The phoenix shall fly

On February 28, 2020 the Supreme Court of Canada released its decision in Nevsun Resources Ltd. v. Araya, 2020 SCC 5. By a narrow five-four majority, the SCC held Canadian companies may be sued for breaches of Customary International Law (“CIL”), abroad. Writing for the majority, Abella J. began her decision as follows:

[1] This appeal involves the application of modern international human rights law, the phoenix that rose from the ashes of World War II and declared global war on human rights abuses. Its mandate was to prevent breaches of internationally accepted norms. Those norms were not meant to be theoretical aspirations or legal luxuries, but moral imperatives and legal necessities. Conduct that undermined the norms was to be identified and addressed.

The decision represents a significant leap for corporate social responsibility and serves as a caution for Canadian corporations operating abroad. The recognition that there may be a private law duty to abide by peremptory norms of customary international law means Canadian multinationals can no longer turn a blind eye to human right violations occurring in their hosting states.

This potential new liability for corporations will have a global ripple effect as Canadian multinationals either avoid conducting business in and/or with states with gross human rights track records, or, alternatively, meaningfully enhance due diligence throughout such ventures. Companies operating abroad must now exercise extreme caution in their training programs, reviews, audits, and the implementation of any other measures necessary to ensure compliance with peremptory norms.

Questions still remain on where the CIL liability threshold lies and how damages are to be determined. Whereas the majority provided a method to determine when international practice has become a norm of CIL, how to test whether certain actions have violated such norms remains open. The SCC has left developing such a framework in the hands of the trial courts, creating deep uncertainty as such cases are inevitably brought forward. Similarly, the SCC did not provide a limit or range for damages, beyond stipulating it may be greater than normal tort damages. Leaving such a broad statement with the trial courts means unchartered territory and unbounded risk for operators and insurers, at least for the foreseeable future until case law develops.

Overview

Eritrea practices forced conscription into its National Service Program, which requires military training and service of all Eritreans over the age of 18. The term of service is indefinite. The plaintiffs are refugees and former Eritrean nationals who allege that as part of the National Service Program, they were used as labour to construct a gold mine in Eritrea, known as the Bisha mine (“Bisha”).

Nevsun Resources Ltd., a Canadian mining company headquarter in British Columbia (“Nevsun”), owns a controlling interest of Bisha and worked with local sub contractors: government owned construction firms known to use forced labour. The plaintiffs allege they were forced to work at Bisha under violent, cruel, inhuman and degrading conditions from 2008 to 2012.

In November 2014, the plaintiffs brought a claim against Nevsun in B.C., alleging the company was complicit in the use of forced labour and other illegal conduct committed by the Eritrean government and/or its entities at Bisha.

The case worked its way up to the SCC, constituting the first time ever an appellate court in Canada has permitted a mass tort claim for modern slavery. The SCC allowed Nevsun’s appeal which was heard on January 23, 2019.  

Issues on Appeal

1. Does the act of state doctrine, which precludes domestic courts from impeaching the conduct of another sovereign state, form part of Canadian common law?
2. Do violations of CIL prohibitions against forced labour; slavery; cruel, inhuman or degrading treatment; and crimes against humanity form the basis of a claim for damages under Canadian law?

Held

1. No, the act of state doctrine is not part of Canadian common law.
2. CIL norms are part of Canadian law and it is not “plain and obvious” that CIL claims have no reasonable likelihood of success. It is also not “plain and obvious” that corporations are excluded from direct liability for breaches of CIL.

Reasons

No Act of State Doctrine in Canada

Writing for a seven-to-nine majority, Abella J. found the act of state doctrine is not part of Canadian common law, and neither it nor its underlying principles as developed in Canadian jurisprudence are a bar to the Eritrean workers’ claims.¹ Unlike American and English law, the Canadian jurisprudence on conflict of laws and judicial restraint covers the same principles act of state otherwise considers.

