ATS of the North? Canadian Court Allows Suit to Continue for Human Rights Abuses Committed Abroad

by Foley Hoag LLP - Corporate Social Responsibility

Map of Canada in Canadian flag colorsThe Superior Court of Justice of Ontario’s recent ruling in the matters of Choc v. Hudbay Minerals Inc., Caal Caal v. Hudbay Minerals Inc., and German Chub Choc v. Hudbay Minerals has signaled a willingness by Canadian courts to use generally accepted principles of common tort law to hold domestic companies liable for human rights violations committed overseas by subsidiaries.

The plaintiffs include over a dozen indigenous Mayan Q’eqchi from El Estor, Guatemala, who have brought suits in Ontario against Hudbay (a Toronto-based mining company) and its wholly-controlled subsidiaries for alleged atrocities committed in Guatemala by the subsidiaries’ security personnel amid a mining-related land dispute. As described by the court:

[The plaintiffs] allege that security personnel working for Hudbay’s subsidiaries, who were allegedly under the control and supervision of Hudbay, the parent company, committed human rights abuses. The allegations of abuse include a shooting, a killing and gang-rapes committed in the vicinity of the former Fenix mining project, a proposed open-pit nickel mining operation located in eastern Guatemala.

Hudbay filed several motions, including a motion to strike the claims on the ground that even if the plaintiffs’ allegations were true, it still could not be held liable because the plaintiffs failed to plead their cause of action for negligence under common law.

Notably, the court granted Amnesty International Canada intervenor status to file a submission on issues of law, particularly on international standards and norms regarding the duty of care. According to the court, Amnesty concluded that “international norms, authorities and standards […] support the view that a duty of care may exist in circumstances where a part company’s subsidiary is alleged to be involved in gross human rights abuses,” and that:

[T]ransnational corporations can owe a duty of care to those who may be harmed by the activities of subsidiaries, particularly where the business is operating in conflict-affected or high-risk areas, such as Guatemala.

In reaching this conclusion, Amnesty referred to the Voluntary Principles on Security and Human Rights, the OECD Guidelines for Multinational Enterprises, the United Nations Global Compact, the United Nations’ Protect, Respect and Remedy: Framework for Business and Human Rights, the Guiding Principles on Business and Human Rights, as well as Canadian domestic precedent recognizing “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.”

Underscoring that “pleadings should not be struck if there is a chance that the plaintiff may succeed,” the Court dismissed Hudbay’s motions, indicating a willingness to entertain causes of action arising from (1) a Canadian parent company’s alleged breach of a novel duty of care regarding a subsidiary’s foreseeable acts against overseas persons, and (2) vicarious liability due to an agency relationship between the Canadian parent company and its foreign subsidiary.

The court’s July decision did not rule on the merits of the cases, which had been consolidated for the purposes of the preliminary motions. With the motion to strike dismissed, each are expected to proceed to trial. The international corporate community — especially those operating in conflict-affected or high-risk areas — will closely follow the proceedings, waiting to see if they pave the way for Canada to become the new destination jurisdiction for extraterritorial human rights suits.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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