Canadian Supreme Court gives go ahead for consideration of the CSR issues in Nevsun Resources.

I have reported earlier on the issues which yesterday led to the decision of the Canadian Supreme Court 2020 SCC 5 Nevsun Resources Ltd. v. Araya, in which the Supreme Court was asked whether there should be a new tort of breach of international law, and whether the “act of state” doctrine prevents adjudication in the case at issue. The case does not have jurisdictional issues to consider so I shall leave the substantive public international law analysis (not my core area) to others: Dr Ekaterina Aristova’s Twitter feed referenced below should give readers plenty of pointers, as does (which came out just as I was finalising this post) Stephen Pitel’s analysis here.

The case does raise the kinds of questions upon which the US Supreme Court (Kiobel; Jesner) refused to be drawn, particularly issues of corporate culpability under public international law. Again, this is not my area of core expertise and my thoughts here are merely that.

Three Eritrean workers claim that they were indefinitely conscripted through Eritrea’s military service into a forced labour regime where they were required to work at a mine in Eritrea. They claim they were subjected to violent, cruel, inhuman and degrading treatment. The mine is owned by a Canadian company, Nevsun Resources Ltd. The Eritrean workers started proceedings in British Columbia against Nevsun and sought damages for breaches of customary international law prohibitions against forced labour, slavery, cruel, inhuman or degrading treatment, and crimes against humanity. They also sought damages for breaches of domestic torts including conversion, battery, unlawful confinement, conspiracy and negligence.

Nevsun brought a motion to strike the pleadings on the basis of the ‘act of state’ doctrine, which precludes domestic courts from assessing the sovereign acts of a foreign government. Nevsun also took the position that the claims based on customary international law should be struck because they have no reasonable prospect of success.

The act of state doctrine is “a rule of domestic law which holds the national court incompetent to adjudicate upon the lawfulness of the sovereign acts of a foreign state” (R. v. Bow Street Metropolitan Stipendiary Magistrate, Ex parte Pinochet Ugarte (No. 3), [2000] 1 A.C. 147 (H.L.), at p. 269) (Lord Millett). The doctrine exists in Australian and English common law (with plenty of discussion) but is not part of Canadian common law. At 30 Abella J for the majority explains the connections and differences with the doctrine of state immunity. [The doctrine was also at stake in [2018] EWHC 822 (Comm) Reliance v India on which I reported earlier].

The motion was dismissed by the Court of Appeal and the Supreme Court in majority has now agreed, arguing  (ia at 44-45)

The act of state doctrine and its underlying principles as developed in Canadian jurisprudence are not a bar to the Eritrean workers’ claims. The act of state doctrine has played no role in Canadian law and is not part of Canadian common law. Whereas English jurisprudence has reaffirmed and reconstructed the act of state doctrine, Canadian law has developed its own approach to addressing the twin principles underlying the doctrine: conflict of laws and judicial restraint. Both principles have developed separately in Canadian jurisprudence rather than as elements of an all‑encompassing act of state doctrine. As such, in Canada, the principles underlying the act of state doctrine have been completely subsumed within this jurisprudence. Canadian courts determine questions dealing with the enforcement of foreign laws according to ordinary private international law principles which generally call for deference, but allow for judicial discretion to decline to enforce foreign laws where such laws are contrary to public policy, including respect for public international law.

Nor has Nevsun satisfied the test for striking the pleadings dealing with customary international law. Namely it has not established that it is “plain and obvious” that the customary international law claims have no reasonable likelihood of success.

Of note is at 50 the insistence with reference to authority that ‘deference accorded by comity to foreign legal systems “ends where clear violations of international law and fundamental human rights begin” ‘, and the majority’s opinion’s references to the stale nature of the established concept that public international law exists for and between States only.

Clearly the case is not home and dry for the lower courts will now have to address the substantive issues and may still hold for Nevsun. Moreover claimant’s case is based on parts of international law traditionally considered ius cogens – of less use in other corporate social responsibility cases involving environmental issues or more ‘modern’ social rights other than the hard core ius cogens category. Hence in my initial view the precedent value of the case may not be as wide as one might hope. However the clear rejection of the act of state attempt is significant.

