March 26, 2020

Supreme Court of Canada recognizes corporate liability for human rights violations

[Cross-posted from Just Security]

By William S. Dodge

Late last month, in Nevsun Resources Ltd. v. Araya, the Supreme Court of Canada held that Canadian corporations may be sued in tort for violations of international human rights law that occur abroad. The Canadian Supreme Court thus resolved under Canadian law an issue that the U.S. Supreme Court has struggled with unsuccessfully since 2012. Nevsun is part of a growing trend of court decisions in other countries recognizing corporate liability under various theories. These decisions illustrate a basic point that is too often overlooked in the debate over corporate liability — that international law leaves it to each domestic legal system to decide how to enforce norms of international human rights.

Nevsun Resources Ltd. is a Canadian company that owns a mine in Eritrea. The plaintiffs suing Nevsun claimed that they were conscripted by the Eritrean military into a regime of forced labor at the mine and subjected to cruel, inhuman, and degrading treatment. They brought suit in British Columbia seeking damages for breaches of customary international law prohibitions against forced labor, slavery, cruel, inhuman, or degrading treatment, and crimes against humanity. They also sought damages for domestic torts such as battery and unlawful confinement. Nevsun moved to strike the pleadings based on the act of state doctrine and moved to strike the customary international law claims on the ground that it was plain and obvious that such claims had no reasonable prospect of success.

This post describes the central holdings and contentious questions in Nevsun and compares the approach adopted by the Canadian Supreme Court with approaches to corporate human rights liability in the United States and other countries. While the Nevsun decision should be viewed as part of a trend outside the United States toward the recognition of corporate liability for human rights violations, the approach adopted in Nevsun is just one of the roads that domestic legal systems might take.

Corporate Liability for Human Rights Violations

By a vote of five to four, the Canadian Supreme Court held in Nevsun that claims for violations of international human rights norms abroad may be brought in Canadian courts. The majority based its decision on the doctrine of “adoption” (called “incorporation” in English law), which the Court traced to William Blackstone’s famous Commentaries of the eighteenth century. (para. 87). The Court explained:

[A]s a result of the doctrine of adoption, norms of customary international law — those that satisfy the twin requirements of general practice and opinio juris — are fully integrated into, and form part of, Canadian domestic common law, absent conflicting law … . Legislatures are of course free to change or override them, but like all common law, no legislative action is required to give them effect. (para. 94).

The Court further held that because customary international law is part of Canadian law, its content need not be proved as a fact and is appropriate for judicial notice. (para. 98). The norms alleged to have been breached in this case — those prohibiting crimes against humanity, slavery, forced labor, and cruel, inhuman, and degrading treatment — were all found to be well established as jus cogens in customary international law. (paras. 99-103).

The majority made short work of the defendant’s argument that norms of international human rights law do not apply to corporations. It noted that some norms of customary international law “prohibit conduct regardless of whether the perpetrator is a state” (para. 105) and that norms applicable to private actors could cover corporations. (para. 111). The majority therefore concluded: “it is not ‘plain and obvious’ that corporations today enjoy a blanket exclusion under customary international law from direct liability for violation of ‘obligatory, definable, and universal norms of international law,’ or indirect liability for their involvement in … ‘complicity offenses.’” (para. 113).

Invoking the general principle that there must be a remedy where there is a right (para. 120), the majority held that courts could develop “a civil remedy in domestic law for corporate violations of the customary international law norms adopted in Canadian law.” (para. 122). Treating human rights violations only as ordinary domestic torts like battery and unlawful confinement would not be sufficient “to adequately address the heinous nature of the harm caused by this conduct.” (para. 125). The Court left it to the trial judge to determine in the first instance whether to recognize new domestic torts like slavery based on customary international law or to apply customary international law directly to the defendant’s conduct, but the majority expressed a clear preference for the direct application of international law as more consistent with the doctrine of adoption and as more appropriate to the gravity of the offenses. (paras. 127-129).

Two dissenting opinions took issue with the majority on a number of points relevant to corporate liability. Both opinions asserted that customary international law does not recognize corporate liability for human rights violations (paras. 191, 269). Quoting the U.S. Court of Appeals decision in Khulumani, Justices Brown and Rowe went on to note that international law “leaves to each nation the task of defining the remedies that are available for international law violations.” (para. 197). In their view, criminal law was better suited to remedy violations of international human rights norms. (paras. 208, 218). They noted that Parliament could chose to create a civil cause of action for violations of international human rights, but for the Supreme Court to do so as a matter of common law broke “the unwritten constitutional principle of legislative supremacy” (para. 225). Finally, with respect to the possibility that the trial court might recognize new domestic torts rather than applying customary international law directly, Justices Brown and Rowe questioned whether Canadian law properly applied to conduct in Eritrea, because under Canadian conflict of laws rules “[i]t is the law of the place of the tort that will, normally, govern.” (para. 252).

