On January 23, 2019, the Supreme Court of Canada heard oral arguments on the appeal in Nevsun Resourcs Ltd. v Gize Yebeyo Araya et al. (“Nevsun”). The two issues before the Supreme Court in this matter are whether the “act of state” doctrine (explained below) precludes a Canadian court from judging the legality of the sovereign acts of a foreign state that are carried out within that foreign state’s own territory, and whether Canadian common law should recognise a new “cause of action for damages based on alleged breaches of norms of customary international law.”1 The Court’s decision has the potential to greatly increase the scope for claims against and risks for companies operating internationally. The following provides a review of the litigation, the two issues before the Supreme Court of Canada and the potential impacts that can be expected when the Court releases its decision.
As a brief overview, the plaintiffs filed a Notice of Civil Claim (“NOCC”) in November 2014 in the Supreme Court of British Columbia against Nevsun alleging, amongst other things, that “Nevsun was complicit in the use of forced labour, slavery, torture, inhuman or degrading treatment, and crimes against humanity” in the construction and operation of the Bisha Mine located near Asmara, Eritrea.2 Nevsun, a public British Columbia corporation, holds a 60% interest in the Bisha Mine Share Company (“BMSC”) (the other 40% of which is held by Eritrea’s national mining company).3 BMSC owns and operates the Bisha Mine.4 Construction of the Bisha Mine began in 2008 and commercial production of gold began in 2011, with production of copper and zinc following thereafter.5
BMSC engaged an Engineering, Procurement and Construction Manager for construction of the Bisha Mine, and the EPCM then further sub-contracted with other entities. The plaintiffs allege that these other, sub-contracted, entities utilized Eritrean nationals from that country’s National Service Program (“NSP”), “a government program of military and national service administered by the Eritrean Ministry of Defence,”6 to build the infrastructure at the Bisha Mine.7 The plaintiffs allege that they were conscripted under the NSP and then “forced to work at the mine in inhuman conditions and under the constant threat of physical punishment, torture and imprisonment, even after they had served their periods of conscription in the military.”8
The NOCC outlines several causes of action that can be broken into two categories. First, private law torts, including battery and unlawful confinement through corporations controlled by Nevsun and negligence in failing to adhere to any standards of corporate social responsibility. Second, the plaintiffs allege that Nevsun has breached principles of international law for which they seek damages at customary international law (“CIL”) as incorporated into the law of Canada.9
In 2015, Nevsun brought three substantive applications to stay or strike all or part of the claims. Nevsun was unsuccessful in all three applications at the Supreme Court of British Columbia and before the British Columbia Court of Appeal. Issues from two of these applications are now before the Supreme Court of Canada.
The first involves the “Act of State Application”, under which Nevsun sought an order staying or striking the claim as a result of the State Immunity Act (“SIA”).10 Simply put, Nevsun’s argument is that for the claims to be successful a Canadian court must find that the State of Eritrea acted unlawfully under international and British Columbia law. This is because, in Nevsun’s argument, all or part of the alleged wrongs of which Nevsun is accused are secondary or derivative of the alleged liability of the State of Eritrea, a direct examination of which is prohibited by the SIA and the act of state doctrine. The chambers judge held that the act of state doctrine was not engaged in this case, but Nevsun could revisit the matter in its defence at trial.11 The Court of Appeal held that the act of state doctrine did not apply and Nevsun could not rely on the doctrine further.12 If the act of state doctrine precludes a Canadian court from judging the legality of the sovereign acts of a foreign state within that state’s own territory then Nevsun’s Act of State Application could, if resolved in its favour, be sufficient to settle the lawsuit.13 Regardless of the outcome, this will result in a rare decision from the Supreme Court of Canada on the applicability of, and exceptions to, the act of state doctrine.
The second ground of the appeal, which has the potential to create new causes of action for claims in Canada, is the so-called “CIL Application.” In this application, Nevsun sought to strike those parts of the claim based in customary international law.14 Both the chambers judge and the Court of Appeal were unwilling to strike these claims because they could not say that the claims met the threshold required to strike them, namely that they were “bound to fail.”15 The claims in the NOCC are unlike any claim previously determined in Canada; earlier jurisprudence alleging violations of human rights or torture abroad that sought civil remedies in Canadian courts for such violations involved claims brought by individuals against states. The NOCC, in contrast, seeks remedies only against Nevsun. This ultimately requires an examination of whether, to the extent CIL principles have been adopted into domestic Canadian law, they can constitute grounds for civil remedies and, in particular, remedies against a private corporation.
The ramifications from the creation of new torts would be extensive. As stated by the Mining Association of Canada in its intervener submissions, allowing this type of claim between private parties “based on a system of laws developed on the basis of inter-state relationships would amount to an unprecedented expansion of the common law, and would create indeterminate liability and materially (and negatively) affect the business environment within Canada.”16 They further caution of the risk of reduced investment in Canada, and reduced Canadian investment abroad, if these new causes of action are realized.
It is important to keep in mind the genesis for this appeal to the Supreme Court of Canada: Nevsun’s applications to strike all or part of the NOCC on various grounds. While the Supreme Court could determine that Canadian common law now recognises “a cause of action for damages based on alleged breaches of norms of customary international law,” this does not mean that the Court will, in its forthcoming decision on this matter, find that such has indeed occurred. That could remain outstanding, to be argued and adjudged by the courts at a later date (assuming the determination on the applicability of the act of state doctrine does not fully end this litigation). Clarity on this possibility, and on the application of the act of state doctrine, will assist companies operating internationally in assessing potential risk. As noted by Madam Justice Newberry of the British Columbia Court of Appeal, “it is to be hoped that guidance can be provided as to ‘where we are’ in the evolution of transnational law [which regulates actions transcending state borders] that legal and other scholars have observed in recent years.”17 Specifically, whether norms recognized by customary international law can ground new private law causes of action in Canada before Canadian courts.
1 Factum of the Appellant Nevsun Resources Ltd. at para 21.
2 Araya v Nevsun Resources Ltd., 2017 BCCA 401 at para 4 [Appeal].
3 Ibid at para 2.
4 Araya v Nevsun Resources Ltd., 2016 BCSC 1856 at para 33.
5 Ibid at paras 33-36.
6 Ibid at para 26.
7 Ibid at para 37
8 Appeal at para 3.
9 Ibid at paras 6-7.
10 RSC 1985, c S-18.
11 Appeal at paras 67-72.
12 Ibid at paras 165-169.
13 Araya v Nevsun Resources Ltd,2019 BCSC 260 at para 9.
14 Respondents’ Factum at para 21.
15 Appeal at para 197.
16 Factum of the Intervener, Mining Association of Canada at para 4(c).
17 Appeal at para 177.