Corporate profit is often made at the expense of vulnerable communities in countries where businesses are poorly regulated or in conflict zones where there is no prospect of obtaining justice for victims. The 2018 report by Global Slavery Index found $354 billion worth of goods imported into G20 countries ($15 billion in Canada) have high risk of involving forced labour in their supply chains. The surge in “anti-slavery” or “modern slavery” legislation in different countries over the past 10 years can be seen as one of the responses to a growing, wider public awareness of egregious human and labour rights violations throughout global supply chains.
Furthermore, with a focus specifically on enhancing corporate accountability for the conditions that govern extractive and manufacturing practices in the subsidiaries of multinationals, recently emerging domestic legislation attempts to bring corporations’ overseas activities under the states’ governance. Simultaneously, much attention rests on litigation strategies pursued before domestic courts in the U.S., Canada, and various EU countries. These have increasingly become the fora for complex litigations brought on behalf of miners, garment workers, construction workers, fishermen, domestic workers or, as in a widely discussed case of April 2021, ‘ship-wreckers’ in Bangladesh’s infamous “Chittagong” shipwrecking yard . In addressing the gaps in corporate governance, the courts have evolved a more flexible approach to interpreting laws, allowing them to consider commercial laws in tandem with environmental and human rights law. These three recent rulings in that regard are impressive examples of how domestic courts continue to delve into the complexities and details of corporate activity on the ground and their effects on individual rights, while adjudicating the question of jurisdiction and appropriate forum.
In a ground-breaking case, in September 2021, France’s Supreme Court, the Cour de Cassation, upheld the indictment of the French company, Lafarge, for its complicity in crimes against humanity in Syria. As was widely acknowledged, the Court’s decision was a worldwide “first” for a parent company facing formal investigation for complicity in crimes against humanity abroad. Lafarge, a global leader in construction with 2’500 factories world-wide, had allegedly paid 13 million euros to armed groups including the Islamic State of Iraq and Syria (ISIS) in exchange for the ability to keep its subsidiary factory, Lafarge Syria, open between 2012-14. The company faces additional charges such as financing terrorism and violating EU embargo. The charge of crimes against humanity had been suspended by the French court of appeal, which considered that it had not been proven that Lafarge had the intention to fund ISIS’s gruesome abuses. With the backing of NGOs, ECCHR and Sherpa, 11 of the former employees of Lafarge challenged that ruling.
The Supreme Court judges ruled that ‘intention to be associated with the crimes’ was not necessary for being charged as an accomplice. Since Lafarge had known about the grotesque and systematic abuses ISIS perpetrated at its doorsteps, the fact that the company had only pursued commercial purposes in negotiating with ISIS did not diminish its complicity in crimes against humanity.
If the charge of focusing on financing terrorism had become the sole driving force of the case, it would have taken on a state-centered nature. Counter-terrorism legislation focuses on state priorities, with the political actors’ prerogatives occluding transparency, and state security agenda taking centre stage, sometimes pursued at the expense of individual rights and liberties. Putting human rights at the centre of the case brought light to the abuses suffered by the victims of ISIS including Lafarge’s employees. Following the eruption of violence in the region, the company had evacuated its foreign nationality staff, while coercing the Syrian employees to continue working, and exposing them to different risks including kidnappings by the IS. When IS fighters eventually took control of the factory in 2014, Lafarge still had no evacuation plan in place. In the absence of a bus, the employees had to scramble to find private cars in order to escape being killed in a matter of hours.
Procedurally, a key determination in the context of prosecuting crimes committed on foreign territory concerns jurisdiction of the court where the parent company is located. Even when crimes can be linked in a sufficient manner to the home jurisdiction of the parent corporation, defendant lawyers will often point to the practical obstacles facing the court, say, in London or New York, as regards the gathering of evidence, accessing witnesses, as well as the limitations inherent in applying traditional black letter law to the circumstances of the actual ongoings in a faraway place. Recent case law such as Lafarge as well as cases out of the UK display a growing willingness by the courts to engage with these challenges rather than to dismiss the case on a purely procedural stance. A central consideration in this regard has been whether there is ample evidence that the parent company exercised control or otherwise had conclusive knowledge of or involvement in the subsidiaries’ activities on the ground.
