(NorthernMiners) The shifting liability landscape for Canadian miners abroad

From: Biniam Tekle <biniamt_at_dehai.org_at_dehai.org>
Date: Thu, 30 Apr 2015 21:10:19 -0400


DAILY NEWS Apr 29, 2015 11:49 AM - 0 comments

Commentary: The shifting liability landscape for Canadian miners abroad

By: Young Park and Rick Moscone, Special to The Northern Miner

Two recent lawsuits brought in B.C. by foreign plaintiffs against two
Canadian mining companies for alleged human rights abuses abroad have
raised the stakes for mining projects in foreign jurisdictions.

On June 18, 2014, seven Guatemalan men sued Tahoe Resources Inc.,
alleging that private security forces hired by Tahoe’s Guatemalan
subsidiary opened fire on them in San Rafael Las Flores. On Nov. 20,
2014, three Eritrean refugees sued Nevsun Resources Ltd., alleging
they were forced to work at a mine in Eritrea under threat of torture
by Eritrea’s ruling party.

These lawsuits appear to be inspired by the decision of the Ontario
Superior Court of Justice on July 22, 2013, in Choc v Hudbay Minerals
Inc., the first case against a Canadian mining company over alleged
human rights abuse abroad that was permitted to go to trial in Canada.
In light of this recent litigation, it may be worthwhile for Canadian
mining companies to revisit Hudbay to understand how plaintiffs are
now using Hudbay to frame their claims, and to consider a risk
management plan to mitigate the risks raised by Hudbay and the
litigation it has spawned.

Hudbay decision

Three related actions were brought by 13 Guatemalan Mayan Q’eqchi’
plaintiffs against Hudbay in Ontario for human rights abuses allegedly
committed by private security forces working for Hudbay’s Guatemalan
subsidiary, CGN. The events arose in the context of a land dispute
between Hudbay, which at the relevant time owned a proposed open-pit
copper mine near El Estor, Guatemala, and indigenous Mayan Q’eqchi’
farmers, who claimed that part of the mining property fell on their
ancestral lands.

Hudbay brought a procedural motion to strike the claims as disclosing
no reasonable cause of action. Hudbay argued that it could not be
liable to the plaintiffs in negligence, as there is no recognized duty
of care owed by a parent to ensure that its foreign subsidiary does
not harm the plaintiffs. This argument was rejected.

The test on this procedural motion was whether it was plain and
obvious that the plaintiffs’ allegations, if accepted as true, would
fail. The court ruled that it was not “plain and obvious that no duty
of care can be recognized.” The court found that Hudbay’s public
statements on its commitment to corporate social responsibility and
the Voluntary Principles on Security and Human Rights suggested a
relationship of proximity between the parties, “such that it would not
be unjust or unfair to impose a duty of care” on Hudbay.

While Hudbay did not establish a new duty of care, it opened the door
for Canadian courts to establish a new duty in appropriate cases and
on a proper evidentiary record.

Cases inspired by Hudbay

In Adolfo Agustin Garcia et al v Tahoe Resources Inc., seven
Guatemalan men sued Tahoe alleging that they were injured when private
security forces working for Tahoe’s indirect Guatemalan subsidiary,
MSR, opened fire on them during a peaceful protest held on a public
road near the Escobal mine. MSR owned the Escobal mine, a gold and
silver mine located in San Rafael Los Flores. The plaintiffs allege
that Tahoe owed them a duty to ensure their safety based in part on
public statements made by Tahoe affirming its commitment to CSR, and
international norms like the Voluntary Principles and the United
Nations’ Guiding Principles on Business and Human Rights.

