MTI Energy Inc. listed in Alberta’s corporate registry. The NCP confirmed by phone on January 23 and again on February 14 that the Respondent had received a copy of the draft initial assessment document. The NCP did not receive any comments from the Respondent.
  4. On March 15, 2024, the NCP sent a finalized version of the initial assessment to both parties, noting that it would be published no earlier than April 15, 2024. A representative of the Respondent replied to the NCP on April 15. However, the Respondent did not provide any specific comments on the initial assessment, or on the claims made by the Notifiers. The Respondent did not respond to the NCP’s offer of good offices. The NCP noted this in its reply to the Respondent and offered to convene a call with the Respondent’s representatives to discuss. The NCP did not receive a response.
  5. On October 16, 2024, the NCP sent an updated initial assessment to both parties. The NCP asked both parties to review and to provide any proposed factual corrections by November 21, 2024.

Substance of the initial assessment

  1. The initial assessment considers whether the issues raised are bona fide and relevant to the implementation of the Guidelines, taking into account the following:
    • the identity of the party concerned and its interest in the matter
    • whether the issue(s) are material to the Guidelines
    • whether the available information suggests that the issue(s) merit further consideration, namely through dialogue under the NCP’s good offices
    • whether there seems to be a link between the enterprise’s activities and the issue(s) raised in the specific instance
    • the relevance of applicable law and procedures, including court rulings
    • how similar issues have been, or are being, treated in other domestic or international proceedings
    • whether the consideration of the specific issue(s) would contribute to the purposes and effectiveness of the Guidelines

Identity of the party concerned and its interest in the matter

  1. Available information indicates that EarthRights International has been engaged on human rights/environmental issues involving Myanmar and the Yadana project since the 1990s. Based on information received by the NCP, the Myanmar civil society organization also appears to have a mandate relevant to local impacts associated with the Yadana project.

Whether the issues are material and merit further examination

  1. In assessing whether the issues raised are “material”, the question is whether the issues raised have clear and meaningful relevance to the Guidelines.
  2. The NCP also considers whether the issues are being raised on the basis of a coherent interpretation of events and sufficient information. The available information does not have to prove conclusively, or even on a balance of probabilities, that certain events occurred or that the enterprise acted in a particular way. This reflects the preliminary nature of the initial assessment, and its objective of determining whether the issues raised could merit further examination, namely through dialogue between the parties under the good offices of the NCP.
  3. The NCP’s assessment of these issues in no way asserts that events occurred in the way alleged by the Notifiers, nor is it a determination as to whether or not the Respondent has observed the Guidelines.

Issues raised concerning Chapter II, paragraph A.11 (risk-based due diligence)

  1. The Notifiers questioned whether the Respondent undertook appropriate due diligence concerning its reported agreement to acquire Chevron’s interest in the Yadana gas project. The Notifiers said they were not aware of any due diligence conducted by the Respondent as part of its “decision to invest in the Yadana gas pipeline”. As noted below, the Notifiers also alleged a lack of engagement with local stakeholders and corporate disclosure as reasons to question the Respondent’s observance of the due diligence recommendation in paragraph A.11.
  2. The NCP has likewise been unable to find and has not been made aware of any risk-based due diligence undertaken by the Respondent regarding the reported acquisition agreement. This does not mean that the Respondent has necessarily failed to observe the Guidelines’ recommendations on due diligence. However, the NCP sees merit in examining the issue further through dialogue under the NCP’s good offices.

Issues raised concerning Chapter II, paragraph A.15 (meaningful stakeholder engagement)

  1. The Notifiers claimed that the Respondent had not consulted or engaged with any community representatives in the Yadana “project area”. The Notifiers claimed that one local civil society organization had reached out to the Respondent but did not receive a response.
  2. In this case, media reports indicate that the Respondent was poised to take a significant interest in a major offshore gas extraction project, potentially assuming influence over its operation. The NCP has not found or been made aware of any information concerning the Respondent’s stakeholder engagement related to due diligence around a prospective role in the joint venture. The NCP considers this issue material to the Guidelines and one meriting further examination through dialogue under the NCP’s good offices.
  3. The NCP’s assessment should not be considered an endorsement of the specific recommendations concerning stakeholder engagement outlined in the Notifiers’ request for review. Canada’s NCP cannot provide definitive direction on which stakeholders may or may not be relevant to an enterprise’s observance of paragraph A.15. Commentary paragraph 28 notes that relevant stakeholders are “persons or groups, or their legitimate representatives, who have rights or interests related to the matters covered by the Guidelines that are or could be affected by adverse impacts associated with enterprise’s operations, products or services.”

