Law Times

Law Times • June 18, 2012 Lawyers to fight against budget's attack on environmentalists P COMMENT dozen hard hits on the environmental movement into his budget implementa- tion legislation. They include clauses saying only rime Minister Stephen Harper thought he could get away with pulling a couple of fast ones over the tree-huggers by slipping a groups directly affected by oil pipe- lines and oilsands projects could appear before environmental hearings that could now last no longer than two years, no matter how many people had some- thing to say. So they'll hear from a couple of native bands and a few angry farmers before wrapping the hearings up and rolling out the pipeline to take oil to China. But things haven't turned out quite "The bill is bad, the pro- cess is bad," Stephen Hazell, an environmental law pro- fessor at the University of Ottawa, told reporters last Tuesday. "This legislation is basi- The Hill cally about eliminating legally required environ- mental assessments and replacing them with a framework of political dis- cretion by the prime min- ister and his minister of the environment at any point in the process whenever they want." The part that riles him is the clause that way. The environmental groups, tired of environmental assessments," he said. "We deadlines for investors. We believe that not only envi- ronmental protection also want clear important but also develop- ment of our resources." With those words, Harper is Richard Cleroux spoke like a true oil com- pany shill. It' their pipelines on a specific timeline. But what about clarity for farmers or being blocked by Harper, have hauled out their lawyers. They know the law, the courts, and how to make a case. In fact, a group of 124 environmental that provides for only people having direct interest in energy development projects, mining operations, and oil or gas pipelines to take part in public hear- ings. It' lawyers, some representing the biggest environmental charities, sent an open letter to Harper last week telling him to get those anti-environmental provisions out of his budget bill and into legislation of its own. If you've got one lawyer against you, it's not necessarily so bad. But when you have 124 of them against you, including some of the best who know what they're doing, you're in trouble. Their message amounted to telling Harper to hive off those environmental provisions and put them into another separate piece of leg- islation. in simple terms pockets can protest. Harper will have trouble getting away with it. "You can imagine that when the s like saying only those with deep for investors that are impor- tant, meaning oil companies can be certain they can start native communities when it comes to being sure projects won't pollute their land or leave every living thing on it under a bunch of oil? One thing Harper' to want to realize or even admit is that if you push back hard enough at him, he does sometimes back off. Remember cabinet minister Vic s critics never seem Nati onal Energy Board or a joint review panel on the oilsands tells the Sierra Club it has no right to take part in the process, the next step would obviously be the Federal Court," said Hazell. Harper can say what he wants right now, but one thing he doesn't like is Federal Court. He has been there often enough and he usually loses. But back in the House of Commons, he's the king of the court. Last week, he was once again defending his attack on environmental charities. "We will keep a rigorous system of Toews' famous plan to let police snoop around on everybody' That's the one Toews said only people s online activities? who stand with the child pornographers would oppose. It blew up in their faces and Harper and Toews backed off. Toews had to eat his legislation, staples and all. The same thing could happen to the environmental provisions in the budget bill. s clear deadlines bono lawyers working for them to win this one. Harper has good lawyers as well and he's eager to put down those pesky environmentalists once and for all. They're the people his Natural Resources Minister Joe Oliver openly calls terror- ists. Canada must be the only place out- side Vladimir Putin's Russia where public officials label environmentalists as ter- rorists. Even the Chinese government is less insulting to many of its critics. This time, Harper is facing a big oppo- a court of law. Harper will be facing environmental s legal arguments that count in nent. He can call them all of the nasty names he wants. That doesn't work in the courts. It' charities with millions of dollars behind them and the support of hundreds of thousands of environmentalists and the best lawyers money can buy. There' invested in all of this. If Harper doesn't perform for them, PAGE 7 Harper is going to back down in his fight against environmentalists. The big oil companies have too much they'll find somebody else who will. It'll be one great fight and it could take The victory won't be in the Commons, however. That's Harper's playground. He years. If Harper thought sneaking his attack on the environmental movement into a budget implementation bill was a smart move, he made a big mistake. The fight is far from over. Neither side has won — yet. LT has the numbers and wins every vote. The environmentalists understand they need more than a couple of pro Richard Cleroux is a freelance reporter and columnist on Parliament Hill. His e-mail address is