Canada

08 Dec 2020
Legislation and cases

Legislation

There have been several important business and human rights-related legislative developments in Canada this past year.

Attempts at passing a ‘Modern Slavery Act’

In 2020, there were two attempts to introduce a modern slavery act into law: Senate Bill S-211, which died on the order paper in the early stages of the pandemic, and Senate Bill S-216, which is now in its committee stage. Bill S-216 is modelled on comparable UK and Australian legislation, the Bill would require certain large business entities[1] to report annually on efforts taken across their operations and supply chains to combat and eradicate forced and child labour.

If passed, Bill S-216 would require qualifying entities to submit an annual report setting out the steps the entity has taken during the last financial year to prevent and reduce the risk that forced labour or child labour is used at any step of the production of goods by the entity or of goods imported into Canada by the entity. In addition, it would have to describe:

  • its corporate structure and the goods that it produces in Canada or elsewhere or that it imports into Canada;
  • its policies in relation to forced labour and child labour;
  • its activities that carry a risk of forced labour or child labour being used and the steps it has taken to assess and manage that risk;
  • any measures taken to remediate any forced labour or child labour; and
  • the training provided to employees on forced labour and child labour.

The proposed Bill would also grant the Minister of Public Safety and Preparedness additional regulatory oversight to limit, condition, or ban the import of goods manufactured by child or forced labour

Similar to the changes seen in corporate behaviour arising from the passage of similar law in Australia, Bill S-216, and the real risk of a product import ban, is anticipated to impact the scope of supply-chain diligence undertaken by corporations involved in the production or importation of goods into Canada.

Canadian Ombudsperson incorporates international business and human rights standards

In September, the recently established (2019) Canadian Ombudsperson for Responsible Enterprise (“CORE”), published its draft Operating Procedures (“Procedures”). The Procedures, while not final, incorporate certain international business and human standards such as the UN Guiding Principles of on Business and Human Rights and the OECD Guidelines for Multinational Enterprises, and set out in detail the CORE’s functions and processes. 

According to the draft document, in addition to other advisory functions, the CORE may investigate alleged human rights abuses by Canadian companies in the garment, mining, and oil and gas sectors. This function is described as a “review” and may be initiated at the CORE’s own initiative or following a complaint, and includes a compliance and dispute resolution mechanism. The CORE may conduct joint or independent fact-finding, and may draw negative inferences from a failure to participate by the company concerned. However, while the CORE may facilitate mediation and arbitration services, including coordinating with the Canadian National Contact Point (“NCP”), the CORE can only make recommendations and refer a matter to another body such as the NCP or law enforcement; the CORE has no power to compel a company to act, and cannot subpoena witnesses or documents.

Alberta passes Protecting Survivors of Human Trafficking Act

In 2020, Alberta passed the Protecting Survivors of Human Trafficking Act (“Act”). This law enables courts and magistrates to make “human trafficking protection orders” against any “person” found to have engaged in or who may engage in human trafficking. Human trafficking is defined as the recruitment, transportation, transfer, holding, concealing, harbouring or receipt of a person. Under the Act, it is an offence to contravene a human trafficking protection order. It remains to be seen whether courts will interpret the Act as capable of applying to legal – as well as natural – persons. The legislation is substantially similar to that in other jurisdictions, most notably the UK, where Part I of the Modern Slavery Act 2015 includes provision for “slavery and trafficking prevention orders” and “slavery and trafficking risk orders”.

Caselaw

Canada continues to be seen as a friendly forum for business and human rights complaints. There have been several important case law developments in 2020.

Nevsun Resources Ltd. V. Araya, 2020 SCC 5

The most significant business and human rights decision in Canada was Nevsun Resources Ltd. V. Araya, 2020 SCC 5, where the Supreme Court of Canada (“SCC”) opened the door to international human rights torts claims. The originating claims were brought by Eritrean refugees allegedly conscripted to work at the Bisha mine part owned by Nevsun Resources Ltd.

