Several Canadian firms operating in Guatemala, Eritrea may have civil claims against them heard in Canada
In the coming months, the BC Supreme Court is expected to decide whether a civil claim against a B.C. company with a mine in Eritrea can be heard in Canada.
Three former Eritrean mine workers claim Nevsun Resources Ltd. (TSX:NSU) was complicit in the Eritrean government’s use of conscripted labour and other human rights abuses at the company’s Bisha mine.
Should the court decide the claim can be heard in Canada, it could have wider implications for Canadian mining companies operating in countries with less than sterling environmental and human rights records.
More than three-quarters of the world’s mining and exploration companies are based in Canada and operate in 100 countries, according to a McCarthy Tétrault report on mining and the courts.
The Nevsun claim is one of three that have been launched against Canadian mining companies since 2014.
Toronto’s HudBay Minerals Inc. (TSX:HBM) faces three separate claims, which include allegations of rape and murder committed by security forces acting on behalf of HudBay at Guatemala’s Fenix mine, which it acquired through a merger in 2008 and sold in 2011.
Even though HudBay didn’t own the mine when the alleged rapes occurred in 2007, the company might still be held liable if the allegations prove true, according to Nicholas Hughes, co-chairman of McCarthy Tétrault’s mining litigation group.
“It depends on how the merger operated,” Hughes said. “If the merger operated as such that there was an amalgamation, then you bring in all the problems into the merged company.”
In December, the BC Supreme Court ruled against hearing a civil claim launched by seven Guatemalans against Tahoe Resources Inc. (TSX:THO), whose Guatemalan security personnel were accused of using excessive force during a violent protest at its Escobal silver mine.
Tahoe argued that Guatemala, not Canada, is the proper jurisdiction for such a claim. The court agreed and stayed the proceedings – a decision that is being appealed by the Canadian Centre for International Justice (CCIJ), which helped launch the claim. CCIJ is also assisting the Eritreans in their claim against Nevsun.
Canadian courts have jurisdiction to hear cases against Canadian companies operating overseas.
But in the Tahoe case, the court decided that in countries with a functioning court system, it is more convenient to hear the cases in those countries.
That argument might be harder to make in the Nevsun case because its Bisha mine is in a country that the United Nations (UN) says is plagued with “widespread and gross” human rights violations, including forced labour and a “total lack of rule of law.”
“Indeed, with no parliament meeting and the court system controlled by the executive, it could even be affirmed that there is no rule of law in Eritrea,” a 2015 UN commission of inquiry on Eritrea stated. “It is not law that rules Eritreans, but fear.”
If the BC Supreme Court agrees there is no real means of legal redress in Eritrea, it could open the door for the claims to be heard in B.C.
“If justice can’t be done, that will be weighed heavily by the court,” Hughes said.
The Tahoe, Nevsun and HudBay claims are part of a recent trend of Canadian mining companies operating abroad being taken to court in Canada by litigants who claim they cannot get justice in their own countries.
It poses a dilemma for Canadian courts, because to an extent they are being asked to impose Canadian law on sovereign nations, since the alleged crimes may have been committed by personnel acting on behalf of the state.
According to human rights organizations like CCIJ, Canadian mining companies have operated for too many years with impunity in countries with lax environmental and human rights standards, so they are trying to bring some of the more high-profile cases to court in Canada.
According to CCIJ, Canadian resource extraction companies often use subsidiaries set up to act as firewalls to insulate them from liability. Nevsun, for example, owns the Bisha mine in Eritrea indirectly through a complex link of subsidiaries.
Nevsun Resources (Canada) owns 100% of Nevsun (Barbados) Holdings Ltd., which owns Nevsun Africa (Barbados) Ltd., which owns 100% of Nevsun Resources (Eritrea) Ltd., which owns 60% of the Bisha Mine Co. The Eritrean National Mining Corp. owns the remaining 40% of the Bisha Mine Co.
Nevsun disputes the suggestion the ownership structure is intended to insulate the company.
“This ownership structure is common international practice that is done for several reasons related to flexibility in future ownership changes, tax planning, operational management segregation and accountability,” the company said in an email to Business in Vancouver.
Regardless of intent, the use of subsidiaries might not insulate companies from liability, if a Chevron Corp. case is any indication of where the courts may be headed.
Last year, the Supreme Court of Canada made a ruling that could give mining and oil and gas companies with overseas operations a case of the litigation jitters.
“It’s relatively limited as to its ultimate legal impact, but it has got everyone hot and bothered,” Hughes said.