Issues raised concerning Chapter II, paragraph A.16 (abstain from any improper political activities)

  1. The Notifiers claimed that the Respondent’s reported decision to enter a joint venture involving the MOGE effectively recognized the military regime as the government of Myanmar. In a context where the military’s legitimacy as a national government was and remains highly disputed, the Notifiers say the Respondent’s conduct constituted “involvement in improper political activities” (Chapter II, paragraph A.16).
  2. The Guidelines’ commentary does not elaborate on paragraph A.16’s recommendation that enterprises “abstain from any inappropriate political activities”. However, the NCP is not convinced that the issue raised by the Notifiers is material to this recommendation. According to the Notifiers, observance of A.16 would require multinational enterprises to make the conduct of business with a local authority conditional on that authority having a particular level of political legitimacy and recognition within the international community. The NCP cannot see paragraph A.16 encompassing such an expectation for enterprises, especially given the nature and variability of international practice in such matters.
  3. The materiality of the issue to paragraph A.16 notwithstanding, enterprises are well advised to carefully consider the potential reputational, legal, and other risks of doing business with State-owned enterprises in situations where the legitimacy of the local authority is highly contested or uncertain. In the context of Myanmar, it is worth reiterating that Canada and many other countries denounced the overthrow of the country’s democratically elected government in February 2021, and that many within Myanmar deny the military’s legitimacy to act as a national government. On this point, the NCP notes the following excerpt from the Government of Canada’s Commercial advisory on doing business with Myanmar-related entities:

    …[the Government of Canada] considers that Canadian companies active in Myanmar may face heightened commercial and reputational risks and should take appropriate action to mitigate risks, particularly in cases that might have ties to Tatmadaw-owned or -connected entities.

Issues raised concerning Chapter III (Disclosure)

  1. The Notifiers questioned the Respondent’s observance of disclosure recommendations in Chapter III of the Guidelines, claiming that the Respondent did not maintain a website and had not published any information about its activities.
  2. Chapter III calls on multinational enterprises to disclose information in order to help build “transparency and accountability” around their operations (Chapter III, commentary paragraph 30). While recognizing that the first set of recommendations in Chapter III focuses primarily on publicly traded companies, as commentary paragraph 31 notes: “these disclosure recommendations may also be a useful tool to improve corporate governance in non-traded companies.” Overall, Chapter III’s recommendations – including those related to the communication of responsible business conduct information – remain addressed to all multinational enterprises.
  3. The Respondent’s apparent lack of publicly available information about its operations raises understandable questions about its approach to the recommendations in Chapter III. Although the Respondent appears to have activated a website at some point in the first half of 2024, as of October 16, 2024, the website provided only contact information and a brief description of the company’s purpose. This does not mean that the Respondent has necessarily failed to observe the recommendations of the chapter. However, the NCP sees merit in examining this issue further under good offices.

Issues raised concerning Chapter IV (Human Rights), paragraphs 2 and 3

“Contributing” to adverse human rights impacts

  1. The Notifiers claimed that by reportedly agreeing to acquire Chevron’s interest in the Yadana project, the Respondent was already contributing to adverse human rights impacts caused by the military in Myanmar, namely by lending it legitimacy and “reassurance” to continue causing adverse such impacts.
  2. The NCP recognizes the many credible reports of adverse human rights impacts caused by the military in Myanmar. However, the NCP is of the view that the Notifiers’ specific claim regarding the Respondent’s alleged “contribution” to these impacts did not merit further exploration under the NCP’s good offices.
  3. Based on the information available to the NCP, it was unclear how the Respondent was contributing “within the context of [its] own activities” to adverse human rights impacts caused by the military, at least as understood in the Guidelines. Commentary paragraph 16 notes that “contributing” to an adverse impact “should be interpreted as a substantial contribution, meaning an activity that causes, facilitates or incentivises another entity to cause an adverse impact and does not include minor or trivial contributions.” It was difficult to see how the Respondent’s alleged activities met this threshold in relation to reported adverse human rights impacts caused by the military regime.
  4. The Notifiers claimed that if the Respondent entered a joint venture with the MOGE, it would risk contributing to the adverse human rights impacts caused by the military. Here the Notifiers pointed to sources and assessments highlighting how payments made to Myanmar State-owned enterprises in the extractive sector are at high risk of being appropriated by military forces to fund activities resulting in adverse human rights impacts. The NCP is of the view that the issue raised by the Notifier merits further examination under the NCP’s good offices, namely in the context of dialogue on the Respondent’s approach to due diligence concerning the prevention and mitigation of potential adverse impacts.