A remarkable development in recent years is that courts have been defining ‘control’ increasingly widely when assessing the myriad ways in which a parent is engaging with its subsidiary. An example of this is court’s detailed engagement even with the CSR and ESG related documentation, policies and strategies that parent companies have been implementing with regards to their subsidiaries or in relation to the environmental, social and sustainability standards that the parent would aim at seeing adherence to throughout its supply chain. Strikingly, courts have begun to acknowledge such commitments as a basis of the parent assuming binding obligations under the auspices of a parental company’s duty of care towards those that are affected by the subsidiaries’ actions.
In a 2019, UK Supreme Court case, Vedanta Resources, a parent mining company in England was found to have sufficient control over its subsidiary in Zambia based on the Court’s assessment of its published reports and public statements in which Vedanta had repeatedly emphasized its supervision over the environmental and social practices of its subsidiaries.
The case was filed by a UK law firm, on behalf 2,577 members of a rural farming community in Zambia, whose health and farming activity had been affected by the toxic waste spilled by a Copper mine into their only water source for drinking and irrigation. Not only had the contamination spoiled the previously fertile lands, but it had taken the lives of several community members and children.
What makes the case outstanding is that the court engaged with ethnographic information on what was happening on the ground, something that legal anthropologists of CSR have been arguing for years. The claimants had previously brought lawsuits in Zambia which had failed because they had failed to bring medical and expert reports. The Court of Appeal’s judge examined at length the cost and availability of legal representation in Zambia and found that local resources were insufficient for claimants to obtain justice there.
As is often acknowledged, the issue of regulating multinational corporations has direct relevance and urgency in Canada, where almost 75 percent of the mining companies in the world are headquartered. The Canadian government has historically made concessions to the extractive industry and supported it through a loose regulatory regime, tax incentives and diplomatic assistance. In 2020, the Canadian government placed a ban on the importation of goods involving forced labour in the supply chains, however there has been no enforcement up to date.
In 2020, in Nevsun Resources Ltd. v. Araya, a ruling that represents a significant leap towards liability for Canadian corporations abroad, the Canadian Supreme Court directly adopted customary international law (general practice accepted as law) into the common law of Canada, not only as an interpretive tool, but in order to provide the victims of a mining company, Nevsun, with a civil recourse in Canada. The ruling was further unique in that it applied the rules of customary international law which are normally applicable only to States, to a corporation, a private actor.
The case involved three refugees from Eritrea who had suffered inhumane treatment while working in a mine owned by a Canadian company, Nevsun Resources Ltd. The treatment of workers included slavery, forced confinement and a variety of punishments, including “being ordered to roll in the hot sand while being beaten with sticks until losing consciousness”.
The Court emphasized the post WWII revolutionary shift of international law from state-centric to focused on the protection of individual rights. It rejected a conception of human rights law as aspirational, in favour of a practical approach that identifies abuses and addresses them. In doing so, the Court acknowledges the vast scope of the effects of Canadian corporations on the lives of workers overseas and prioritized individual rights over the political and economic considerations that have historically dampened the willingness and ability of the State to act.
Taken together, Lafarge, Vedanta and Nevsun, along with Begum, offer a window on the growing sensibility of domestic courts towards the fact that multinational corporations’ private governing systems largely exist outside of the states’ regulatory capabilities. In recognizing the implications of this impunity, the courts show an increasing willingness to shift the emphasis from abstract models of law to an approach that evaluates the effects of corporate acts on victims of human rights abuses and environmental harms. This development in the case law, parallel to the continuing legislative efforts concerning supply chain transparency and accountability as most recently in Australia, Germany and Norway is of utmost significance for corporate and inhouse counsel and should be paid close attention to.