Of interest finally is also the judgment at 75 and at 109 citing Philippe Sands’ (KU Leuven doctor honoris causa) formidable East West Street in support.

Geert.

(Handbook of) European Private International Law, 2nd ed. 2016, Chapter 8, Heading 8.3.

 

 

Nevsun Resources Ltd. v. Gize Yebeyo Araya, et al. Some of the unanswered Kiobel and Jesner Bank issues now at the Canadian Supreme Court.

Plenty of goings-on in the Corporate Social Responsibility /mass torts category, as regular readers of the blog and /or my Twitter-feed will know. Thank you Jutta Brunnée for alerting us to Nevsun Resources v Gize Ybeyo et al, currently making its way through the Canadian Supreme Court. Thank you also Cory Wanless for pointing out the core of the issue: Nevsun are not contesting jurisdiction (its existence is secure; much like in the EU context) e.g. on forum non conveniens grounds. Rather, the Supreme Court is asked whether there should be a new tort of breach of international law, and whether the “act of state” doctrine prevents adjudication.

The first question undoubtedly will lead to a discussion of similar issues raised in Kiobel, where they were not discussed by the USSC, and in Jesner Bank, where the USCC refused to be the dealmaker on public international law. The second issue is likely to imply consideration of the very foreign poicy considerations which featured heavily in circuit considerations prior to Kiobel.

Geert.

(Handbook of) European Private International Law, 2nd ed. 2016, Chapter 8, Heading 8.3.

Unilever. Court of Appeal summarily dismisses CSR jurisdiction against mother company, confirming High Court’s approach. Lex causae for proximity again left undiscussed.

Update 25 July 2019 Leave to appeal to the Supreme Court has been refused (unlike Okpabi, where it has been allowed yesterday).

Update 21 September 2018 further litigation on similar issues is underway in Gemfield [AAA and others v Gemfields Plc and Montepuez Ruby Mining Limitada]. See overview of issues here.

The Court of Appeal in [2018] EWCA Civ 1532 has confirmed the High Court’s approach in [2017] EWHC 371 (QB) AAA et al v Unilever and Unilever Tea Kenya ltd, holding that there is no good arguable case (the civil law notion of fumus boni iuris comes closes, as Bobek AG notes in Feniks) against Unilever, which could then be used to anchor the case in the English jurisdiction.

Pro memoria: jurisdiction against Unilever is clear, following Article 4 Brussels I Recast. That Regulation’s anchor mechanism however is not engaged for Article 7(1) does not apply against non-EU based defendants. It is residual English private international law that governs this issue.

Appellants appeal in relation to the High Court’s ruling that neither Unilever nor UTKL (the Kenyan subsidiary) owed the appellants a duty of care. Unilever has put in a respondent’s notice to argue that the judge should have found that there was no duty of care owed by Unilever on the additional ground that, contrary to her view, there was no proximity between Unilever and the appellants in respect of the damage suffered by them, according to the guidance in Chandler v Cape Plc. Unilever and UTKL also sought to challenge that part of the judgment in which the judge held that, if viable claims in tort existed against Unilever (as anchor defendant) and UTKL, England is the appropriate place for trial of those claims. Unilever also cross-appealed in relation to a previous case management decision by the judge, by which she declined an application by Unilever that the claim against it should be stayed on case management grounds, until after a trial had taken place in Kenya of the appellants claims against UTKL.

The legal analysis by Sales LJ takes a mere five paragraphs (para 35 onwards). Most of the judgment is taken up by an (equally succinct) overview of risk management policies within the group.

At 35 Sales LJ notes ‘Having set out the relevant factual background in relation to the proximity issue (i.e. whether the appellants have any properly arguable case against Unilever in the light of Chandler v Cape Plc and related authorities), the legal analysis can proceed much more shortly. It is common ground that principles of English law govern this part of the case.

– the ‘common ground’ presumably being lex loci incorporationis.

This is an interesting part of the judgment for I find it by no means certain that English law should govern this part of the case. In one of my chapters for professor Vinuales’ en Dr Lees’ forthcoming OUP book on comparative environmental law, I expand on that point.