The majority opinion in Nevsun recognizing corporate liability for human rights violations resolves as a matter of Canadian law a question that the U.S. Supreme Court has repeatedly failed to answer as a matter of U.S. law. As I have previously recounted on Just Security, the U.S. Supreme Court recognized an implied cause of action under the Alien Tort Statute (ATS) for well-established norms of human rights law in Sosa (2004). The Second Circuit subsequently held in Kiobel (2010) that corporate liability for human rights violations was not well-established enough to meet the Sosa standard. The Supreme Court granted certiorari to decide the corporate liability question, but instead disposed of the case by limiting the ATS cause of action in Kiobel (2013) to claims that “touch and concern” the territory of the United States. The Court granted certiorari to decide the same question in Jesner (2018), but again avoided the question by limiting the ATS cause of action to U.S. corporations. The U.S. Supreme Court has been asked to take up the corporate liability question a third time in Nestle v. Doe, a case alleging that a U.S. corporation aided and abetted child slavery abroad. The Court has called for the views of the Solicitor General on whether certiorari should be granted.

As the Nevsun majority pointed out, the argument that customary international law itself does not recognize liability for human rights violations “misconceives modern international law.” (para. 105). Customary international law prohibits violations of fundamental human rights, but it does not provide the means of enforcing those norms. The means of enforcement are supplied by states, which may act either collectively through treaties or individually by creating criminal or civil liability in their own domestic laws. Therefore, Justices Brown and Rowe were correct to observe that international law leaves to each nation the task of defining remedies for international law violations. (para. 197).

But the two Justices failed to see how that observation undercuts their separate assertion that customary international law does not recognize corporate liability (para. 191). Because each nation is free to decide for itself what remedies to provide, a lack of consensus about remedies for human rights violations says nothing about the content of the customary international law norms. As the amicus brief of International Law Scholars in Jesner explained, to argue that customary international law does not recognize corporate liability because international criminal tribunals limit their jurisdiction to natural persons, or because many nations have not created civil remedies, is to mistake limits on enforcement mechanisms for limits on the norms themselves. The question the Second Circuit posed in Kiobel — whether there is a “norm of corporate liability under customary international law” — is a question that simply does not make sense.

The question that does make sense is whether particular norms of human right law apply to particular actors. But international law seems quite clear that human rights norms do apply to corporations. In Kiobel, the amicus brief filed by the Obama Administration noted (at pages 20-21) that the prohibitions against torture, genocide, and war crimes apply equally to natural persons and to corporations. In Jesner, the amicus brief filed by the Trump Administration took the same position (at pages 13-14). A separate amicus brief of the Yale Law School Center for Global Legal Challenges expanded the analysis to other customary international law norms, including the prohibitions against crimes against humanity, financing terrorism, extrajudicial killing, slavery, and piracy, concluding in each case that these norms apply to corporations. On the question whether human rights norms apply to corporations, the majority in Nevsun was clearly correct.

Whether the Supreme Court of Canada should have created a civil damages remedy for breaches of human rights norms under Canadian common law is a separate question. I have long been skeptical of the argument that court-created remedies for human right violations are inconsistent with legislative supremacy, because legislatures may of course alter those remedies.

The traditional way of addressing human rights violations like those alleged in Nevsun is through domestic tort law. But as Justices Brown and Rowe correctly pointed out, this raises the question of whether Canadian or Eritrean tort properly applies. A less traditional way of addressing human rights violations is to apply customary international law directly as the rule of decision, which is what U.S. courts have done in ATS cases. This approach avoids the choice of law question because international human rights law is equally applicable to conduct in every nation, but it may raise other questions of domestic law. In the United States, the decision to take the road “less travelled by” led to questions about the proper scope of an implied cause of action under the ATS that the U.S. Supreme Court has answered in an increasingly limited way. In Canada, the questions are likely to be different because Canada does not have an ATS and because the Canadian Supreme Court has authority over Canadian common law that the U.S. Supreme Court lacks with respect to U.S. common law. In deciding how to implement the decision in Nevsun, Canadian courts may learn from the U.S. experience, but they need not make the same decisions.

