Spring 2020

Canadian courts assert jurisdiction over allegations against Canadian mining company for alleged complicity in modern slavery and human rights abuses in Eritrea

On 28 February 2020, a majority of the Supreme Court of Canada (the “SCC”) ruled in Nevsun Resources Ltd. v. Araya, [2020] SCC 5 that Canadian courts have jurisdiction over modern slavery claims and allegations of human rights abuses abroad by local subsidiaries and sub-contractors of Canadian companies.  The claim alleges that Canadian mining company Nevsun Resources Ltd. (“Nevsun”), through its majority-owned Eritrean subsidiary Bisha Mining Share Company, constructed a gold, copper and zinc mine in Eritrea using conscripted workers forced into labour while on indefinite tenure with Eritrea’s compulsory National Service Program.

Factual background

The claim against Nevsun was filed in November 2014 before the British Columbia Supreme Court by three Eritrean nationals who, having escaped Eritrea between 2011 and 2013, claimed that Nevsun was complicit in the use of forced labour and other human rights violations by local sub-contractors at its Eritrean mine site.

Bisha Mining Share Company is owned as to 60 per cent by Nevsun, with the Eritrean National Mining Corporation owning the remaining 40 per cent.  For the construction of the Bisha mine, the local company hired a South African company, which in turn subcontracted works to two Eritrean construction companies.  These two companies are controlled, respectively, by the Eritrean military and Eritrea’s ruling and only political party.  According to the SCC judgment, these companies received conscripts from Eritrea’s National Service Program, who were indefinitely conscripted and forced to provide labour at subsistence wages.

The plaintiffs sought damages for violations of customary international law norms (forced labour, slavery, cruel, inhuman and degrading treatment and crimes against humanity) and domestic tort law (conversion, battery, unlawful confinement, conspiracy and negligence).  They argued that the alleged customary international law violations were actionable at common law.

In October 2016, the British Columbia Supreme Court rejected Nevsun’s motion to dismiss the lawsuit and ruled that the case should proceed before the Canadian courts (see Araya v. Nevsun Resources Ltd., [2016] BCSC 1856).  In November 2017, the British Columbia Court of Appeal rejected Nevsun’s appeal against that decision.  Nevsun subsequently appealed to the SCC, which agreed in June 2018 to consider the appeal.

Key findings in Nevsun v. Araya

The most contentious issue before the court concerned corporate liability for violations of international human rights law.  In a 5-4 vote, the SCC majority held that corporations could be held liable for violations of customary international law and that such violations were actionable at Canadian common law.  In their view, the Canadian doctrine of adoption meant that customary international law is automatically incorporated into Canadian law.  Nevsun, as a company bound by Canadian law, could thus plausibly be held to account for breaches of customary international law.

On this point, the majority held that international law had evolved from the “state-centric template” that recognised only States as subjects of international law.  It was now not “plain and obvious” (as required for striking the claim) that corporations like Nevsun would enjoy “blanket exclusion” from direct liability for violations of “obligatory, definable, and universal norms of international law”.  The analysis was facilitated by the majority’s assessment that the international norms at issue qualified as peremptory norms or jus cogens.

The majority therefore allowed the claims to proceed to the merits stage in trial before the British Columbia courts.

However, the SCC majority acknowledged that many international norms are addressed to States and of a “strictly interstate character”.  It left for the trial judge to decide whether the norms relied on in the case at hand were of such character and, if so, whether there was reason to let the “common law evolve so as to extend the scope of [interstate] norms to bind corporations”.

Illustrating how complex the issues are, there were two thought-provoking dissenting opinions.

Justices Brown and Rowe disagreed with the majority on the view of customary international law’s adoption into Canadian law.  In their view, corporations are not subject to customary international law prohibitions and States are the only duty-holders under international law.  Moreover, they argued that the adoption of a prohibition under customary international law could not automatically create a civil liability remedy and that it was not the place of the courts to create such a remedy, because States remain free to choose how best to implement their international undertakings.  In other words, it was not for the court to create a cause of action against private parties on the basis of a norm of customary international law prohibiting certain State conduct.  In such situations, corporations could only be held liable for violations of national law, enacted by Parliament and domesticating prohibitions under customary international law.

