Overseas working conditions: Is your client on the hook?

Editor’s note: The Supreme Court of Canada released its Nevsun ruling after this issue went to print.

If your corporate clients do business overseas, the liability they may face if workers are injured or subject to abuse outside of Canada is about to come under scrutiny by Canada’s top court. The Supreme Court of Canada is expected to clarify the risk exposure when it releases its ruling in Gize Yebeyo Araya, et al. v. Nevsun Resources Ltd.

It is not unusual for clients in mining and manufacturing to be named in Canada in class-action suits by non-Canadian workers. In January 2019, the Supreme Court heard an appeal from Vancouver-based Nevsun, which has a stake in a zinc-copper mine in the East African nation of Eritrea. The appeal is not on the merits of the case, but on whether a lawsuit could actually be heard by a Canadian court.

At the time of writing, the top court had yet to release a decision. Once a ruling is made, that might provide some guidance on the liability risk to Canadian companies with supply chains overseas in areas with sub-standard or non-existent protection for workers, Chris Burkett, Toronto-based partner with Baker McKenzie, said in an interview with Canadian Underwriter.

Related – New Supreme Court of Canada guidance on liability for Canadian clients operating overseas

In another lawsuit, plaintiffs from Guatemala alleged that security personnel working for Ontario’s Hudbay Minerals Inc. subsidiaries committed human rights abuses near a proposed open-pit nickel mining operation.

Allegations against Hudbay have not been proven. In Choc v. Hudbay Minerals Inc., released in 2013, the Ontario Superior Court of Justice declined to throw the lawsuit out of court. Hudbay argued it does not have a duty of care to ensure that a subsidiary’s commercial activities in a foreign country are conducted in a manner designed to protect those people with whom the subsidiary interacts.

A different case, Arati Rani Das, et al. v. George Weston Limited, was tossed out of court. Plaintiffs from Bangladesh tried to sue Loblaw Companies Ltd. in Ontario. Its brands include Joe Fresh, whose clothing was manufactured at the Rana Plaza, an eight-storey factory complex. It collapsed in 2013, killing thousands.

Plaintiffs alleged that Loblaw was vicariously liable for negligence on the part of suppliers and sub-suppliers. But the Ontario Superior Court of Justice dismissed the lawsuit, ruling that a clothing manufacturer operating out of Rana Plaza was neither a subsidiary of the company nor an independent contractor of the sort that could trigger vicarious liability. The ruling was upheld on appeal. The SupremeCourt of Canada announced this past summer it denied the plaintiffs’ leave to appeal.

“There is a real question mark in Canadian law about whether liability can extend to the end-user in the supply chain,” Burkett said, referring to companies who buy goods in developing countries where labour laws are lax, non-existent, or not enforced.

Others say the liability risk is real. “Whether or not a company is ultimately found to be at fault, lawsuits like this are legally complex and require years of litigation,” according to regulatory lawyer Yusra Khan.

Khan has advocated for the Canadian government to adopt a law similar to the California Transparency in Supply Chains Act. In Canada, draft legislation is in the works but has yet to be tabled in either the Senate or House of Commons.