The Power of Perspectives

The Canadian Bar Association

Supriya Tandan

Wake-up call: Canada’s human rights abuses and global trade

November 18 2016 18 November 2016

Lost in the noise amidst all the discontent with trade agreements, is how little international labour laws are enforced in foreign countries, where labour is often cheap. A spate of lawsuits against Canadian mining companies operating abroad could change that.

In a recent decision handed down by the British Columbia Supreme Court, Araya v. Nevsun Resources Ltd, Justice Patrice Abrioux ruled that a lawsuit launched by Eritrean miners alleging human right abuses could proceed to trial. These are foreign claimants who are relying on customary international law to sue a Canadian company in Canada. The major issues at play include applications of forum, the act of state doctrine and the use of customary international law within British Columbia/Canada.

Justice Abrioux found that Canada is the appropriate forum for this case, that it would not violate the act of state doctrine – whereby sovereign states must respect the independence of other sovereign state. It also ruled that parent companies can be sued for the violations committed by their subsidiaries. The interference of the Eritrean government in the judicial system and the clear control of the (Canadian) parent company on its subsidiary, as demonstrated by their own documents, were deciding factors in this case.

Kevin Coon and Christopher Burkett, from Baker & McKenzie, see this case as a part of a rising trend amongst Canadian courts seeking to expand their jurisdiction in a more globalized world. It began, as they see it, with the Rana Plaza class action suit after a group of Bangladeshi garment workers sued Loblaws and Joe Fresh, as well as their subcontractors, for failing to provide adequate oversight for the health and safety auditing of their facilities. Cook and Burkett caution that multinational executives need to be more mindful of this trend, continually monitor their supply chains, check for legal risks and implement policies to limit their liabilities:


“They have demonstrated that they are not adverse to finding that Canadian companies owe a duty of care to the foreign workers who produce their products. This emerging trend in Canada is taking place against the backdrop of hardening and expanding international business and human rights standards and norms. As large civil claims for alleged overseas human rights violations find receptive courts in Canada, it is critical for Canadian multinational employers to take stock and commit to action. A failure to understand and act upon the emerging risks can have a significant negative impact on profitability and undermine a company’s social license to operate”


Noting that Canadian courts have yet to fully consider a direct duty of care, Nick Baker, a lawyer for the Araya plaintiffs, highlights the importance of the Araya ruling:

While at least two Canadian courts of first instance, on interlocutory motions, have indicated that a parent company may be directly liable for its own negligent conduct with respect to managing or failing to properly manage the actions of its subsidiaries,[iii] no Canadian court has fully considered the possibility yet.  In contrast, appellate courts in Australia and now the UK have affirmed the possibility and found that a duty can be owed from a parent-entity to an employee of a subsidiary.

In Australia and the UK, it has been found that the direct duty will exist not because the parent is a shareholder, but because the parent’s involvement in the subsidiary has gone beyond normal incidents of the exercise of shareholder rights.  That is, the parent has brought itself into a relationship with the plaintiffs.

The Economist recently suggested it is a “convenient fiction that different units of multinationals are really separate companies.” That may be right.  After all, it is not uncommon that corporate structures are created principally for tax reasons and the parent actually exercises effective control over its distant operating subsidiaries.  In such circumstances, where the evidence supports it, the application of ordinary negligence principles to impose a direct duty of care on a parent-entity should be seen as entirely appropriate.
 

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