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Speaker's Corner: Piercing of corporate veil in Hudbay case may send Canadian companies elsewhere

Compañía Guatemalteca de Níquel (Guatemala Nickel) owns and operates the Fenix nickel mine in Guatemala. Between 2007 and 2009, there were some unfortunate security incidents at the mine when protesters clashed with police and private security details working for a security contractor that had been retained by Guatemala Nickel. These clashes allegedly led to the death of one man, the serious injury to another man, and the rape of several women.

The alleged victims of this violence in Guatemala, rather than suing Guatemala Nickel domestically in that country, brought three separate actions in Canada against Hudbay Minerals Inc., the parent company of Guatemala Nickel, for an aggregate of approximately $67 million in damages. Hudbay, in response, brought a motion in Ontario’s Superior Court to dismiss the Guatemalan claims, asserting that the proper place for a trial, if any, was in Guatemala, and that the proper party that should be responsible for whatever happened in Guatemala, if any, was Guatemala Nickel.

On July 22, Superior Court Justice Carole Brown denied Hudbay’s motion to dismiss the case in Canada, allowing the Guatemalans to continue their lawsuit against Hudbay in Canada. This precedent-setting decision is, according to Murray Klippenstein, counsel for the plaintiffs, “the first time that a Canadian court has ruled that a claim can be made against a Canadian parent corporation for negligently failing to prevent human rights abuses at its foreign mining project.”

Klippenstein goes on to conclude: “As a result of this ruling, Canadian mining companies can no longer hide behind their legal corporate structure to abdicate responsibility for human rights abuses that take place at foreign mines under their control at various locations throughout the world.”

Of course, the Hudbay decision was only an interlocutory motion and the substantive claims in the case have yet to be proven. Furthermore, the decision on the motion may as yet be appealed. But for the time being, it seems that all Canadian parent companies are indeed now exposed to open-ended liability for alleged torts that may be committed by subsidiaries far from our borders. While civil rights activists certainly have cause to rejoice the decision, the case reflects a growing cause for concern for corporate Canada.

While much of the mainstream press has focused on the issue of extraterritoriality with Mayans from Guatemala making the trek to Canada in order to press their case for justice in our courts, the case is much more than an adjudication of the convenient forum. Instead, the decision goes right to the heart of Salomon v. A. Salomon & Co. Ltd. and the idea of an independent corporate personality. The direct tortfeasor in the Hudbay case, if indeed there was one, was a locally domiciled Guatemalan company whose shareholder happened to be Canadian. If there were torts committed, the juridical entity responsible for those torts was arguably Guatemala Nickel.

For more, see "Hudbay plaintiffs succeed on 'very low bar.'"

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