Canadian companies operating in environmentally sensitive industries are subject to highly regulated regimes. Federal, provincial or local government officials may carry out routine inspections or respond to specific incidents using broad statutory powers.

Recently, regulators are relying on administrative monetary penalties to address findings of non-compliance. In more serious circumstances, pursuit of quasi-criminal liability has expanded to a wide range of corporate actors. Companies can protect against reputational harm and financial loss by implementing plans and policies, as well as training management and staff, to prepare for when regulators come knocking.

There is a critical distinction between an “inspection” and an “investigation” by a regulator. Environmental legislation often imposes a legal requirement to comply and cooperate with an inspection, and the failure to comply with an inspector’s request can attract financial consequences. Conversely, where the regulator has commenced an investigation into a quasi-criminal offence that may attract heavy fines and even potential jail time, certain procedural safeguards are engaged such that cooperation may not be mandatory absent a court order.

A. ArcelorMittal Exploitation Minière Canada s.e.n.c. ordered to pay $100,000 CAD

The recent enforcement action against ArcelorMittal Exploitation Minière Canada s.e.n.c. (“ArcelorMittal”) in Quebec illustrates the consequences of failing to cooperate with an inspection.

In that case, officers conducting an inspection requested certain documents from ArcelorMittal to verify compliance with the Metal and Diamond Mining Effluent Regulations and Fisheries Act, which ArcelorMittal refused to provide. The Fisheries Act prohibits obstructing or hindering an inspector who is carrying out legislated duties or functions. It also imposes a duty on individuals to provide “reasonable assistance” to an inspector and provide any relevant information reasonably requested.

In November 2024, ArcelorMittal plead guilty to violating the Fisheries Act for obstructing enforcement officers in the performance of their duties and was ordered to pay a fine of $100,000 CAD.

Although an exemplary case in the Fisheries Act context, similar (and potentially graver) consequences can arise from failing to cooperate with an inspection in most federal and provincial legislative regimes.

B. Key issues to consider when planning for inspections

Given the potentially significant consequences for failing to comply and cooperate with an inspection, we briefly set out key issues for your organization to consider when developing a plan to respond specifically to inspections.

This information builds on our previous article “10 tips for Canadian companies when environmental regulators call,” which provides practical tips to prepare your organization for both inspections and investigations.

1. Plan based on inspector’s powers under various legislation

Environmental legislation such as the Fisheries Act, British Columbia’s Environmental Management Act, and Ontario’s Environmental Protection Act provide inspectors with broad powers, which, although similar, are specific to each legislative regime.

Companies should be prepared to respond to the full scope of an inspector’s powers under various environmental legislation and know in advance what actions should be taken (e.g. what records must be kept on hand for inspection and how to respond to additional requests for information). Tailored with specific legal advice, a written policy or plan on these topics provides companies with a consistent approach to managing risk while ensuring regulatory compliance.

If a company is concerned about whether an inspector has exceeded their statutory powers, seeking and acting upon legal advice without delay may be necessary to avoid potentially significant financial consequences.

2. Know the difference between an inspection and an investigation

Training staff and management on the difference between an inspection and an investigation may help the company and its employees better understand their respective legal responsibilities. A company will likely respond to an inspection and an investigation differently:

  • An inspection verifies regulatory compliance. As discussed above, regulators exercise broad statutory powers to search, inspect records, request information and, in some cases, take samples without a warrant. Failure to comply with appropriate demands made during an inspection may constitute an offence.
  • An investigation is likely to collect evidence to be used in prosecuting an alleged offence, when there are already reasonable grounds that an offence may have occurred. This increased jeopardy engages certain substantive and procedural protections under the Canadian Charter of Rights and Freedoms. Cooperation with an investigation is generally not required, subject to some limited legislative requirements or judicial requirements provided by a warrant.

This key difference informs the purpose and scope of the regulator’s visit and the company’s corresponding response, as demonstrated below by the example of responding to a regulator’s request for statements and interviews.

3. Statements and interviews

If a regulator seeks oral or written statements from a company’s representatives or employees, the response depends on whether the regulator is conducting an inspection or investigation:

  • Generally, in an inspection individuals don’t have a right to silence. The company is required to provide compliance-related information that is reasonably requested to administer various environmental legislation. For example, in Ontario under the Environmental Protection Act, inspectors are empowered to “make reasonable inquiries of any person” and have the statutory ability to exclude everyone from an interview except counsel for the person being interviewed.
  • In an investigation, individuals don’t have a duty to cooperate and must only provide statements as required by a warrant or by legislation. The company may consent to provide statements after obtaining legal advice. Companies must be mindful of not interfering with interviews of employees, if they wish to provide voluntary statements. However, in all cases it is advised that legal counsel be present during questioning.

C. Conclusion

To ensure regulatory compliance while minimizing reputational and financial risk, it is prudent to implement a plan addressing the actions to be taken during environmental inspections and investigations. Because of the inherent overlap between investigations and inspections, it is important that both regulatory activities be addressed in a comprehensive plan, particularly since an inspection may turn into an investigation.

If your organization is looking to develop a robust inspection and investigation response strategy, including training programs, or is currently the subject of an environmental inspection or investigation, we encourage you to reach out to our team of environmental law practitioners who have extensive experience across various industrial and commercial sectors.