We have written over the past two years about a growing wave of significant lawsuits in Canada against corporations for alleged international labour and human rights violations in their overseas operations or supply chains. As we have reported, Canada’s judiciary is demonstrating a willingness to expand their jurisdictional reach to permit such claims to proceed. Canadian judges are keeping an open mind as to whether a novel duty of care exists between multinational companies and the upstream foreign supply chain workers or the local residents affected by their operations. Our courts and NGOs have also queried whether longstanding principles of corporate liability in Canada are due for an update.

Recent Ontario Decisions

Two recent decisions from Ontario courts seemingly called this growing trend into question. First, Justice Perrell refused to certify the Rana Plaza multi-billion dollar class action against Loblaw and Joe Fresh brought by Bangladeshi garment workers against Loblaws and Joe Fresh after the collapse of a factory in Dhaka, which killed 1,134 people. More recently, Justice Epstein of the Court of Appeal ordered indigenous Ecuadorian villagers to post $1M in security for costs before continuing with their appeal. The villagers are seeking to enforce a multi-billion dollar foreign judgment relating to an environmental and health disaster in the oil rich Lagio Agrio region. Epstein J. also found that the plaintiffs likely did not have a good chance of succeeding on appeal, particularly on the issue of piercing the corporate veil.

Both of these Ontario decisions were dismissive of recent arguments that it may be time to take a more liberal and innovative judicial approach on  issues of corporate separateness and tort liability given the modern commercial realities of corporations and global supply chains.

However, last week a panel of the Court of Appeal overturned Justice Epstein’s order against the villagers. The Appeal panel held that the villagers’ legal arguments are untested and that it is possible they may prevail, which is, the Court stated, how the common law progresses. The Court rebuked Justice Epstein, in recognizing that the Defendant’s motion was a tactical attempt to terminate the proceedings, it held that it would be unjust for a potential restatement of the law to be thwarted by a procedural security for costs award.

At the same time, the Bangladeshi garment workers in the Rana Plaza class action have served a Notice of Appeal of Justice Perrell’s decision to refuse certification. And parallel to this, similar cases are continuing to make their way through BC courts (see here and here). In fact, the case of Choc v. Hudbay moves closer to trial as 11 women from Lote Ocho, Guatemala travel to Canada for examinations for discovery in litigation involving horrific allegations of abuses against local protesters at a nickel mine in their village.

The Way Forward

There is an ongoing and significant push in some legal circles and by public policy advocates to re-think the way in which legal responsibility is attributed among members of a corporate group under domestic criminal and civil laws, which they argue facilitates the avoidance of accountability for overseas misconduct. It remains to be seen whether a Canadian court will soon find that Canadian corporations owe a duty of care to foreign workers or local villagers affected by their operations, or whether a corporate veil will be pierced in one of these cases bringing potential liability to Canadian shores.

As we wrote in the Guardian, it is clear that no industry or region is fully insulated from the social deficit which has emerged from the rise of the modern global economy. In the modern labour market, there is a continuous supply of workers in foreign jurisdictions ready to produce goods at a lower cost than the domestic labour market. In many instances this is a positive development for workers in communities overseas and for the corporations at the top of the supply chain and for the consumers who demand products and goods and lower prices. However, with multiple levels of subcontracting, particularly throughout impoverished regions where the rule of law is weak or non existent, global labour and product supply chains can provide fertile ground for inhumane practices and working conditions. Responsible corporate actors must be on guard to ensure they are not contributing to adverse human rights impacts.

While there is no one size fits all solution, respect for human rights, a comprehensive understanding of the direct and indirect impacts of business activities and supply chains, and effective due diligence processes are increasingly essential for large and small businesses alike in minimizing legal and reputational risk. The necessary first step is a risk analysis of current activities and operations, followed by the implementation of human rights policies and supplier codes of conduct, and swift action to investigate and remedy problem areas. All of this is against a backdrop of increasing mandatory transparency and reporting requirements (see for example, modern slavery initiatives in the UK, California, Australia, France, Netherlands, Switzerland, and the European Union). It is worth noting that Canada has announced a parliamentary study on child labour and modern slavery in corporate supply chains.

The ongoing shift in public opinion, Canadian jurisprudence, and legislative action herald potentially extensive legal and reputational liability for multinational companies who choose not to assess their global operations or who fail to take steps to investigate and remedy deficiencies. The development of business and human rights standards under the UN Guiding Principles is progressing at a rapid pace and all signs point to continued expansion and reach.