Recognition of Corporate Human Rights Obligations in Nevsun Resources: An Attempt to Close the Governance Gap

Introduction

In recent times, the state-centric conception of international law has been increasingly questioned by scholars emphasizing on the conceptual possibility as well as practical necessity of imposing direct international human rights obligations on corporations. Keeping in line with this building momentum, the Canadian Supreme Court (the “Court”) last year in Nevsun Resources Ltd. v Araya permitted a claim alleging violations of international human rights law against a Canadian mining company operating abroad. The Court, by a 5:4 majority, concluded that a common law claim on the basis that the corporation had violated various customary international law obligations was sufficiently plausible to survive a motion to strike.

The present article is an examination of the issue presented before the Court in Nevsun Resources. It notes that the Court’s verdict breaks new ground by recognising that customary international law obligations may apply to corporations and may give rise to a civil cause of action under Canadian law. In holding so, this decision marks a significant step in the quest to achieve a global consensus on corporate human rights responsibilities.

Nevsun Resources: Case Background and Holding

Nevsun Resources Ltd. (the “Appellant”) is a Canadian company which owned the majority stake in the Bisha Mining Share Company. This Eritrean company owned and operated the Bisha mine in Eritrea. The Plaintiffs in this case were three Eritrean workers (the “Respondents”), who were indefinitely conscripted through Eritrea’s mandatory “National Service Program” to work at the Bisha mine. They claimed that they were forced to work at subsistence wages under harsh and dangerous conditions, and were subjected to inhuman punishments such as “being ordered to roll in the hot sand while being beaten with sticks until losing consciousness.” After escaping Eritrea, the Respondents initiated class action proceedings against the Appellant in the Canadian province of British Columbia.

The Respondents sought damages by pleading domestic torts including negligence, unlawful confinement and battery. However, they did not confine themselves to these common law remedies, and also argued alleged breaches of customary international law prohibitions against forced labour, slavery, cruel, inhuman and degrading treatment, and crimes against humanity.

At the preliminary stage, the Appellant sought the striking of pleadings based on customary international law as being unnecessary and disclosing no reasonable cause of action. This application reached the Supreme Court after successive appeals.

Abella J., speaking for the majority, started by addressing whether a civil action is possible on the basis of a customary international law violation. The majority answered this question in the affirmative by relying on the doctrine of adoption, which automatically incorporates customary international law into the sphere of domestic law.

The second issue before the Court concerned the possibility of binding corporations to norms of customary international law. In this regard, the Court first held that the norms prohibiting crimes against humanity, slavery, forced labour, and cruel, inhuman and degrading treatment are of such fundamental importance that they have attained the status of jus cogens under international law. The majority then acknowledged that while states were classically considered as the main actors in international law, the position has now evolved and “there is no longer any tenable basis for restricting the application of customary international law to relations between states”. Finally, the Court concluded:

…it is not ‘plain and obvious’ that corporations today enjoy a blanket exclusion under customary international law from direct liability for violations of ‘obligatory, definable and universal norms of international law,’ or indirect liability for their involvement in…’complicity offences’.

Implications on Corporate Liability for Human Rights Violations

The Nevsun Resources represents a significant leap in judicial thinking towards international human rights obligations of corporations operating worldwide. This section analyses the potential impact of this decision within two spheres- human rights litigation before domestic courts and investment arbitrations.

(i) Transnational Human Rights Litigation in Domestic Courts

The Court’s holding signals that corporations may no longer be immune from domestic actions for enforcing human rights standards across the globe. Until now, customary international law was only incidentally considered by Canadian courts while adjudicating disputes. The holding may also influence and help in the development of civil actionability regimes for international law violations in other common law jurisdictions such as UK, Australia and India.

Further, the Court’s holding does not confine itself to Canadian law- it crucially ruled over the issue of corporate responsibility under international law. Global businesses have increasingly come under the scrutiny of courts for transnational human rights violations. In 2019, the UK Supreme Court allowed claims brought by Zambian villagers against UK-based Vedanta and its Zambian subsidiary to proceed to trial in the English courts. Around the same time, a Dutch Court held that it had jurisdiction to hear a suit brought against Shell by four widows of activists executed by the Nigerian government. It was alleged that the British-Dutch company and its Nigerian subsidiary were complicit in the Nigerian government’s actions. Although these cases are important precedents for the global human rights movement, the claims involved were limited to the breach of domestic laws of the states where the alleged violations were committed. This is unlike Nevsun Resources where claims on the basis of customary international law violations have also been raised. Thus, this decision could open up new avenues for transnational human rights litigation.

(ii) Host States’ Counterclaims before Investment Tribunals

Investment tribunals have often been faced with treaty claims which involve issues concerning human rights implications of corporate activities. In this context, the decision in Urbaser v. Argentina was widely noted for being the first decision by an investment tribunal to contemplate the possibility of holding investors liable for breaches of international human rights norms. The Urbaser tribunal concluded that companies operating internationally are subjects of international law and have international human rights obligations. The tribunal subsequently noted the distinction between positive and negative obligations. It observed that while states have positive obligations to enforce the human right to water, an investor has no such obligations under international law. Investors, according to the tribunal, only have negative obligations to abstain from activities violating human rights. 

The Court in Nevsun Resources does not tread along the same path as the Urbaser tribunal. It simply recognises that corporations are bound by customary international law without drawing the distinction between positive and negative obligations. This leaves open a greater scope of enforcing obligations on corporations through host states’ counterclaims. For instance, under the Urbaser test, the obligations to ensure safe and healthy working conditions for workers along with rest, leisure and limitation of working hours may be considered as positive in nature, thereby exempting corporations. However, such obligations may very well extend to corporations as per the Nevsun Resources verdict. Therefore, the Nevsun Resources decision may significantly reinforce the ability of counterclaims to hold investors liable for human rights abuses, and lead to a more equitable investor-state dispute settlement regime.

Conclusion

The lack of effective remedies available to the victims of corporate human rights violations is a grave concern for the business and human rights movement. In this regard, the Canadian Supreme Court’s decision in Nevsun Resources marks a landmark development in human rights litigation. The Court’s recognition of corporate obligations is significant, especially in light of studies which have indicated the negligible impact of voluntary codes of conduct on corporate behaviour.

An effective system must be based on a combination of voluntary as well as certain binding norms on corporations to check human rights abuses. The Nevsun case has shown the conceptual possibility of such a governance model under the existing state of international human rights law. It is hoped that this case would provide the much-needed impetus for an international framework that articulates binding human rights obligations of businesses along with an effective enforcement mechanism.

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