In Gize Yebeyo Araya et al v Nevsun Resources Ltd., three Eritrean
refugees sued Nevsun claiming they were forced to work at the Bisha
mine in Eritrea and subjected to cruel, inhuman and degrading
treatment by the Eritrean government. Nevsun’s Eritrean subsidiary,
BMSC, owns 60% of the Bisha mine (a gold, copper and zinc deposit) in
partnership with the Eritrean government. The plaintiffs claim Nevsun
was an accomplice to forced labour and other crimes against humanity
by entering into a commercial venture with the “rogue state of
Eritrea” to develop the Bisha mine. They also allege that Nevsun is
liable in negligence, as it owed them a duty of care to ensure BMSC
did not cause them harm. They base this claim in part on Nevsun’s
public commitment to CSR, minimizing adverse impacts on the local
community and the IFC Principles, an international norm.

CSR and international norms

Canadian mining companies adopt CSR polices and publish CSR reports.
TSX issuers are required to review CSR issues in their annual
information forms. As part of their CSR policies, companies adopt
international norms such as the Voluntary Principles, Guiding
Principles and other international standards of conduct endorsed by
the Canadian government. The plaintiffs in these new cases rely on
public commitments made by the defendants to CSR and to these
international norms to support their claim for a new duty of care. If
a new duty of care is established, the court will likely look to these
international norms to define the content of the standard of care.

Risk Management

Canadian mining companies that operate in conflict-affected areas
should heed the risks raised by Hudbay and the litigation it has
spawned in their risk management planning. The fact that their foreign
operations are owned and operated by foreign subsidiaries in distant
lands may not immunize Canadian mining companies from liability in
negligence law. Certainly, this fact is not deterring foreign
plaintiffs from pursuing Canadian mining companies in Canada.

Put simply, the best way for Canadian mining companies to mitigate
these risks is to fulfill their commitments under their CSR policies
and any international norms they adopt. If a proponent makes public
commitments to CSR, the proponent should assume it owes a duty of care
under Canadian law to local community members to ensure its foreign
operations do not violate their human rights. Making this
risk-management assumption may guide the proponent in planning the
steps it should take, and the resources it should devote, to fulfill
its CSR commitments.

While the nature and scope of such a plan will vary, some steps that
may be considered include:

• Develop, continuously monitor and enforce protocols to observe CSR

• Conduct risk assessments and due diligence on actual and potential
adverse human rights impacts of their operations to identify, avoid
and mitigate such impacts;

• Provide adequate on-the- ground management of issues identified as high risk;

• Adequately screen, train, monitor and supervise security personnel;

• Conduct due diligence to avoid hiring security personnel who have
been credibly implicated in past human rights violations;

• Set clear rules of engagement for security personnel — use force
only when strictly necessary and only to an extent that is
proportional to the threat; and

• Include clauses in contracts with private security forces that
prohibit them from employing individuals credibly implicated in past
human rights violations, and require them to observe international
norms, such as and permit termination of the relationship where there
is evidence of abusive behaviour.


The Canadian legal landscape is shifting. The new exposure faced by
Canadian mining

companies in negligence law for their foreign operations call for
risk-management planning to ensure compliance with CSR commitments.
Fulfilling these commitments will also have intrinsic value to
Canadian proponents and investors, and contribute to the long-term
stability and success of the foreign projects.

— Based in Toronto, Young Park is a partner in Fogler Rubinoff LLP's
litigation group, and has a diverse commercial litigation practice. He
is a skilled advocate with extensive experience conducting trials,
commercial arbitrations and regulatory hearings. Young also advises
his clients on a wide range of regulatory and risk management matters.

Rick Moscone is a partner in Fogler Rubinoff's Toronto office, and is
chair of its Securities Law Group. He has over 10 years experience in
corporate finance, mergers & acquisitions, and securities matters. His
experience includes structuring and negotiating securities and
commercial transactions, as well as providing general corporate
commercial advice.

Fogler Rubinoff LLP is a full service law firm with offices in Toronto
and Ottawa, comprising 110 lawyers and a support network of 125 legal
and administrative staff. Please visit foglers.com for more
Received on Thu Apr 30 2015 - 21:10:59 EDT

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