Legal trends highlight human rights risks for miners operating abroad

More cases out of British Columbia highlight the growing legal risks related to human rights practices abroad and the adoption of CSR standards covering global mining operations.

New British Columbia decisions

The B.C. Court of Appeal recently reversed a lower court’s decision in Garcia v Tahoe Resources Inc., allowing a claim to be pursued in Canada for damages relating to alleged human rights violations occurring in Guatemala. The trial judge granted Tahoe’s motion to bring the matter to an end in Canada, finding that Guatemala was a clearly more appropriate forum for the litigation. On appeal, the Court of Appeal disagreed with the finding of the trial judge that a separate civil suit would be a more appropriate forum than a proceeding in Canada.

The Court found that the trial judge did not give adequate consideration to (1) the limited ability under Guatemalan civil procedure to discover documents in the possession of a foreign company; (2) the expiry of the one-year limitation period under Guatemalan law; and (3) evidence of corruption in the Guatemalan judiciary. The Court of Appeal further held that the trial judge had not applied the correct legal test for assessing the risk of corruption as one of the forum non conveniens factors. The trial judge had asked herself whether the foreign forum was “capable of providing justice,” but the Court of Appeal held that the correct legal test is whether there is a “real risk” that the proposed alternative forum would not provide justice. The Court noted that the claim arose in a highly politicized environment surrounding the government’s grant of a permit to a large foreign-owned mining operation in rural Guatemala and found that there was a measurable risk that the plaintiffs would encounter difficulty in receiving a fair trial against a powerful international company whose interests aligned with the political interests of the state.

In an earlier but still recent decision by the British Columbia Supreme Court (a lower court in B.C.) in the ongoing claim of Araya v Nevsun Resources Ltd., the Court also refused to strike proceedings based on human rights abuses alleged to have occurred at a mine located in Eritrea and owned and operated by an indirect subsidiary of a Vancouver-based mining company, allowing the claim to proceed to trial. The plaintiffs claim that the mine using forced labour, and alleging that Nevsun’s “mind and management” are primarily in Canada, Nevsun allegedly had oversight of the conditions at the mine. The plaintiffs point to evidence that Nevsun’s CEO chaired the board of its Eritrean subsidiary, statements in Nevsun’s public disclosure that Nevsun was involved in all aspects of the Bisha mine’s operations and Nevsun’s adoption of the 2006 International Financial Corporation’s Performance Standards on labour practices and working conditions. Nevsun denies the allegations and claims, in part, because the Bisha mine is an asset of a subsidiary which is party to the relevant commercial arrangements and makes all operational decisions (including in selecting the contractor). The B.C. Supreme Court dismissed a motion brought by Nevsun to dismiss the claim, concluding that the claims passed the very low threshold of it not being plain and obvious that they are bound to fail. Subject to any appeal, Nevsun will face a trial on the merits of the issues.

These cases are not just being seen in British Columbia, one of the first decisions allowing a claim to proceed in Canada was Choc v Hudbay Minerals Inc. that was decided by an Ontario court. In that case, the court found it was not plain and obvious the claim would fail and it is proceeding to trial.

Key takeaways for miners operating abroad

These cases show there is an emerging willingness for Canadian courts to take on cases where they are convinced the plaintiffs will not obtain justice in their home forum and highlight the importance of forethought in how human rights are managed by Canadian companies, considering:

• What legal obligations exist regarding human rights and international standards that could have bearing on their duty of care for their global operations;
• What voluntary or international standards, such as the UN Guiding Principles, can affect their legal position and how they should be correctly applied prior to public adoption;
• Whether the company is conducting adequate human rights due diligence on international operations, foreign subsidiaries, business partners and supply chains; and
• How transparency and reporting should be handled to meet disclosure expectations (from regulators and stakeholders more broadly) balanced against legal risk mitigation.

Getting ahead of the curve in managing human rights risk is not just good for a company’s reputation, but an important part of legal risk management as well.

MICHAEL TORRANCE is a lawyer with Norton Rose Fulbright, Toronto.