Recent Canadian and international trends point to signs of an increasingly litigious mining industry and an increased risk of liability exposure for mining companies, officers and directors. Over the last several months, there have been significant developments in the areas of class actions, foreign bribery prosecutions, legal liability for conduct abroad, and environmental assessments.
Largest Class Action in South African History Commenced
In January 2013, 17,000 former miners launched the biggest class action in South Africa's history against 30 of some of the world's leading gold mining firms, alleging that the miners had contracted silicosis (a respiratory disease caused by inhaling silica dust) after working in South Africa's mines. The mining companies involved include AngloGold Ashanti (the third-largest global bullion producer), Gold Fields, and Harmony Gold. Anglo American has also been named, although it apparently no longer owns gold assets, nor produces gold, in South Africa.
Class actions are not common in South Africa. The South African Constitution makes provision for class actions,1 but the requirements for instituting a class action and the relevant procedures were only recently outlined by South Africa's Supreme Court of Appeal in November 2012.2 Until this decision, neither the South African courts nor Parliament had laid down clear rules regulating class action litigation.
Lessons for Canadian Mining Companies – Compliance with Canada's Corruption of Foreign Public Officials Act (CFPOA)
As recently published by Osler, on February 5, 2013, the Government of Canada introduced Senate Bill S-14, An Act to Amend the Corruption of Foreign Public Officials Act (Bill S-14). In doing so, the Government announced that it was "redoubling" its fight against bribery and corruption and that it expects "Canadian business to play by the rules." This announcement follows on the heels of the second conviction and the second multi-million dollar fine imposed against a Canadian company pursuant to the CFPOA.3 Some of the proposed amendments include but are not limited to:
- increasing the maximum jail term to 14 years for individuals;4
- expanding the CFPOA's jurisdiction by permitting prosecutions against Canadian companies and individuals, regardless of where the alleged bribery took place;
- adding a books and records offence, making it illegal to falsify records or hide payments related to bribery of foreign public officials; and
- phasing out the facilitation payments exemption.
Facing a potentially increased risk of litigation because of their operations in high risk developing countries, mining companies should take heed of these recent developments. Prior convictions under CFPOA can be instructive on the types of measures that Canadian mining companies can implement to avoid litigation, such as establishing clearly articulated internal codes of conduct, policies and compliance standards and procedures regarding training, disciplinary procedures and sanctions for violations of CFPOA and other anti-bribery laws. This could include developing policies governing gifts, entertainment, business expenses, political contributions, charitable donations, sponsorships, solicitation and extortion. Further steps could include developing a robust internal investigation protocol for investigating CFPOA violations5 and delegating to a senior corporate executive the responsibility of reporting on a quarterly basis to the Audit Committee or the Board of Directors on the company's anti-corruption compliance.
Legal Liability of Canadian Mining Companies for Alleged Abuses Abroad
Last week, news broke that HudBay Minerals Inc. (and its co-defendants) voluntarily withdrew their respective jurisdictional challenges to three related lawsuits (Choc v. HudBay Minerals Inc.,HMI Nickel Inc. and Compañía Guatemalteca de Níquel S.A.) commenced against them in the Ontario Superior Court of Justice. The actions seek about $55 million for alleged human-rights abuses committed by security personnel at a Guatemalan mine. As a result, this appears to be the first time that lawsuits against a Canadian mining company relating to its liability for alleged actions committed abroad could be heard on their merits in a Canadian court, provided the plaintiffs survive the hurdle of the defendants' motions to strike the actions as disclosing no reasonable cause of action. The defendants' motions to strike are scheduled to be heard on March 4 and 5, 2013. Amnesty International was recently successful in obtaining intervener status in these motions.6
Previous attempts to obtain judgment against Canadian mining companies for alleged abuses committed abroad have been unsuccessful. None of these previous lawsuits have been heard on their merits; each case was dismissed at a preliminary stage. For instance, in November 2012, the Supreme Court of Canada dismissed an application for leave to appeal from a decision of the Québec Court of Appeal in Association canadienne contre l'impunité v. Anvil Mining Limited, which had denied the Association's motion for authorization to institute a class action against Anvil Mining Limited for its alleged complicity in the commission of war crimes and crimes against humanity in 2004 in the Democratic Republic of the Congo (DRC). The Québec Court of Appeal denied authorization on a procedural basis. Québec lacked the jurisdiction to hear the dispute, given that, in 2004 (when the subject matter of the litigation had taken place), Anvil Mining did not (yet) have a place of business in Québec nor did it conduct any activity in Québec.7 Similarly, the Ontario Court of Appeal disposed of an appeal in Piedra v. Copper Mesa Mining Corporation on a procedural basis. The claim, which sought about $1.5 million in damages for a campaign of violence allegedly committed by or on behalf of Copper Mesa in connection with a mining project in a remote area of Ecuador, disclosed no reasonable cause of action. The Court denied leave to amend the Statement of Claim.
