Corporate accountability and diplomatic liability in overseas extractive projects

Highlights

• Attempts at creating accountability for Canadian companies by federal lawmakers have not succeeded.

• Canadian diplomats promote overseas mining without without sufficient liability.

• Court judgements open the door to litigation in Canada for alleged overseas human rights violations.

• Diplomatic liability over the promotion of harmful overseas extractive projects should be advanced as part of home-state responsibility.

Abstract

The activities of multinational mining corporations in the developing world have come under increased scrutiny, and so has the failure of their home governments to regulate the negative impacts of their activities on host communities. Attention on regulatory instruments available for home governments has so far mostly focused on investment guidelines for investment abroad, export credit risk assessments and conditionalities, and extra-territorial court proceedings to bring some accountability. In contrast, little attention has been given to the potential liability of home country diplomats, who actively promote these activities while being aware of potential environmental risks and the likelihood of human rights abuses. Despite attempts by human rights activists, scholars, and Members of Parliament, the Canadian Government still inadequately addresses allegations of impacts ranging from physical abuse to killings and modern slavery. Instead, Canadian diplomats continue promoting mining interests abroad, often at the cost of human rights, and consequently, in contravention of policies to which they are required to adhere. This paper argues that in the absence of government will to regulate the conduct of Canadian companies abroad, hope to effectuate substantial change rests with the judiciary and in pushing for reform in the way diplomatic liability is addressed as part of the broader concept of home-state responsibility over the conduct of extractive companies.

Introduction

Conflicts around extractive projects sharply increased in number during the recent commodity boom (Le Billon et al., 2016; Temper et al., 2015). Relations with local communities and liability issues for human rights and environmental abuses have become major concerns for extractive companies and their home governments (Coumans, 2019; Frederiksen, 2018; Seck, 2008), especially in light of increased calls for accountability by human rights, environmental and development organizations (Cohen, 2020; Coumans, 2010). Increasing efforts by governments and the extractive sector to prevent and reduce conflicts have focused on mechanisms to improve resource governance through guidelines for investment companies, conflict negotiation tools and institutions, and stricter norms of transparency and accountability (Coumans, 2019). Some of these conflicts have resulted in grave human rights abuses, as well as major losses for communities, companies, and governments – particularly in Latin America (Bebbington, 2012; Bond and Kirsch, 2015; Franks et al., 2014; Middeldorp and Le Billon, 2019).

The Canadian government and companies listed in Canada have been a major target of debates and legal initiatives to bring accountability to human rights and environmental abuses associated with mining projects (Butler, 2015; Haslam et al., 2018; Grégoire and Etienne, 2019; Seck, 2011). A frequent critique is that the Canadian authorities are failing to exercise their ‘home-state responsibility’ (Seck, 2008; O'Brien, 2018) over the harmful practices of extractive companies incorporated within Canada, by actively promoting business interests rather than protecting human rights (see Kwakyewah and Idemudia, 2017). Generous tax breaks and subsidies, lax stock market regulations on listing and disclosures, continued support from provincial and federal governments, and a strong concentration of mining expertise has allowed Canada to retain its position as a leading jurisdiction of incorporation for mining companies (Deneault and Sacher, 2012; Gordon and Webber, 2019). As discussed below, Canadian-listed companies also benefit from the diplomatic support of Canadian authorities, including the embassy and consular staff (Imai, 2018), as well as international aid (Brown 2020); contributing what (Dougherty, 2016) calls “Canada's mineral resource protection network”, which plays a crucial role within what Petra and Veltmeyer (2014) qualify as ‘extractive imperialism’. By 2018, the Toronto Stock Exchange (TSX) and the TSX Venture Exchange (TSXV) was home to nearly half of the world's public mining companies (TSX TSXV Mining). The total value of Natural Resources Canada (CMAs) amounted to $260.1 billion in 2017. This total was held by 1364 companies, of which 699 had CMAs located abroad worth $168.7 billion (Natural Resources Canada). By its own assertion, Canada has ‘set world standards for sustainable mining’ through its ‘Towards Sustainable Mining’ (TSM) initiative (Canada Sets a World Standard for Sustainable Mining). Participation in the TSM program, however, is only mandatory for Mining Association of Canada's members’ operations in Canada; noting that participation is the only mandatory element of the program, not the application of its ‘norms’. Meanwhile, Canadian mining corporations’ legacy of environmental degradation and human rights abuses abroad has continued to persist, which in turn questions the Corporate Social Responsibility approach and associated forms of private governance that the industry and Canadian authorities have promoted (see e.g. Nolin and Stephens, 2011; Andrews and Grant, 2020; Brown, 2020).

Local communities who are the victims of human rights abuses and environmental degradation caused by mining corporations are often pitted against not only the corporation but also the host government who may believe it has much to gain from the investment that these corporations offer. Also, host governments may fear legal repercussions by being taken to an international tribunal if they try to hold a company to account. Domestic courts are often insufficiently independent from host country governments, and law enforcement themselves maybe involved in human rights violations (Scurr, 2014). In such situations, the only recourse for these communities is legal redressal in the corporations’ home state. As a leading jurisdiction for mining corporations, Canada has been called upon by civil society organisations, academia and media to help prevent or resolve conflicts associated with large-scale mineral development and bring redress to the affected communities.

In Canada, however, corporate accountability for overseas projects is often criticized as being minimal, and corporations use a variety of legal mechanisms and corporate safeguards to evade liability. Canada has, only voluntary, and no mandatory guidance for how Canadian mining companies should operate overseas. Rather than being withheld from companies suspected of serious human rights and environmental abuses until these can be independently investigated, diplomatic and financial support is generally extended to further the companies’ interests (MiningWatch Canada, 2013). As evidenced below, substantial efforts to reform legislation or policy in the country is constantly sidelined. What is heartening though is the role of the judiciary in law reform in the past few years.

Canada is not the only jurisdiction that serves as a base for questionable extractive projects abroad, but given the sheer number of companies it houses, Canada has a global responsibility to revamp its current policies. Following this introduction, Section 2 opens with a brief look at failed attempts of federal lawmakers at setting standards and creating accountability for Canadian companies, as well as the lack of accountability required of Canadian diplomats and public officials. This legislative vacuum has compelled the courts to review and re-evaluate the application of certain legal doctrines. Section 3 looks at the specific issue of diplomatic liability, looking into critiques relating to a case in Mexico that was recently brought to the attention of Canadian regulators and courts. Section 4 briefly discusses the complex challenges posed to foreign plaintiffs and traces the legal trajectory of mining cases in the country, demonstrating the evolving trend in judicial interpretation. Section 5 concludes with a discussion of implications for improved access to justice and the promotion of diplomatic accountability in Canada and beyond.