Supreme Court Of Canada Opens The Door To Novel International Human Rights Claims: The Uncertain Implications For Canadian Resource Companies

In its 5-4 decision in Nevsun Resources Ltd. v. Araya,1 the Supreme Court of Canada has given Canadian courts the green light to develop new forms of civil liability based on alleged breaches of customary international law. In doing so, it has permitted torts that are unlike those in any other jurisdiction - with the possible exception of claims brought under the United States' Alien Tort Statute.2

The Supreme Court's decision has implications for all corporations subject to the jurisdiction of Canadian courts, but especially for Canadian-based resource companies with operations in developing countries that have poor human rights records. These companies now face vague and uncertain potential liabilities in Canada connected to the development of resource projects by their foreign subsidiaries.

The Growth of International Human Rights Litigation in Canada

The Nevsun decision is the latest in a series of cases brought against Canadian mining companies by non-resident plaintiffs alleging harm caused by the actions of these companies' foreign subsidiaries. To this date, none of these cases has resulted in a decision considering the merits of the serious allegations of international human rights abuses. However, Canadian courts have shown an increasing reluctance to dismiss these claims on a preliminary motion. The Nevsun decision will only make it harder for defendants to bring successful preliminary objections.

The earliest international human rights claims against Canadian mining companies were framed as traditional common law torts, but Canadian courts still struck them out for failure to disclose a cause of action.3 One of the hurdles faced by plaintiffs in these cases was Canadian courts' reluctance to lift the corporate veil between parent corporations and their subsidiaries.4 However, plaintiffs were later able to overcome this hurdle by pleading that subsidiaries acted as agents of parent companies, thereby rendering the parent liable for any tort committed by the subsidiary. Plaintiffs also alleged that parent companies owed a duty of care to those harmed by their subsidiaries, thereby rendering them directly liable in negligence.5 Given the high standard for dismissing such claims on a preliminary basis, which assumes the truth of the allegations in the pleadings and requires it to be “plain and obvious” that no claim can succeed, courts permitted plaintiffs the opportunity to prove these common law tort claims on the evidence.

The early success of some Canadian mining companies in staying international claims on the basis of the doctrine of forum non conveniens also proved to be short lived. Canadian courts have jurisdiction over parent companies resident in Canada, but have discretion to decline to exercise their jurisdiction in favour of the plaintiffs' home jurisdiction. Where the defendant seeks a stay, the plaintiffs and most witnesses reside outside of Canada, the alleged torts were committed outside of Canada and foreign law likely applies, a Canadian court would traditionally decline jurisdiction. 6 However, in Garcia v. Tahoe Resources Inc.,7 the British Columbia Court of Appeal held that Canadian courts could find areal risk that the plaintiffs would not obtain justice in their home jurisdiction based on generalized allegations of corruption or bias against the local judiciary and thereby refuse to refer claims back to those courts. This willingness to engage in broad condemnation of a foreign judiciary contrasts with the more circumspect...