Lawsuit could be precedent-setting for Canadian mining companies operating abroad

The Fenix Ferronickel project, in Guatemala, used to belong to Toronto-based HudBay Minerals. (Image from archives)

Legal proceedings were held last week in Toronto related to a case against a Canadian mining company that formerly was operating through a subsidiary in Guatemala. The outcome of the case could have wider repercussions for Canada-based mining companies who do business overseas.

Base and precious metals miner Hudbay Minerals (TSX,NYSE:HBM) is defending itself against allegations that five women from a remote Guatemalan community were raped by employees of one of Hudbay’s former subsidiaries.

“The alleged events predate HudBay Minerals’ business interests and operations in Guatemala, and we are not aware that they have ever been reported to Guatemala law enforcement or other authorities”: Part of Hudbay’s statement about the case 

According to the CBC, the five women came to Toronto for pre-trial questioning by Hudbay’s lawyers, in connection with three civil suits filed against the Toronto-based firm. States CBC:

They concern the alleged killing of community leader Adolfo Ich in 2009, a separate shooting that left another man paralyzed in 2009 as well as the gang rape of 11 women in 2007.

CBC Radio host Anna Maria Tremonti featured the story last week during The Current current affairs program. During the program a CBC reporter said the women feel they cannot get justice in Guatemala for their allegations, none of which has been proven in court.

The national broadcaster also reported that Hudbay’s lawyers are arguing that the trial should be held in Guatemala, and that “the parent company isn’t responsible for the subsidiaries actions” according to a lawyer for the Guatemalans quoted by CBC.

Hudbay Minerals purchased the Fenix nickel project owned by Compania Guatemalteca de Niquel, or CGN, through a takeover of Skye Resources in 2008, but sold it in 2011. The alleged rapes were perpetrated during forced evictions by security staff of CGN, states CBC. But at the time, CGN was not a subsidiary of Hudbay.

On its website Hudbay says the allegations “are counter to all of the available information we have” and vowed to “defend ourselves vigorously against them.”

“The alleged events predate HudBay Minerals’ business interests and operations in Guatemala, and we are not aware that they have ever been reported to Guatemala law enforcement or other authorities. Based on reports from government sources, we understand that a legal eviction was conducted by the Guatemalan government in the area on the date in question. Official government accounts indicate that substantial effort was made to keep the evictions nonviolent, and in accordance with Guatemalan law the evictions were carried out by unarmed police officers,” reads an excerpt from the statement.

Mining industry watchers are paying close attention to the case because its outcome could shed new light on the extent of a mining company’s liability when operating outside the country in which it is based.

Hudbay is joined by two other Canadian mining companies whose operations are the subject of lawsuits against them. The litigants claim they cannot get justice in their own countries and are therefore attempting to sue the companies on Canadian soil.

Nevsun Resources (TSX:NSU) is defending itself against allegations from former Eritrean mine workers that it was complicit in the Eritrean government’s use of conscripted labour and other human rights abuses during construction of the company’s Bisha mine. Nevsun argued the case should be heard in Eritrea but the BC Court of Appeal recently upheld the BC Supreme Court’s ruling that the province’s court has territorial jurisdiction, reported Canadian Press via The Financial Post. The allegations against Nevsun have not been proven in court.

Tahoe Resources (TSX:THO) made the same argument about legal jurisdiction regarding a civil claim launched by seven Guatemalans against the company. They alleged that Guatemalan security personnel used excessive force during a violent protest at Tahoe’s Escobal silver mine. In December 2015 the BC Supreme Court ruled against the Guatemalans, saying that Guatemala is the proper jurisdiction for the claim.

In June however the Supreme Court of Canada denied Tahoe Resources leave to appeal, clearing the way for a civil lawsuit against the company to move to trial in British Columbia, according to Mining Watch Canada.

A 2016 article by Business in Vancouver cited a report showing that over three-quarters of the world’s mining and exploration companies are based in Canada and operate in 100 countries.

Regarding the Hudbay case, BIV quoted Nicholas Hughes, co-chairman of McCarthy Tétrault’s mining litigation group – author of the report – saying that even though Hudbay didn’t own the mine when the alleged rapes occurred in 2007, it could still be held liable if the allegations are proven to be true:

“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.”