While Brown and Rowe JJ agreed with the majority that the act of State doctrine does not form part of the Canadian common law and thus could not preclude the claims, Justices Côté and Moldaver dissented also on this point.

Côté and Moldaver JJ agreed with Brown and Rowe JJ on the role of customary international law in Canada, in particular on the point that customary international law cannot impose obligations directly on corporations.  However, they also wanted to bar the claims on the basis of non-justiciability.  They pointed out that the claim alleged that Nevsun was complicit in alleged internationally wrongful acts by Eritrean authorities, which had conscripted the plaintiffs and forced them into working at the mine.  Therefore, they maintained, Nevsun could only be held liable in the event that the Canadian courts found the acts of the actual alleged perpetrators, i.e., Eritrea and its agents, unlawful under public international law.  In their view, the Canadian courts were prevented from scrutinising the acts of another sovereign State in this manner.

Global trends in human rights-based litigation

The majority decision continues to develop trends from previous Canadian case-law.  For example, in January 2017, the British Columbia Court of Appeal agreed to hear a case in which seven Guatemalan individuals sued a Vancouver-based company for alleged abuses committed at the company’s Guatemalan mine (Garcia v. Tahoe Resources Inc. [2017] BCCA 39).  The British Columbia Court of Appeal held that it was not clear that Guatemala was the more appropriate forum for the mine workers’ claim, as there was a risk that the workers might not obtain justice in their country.  This Canadian jurisprudence resonates with decisions from other jurisdictions in human rights-based extraterritorial litigation, such as the much-discussed Vedanta Resources PLC and Others v. Lungowe and Others [2019] UKSC 20, where the Supreme Court of the United Kingdom asserted jurisdiction over alleged human rights impacts caused by the local subsidiary of a UK mining company, similarly inter alia on the ground that the Zambian plaintiffs were unlikely to have access to justice in Zambia.

There is indeed a tangible pattern of increasing pressure on domestic courts to assume competence to hear cases against enterprises incorporated in their territory and alleging abuses committed in other jurisdictions, including at the hands of local subsidiaries, subcontractors and even suppliers.  Decisions such as Jesner et al. v. Arab Bank, PLC [2018] 584 US, where the United States Supreme Court decided to exclude foreign corporations from claims under the Alien Tort Statute, have arguably driven a shift towards focussing on companies headquartered in Western jurisdictions that may be tied to human rights impacts occurring in other countries, as an alternative to bringing claims against the entity directly responsible for the operations in the course of which such impacts occurred.  Most recently, in December 2019 a claim was brought before the District Court of the District of Columbia, contending that major US technological companies should be liable for knowingly benefitting, as end users, from forced and child labour in the global supply chain for cobalt, including in mines in the Democratic Republic of Congo that the respondents themselves had no role in operating (Jane Doe 1 and Others v. Apple Inc. and Others, Case 1:19-CV-03737, D.D.C.).

The dissenting opinions in Nevsun v. Araya however raise important issues of public international law, recalling that while corporations may be implicated in conduct that creates or contributes to various forms of impact on the rights of others, obligations under international human rights law are ultimately addressed to States, deriving from international treaties or customary international law.  Furthermore, the notion of corporate complicity in State violations of human rights is complex, not least because corporate human rights impacts will in many cases be facilitated by States’ underlying failures to impose legislation and regulatory requirements that reflect their international human rights commitments.

What should businesses do?

Regardless of the doubts raised by the dissents in Nevsun v. Araya as to corporate liability under international law, companies with global operations or supply chains should anticipate and prepare for the possibility of being held to account in their home jurisdiction for human rights impacts allegedly caused by subsidiaries, subcontractors or suppliers in other countries.

For further information about these developments and other issues related to Business and Human Rights, please contact Graham Coop (Graham.Coop@volterrafietta.com) or Maria Fogdestam-Agius (Maria.Fogdestam-Agius@volterrafietta.com).