Ontario Judgment Opens Door to Increased Risk for Canadian Mining Companies Working Abroad

Globe and Mail: Lawyers scramble after HudBay decision by Josh Kerr, August 13, 2013, Breaking the Silence blog
The landmark decision by the Ontario Supreme Court to hear a lawsuit brought by the victims and family members of alleged violence at a Guatemalan mine owned by Canadian mining company HudBay Minerals Inc. has the legal community scrambling to find out how it changes the game for Canadian companies that operate overseas. “I got about three e-mails from partners about it on Monday, they had seen it in the paper, saying basically … ‘what do we make of this?’” said David Kent, a partner with law firm McMillan LLP. Justice Carole Brown on Monday threw out HudBay’s motion to dismiss the case. The motion argued the parent company couldn’t be held liable for the actions of its subsidiary.

Lawyers for the 13 Guatemalans that brought the case are seeking $67-million in damages from HudBay, alleging security personnel working for its Guatemalan subsidiary, Compania Guatemalteca de Niquel, raped 11 woman during a forced eviction of a Mayan village in 2007. They also claim that in September, 2009, mine security guards killed a local Mayan activist who opposed the company’s Fenix nickel mine in eastern Guatemala and shot another man, leaving him paralyzed from the chest down.

HudBay has denied the allegations, which have not been proven in court. HudBay hasn’t decided if it will appeal the ruling, said Robert Harrison, one of the HudBay’s lawyers. Shin Imai, an associate professor at York University’s Osgoode Hall Law School, expects the company to appeal, although he doesn’t think it is likely to succeed. “This idea that a parent company has no responsibility – that’s what they say, ‘that there’s no recognized duty of care owed for what happens with a subsidiary,’ I mean the trains left the station on that,” said Mr. Imai. “I just can’t imagine any court saying, ‘yeah that’s right, Canadian companies aren’t responsible for what happens overseas even though they’re making profits from those operations.’”

But the opinion of the legal community is mixed.

But Chris Baldwin, a lawyer with Lawson Lundell LLP, doesn’t see this latest development as all that extraordinary. The decision rests on some basic Canadian legal principles, since it’s HudBay and not its foreign subsidiary that is being accused in Canada, said Mr. Baldwin. Having this case go to trial, most legal experts agree, could mean that Canadian mining firms will face more legal challenges from individuals and communities affected by their overseas operations.

It’s a proposition that HudBay argued would open the door to “meritless” cases against mining companies. But that’s a spurious argument, said Cory Wanless, one of the lawyers representing the Guatemalans. “Essentially the Canadian mining industry wants different rules for itself than the rules that apply for everyone else,” said Mr. Wanless. “All our clients have been asking from Day 1 is a chance to bring it to court,” he said. [Emphasis added]

Ontario Judgment Opens Door to Increased Risk for Canadian Mining Companies Working Abroad by Baker & McKenzie International, August 2013
For what may be the first time in Canada, the Ontario Superior Court has allowed civil lawsuits against a Canadian mining company to proceed to trial in Ontario, where the claims are based largely upon wrongs allegedly carried out at a foreign operation. In Choc v. Hudbay Minerals Inc., the mining company and its subsidiaries sought to have the lawsuits, which involve allegations of human rights violations at a Guatemalan mining project, dismissed before trial. In its procedural decision, the Court considered established tests regarding “piercing the corporate veil” and the “duty of care” in relation to new facts, resulting in a potentially noteworthy decision. 

Although the Court allowed the claims to proceed, they did not make any decisions regarding the merits of the case. The allegations have not been proven and the defendants have made clear their intention to strenuously defend themselves against the lawsuits. However, the fact that the claims will proceed to trial is noteworthy, as it signals to Canadian companies that they may now face an increased risk of litigation in Canada for conduct abroad. When the case is heard on its merits, the Court is expected to be asked to consider, among other issues, the extent to which Canadian companies are responsible for the conduct of their subsidiaries and agents working in foreign operations. …

“Piercing the Corporate Veil”

In one of the three cases, the plaintiffs argued that the Court should “pierce the corporate veil,” and find Hudbay responsible for the alleged actions of CGN in Guatemala. Hudbay asserted that the Court should not overlook the fact that it is a separate legal entity from its subsidiaries. The Court did not make a final decision on this issue, but noted that Hudbay could be held liable in Canada if it was proven at trial that CGN or HMI acted as Hudbay’s agent in carrying out the alleged wrongs. Because it was possible that the plaintiffs would be able to prove that the subsidiaries had acted as Hudbay’s agents, the Court allowed the claim to proceed to trial in Ontario.

A Corporate “Duty of Care”?

In the remaining two claims, the plaintiffs alleged that that Hudbay was involved in overseeing and authorizing the use of CGN’s security personnel at the mine site. The plaintiffs claimed that Hudbay had a “duty of care” to protect individuals affected by the Fenix project, and alleged that Hudbay had acted negligently in failing to prevent the alleged human rights violations. If proven at trial, this type of duty of care may lead to increased scrutiny of mining companies’ actions or omissions abroad. Without making a decision on the merits of the plaintiffs’ allegations, the Court determined that it was not impossible for the plaintiffs to prove that a duty of care existed and that Hudbay was liable, if it could be proven that Hudbay was aware of the risk of harm and was in a position to prevent it. Because it is not impossible that the claims might succeed, the Court refused to dismiss the lawsuits before trial. As a result, Canadian parent companies operating abroad may now face an increased risk of civil litigation at home. [Emphasis added]

[Refer also to:

How Alberta Will Fight Fracking Folk Hero Jessica Ernst, In famous flaming water case, regulator to argue ‘no duty of care’ to landowners or groundwater

Guatemalan mine claims against HudBay can be tried in Canada, judge says

Guatemalan Lawsuit Against Canadian Mining Giant May Set Precedent ]

This entry was posted in Other Lawsuits. Bookmark the permalink.