“Directly linked” to adverse human rights impacts by a business relationship

  1. The Notifiers claimed that the Respondent’s business operations, products or services were directly linked to adverse human rights impacts caused by the military through its reported agreement to acquire Chevron’s interest in the Yadana project, and that those links would have been reinforced if/when the reported acquisition had been concluded.
  2. It remains unclear to the NCP how the Respondent’s operations, services or products were supposed to have been “directly linked” to adverse human rights impacts in the manner alleged by the Notifiers. However, the NCP does see merit in facilitating dialogue on the Respondent’s approach to identifying and addressing such any risks through due diligence. The NCP sees reason to address this question in the context of dialogue on the Respondent’s approach to the due diligence recommendations concerning the prevention and mitigation of potential adverse impacts.

Issues raised concerning Chapter VII (Combatting Bribery and Other Forms of Corruption)

  1. The Notifiers claimed that any funds intended for or transferred to the MOGE by the Respondent or on the Respondent’s behalf under the joint venture would risk being misappropriated by military officials or otherwise lost to corruption. Based on the assessments cited in the Notifiers’ submission and publicly available information, the Notifiers’ concerns about potential corruption risks appeared material to the Guidelines and seemed to merit discussion under the NCP’s good offices, namely within the context of a dialogue about the Respondent’s approach to the due diligence recommendations of Chapter II concerning the prevention and mitigation of potential adverse impacts.

Whether there seems to be a link between the enterprise’s activities and the issue raised in the specific instance

  1. There seemed to be a link between the enterprise’s alleged activities and the issues which the NCP considered material and meriting further discussion under good offices.

The relevance of applicable law and procedures, including court rulings

  1. In their request for review, the Notifiers alleged that the Respondent had “engaged in breach of Myanmar law”. Although the NCP took note of the provisions of Myanmar law cited by the Notifiers, it was unclear how these were meant to inform the NCP’s initial assessment, except to illustrate local legal expectations and standards concerning theft, misappropriation, breach of trust, and corruption. The Notifiers did not refer to any court rulings.
  2. The Notifiers claimed that the Respondent’s alleged breaches of local law represented a failure to observe paragraph 2 of Chapter I of the Guidelines (“obeying domestic laws is the first obligation of enterprises”). The Notifiers asked that the alleged breaches of Myanmar law be considered a “standalone” ground of their complaint and a dedicated subject of discussion under the NCP’s good offices.
  3. Paragraph 2 of Chapter I (Concepts and Principles) acknowledges a general principle that informs implementation of the Guidelines by multinational enterprises. However, it does not provide a basis to equate any alleged breach of local law with an alleged failure to observe the Guidelines, and thereby make the issue eligible for further examination by the NCP. Local laws and legal findings can be relevant to understanding an enterprise’s observance of the Guidelines in specific instances. But ultimately the NCP remains a forum to consider implementation of the Guidelines, not matters of local legal liability. Accordingly, the NCP is not in a position to examine the alleged breaches of Myanmar law (i.e., questions of law) as a “standalone” issue under good offices, as requested by the Notifiers.

How similar issues have been, or are being, treated in other domestic or international proceedings

  1. Neither of the parties indicated the existence of parallel proceedings relevant to this specific instance. The Notifiers referred to three specific instances involving Myanmar handled by other NCPs, but apparently only to distinguish the issues in those instances from the issues raised in this specific instance.

