Multinational businesses face new litigation and compliance risks in the rapidly-developing field of transnational human rights law.
Courts in both the United Kingdom and Canada have begun to tackle complex jurisdictional and other legal arguments in proceedings against parent companies for alleged human rights impacts involving their subsidiaries overseas. Governments have recently adopted innovative ways to address human rights, including legislation and a new ombudsperson’s office in Canada.
Volterra Fietta and Bennett Jones LLP will host joint sessions on 19 June in London and in July in Toronto to discuss in detail how to identify and manage the litigation and compliance risks and navigate the landscape.
Below is a short primer on these quickly-evolving issues.
U.K. legal and regulatory developments
In recent years, the UK has relied on the jurisdiction it possesses over UK domiciled parent companies to regulate the human rights impacts of those companies and, through them, their subsidiaries overseas. For example, the Companies Act 2006 requires all UK listed companies to publish a strategic report containing information about social, community and human rights issues, including information about the companies’ policies and the effectiveness of those policies.
The Modern Slavery Act 2015 requires any company, wherever incorporated or listed, that supplies goods and services in the UK, with an annual global turnover of more than GBP 36 million, to publish an annual slavery and human trafficking statement on its website. The statement should outline the steps taken by the company to ensure that slavery and human trafficking is not taking place in any of its supply chains and in any part of its own business. Beyond the reporting requirements, the Modern Slavery Act also created an Independent Anti-Slavery Commissioner and established slavery and human trafficking as criminal offences.
On the judicial front, claimants rely on the jurisdiction English courts possess over UK-domiciled parent companies to bring claims involving the human rights impacts of those companies and their overseas subsidiaries. Vedanta, Unilever and Shell, for example, are currently facing claims before English courts regarding the alleged impacts of their subsidiaries’ operations overseas. The jurisdiction to entertain these claims has been challenged in all three cases. The Court of Appeal affirmed jurisdiction in Vedanta, but denied it in Shell. Both cases are now before the Supreme Court. Unilever is pending before the Court of Appeal.
Claims against English parent companies and their foreign subsidiaries include claims for actions taken by third parties, particularly police forces. A case against African Minerals concerns allegations that the defendants had been complicit in alleged police abuses in Sierra Leone during demonstrations by local villagers against an iron mine; two weeks of the six-week High Court trial will be held in Sierra Leone. A new case against Gemfields Limited, a London-based mining company that owns Fabergé, alleges that artisanal miners and members of communities surrounding Gemfields’ Montepuez Ruby Mine in North Mozambique have suffered serious human rights abuses at the hands of security forces associated with the mine.
Canadian legal and regulatory developments
Canada has introduced administrative processes to promote human rights in international business. In January 2018, the government announced the Canadian Ombudsperson for Responsible Enterprise (CORE), which will have a mandate to investigate complaints brought against Canadian companies for alleged human rights abuses committed abroad. The position is to take effect in May 2018. CORE’s role will be to receive complaints, gather facts and then make and monitor recommendations based on its findings. It may recommend certain sanctions against companies violating human rights, which may include the Canadian government withholding trade commissioner services or access to government export credit.
As a non-judicial mechanism, CORE is expected to attract those who lack the means to engage in lengthy and costly court battles but still seek to influence or alter companies’ conduct.
In addition to CORE, the government will establish an advisory body on responsible business conduct, with a mandate to advise on further legal and policy development relating to business and human rights. This could lead to new laws or administrative processes to further regulate and monitor the conduct of Canadian businesses abroad.
Three Canadian mining companies are defending lawsuits by foreign plaintiffs in Canadian courts based on alleged human rights abuses at mine sites outside of Canada. Two claims, one against Hudbay Minerals and another against Tahoe Resources, arise from separate activities in Guatemala. The plaintiffs’ claims in both cases are moving towards trial after defeating motions by the defendant company to dismiss or stay the claims on legal or jurisdictional grounds. A third claim, against Nevsun Resources, is based on allegations about a mine in Eritrea. In late 2017, the British Columbia Court of Appeal dismissed similar motions by the company. Nevsun has requested leave to appeal to the Supreme Court of Canada.
A group of survivors and relatives of victims of the 2011 Rana Plaza disaster in Bangladesh brought another claim, a proposed class action. The action was against Canadian retailer Loblaws Inc., which sells a brand of clothing called Joe Fresh, which indirectly sourced garments from factories in Rana Plaza. In 2017, the defendants succeeded in obtaining an order dismissing that claim as disclosing no reasonable cause of action and without certifying the claim as a class proceeding. A claim against the company Loblaws hired to audit the Rana Plaza factories was also dismissed. The plaintiffs have appealed to the Court of Appeal for Ontario.