Previous attempts to legislate in this area have also been (to date) unsuccessful. In October 2011, a private member of Parliament introduced a proposed bill, C-323: An Act to Amend the Federal Courts Act (International Promotion and Protection of Human Rights), seeking to amend the Federal Courts Act to expressly permit persons who are not Canadian citizens to initiate tort claims (based on violations of international law or treaties to which Canada is a party) if the alleged acts occur outside Canada. It also seeks to set out the manner in which the Federal Courts can exercise their jurisdiction to hear and decide such claims. However, this Bill has languished since October 2011, making no progress toward being enacted into law.8
B.C. Government Facing Legal Action for Refusal of Environmental Assessment Certificate
In October 2012, the British Columbia Ministry of the Environment (MOE) denied an environmental assessment certificate (EA Certificate) to a proposed open-pit copper and gold mine on the shores of Morrison Lake, in the interior of British Columbia (the Proposed Project). On February 13, 2013, the proponent, Pacific Booker Minerals Inc., announced that it had retained counsel to "advance litigation against the Province of British Columbia" for its refusal to issue the EA Certificate. The proponent spent $30 million doing feasibility studies and working through the three-year-long EA process.
The Government's refusal follows the Environmental Assessment Office (EAO) Executive Director's recommendation that the MOE deny the Proposed Project, despite the EAO's report that the Proposed Project "would not result in any significant adverse effects [to the environment] with the successful implementation of mitigation measures and conditions". Various factors may have influenced the rejection of the Proposed Project: Morrison Lake is an important ecosystem for a genetically unique salmon population; there existed a strong prima facie Aboriginal title claim to the affected area by a First Nation opposed to the Proposed Project; and the identified environmental liabilities of the Proposed Project would continue "in-perpetuity" since the contaminated mine water would need to be collected and treated for 100+ years in order to avoid significant adverse effects to Morrison Lake. The Ministry of Energy and Mines' preliminary analysis of the reclamation, closure and environmental liabilities for the Proposed Project was in excess of $300 million, a significant liability risk to the Province.
The legal basis of Pacific Booker's proposed claim against the British Columbia Government is not certain at this time, but it will be an interesting case to watch for the mining industry.
1 Section 38(c) of the South African Constitution provides that "anyone acting as a member of, or in the interest of, a group or class of persons" has the right to approach a court claiming that a right in the Bill of Rights has been infringed or threatened.
2 Trustees for the Time Being for the Children (050/2012)  ZASCA 182; 2013 (2) SA 213 (SCA).
3 Griffiths Energy International Inc., a Canadian based international oil exploration and development company active in the Republic of Chad, was fined $10.35 million in January 2013, and Niko Resources Ltd., a Calgary based independent international oil and gas company with operations overseas, was fined $9.5 million, plus three years of probation, in 2011. See a previous Osler Update by Riyaz Dattu, dated January 29, 2013.
4 Monetary fines will remain at the discretion of the judge without regard to a prescribed maximum amount.
5 Mitigating factors taken into account by the Crown in the sentencing of Griffiths Energy International Inc. included GEI's efforts in conducting a robust, credible and independent internal investigation into the circumstances surrounding the agreements and payments in issue.
6 Choc v. HudBay Minerals Inc. et al., 2013 ONSC 998.
7 Anvil Mining is a Canadian company that was incorporated in the North-West Territories in 2004. Its head office is located in Perth, Australia. Anvil's primary activity involves the operation of a copper and silver mine located in DRC. Since 2005, Anvil has leased office space in Montréal, Québec with two employees.
8 Also, in October 2010, the House of Commons, on third reading, narrowly voted 140 to 134 against Bill C-300, An Act respecting Corporate Accountability for the Activities of Mining, Oil or Gas in Developing Countries. See the article " Human Rights and Legal Compliance: The Framework for Socially Responsible Behaviour for Canadian Businesses Venturing Overseas" by Riyaz Dattu in Osler's December 2010 Mining Review.
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