Customary International Law: A New Cause of Action  

The SCC was more divided in determining the issue concerning CIL, with only a five-judge majority finding in favour of the plaintiffs.

The dissenting and majority decisions both agreed that the doctrine of adoption automatically incorporates CIL into Canada’s domestic law—absent express legislation to the contrary. The dissenting and the majority opinions also agreed that within CIL, there exists a subset of norms known as jus cogens, or peremptory norms (such as the prohibition against slavery), from which no derogation is permitted. The test to become of norm of CIL requires an international practice to be of “general but necessarily universal practice” and the “belief that such practice amount[s] to a legal obligation”.²

Where the majority and dissent diverged in their findings was with respect to the question of whether it was “plain and obvious” that the claims for breach of CIL would not succeed at trial, and as a result, the claims should be dismissed. The majority answered the question in the negative and in doing so set new precedent by finding a breach of CIL may be a cause of action in Canadian common law.

The majority also diverged from the dissent with respect to the question of whether private actors, such as individuals or corporations, enjoyed exclusion under CIL from direct liability for violations of peremptory norms. The majority found, again, that it is not “plain and obvious” that corporations enjoy a blanket exclusion under CIL from direct liability for violations of “obligatory, definable, and universal norms of international law, or indirect liability for their involvement in […] complicity offenses.”³ The expansion of the limited application of CIL from state actors to now include application to private actors, such as corporations, is a significant development in Canadian law.

On Damages

The majority and dissent also diverged on the issue of remedies. Citing Kazemi Estate v. Islamic Republic of Iran, 2014 SCC 62, wherein the SCC addressed the right to a remedy in the context of allegations of human rights violations, Abella J. noted the SCC had concluded the State Immunity Act was the kind of express legislation⁴ that prevented a remedy against Iran for the breach of the jus cogens prohibition against torture, which it agreed was part of domestic Canadian law. Abella J. further noted that while in Kazemi the SCC held that the general right to a remedy was overridden by Parliament’s enactment of the State Immunity Act; said act only protects “foreign states” from claims, not individuals or corporations.⁵

The majority concluded there is no law or other procedural bar precluding the plaintiffs’ claims in the case at hand. As a result, the majority held it is not “plain and obvious” that Canadian courts cannot develop a civil remedy in domestic law for corporate violations of CIL norms.⁶

The majority rejected Nevsun’s submission that the plaintiffs’ allegations can be adequately addressed by the recognized torts of conversion, battery, “unlawful confinement”, conspiracy and negligence, all of which the Eritrean workers also pleaded. Instead, Abella J. emphasized the difference between existing domestic torts and slavery, and noted the refusal to acknowledge the difference between the two “may undermine the court’s ability to adequately address the heinous nature of the harm caused by this conduct.”⁷

Her Honour went further and found that even an award of punitive damages in the context of a civil wrong may be inadequate when it comes to the violation of peremptory norms. Such violation results in profound harm “distinct in nature from those of existing torts that, as the workers say, “[i]n the same way that torture is something more than battery, slavery is more than an amalgam of unlawful confinement, assault and unjust enrichment”. Accepting this premise, which seems to be difficult to refute conceptually, reliance on existing domestic torts may not “do justice to the specific principles that already are, or should be, in place with respect to the human rights norm”.⁸

Abella J. did not rule on the novel issue of how the violation of peremptory norms should be remedied; that was left in the hands of the trial judge. However, Her Honour signaled a strong preference for a direct approach over one requiring a recognition of the four new nominate torts (forced labour; slavery; cruel, inhuman or degrading treatment; and crimes against humanity) proposed by the plaintiffs: “Since these claims are based on norms that already form part of our common law, it is not “plain and obvious” to me that our domestic common law cannot recognize a direct remedy for their breach”.⁹

Given the public nature and importance of the violated rights, Abella J. opined that remedying the violations of such rights may require a stronger response than typical tort claims, which emphasizes the gravity of their breach, the impact on the domestic and global rights objectives, and the need to deter subsequent breaches.¹⁰ This was perhaps one of the greater points of contention with the dissenting Justices who were of the view that the criminal prohibition against breaches of preemptory norms did not impose a corresponding obligation on Canada to implement a civil remedy for such breaches.¹¹

Dissent of Brown and Rowe JJ.

