27 April 2020

Canadian Companies May Now Be Sued In Canada For Alleged Human Rights Abuses Abroad, Rules Supreme Court Of Canada

Bennett Jones LLP


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A small group of former Eritrean workers has won a narrow, but important, preliminary victory at the Supreme Court of Canada in a British Columbia lawsuit that alleges human rights abuses...
Canada Government, Public Sector
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A small group of former Eritrean workers has won a narrow, but important, preliminary victory at the Supreme Court of Canada in a British Columbia lawsuit that alleges human rights abuses against a Canadian company operating outside Canada. A slim majority of judges concluded that the case could proceed forward against a British Columbia-based, Canadian mining company, dismissing a defence motion to strike out the claims at a preliminary stage.

Earlier this year, Bennett Jones flagged Araya v Nevsun Resources Ltd as a key Supreme Court appeal to watch in 2020. The Court's decision, released on February 28, did not disappoint. The Supreme Court split 5-4, with vigorous dissenting opinions.

In a noteworthy development in the law, a majority of the Supreme Court recognized that a Canadian company could be liable in Canada for a novel claim of breach of customary international law (CIL) that occurred in another country.

Both the British Columbia Supreme Court and British Columbia Court of Appeal had earlier held that the Eritrean plaintiffs, who advance claims in respect of their prior alleged work at a gold mine in Eritrea, could proceed with their lawsuit against the Canadian company. The workers sought remedies in British Columbia for the Canadian company's alleged complicity in practices they claim were human rights abuses—forced labour, slavery, cruel, inhuman, or degrading treatment, and crimes against humanity—that were allegedly carried out by the mine's owner, an Eritrean company owned in the minority by the Eritrean government and in the majority by indirect subsidiaries of Nevsun.

The lawsuit will now proceed forward towards a hearing of the case on its merits.

The Supreme Court's decision is very important in respect of claims based on alleged human rights abuses outside Canada. But much remains for Canadian courts to decide. Here are five notable considerations that Canadian companies and their lawyers should keep in mind following the Araya decision.

1. This is Not the End of the Araya Story

The Supreme Court's decision was on a preliminary motion. There has been no trial. The merits of the claims remain to be determined. At each level of court, the judges applied a different legal test than a trial judge would apply, and did so without the benefit of evidence on the merits. Araya now returns to the discovery and other pre-trial processes in British Columbia, where a trial judge may eventually engage with a host of new issues, including points raised by the dissenting Supreme Court judges.

2. Rejection of the Act of State Doctrine may have Immediate Implications

A key legal takeaway from the Supreme Court's decision in Araya is that Canadian courts can rule on the lawfulness of another sovereign state's actions. Seven of the nine judges held that the "act of state" doctrine does not form part of Canadian common law. The implications of this legal conclusion may play out in other cases, considering the COVID-19 pandemic has already generated claims in other jurisdictions against foreign governments (see discussion on Bella Vista LLC, et al v The People's Republic of China, et al).

3. It is Unclear how Canadian Trial-level Courts will Approach Breach-of-CIL Type Claims

The majority opinion in Araya contains broad statements about "peremptory customary international law norms" and other concepts in public international law. But many practical and legal questions remain, and it is unclear how Canadian trial courts will respond to allegations of a breach of CIL. Will judges embrace or resist these relatively untried international law principles? Will courts recognize new causes of action in tort, inspired by CIL? If so, how will courts adapt traditional Canadian law to these new CIL-based torts? The majority opinion in Araya offers few clear answers, so the lower courts will have to sort out the answers to these and other questions over time, at least until appellate courts have a chance to clarify.

4. There are Many Other Complex Issues at Play

At the Supreme Court, the dissenting opinion of Justices Brown and Rowe draws out one of many complications in claims for an alleged breach of CIL: which nation's law applies? Under Canadian conflict of laws rules applicable to torts, Canadian courts will apply the substantive law of the jurisdiction in which the alleged wrong occurred―in Araya, one may presume it is the law of Eritrea. That has numerous implications. For example, it is unclear how courts will apply choice of law rules for CIL claims. There are already legal exceptions to applying foreign law. Canadian courts may also accept novel arguments that Canadian substantive law should apply in CIL claims. Further, a foreign law governing the plaintiffs' tort claims must be proven by expert evidence in a Canadian court―assuming a breach of the foreign law supports liability at all. In short, there are many issues left unanswered by Araya.

5. Araya is Not the First or Last Case of its Kind

The Supreme Court's decision in Araya reflects a growing willingness of some courts to hear so-called "transnational" cases―claims by foreign residents in the home jurisdictions of companies based on harm allegedly occurring abroad. In another transnational proceeding, the United Kingdom Supreme Court in 2019 accepted that an English parent company may owe a duty of care under tort law to third parties affected by operations of its foreign subsidiary (see Vedanta Resources Plc v Lungowe).

Araya is one of a small cohort of Canadian cases raising similar issues for Canadian companies with operations in, or investments in, projects through subsidiaries in a foreign country. Other Canadian cases include Garcia v Tahoe Resources Inc and Choc v Hudbay Minerals Inc. However, just last year, the Supreme Court dismissed an application for leave to appeal from the Ontario Court of Appeal's decision in Das v George Weston Limited. In that case, Bennett Jones represented several of the defendants that successfully obtained the dismissal of a proposed class action related to the Rana Plaza factory collapse tragedy in Savar, Bangladesh.

In conclusion, the door may be opening somewhat for transnational corporate accountability claims. Though much uncertainty remains, we know from Araya that allegations of a breach of CIL may, if properly pleaded in a statement of claim, survive a motion to strike for failing to state a tenable cause of action. Practically speaking, that is significant in and of itself. How those allegations will fare at a trial on full evidence remains to be seen. Meanwhile, we will likely see additional claims by foreign plaintiffs against Canadian companies based on alleged human rights abuses abroad.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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