Commentary: #Nevsun and the Canadian Mining Experience
This commentary was originally published on the Ontario Bar Association's Aboriginal Law Section under Recent Articles here.
In January 2019, the Supreme Court of Canada heard an appeal into whether a Canadian-based mining company, Nevsun Resources Ltd. (“NRL”), is liable for the action of Bisha Mining Share Company (“BMSC”), its subsidiary (see Araya v Nevsun Resources Ltd., 2017 BCCA 401 [Nevsun]). The plaintiffs, now refugees, allege that NRL utilized state and military forces to engage in torture and slave labour. The plaintiffs seek to have the action heard in British Columbia, the provincial jurisdiction for NRL. NRL argued in the lower courts that the country in which BMSC operates should hear the trial, relying on, among other things, principles of comity and highlighting the logistics of conducting a trial in Canada, when the majority of the witnesses are not in Canada. BMSC operates in the state of Eritrea, a country in Africa.
I have previously written on a similar case, Yaiguaje v Chevron Corporation, 2018 ONCA 472 [Chevron]. The issue in Chevron was whether to pierce the corporate veil and enforce an arguably fraudulently obtained judgment against a seventh-level subsidiary of Chevron Corporation. That subsidiary operated in Canada. The SCC denied leave to appeal that decision on April 4, 2019. In the Chevron article, I agreed with the majority holding because the dissent relied on an Ontario decision that focused on a Toronto-centric business with no global operations -- the facts in Nevsun, however, were and are easily distinguishable.
In the Nevsun case, I agree with the holdings of the lower courts. While some may argue that the facts in Nevsun are similar to the Chevron, the Nevsun case presents a unique opportunity for Canadian courts to ensure Canadian corporations are living up to their corporate social responsibilities.
The issues in Nevsun include:
whether certain secondary evidence may be admitted in its entirety and the weighing of certain expert evidence (the “Evidence Application”);
whether the State of Eritrea is the more appropriate forum for the proceeding (the “Forum Application”);
whether British Columbia’s courts lacked subject matter competence in respect of the claim such that the claim fails to disclose a reasonable cause of action (the “Act of State Application”);whether prohibitions recognized under customary international law (“CIL”) impose obligations on corporations (the “CIL Applications”); and
whether the plaintiffs satisfy the criteria for a form of common law class action set out by the SCC (the “Representative Action Application”).
The trial judge allowed certain affidavit and secondary evidence for context, and admitted the opinion portion of the expert evidence, which included analysis by lawyers and former judges. The judge dismissed the Forum Application, the Act of State Application, and the CIL Application, and granted the Representative Action Application. The Court of Appeal agreed and so, do I.
I agree with the Nevsun decision because Nevsun signals to Canadian corporations with global operations that the ability to engage in corporate conduct freely at a global scale does not include the free right to ignore human rights abuses.
NRL, in its corporate filings, acknowledges that BMSC, the subsidiary in question, is an Eritrean entity of which NRL is a majority shareholder (60% to be exact) with the outstanding shares held by a state-owned mining company, Eritrean National Mining Corporation. There is a mining agreement between BMSC and the Government of the State of Eritrea covering for future development and operations of the Bisha property, NRL’s principal mineral property in Eritrea, where the alleged human rights abuses occurred or are occurring.
According to its corporate filings, NRL originally acquired the Bisha property in 1998 with a prospecting permit covering an area of 100 square kilometres. In 2003, an NRL geologist was killed while carrying out mapping activities near the property. The government of Eritrea considered the murder an act of terrorism and increased security around NRL’s operations. In 2005, 2006 and 2007, NRL raised approximately $100 million to advance the Bisha project and another mining project through a series of equity issues. From 2003 until approximately 2011, there was almost no mention of the risk of forced labour or the use of the State of Eritrea’s national service program, a form of state-forced labour. NRL does, however, refer to employing “national staff” in its early 2000 corporate filings but it is not clear whether “national staff” are also staff under the national service program.
By 2012, NRL started to explicitly refer to forced labour. In its 2013 filings, conscripted labour was noted to be prohibited at Bisha. In 2014, 2015 and 2016, NRL reiterated conscripted labour as prohibited at Bisha, including seeking assurances that all of its workers were discharged from the national service program. By 2017 and 2018, NRL explicitly outlined in its corporate filings its prohibited use of forced labour through the national service program.
These facts suggest that not only was NRL aware of the national service program at some point in time from 2011 until 2017, but that it seemingly did very little to prevent the use of forced labour through the national service program. The national service program was only considered a material risk to its principal mineral property sometime around 2012 and 2013, and it only explicitly prohibited the use of forced labour in 2017 and 2018. The facts alleged suggest NRL engaged in questionable state apparatuses to protect its operations.
With the Bisha property being NRL’s principal mining property, it is hard to ignore how NRL, as the parent company of the subsidiary that owns and operates the mine, did not know the alleged human rights abuses were taking place. This is especially troublesome when the facts of the case are overlaid with NRL’s own corporate filings.
While I respect a company’s ability to engage in corporate conduct freely, it becomes a troublesome state of affairs when a corporation does little to address human rights abuses. Individuals like the plaintiffs in Nevsun often put themselves in harm’s way by bringing forward such a claim, particularly so if (in this case) the allegations regarding the role of the Eritrean government have a grounding in reality. A Canadian corporation operating in other jurisdictions should not be able to shield itself from Canadian laws and (albeit developing) norms of corporate citizenship. Individuals who suffer through the actions of Canadian corporations outside of Canada should be able to look to Canadian courts to adjudicate disputes with Canadian corporate citizens especially when it is likely that other jurisdictions are likely to exacerbate threats to already vulnerable plaintiffs. In the end, a Canadian corporation that enjoys the benefits of operating at a global scale across jurisdictions, with a documented history of human rights abuses, as in alleged in Nevsun, must be able to live up to the Canadian standard of operating in or outside of Canada. Unless of course, we are prepared to accept the exploitation of non-Canadians overseas as the Canadian standard.