Due Diligence Abroad

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Excerpts

Una Jefferson: So before we dive into the nitty-gritty details of this case before the Canadian Supreme Court, can you talk about what we know about working conditions at the Nevsun mine in Eritrea? What were the allegations of human rights abuses?

Cory Wanless: The core allegations were of forced labor. Eritrea is a deeply repressive state which is controlled by a dictator. It has a policy of national service which has become an unpaid forced labor workforce that is sent out by the government to do various things like constructing this mine. The individuals, in this case, alleged that they were essentially modern-day slaves, they were forced to work at the mine, were not allowed to leave, their movements were controlled, they were barely paid, and they were subject to horrific treatment if they got out of the mine.

The individuals, in this case, alleged that they were essentially modern-day slaves

So these allegations even amount to torture, but certainly inhumane treatment, the big one being that they were essentially enslaved.

Una Jefferson: The case that went before the Canadian Supreme Court last week wasn’t even about whether these abuses occurred. It was about whether Nevsun can be investigated and tried in a Canadian court for these abuses abroad. Why is that an issue and what’s at stake with this decision?

Cory Wanless: So Nevsun’s direct employees were not subjected to forced labor, but the company did rely on the government of Eritrea for the construction. In this case, the forced labour is still just an allegation because it hasn’t been proven in a court of law, but these are allegations that have been around for a long time. There’s been a lot of really hard-hitting reporting on it, including by the United Nations and various human rights groups. So clearly, forced labor is being used in the construction of this mine, no doubt about that. Now the question before the court is whether Nevsun, who stood to benefit from the use of forced labor, and knew about it, can be held liable in Canadian courts.

There are a number of cases that are currently proceeding against Canadian companies for human rights abuses that were committed at Canadian mines abroad, and Nevsun is one of them. The questions that the court has to grapple with include, should these cases be heard in Canada or should they be heard somewhere else? For example, can a Canadian company be held responsible when the actions on the ground are being taken by either their subsidiary corporation, which they own or by a contractor?

Canadian courts are increasingly taking the view that these disputes are properly resolved in Canadian courts.

Canadian courts are increasingly taking the view that these disputes are properly resolved in Canadian courts. First off, there’s no jurisdictional issue. Canadian courts can always consider cases brought against Canadian companies. But, companies often rely on a strange doctrine known as Forum non conveniens, which says that there is another jurisdiction that is better suited to hear the claim despite the fact that the Canadian court could hear it. Forum non conveniens was specifically argued in this case before the lower courts in BC but the courts said that the case should be heard in Canada. Interestingly, Nevsun did not appeal that ruling to the Supreme Court. The arguments that went up to the Supreme Court were the doctrine known as Act-of-State, which says Nevsun’s wrongs are so entwined with the actions of the foreign state that any judgment or lawsuit against Nevsun would require the court to consider the actions of a foreign state and we shouldn’t do that as it might infringe the sovereignty of the foreign state.

Act-of-State doctrine has never been recognized in Canada

I should mention that the Act-of-State doctrine has never been recognized in Canada before. It’s not a Canadian doctrine. It’s been recognized in the United States and in the UK in limited circumstances. The doctrine that is being urged by Nevsun would not only be recognized in Canada for the first time, but it would be a radical expanding of the doctrine to circumstances that haven’t been applied before anywhere.

The other issue, which is an interesting one, is whether the court should recognize a new cause of action or a new tort. Nevsun is being sued for a number of torts that are already recognized under Canadian law. These include the tort of negligence, torts of battery or assault, the tort of wrongful imprisonment, all of which are already recognized causes of action. So the claim will continue even if the court declines a new tort known as breach of customary international law.

Una Jefferson: How has the Act-of-State been applied in other jurisdictions, even if it hasn’t been applied in Canada?

Cory Wanless: Well, it has been recognized in the UK and in the United States but there are always exceptions. The first exception is it doesn’t apply if the fundamental claim is about a wrong, like really bad stuff, such as forced labor. In such circumstances, there’s always a public policy exception that says, look, it’s so bad the UK courts or the US courts should look at it.

Una Jefferson: The claimants are not arguing that Nevson directly did this, but that they knew or should have known about forced labor. So what would a decision in this case mean in terms of due diligence that will be required of Canadian mining companies abroad, partnering with foreign contractors.

