Canada: Canadian Mining Companies: Is There Liability In Canadian Courts For Activity In Foreign Countries?

Last Updated: July 27 2013
Article by George Waggott and Darrell W. Podowski

The increasing scrutiny and potential liability of Canadian multinationals has received further media attention as a result of a decision issued on July 22, 2013 by the Ontario Superior Court of Justice. In her reasons in Choc v Hudbay Minerals Inc., 2013 ONSC 1414, Madame Justice Carole J. Brown dismissed a preliminary motion which sought to strike claims against Hudbay Minerals Inc. ("Hudbay") and its subsidiaries.

The decision involved three related actions against Hudbay brought by an indigenous Mayan Q'eqchi' group from Guatemala. The claims all alleged that security personnel working for Hudbay subsidiaries, who are allegedly under the control and supervision of Hudbay, committed human rights abuses. The specific allegations include shooting, killing and gang rapes allegedly committed in the vicinity of a proposed open pit nickel mining operation.

The defendants sought to strike all three consolidated actions on a variety of grounds, including that there is no recognized duty of care. Hudbay argued no duty is owed by a parent company to ensure that the commercial activities carried on by its subsidiary in a foreign country are conducted in a manner designed to protect those people with whom the subsidiary interacts.

The plaintiffs opposed the motion in large part based on their argument that Hudbay was directly liable for actions leading to the alleged damages based on human rights abuses. In this regard, the plaintiffs pointed to on-the-ground management of the relevant project as well as management of relevant security personnel. It was also noted that Hudbay made statements publicly that they were committed to adhering to certain standards of conduct, including adherence to Guatemalan international law and the Voluntary Principles on Security and Human Rights.

Amnesty International Canada ("Amnesty") was granted intervenor status in the proceedings and supported the plaintiffs in opposing the motion to strike. Amnesty also referred other international guidelines and standards relating to corporate responsibility and human rights.

The Court's decision to dismiss the motion to strike has been heralded by some as confirmation of an expansion of the scope of liability of the activities of multinationals. On a close reading of the decision, the exact implications of the ruling remain to be seen. The Court noted that the test to strike a claim, which must be based solely on a reading of the plaintiff's pleadings as presented, is stringent. In the specific circumstances, the Court noted that there are competing policy considerations in recognizing a duty of care between a Canadian company and individuals harmed by security personnel at its foreign operations. While the approach to claiming negligence was described as "novel", it does not therefore automatically mean that such a claim will be clearly unsustainable or untenable.

There are many other issues referenced in the ruling, and the specific outcome on the motion was based on a legal question which only serves as a preliminary determination of how the case will proceed. The actual merits of the allegations remain unproven.

The Hudbay decision does align with a recent trend, which is that courts in Canada appear to be taking an expansive view of their own jurisdiction in respect of events that take place outside of our borders. Particular attention should therefore be paid to cases where employees are working or employing contractors in other jurisdictions, and company policies and relevant agreements should be reviewed carefully as case law in this area evolves.

The foregoing provides only an overview. Readers are cautioned against making any decisions based on this material alone. Rather, a qualified lawyer should be consulted.

© Copyright 2013 McMillan LLP

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