Brown and Rowe JJ. dissented in part with respect to the CIL issue, while agreeing with the majority on its finding against the applicability of the act of state doctrine in Canada. On the CIL issue, Brown and Rowe JJ.’s main points of dissent are summarized below:

• Courts cannot convert prohibitive rules of CIL into liability rules: doing so would run in the face of the doctrine of incrementalism and the principle of legislative supremacy.¹²
• The right to a remedy does not necessarily mean a right to a particular kind of remedy. A difference in the degree of harm is not sufficient to ground a new tort.¹³ Punitive damages are sufficient.¹⁴
• It is for Parliament, and not the courts, to change the doctrine of adoption to provide courts the power to convert prohibitive rules of international law into free‑standing torts.¹⁵
• Violations of the peremptory norms may be remedied through the criminal law, for which there is not a private law cause of action.¹⁶
• There are no known precedents for corporation being held civilly liable for breaches of CIL, anywhere in the world.¹⁷
• Section 52(1) of the Constitution Act, 1982 finds Canadian law to be the supreme law in Canadian courts, yet the majority has shown a preference for international law.¹⁸
• With respect to the plaintiffs’ proposed new nominate torts of forced labour; slavery; cruel, inhuman or degrading treatment; and crimes against humanity:
  • both proposed torts of cruel, inhuman or degrading treatment and crimes against humanity, would fail the test for recognition of a new tort;¹⁹ and
  • both proposed torts of slavery and forced labor, while capable of passing the test for recognition of a new tort,²⁰ are nevertheless doomed to fail given the foreign context of this case.²¹

Brown and Rowe JJ. concluded their partial dissent by stating that the message from the majority’s decision is: “the more nebulous the pleadings and legal theory used to protect them, the more likely they are to survive a motion to strike” which would result in a clogging of superior courtrooms with actions predestined to fail.²²

Dissent of Moldaver and Côté JJ.

Moldaver and Côté JJ. concurred with the dissent of Brown and Rowe JJ. on the issue of CIL. They also offered a further dissent from the majority on the act of state doctrine, finding that it is in fact part of Canadian law.²³ While a court may consider the legality of acts of a foreign state under municipal or international law if the issue arises incidentally,²⁴ Moldaver and Côté JJ. held in the case at hand the issue of the legality of Eritrea’s acts under international law is central to the respondents’ claims.²⁵

Siskinds LLP, together with Camp Fiorante Matthews Mogerman LLP, represent the plaintiffs.

This article was written with the assistance of our articling student Gigi Pao.

¹ Nevsun Resources Ltd. v. Araya, 2020 SCC 5 at para 59.

² Ibid., at para 77.

³ Ibid., at para 113.

⁴ It is established law that CIL, including peremptory norms, are part of Canadian common law, absent express legislation to the contrary.

⁵ Ibid., at para 121.

⁶ Ibid.

⁷ Ibid.

⁸ Ibid., at para 126.

⁹ Ibid., at paras 127-128.

¹⁰ Ibid., at para 129.

¹¹ Ibid., at para 204.

¹² Ibid., at para 148.

¹³ Ibid., at paras 214-216.

¹⁴ Ibid., at para 221.

¹⁵ Ibid., at para 231.

¹⁶ Ibid., at para 209.

¹⁷ Ibid., at para 188.

¹⁸ Ibid., at paras 150-153.

¹⁹ Ibid., at para 244-246.

²⁰ Ibid., at para 247.

²¹ Ibid., at para 250.

²² Ibid., at para 261.

²³ Ibid., at para 286.

²⁴ Ibid., at para 306.

²⁵ Ibid., at para 310.