richardcleroux@rogers.com. BY MARK TONKOVICH For Law Times O Don't let new client audit inquiry rules fly under the radar u SPEAKER'S CORNER information concerning claims and potential claims against a client for use in preparing financial state- ments. They're particularly common for litigators with large corporate clients. Although the process for responding to audit in- ne of the less glamorous aspects of legal practice is responding to client audit inquiry letters. These letters gener- ally direct lawyers to review and disclose claims. Whereas the joint policy explained that cli- ents were to evaluate whether losses resulting from any claim or possible claim were "likely, unlikely or not determinable, quiries has remained the same for the last 30 years, recent shiſt s in Canadian accounting standards have changed the rules for evaluating existing and contin- gent liabilities. Th ese changes likely fl ew under the radar of many legal practitioners, which is concern- ing since a client' could have signifi cant negative consequences. Th e joint policy statement of the Canadian Bar s failure to properly report claims Association and the Canadian Institute of Chartered Accountants has governed the audit inquiry response process since 1978. Canada' Board recently adopted a number of new accounting standards, including the International Financial Re- porting Standards for public companies. Most public corporations, government business enterprises, and other entities that elect to do so started using IFRS to prepare their fi nancial statements for periods begin- ning on or aſt er Jan. 1, 2011. Although the governing bodies are still working to update the joint policy statement, they have released interim rules to govern audit inquiries in the meantime. The interim guidance makes three main changes to clients' reporting obligations that lawyers should consider when responding to inquiries under the new regime. First, clients must now report a wider array of s Accounting Standards cess "where practicable." plate that any existing or contingent claim will not be determinable. Instead, they require reporting of existing claims where it is "more likely than not" that resolution will require some outflow of resources. We might think of this as a 50-per-cent-plus-one " the new rules do not contem- standard rather than the previous "likely" standard, which was perhaps closer to the 70- to 80-per-cent range. Clients must also report contingent liabil- ities, which include those claims that will not ma- terialize until the occurrence of some future event beyond a client's control, unless the possibility of an outflow of resources is remote. Despite the in- creased breadth of clients' reporting obligations, lawyers' audit inquiry responses should still only disclose new information about existing claims and not contingent liabilities since our responses are generally copied to their auditors. To maintain privilege, where a lawyer's review reveals a potential or contingent liability not identified in the audit in- quiry letter, counsel should raise the issue directly with the client. Second, clients must now go to greater lengths to estimate and report the quantum of their liabilities. The joint policy statement only required clients to report the ultimate amount of loss from any claim or possible claim "if reasonably estimable. the new rules, clients are to provide the "best esti- mate" of what they would "rationally pay" to settle a claim or transfer it to a third party. In the "extremely " Under www.lawtimesnews.com s not a hope in heaven that rare" case where they can't make an estimate or where a claim depends on a future event or will probably not require an outflow of resources, clients are to report it as a contingent liability and complete the more detailed estimation pro- old for non-disclosure of claims. Under the old rules, clients could omit reportable information from their financial statements in cases where in- cluding it would have a "significant adverse effect." Under the new regime, non-disclosure is an option only in the "extremely rare" case in which reporting the information "can be expected to prejudice ser- iously the position of the [client] in a dispute with other parties on the subject matter" of the claim. All in all, the new rules require clients to report Finally, the new rules introduce a stricter thresh- more information about more types of claims, and lawyers are to respond to audit inquiries accord- ingly. While these changes may have little practical effect on those of us who err on the side of caution and disclose more rather than less in the regular course — a practice that may be dangerous in and of itself — they could have significant consequences in borderline cases. Notably, decisions on claims disclosure not in accordance with the joint policy statement and/or the interim guidance may lead to improper financial reporting or may unnecessarily reveal confidential information that is detrimental to a client's bottom line. Given the complex inter- action between the accounting standards and the new and old rules, lawyers should consult the ap- plicable documents if they have doubts about the extent of their obligations in any particular case. LT Mark Tonkovich is a tax litigator at Baker & McKenzie LLP in Toronto. This article represents his personal views and does not constitute legal advice.

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