The long and the short of the argument is that Unilever did not intervene in the affairs of its subsidiary in a more intensive way than a third party would have done. Reference at 37 is made to the contrasting examples given by Sir Geoffrey Vos in Okpabi, ‘One can imagine … circumstances where the necessary proximity could be established, even absent the kind of specific facts that existed in Vedanta … Such a case might include the situation, for example, where a parent required its subsidiaries or franchisees to manufacture or fabricate a product in a particular way, and actively enforced that requirement, which turned out to be harmful to health. One might suggest a food product that injured many, but was created according to a prescriptive recipe provided by the parent. …’

and, at 38, to the raison d’être of mother /daughter structures,

“… it would be surprising if a parent company were to go to the trouble of establishing a network of overseas subsidiaries with their own management structures it if intended itself to assume responsibility for the operations of each of those subsidiaries. The corporate structure itself tends to militate against the requisite proximity …

– subject evidently to proof of the opposite in the facts at issue (a test seemingly not met here).

Geert.

(Handbook of) European Private International Law, 2nd ed. 2016, Chapter 8, Heading 8.3.

Unilever. Accepting CSR jurisdiction against mother companies not the High Court’s cup of tea.

Postscript 13 June 2017 for a similar scenario in the Italian courts (hearings pending) see here: Ikebiri v ENI.

After  Shell/Okpabi, the High Court has now for the second time in 2017 rejected jurisdiction to be established against the foreign subsidiary (here: in Kenya) using the mother company as an anchor. In [2017] EWHC 371 (QB) AAA et al v Unilever and Unilever Tea Kenya ltd, Unilever is the ultimate holding company and registered in the UK. Its subsidiary is a company registered in Kenya. It operates a tea plantation there. Plaintiffs were employed, or lived there, and were the victims of ethnic violence carried out by armed criminals on the Plantation after the Presidential election in Kenya in 2007. They claim that the risk of such violence was foreseeable by both defendants, that these owed a duty of care to protect them from the risks of such violence, and that they had breached that duty.

Laing J unusually first of (at 63 ff) all declines to reject the case on ‘case management’ grounds. Unlike many of her colleagues she is more inclined to see such stay as ignoring ‘through the back door’ Owusu‘s rejection of forum non conveniens.  I believe she is right. Instead the High Court threw out the case on the basis that the claims, prima facie (on deciding jurisdiction, the Court does not review the substantial merits of the case; a thin line to cross) had no merit. Three issues had to be decided:

i) By reference to what law should the claim be decided? This was agreed as being Kenyan law.

ii) Are the criteria in Caparo v Dickman [1990] 2 AC 605 satisfied? (A leading English law case on the test for the duty of care). The relevance of English law on this issues comes about as a result of Kenyan law following the same Caparo test: as I have noted elsewhere, it is not without discussion that lex fori should apply to this test of attributability. Laing J held that the Caparo criteria were not fulfilled. The events were not as such foreseeable (in particular: a general breakdown in law and order). Importantly, with respect to the holding company and as helpfully summarised by Herbert Smith:

  • the pleaded duty effectively required the holding to ensure that the claimants did not suffer the damage that they suffered, and not merely to take reasonable steps to ensure their safety;
  • the pleaded duty also effectively imposed liability on that holding for the criminal acts of third parties, and required it to act as a “surrogate police force to maintain law and order”; and
  • such a duty would be wider than the duty imposed on the daughter, as the actual occupier of the Plantation, under the Kenyan Occupiers’ Liability Act

At 103, Laing J discussed and dismissed plaintiff’s attempts at distinguishing Okpabi. In her view, like in Shell /Okpabi, the mother’s control is formal control exercised at a high level of abstraction, and over the content and auditing of general policies and procedures. Not  the sort of control and superior knowledge which would meet the Chandler test.

iii) Are the claims barred by limitation? This became somewhat irrelevant but the High Court ruled they were not. (This, under the common law of conflicts, was a matter of lex causae: Kenyan law, and requiring Kenyan expert input. Not English law, as the lex fori).

The case, like Okpabi, is subject to appeal however it is clear that the English courts are not willing to pick up the baton of court of prefered resort for CSR type cases against mother companies.

Geert.

(Handbook of) European Private International Law, 2nd ed. 2016, Chapter 8, Heading 8.3.