Act of State Doctrine

The Canadian Supreme Court also denied Nevsun’s motion to strike the pleadings under the act of state doctrine by a vote of seven to two. The Court criticized the act of state doctrine under English law as an “unwieldly collection of principles, limitations and exceptions.” (para. 29). Although Canadian common law has “grown from the same roots” as English law, the Supreme Court of Canada held that “the principles underlying the act of state doctrine have been completely subsumed” by conflict of laws doctrines and judicial restraint. (para. 44). The Court explained:

Our courts determine questions dealing with the enforcement of foreign laws according to ordinary private international law principles which generally call for deference, but allow for judicial discretion to decline to enforce foreign laws where such laws are contrary to public policy, including respect for international law.” (para. 45).

In sum, the Court concluded, “[t]he doctrine is not part of Canadian common law.” (para. 59).

Despite their disagreement with the majority concerning the plaintiffs’ customary international law claims, Justices Brown and Rowe concurred in the majority’s analysis of the act of state doctrine. (para. 135). Only Justices Côté and Moldaver would have held that the doctrine “bars the adjudication of civil actions which have their foundation in allegations that a foreign state has violated public international law.” (para. 272).

In the United States, the act of state doctrine has occasionally been raised as a defense against human right claims, but almost never successfully. U.S. courts have typically held that violations of jus cogens norms cannot be considered acts of state. It is also doubtful that most human rights cases fall within the narrowed scope of the U.S. act of state doctrine after Kirkpatrick. In Kirkpatrick, the U.S. Supreme Court unanimously held that the act of state doctrine applies only when a suit requires a court to declare invalid as a “rule of decision” the official act of a foreign country. Finding that a foreign government has violated customary international law is different from declining to apply foreign law as a rule of decision. I therefore disagree with Justice Côté’s invocation of Kirkpatrick in support of her position. (para. 308).

Because the act of state doctrine is a doctrine of international comity, not international law, each country is free to adopt whatever version of the doctrine it sees fit. As I have previously explained, the U.K. act of state doctrine differs from that of the United States. Canada could have adopted the U.K. version, the U.S. version, the version urged by Justice Côté, or no version at all. Nevsun’s holding that the act of state doctrine has been subsumed by other conflict of laws rules is commendable, and perhaps particularly worthy of consideration in the United States, where the doctrine persists as an odd federal intrusion into the authority of U.S. states over conflicts rules.

Corporate Liability Outside North America

Nevsun is part of a growing trend of decisions recognizing the possibility of corporate liability for human rights violations abroad. Last year, the U.K. Supreme Court, in Vedanta Resources PLC v. Lungowe, allowed claims to go forward against a U.K. corporation and its Zambian subsidiary seeking damages for toxic emissions from a mine in Zambia. The Court observed that the parent company may have intervened sufficiently in the management of the mine to have assumed a duty of care under Zambian common law or fault-based liability under Zambian legislation. U.K. courts had jurisdiction over the parent company because it was domiciled in the U.K. and over the subsidiary because the claims against it were closely connected to those against the parent and because there was a real risk that substantial justice could not be obtained in Zambian courts. Although Vedanta involves environmental claims, it is clear that the same theories of jurisdiction and liability could apply to human rights claims against corporations.

A few weeks later, a Dutch district court in The Hague held, in Kiobel v. Royal Dutch Shell, that it had jurisdiction over claims by widows of activists executed in Nigeria alleging that Dutch and U.K. parent companies and their Nigerian subsidiary were accessories to the unlawful arrests, detentions, and executions of their husbands. The suit involved the same plaintiffs as the U.S. Kiobel case, but the claims before the Dutch court alleged violations of fundamental rights under Nigerian law, rather than violations of customary international law. Having recognized its jurisdiction to hear the claims, the Dutch court rejected most of them for lack of evidence, permitting further discovery only on the claim that the Nigerian subsidiary had bribed witnesses.

In sum, as the U.S. Supreme Court has repeatedly limited the scope of the ATS cause of action against corporate defendants, other countries have begun to recognize the possibility of corporate liability for human rights violations. It is noteworthy that the Canadian, Dutch, and U.K. cases all involved claims against parent companies domiciled in those countries, companies over which personal jurisdiction was clearly proper. In the Dutch and U.K. cases, liability was premised on the domestic law of the country where the alleged torts occurred. In Nevsun, by contrast, the Canadian Supreme Court suggested that the trial court should apply customary international law directly, similar to what U.S. courts have done under the ATS.

As noted above, it seems clear that international human rights norms apply to corporations just as they apply to natural persons. But it is up to each nation to decide whether and how to provide redress for corporate violations of those norms in its own legal system. The road that the Canadian Supreme Court chose to take in Nevsun is a good one. But it is not the only one.