As the business and human rights discourse gains space in courts and transnational litigation in home countries rise to prominence, a question that arises is: what does this mean for businesses and their investors?

Nevsun Resources Ltd. (Nevsun), is a Canadian mining company that is party to a joint venture with the State of Eritrea, through its national mining company (ENAMCO), to develop a gold mine. The Bisha mine has generated $700 million in profits in its first four years of operation.  Three refugees from the State of Eritrea have filed a lawsuit against Nevsun in British Columbia, Canada. The plaintiffs claim that the company was complicit in the use of forced labour, torture, slavery, cruel, inhuman or degrading treatment, and crimes against humanity.[1] The allegations include that the company knew or ought to have known that the national construction companies, that had been hired by either the parent company or the local project company, had engaged in conduct against the workers which included beatings, being made to roll or run in hot sand, being bound with their hands and feet tied together behind their back and left in the hot sun for prolonged periods of time.[2]

In November 2017, the British Columbia Court of Appeal dismissed an appeal by the company to have the case moved to a court in Eritrea.[3] However, the case was appealed to the Supreme Court of Canada which will decide whether it should be dismissed due to the Act of State doctrine, and whether claims based upon violation of customary international law should be allowed to proceed.[4] The Doctrine allows for the termination of proceedings when before the court are another states’ actions; it has never been applied in Canada.  Customary international law claims, which are based on the general practice of states, has traditionally been applied in Canada in the public law space, and not in private law context as in the Nevsun case.

The Nevsun case has gained publicity and public scrutiny in Canada, and it has contributed to several discussions in the Canadian legal and regulatory environment. For example, in 2012, the Canadian House of Commons heard evidence from the CEO of Nevsun, Mr. Cliff Davis, on the allegation of human rights violations.[5]  In 2016, Bill C-331, The International Promotion and Protection of Human Rights Act, was tabled at the House of Commons. It is drafted to allow for Federal Courts to hear civil claims from non-citizens of Canada for violations of human, environmental or labour rights that have been committed outside of Canada.[6] In early 2018, the Canadian federal government announced the creation of an independent Canadian Ombudsperson for Responsible Enterprises that will be mandated to investigate allegations of human rights abuses linked to Canadian corporate activity abroad. In late 2018, the Autorité des marchés financiers (Quebec’s securities regulatory agency) issued a notice to guide issuers on existing disclosure requirements relating to modern slavery. Yet, despite these allegations and the increasing threat of litigation, Nevsun’s share price has not been adversely affected, as shown in Figure 1 below.

In fact, throughout the years, Nevsun remained a good prospect for investors, so much so that in late 2018, Lundin Mining (also a Canadian company) made a hostile bid for Nevsun. However, it was Zijin Mining, a Chinese company, that won the prize and purchased Nevsun with a premium of 21%.

Indeed, the reality is that companies are not being adversely affected by the business and human rights activities, at least not in Canada and not at this time. For instance, the other transnational litigation cases in Canada that involve human rights violations, HudBay Minerals and Tahoe Resources, have had the same inconsequential effect on the companies. In 2011, Solway Investment Group, a Russian group, bought HudBay.  Also, in 2018, Pan American Silver Corp., a Canadian company, bought Tahoe Resources. It appears that the mining business continues as if it is all par for the course.

The question then is whether corporations, especially in the mining sector, are changing behaviour when there appears to be little or no financial consequence to allegations of human rights violations, other than the expected legal fees? Are companies merely adding the possibility of human rights breaches to the cost of doing business? How can the business and human rights space bring to the table investors that are, by their very nature, tolerant of high risk? At least in Canada, we still have a way to go.

Dr. Daniela Chimisso dos Santos, B.A., LL.B., LL.M. S.J.D. is Principal Consultant at Invenient Solutions Consulting, and has practiced law in the oil, gas, and mining industries for 20 years. She has extensive national and international experience, including in Sub-Saharan Africa, South America, and Asia. Daniela has lectured at several law faculties, including the University of Western Ontario, University of Toronto, and Osgoode Hall Professional Development. Her research interests include business and human rights, institutional change, and the role of multinational enterprises in development.

Read more on related topics from Business and Human Rights Journal.

[1] Arya v. Nevsun Resources Ltd. 2016 BSSC 1856 at para 43.

[2] Ibid., at para 46

[3] Araya v. Nevsun Resource Ltd., 2017 BCCA 401.

[4] Nevsun Resources Ltd. v. Araya, [2018] SCCA No. 26.

[5] House of Commons, Subcommittee on International Human Rights of the Standing Committee on Foreign Affairs and International Development, 55/1^st Session, 41^st Parliament, Evidence, November 1, 2012, https://www.ourcommons.ca/DocumentViewer/en/41-1/SDIR/meeting-55/evidence

[6] Bill C-331, An Act to amend the Federal Courts Act (international promotion and protection of human rights), introduced as a private member’s bill (Peter Julian – NDP) https://www.parl.ca/DocumentViewer/en/42-1/bill/C-331/first-reading