In that case, Chevron Corp. (NYSE:CVX) inherited the liability of Texaco, which was hit with a US$9.5 billion judgment against it after a group of indigenous people sued for environmental damage in Ecuador.
Chevron claimed the ruling had been procured through fraud and went to court in New York seeking a Racketeer Influenced and Corrupt Organizations Act application. The U.S. courts accepted the argument and issued an injunction against those suing Chevron.
So the litigants filed suit in Canada.
They applied to have the judgment they received in Ecuador enforced in Canada against Chevron Canada Inc., a subsidiary of Chevron, even though Chevron Canada had nothing to do with the Ecuador operations.
They went after the Canadian subsidiary because the parent company, Chevron, has no assets in Canada.
A laundry list of legal questions will still need to be ironed out in the Chevron case. But the fact that a Canadian court has opened the door to the possibility of enforcing judgments by a foreign court against a Canadian subsidiary suggests that companies might not be insulated against liability through their subsidiaries and could face costly legal battles.
The Nevsun case could also prove to be an interesting test case. Eritrea has been condemned by human rights organizations for using indefinite military conscription. Conscripts are forced to work on government projects and for private companies, according to the UN and Human Rights Watch.
It is alleged that conscripts were forced to work on the Bisha mine project by Segen Construction Co., which is owned by Eritrea’s governing party. In its response to the Eritrean claims, Nevsun said that if forced labour had occurred, the company was unaware that it had.
A report by Human Rights Watch, which had “extensive dialogue” with Nevsun, suggests Nevsun might have had little say or control over the workforce in Eritrea.
“Its efforts to investigate the allegations have been obstructed by Segen itself, and Nevsun has professed itself powerless to compel its contractor to co-operate,” the 2013 Hear No Evil Human Rights Watch report states.
Nevsun disputes the report.
“Their information is not only outdated and incorrect, their primary information source on the Bisha mine is not reliable,” the company stated.
The report concludes with a warning: if Canadian mining companies can’t operate in Eritrea without ensuring the welfare of workers, “they should not invest there at all.”
Canadian companies can protect themselves from civil claims by insisting that their foreign subsidiaries and security forces adhere to higher environmental and human rights standards, Hughes said.
Mark LaLonde, director of risk solutions for Xpera Risk Mitigation & Investigation, which specializes in security and intelligence, said one of the biggest problems for Canadian mining and oil and gas companies operating in countries like Eritrea and Papua New Guinea is the local security forces they hire to protect their workers and assets.
“We’ve seen in eastern Europe and some parts of Africa where it’s organized crime groups running security, or they’re one step away from being an armed militia, or they’re an armed far-right wing group, or they’re running security companies so they can buy firearms for the company and resell them on the black market.”
There is nothing wrong with hiring local security personnel as long as there is proper oversight by someone who will ensure they adhere to international human rights standards, LaLonde said.
“One way to mitigate your risk is to insert a western company to manage your local guard services,” LaLonde said.
The recent claims against Canadian mining companies have prompted renewed calls from Liberal MP John McKay for a Canadian ombudsperson that would investigate complaints about Canadian extraction companies operating abroad.
Pierre Gratton, president of the Mining Association of Canada, said an ombudsperson could do nothing to prevent the kinds of civil claims now being brought before Canadian courts.
“An ombudsman is a non-judicial process that helps parties resolve disputes where legal issues … best left to the courts are not at play,” he said. “In short, John [McKay’s] ombudsman would have no role to play in the HudBay example.” •
Claims test reach of Canadian courts
Araya vs. Nevsun
In a claim launched in November 2014, Gize Yebeyo Araya and two other Eritreans now living outside of Eritrea as refugees say that Nevsun Resources Ltd. (TSX:NSU) is responsible for the actions of a government-owned contractor, Segen Construction Co., that used forced labour and violated international human rights laws.
García vs. Tahoe
In June 2014, Adolfo García, on his and six other complainants’ behalf, filed a civil suit in BC Supreme Court against Tahoe Resources Inc. (TSX:THO) claiming damages in a violent incident that took place in 2013 at Tahoe’s Escobal silver mine project in Guatemala.
Angélica Choc, German Chub Choc and Margarita Caal Caal vs. HudBay Minerals Inc.
Forced evictions, rape, murder – these are some of the allegations levied against HudBay Minerals Inc. (TSX:HBM) in three separate civil claims launched against the Toronto mining company as a result of protests and illegal occupations of a mine it used to own in Guatemala.
As for allegations of forced evictions, HudBay says no one was ever evicted while it owned the mine.
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