Whether the consideration of the specific issue would contribute to the purposes and effectiveness of the Guidelines

  1. As noted in the Decision of the OECD Council on the Guidelines for Multinational Enterprises on Responsible Business Conduct, adherents to the Declaration on International Investment and Multinational Enterprises have set up NCPs to further the effectiveness of the Guidelines. To advance this goal, NCPs have a responsibility to contribute to the resolution of issues that arise in relation to the implementation of the Guidelines in specific instances. Where the circumstances indicate potential for further consideration of the issues to contribute to the effectiveness of the Guidelines, NCPs are expected to offer their good offices to help the parties involved resolve those issues.
  2. Based on the information available to Canada’s NCP, it appears the Respondent in this case was potentially poised to enter a market and business relationship where it could have faced particular risks of contributing to or becoming directly linked to adverse impacts on matters covered by the Guidelines. As noted in the Government of Canada’s Advisory on doing business with Myanmar-related entities: “The coup presents increased risks for Canadian companies active in the region.” However, it remains unclear to what extent the Respondent sought to identify and address potential risks through its own due diligence, and whether the Respondent undertook meaningful stakeholder engagement as part of that process, in line with the Guidelines. The apparent lack of publicly available information from the Respondent on its approach to these issues also raises questions about its implementation of the Guidelines’ recommendations on disclosure.
  3. Given this context, further examination of these issues and an offer of good offices appears to have the potential to resolve issues raised by the Notifiers and to inform and possibly reinforce the Respondent’s implementation of the Guidelines, thereby contributing to their effectiveness and purposes. While there may no longer be any possibility of the Respondent acquiring Chevron’s interest in the Yadana project, facilitating a dialogue on how the Respondent implemented the Guidelines in the context of its alleged earlier pursuit of Chevron’s interest may still be helpful in resolving questions raised by the Notifiers and supporting the enterprise’s implementation of the Guidelines in similar situations in the future.

Conclusion

  1. The NCP offers its good offices to facilitate a dialogue between the Notifiers and Respondent regarding the issues listed below. This does not reflect a finding that the Respondent has failed to observe the Guidelines. Rather, it reflects the NCP’s view that there is an opportunity for examination of these issues to potentially further the effectiveness of the Guidelines, and that an offer of good offices to assist the parties in this case is therefore required to fulfil the NCP’s mandate and responsibilities.
    • MTI Energy’s approach to the Guidelines’ recommendation concerning risk-based due diligence (Chapter II, paragraph A.11), specifically its approach to due diligence in this instance regarding:
      • Risks of potentially contributing to adverse human rights impacts (Chapter IV, paragraph 2)
      • Risks of potentially being directly linked to adverse human rights impacts by a business relationship (Chapter IV, paragraph 3)
      • Risks of potentially contributing to or being directly linked to adverse impacts related to corruption (Chapter VII)
    • the Respondent’s approach to the recommendation in paragraph A.15 of Chapter II (meaningful stakeholder engagement)
    • the Respondent’s approach to the recommendations in Chapter III (disclosure)
  2. The NCP is not offering good offices to facilitate a dialogue on the following issues raised by the Notifiers:
    • the issue raised concerning the Respondent’s observance of the recommendation in Chapter II, paragraph A.16 (abstain from any improper involvement in political activities)
    • whether the Respondent was contributing to adverse impacts caused by the military in Myanmar (Chapter IV, paragraph 2) in the manner alleged by the Notifiers
    • whether the Respondent’s operations were directly linked to adverse impacts through a business relationship (Chapter IV, paragraph 3) in the manner alleged by the Notifiers
  3. The NCP emphasizes that its role is to contribute to the resolution of issues raised in relation to the implementation of the OECD Guidelines. Canada’s NCP cannot provide legal advice or a forum to resolve questions concerning legal compliance issues. Nothing in this initial assessment should be construed as legal advice, including with respect to compliance with sanctions. The NCP takes note of the following excerpt from the commercial advisory issued by the Government of Canada on doing business with Myanmar-related entities:

    The Government of Canada recommends that persons engaging in activities involving Myanmar conduct robust due diligence, including by consulting private legal counsel if appropriate, to ensure their activities comply with Canadian legislation and regulations. The government also advises companies to increase their awareness of the implications of the coup in Myanmar and the potential reputational risks associated with doing business with any affiliate of the Tatmadaw.

  4. This initial assessment and the NCP’s decision to offer good offices should not be interpreted as validating or confirming reports/claims that the Respondent had at any time entered a commercial agreement involving the Yadana gas project.
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