In particular, the majority held that, unlike England, the act of state doctrine is not part of Canadian common law. Accordingly, Nevsun could not use the act of state doctrine as a shield, on the basis that the claims would involve criticism of Eritrean State actions. By contrast, breaches of customary international law are fully integrated into, and form part of, Canadian domestic common law. The court therefore found that the claims under customary international law were not a bar to the claim; it was not “plain and obvious” that corporations enjoy a blanket exclusion under customary international law from direct liability for violations of “obligatory, definable, and universal norms of international law”, or indirect liability for their involvement so-called “complicity offenses”.

Nevsun follows a trend from earlier cases, including Garcia v Tahoe Resources Inc., 2017 BCCA 39, where the courts have been slow to decline jurisdiction or strike out a claim. Several claims are now proceeding, including the claim against Hudbay Minerals Inc. brought by members of a Guatemalan farming community who allege they were sexually assaulted during forced evictions from lands owned by a predecessor of the defendant. The latest chapter is Caal Caal v Hudbay Minerals Inc., 2020 ONSC 415, in which the Ontario superior court granted a motion by the plaintiffs to amend their claim. The case has yet to be decided on the merits.

Schuyler Farms Limited v Dr. Nesathurai, 2020 ONSC 4454 involves a challenge to public health measures relating to migrant workers in Ontario. In this decision, several organizations were granted leave to intervene in the litigation. The case has yet to be decided on the merits but raises a number of issues around the limitations of human rights during the pandemic. Similarly, Canada (AG) v. Kattenburg, 2020 FCA 164, is currently before the Federal Court of Appeal. It involves a challenge to rules-of-origin labelling of wine produced in the West Bank. At first instance, the Federal Court had held that the Canadian Food Inspection Agency’s decision, that the wine could be labelled as a “Product of Israel” was unreasonable. The appeal has yet to be decided, but a motion by a number of organizations to intervene in the appeal was refused in the decision cited above.

The growing number of cases, and the general trend towards both retaining jurisdiction and finding the potential for tortious breaches of international law, mean that consideration of human rights norms is becoming an essential part of legal and business planning for Canadian companies, lest they risk costly litigation and potential liability in Canada.

Show note
Business practices

2020 proxy season is seeing increased emphasis on social issues: Among the S&P/TSX60 companies’ proposals, 17.5 per cent focused on social issues, and this trend is likely to continue into 2021. Notable proposals have been brought at two major banks, a major Canadian grocer, and a Canadian media conglomerate. All proposals alleged that human rights concerns were not being appropriately assessed, prevented and mitigated at the management level of the companies. 

The proposals resonated with shareholders. In particular, a proposal at a media conglomerate was supported by 30% of its independent shareholders, who have asked the company to investigate and report on potential human rights abuses facilitated by contracts with Immigration and Customs Enforcement in the US. 16% of shareholders at a major grocery chain supported a shareholder proposal asking the company to make purchasing decisions in light of human rights issues, to impose meaningful protections relating to payment of living wages by its suppliers and expand the mandate of its Risk and Compliance Committee to cover human rights issues.

In part as a result of the Equator Principles 4, banks are also placing increasing importance on human rights concerns. Following a shareholder proposal, one of the largest banks in Canada has implemented various business and human rights initiatives. Among other commitments, the bank confirmed it will not provide lending or financing services to US private prison companies (and will confirm the same in its circular) and that it will improve stakeholder engagement respecting human rights matters. In October, it published a human rights position statement, which was adopted by its board of directors. Part of this statement contemplates developing mechanisms by which employees, clients, contractors, suppliers and other stakeholders can raise concerns related to human rights.

 
What do you predict for 2021?

We expect the trends both in the caselaw and among the investor community to continue, leading to heightened awareness of human rights issues among the Canadian business community. In addition, based on the progression to date, it is likely that 2021 will see the publication of final operating procedures by the CORE and the first complaints and review processes by that body. This, too, is likely to lead to greater publicity and concern around human rights issues by Canadian companies that operate or have supply chains abroad.

 
Related material
 
Contacts

Benedict Wray
+1 613 780 8683
Benedict.Wray@nortonrosefulbright.com

Alison Babbitt
+1 613 780 8665
Alison.Babbitt@nortonrosefulbright.com

Ray Chartier
+1 403 267 8172
Ray.Chartier@nortonrosefulbright.com

Carole Gilbert
+1 514 847 4666
Carole.Gilbert@nortonrosefulbright.com