Cory Wanless: These cases often are brought as negligence claims. Negligence is a very broad principle that says as we go about in the world, we have to be aware of our actions and if there is a result of our action that is foreseeable, that is predictable, and we had reason to know that it might occur, we have to take steps to make sure that it doesn’t occur. In case of mining in Eritrea, where forced labor is often used, there is a positive obligation on you to figure out if forced labor is going to be used and if it is, then to either take steps to make sure that it isn’t used and if you can’t do that, then do not do the project. So due diligence is going to be a major part of that. In this case, Nevsun knew about forced labour.

Una Jefferson: How do you feel about how the hearing last week?

Cory Wanless: Yeah, the hearing was very interesting. It’s always hard to tell based on the hearing itself how the judges will ultimately decide because what they’re doing in a hearing is they’re asking a lot of probing questions and they ask that for a bunch of different reasons. So you can’t really determine what the court’s going to do. My prediction is that the court might think that a recognition of a new wrong of breach of international customary law is unnecessary based on the torts that already exist. I also think that it’s very likely that the court will allow the claim to proceed and won’t allow the company to get out of it just on this Act-of-State argument.

Una Jefferson: So they’ll allow these types of claims to be heard in Canadian courts in the future?

Cory Wanless: Yeah. It was never really an issue about whether a claim like this can be heard in Canada.

Canadian corporations can be sued in Canada for wrongs that they commit abroad

Canadian corporations can be sued in Canada for wrongs that they commit abroad. It would only be in very narrow circumstances in which their behavior is so entwined with the foreign government that maybe they have an ability to get out, but in all other circumstances, they certainly can be sued here.

Una Jefferson: Given this case which is going on right now and the Choc vs Hudbay Minerals, concerning a Canadian mining company operating in Guatemala, and the Tahoe resources case, there are all these cases you mentioned in the courts right now, how do you see this question of accountability applied to Canadian mining companies operating abroad evolving?

Cory Wanless: Well, there are a couple of important trends, the first being that the Canadian courts will hear these claims. I think previous to these claims, the general assumption was that the companies probably weren’t going to be sued here in Canada. That’s not the case anymore. Directors and officers as they make their decisions about the direction of the corporation should be very aware of the risk that they could be sued in Canadian courts.

Directors and officers as they make their decisions about the direction of the corporation should be very aware of the risk that they could be sued in Canadian courts.

Second, if companies say that they’re going to abide by certain standards, then they better verify that they’re doing it on the ground, otherwise, it will be used against them.

The first step of corporate social responsibility is to acknowledge that they do have that responsibility and that there are certain things they have to do.

Often the companies think that they are meeting CSR by simply signing onto various standards. But the trend now is that that’s not enough. You actually have to walk the walk.

Often the companies think that they are meeting CSR by simply signing onto various standards. But the trend now is that that’s not enough. You actually have to walk the walk.

Una Jefferson: Nevsun has signed onto International Finance Corporation principles that have labor standards in mining. Do you think this might have any bearing on this case?

Cory Wanless: Companies have increasingly wanted to not have what they call hard law. They want soft law. They want to sign onto voluntary standards, where everything’s sort of optional. The risk of doing that though is it sends a signal to the courts about what standards companies are applying to themselves and that feeds into the analysis of whether or not they’re negligent, whether or not they owed a duty of care, and what the standard of care is. The trend has been that companies sign onto these things thinking that there aren’t actual consequences to them, but as the rubber meets the road, it turns out that there are. My recommendation to companies is by all means, you should sign onto these things, but signing on is not enough, you actually have to do it.

Una Jefferson: I know that the Trudeau government in Canada promised on creating an ombudsman post for a responsible enterprise abroad. The position has been created but it hasn’t been filled yet. Do you have any hopes for this position which will extensively be responsible for investigating human rights abuses by Canadian corporations abroad? Do you think this will change anything?

Cory Wanless: It’s a good question. I’m pretty pessimistic about any Canadian government, this one or any of the previous ones actually doing anything about this issue in part because the mining lobby is quite strong. It depends a lot on what powers the post is given, what independence is given, whether it can collect evidence, what findings it can make and ultimately what sanctions it can visit on bad actors. So far all we’ve got from the Canadian government is a vague announcement over a year ago and no details or actual staffing. I’m not so optimistic.

Una Jefferson: What would be a critical power that this office could have that would be a litmus test of how effective they would be?

Cory Wanless: Powers are really important. The biggest one being the power to compel evidence. You won’t be able to ever investigate what happened if you aren’t able to get the evidence. That means they have to have the power to subpoena documents from the company, and they have to have the power to interview various individuals under oath. If you don’t have those powers, you’re not going to be able to investigate, ever.

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