Refusing jurisdiction over claim against Canadian mining company alleging battery abroad by its subsidiary

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Publication March 2016

The Supreme Court of British Columbia in Garcia v Tahoe Resources Inc.1 recently found that Guatemala is the more appropriate forum to consider novel claims by foreign citizens regarding a Canadian mining company’s liability for the conduct of its foreign subsidiary. The decision to stay the action has important implications for corporations, particularly in the mining industry, operating through subsidiaries in foreign jurisdictions.

Connections to Guatemala and Canada

The claim was issued by seven Guatemalan citizens against Tahoe Resources, a company registered in the province of British Columbia, traded on the Toronto and New York stock exchanges, and headquartered in Nevada, USA. Tahoe's only commercial operation was its interest in the Escobal mining project in Guatemala, which was operated by Minera San Rafael S.A., Tahoe’s wholly owned subsidiary.

The plaintiffs were allegedly shot at close range by security personnel employed by Minera San Rafael while protesting outside of the Escobal mine. They claimed Tahoe was vicariously liable in battery for explicitly or implicitly authorizing the use of excessive force against protesters. The plaintiffs also claimed Tahoe had been negligent in failing to adequately ensure security personnel complied with corporate social responsibility policies and internationally accepted standards regarding the use of security personnel.

Guatemala: the more convenient forum

Although Tahoe recognized that the BC courts had jurisdiction over the claims, it urged the court to decline to exercise this jurisdiction on the basis that Guatemala is clearly the more appropriate forum for hearing this dispute. The plaintiffs opposed this challenge on the basis that the central issue in the matter was whether a Canadian company was responsible under Canadian law for the conduct of security forces hired to protect the assets of its wholly owned foreign subsidiary.

The court noted that its objective in deciding whether to decline jurisdiction is to ensure fairness to the parties and promote efficiency in resolving the dispute. The plaintiffs argued that their case could not be more conveniently or efficiently tried in Guatemala because systemic barriers to justice in the Guatemalan legal system prevented them from being guaranteed a fair trial. In finding that Guatemala was the more appropriate forum, the court noted that the real issue was not whether the Canadian legal system was fairer or more efficient, but instead whether the foreign legal system was capable of providing justice.

The court held that trying the action in British Columbia would result in substantial inconvenience considering none of the plaintiffs spoke English, most of the evidence was in Spanish, and criminal proceedings that also sought compensation had already been commenced in Guatemala. This inconvenience would be aggravated by the distance witnesses and parties would be required to travel and the fact the majority of Tahoe’s management and staff lived and worked in Nevada.

Comity and deference to foreign courts

The BC court’s analysis in Tahoe Resources highlights the Canadian judicial system’s commitment to the well-established principles of comity and an approach to jurisdiction that respects the authority of foreign courts, even in the face of novel claims regarding foreign corruption and failures of a Canadian company to comply with its corporate social responsibility policies. The decision demonstrates the willingness of Canadian courts to decline jurisdiction over proceedings regarding events in foreign countries that have the potential to provide meaningful avenues of legal redress.

Implications for the Canadian mining industry

Tahoe Resources is one of several recently launched actions against Canadian mining companies with wholly owned subsidiaries operating in foreign jurisdictions. Companies with foreign operations may take comfort in the court’s finding that the public interest requires Canadian courts to proceed with extreme caution before finding a foreign court incapable of providing its own citizens with justice. Despite such deference, Canadian corporations operating in foreign jurisdictions should prepare to defend the activities of their foreign subsidiaries as the number of these claims increases.

The authors would like to thank articling student James Parker for his assistance in preparing this legal update.

Erik Penz is the global chair of our mining disputes team and Canadian leader of our transnational litigation group.

Footnote

1 2015 BCSC 2045.

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