Why corporate counsel must lead their multinational clients to measure and manage community impacts early and often

Back to Corporate and M&A Law Committee publications

Edie Hofmeister
Vice Chair, IBA Business Human Rights Committee

On 27 April 2013, during the afternoon shift change at the Escobal mining project in San Rafael las Flores, Guatemala, 19 men and one boy approached the mine’s entry gate on an unpaved public road. Carrying rocks, sticks and machetes, they were there to protest the Minera San Rafael mining company, a wholly-owned subsidiary of Canadian-parent, Tahoe Resources, where the author worked as the General Counsel.¹ Local law enforcement and management had peaceably handled these protests for weeks. On this day, however, the manager of the security contract failed to call police and reportedly ordered guards to spray tear gas and fire rubber bullets to disperse the group. Authorities arrested the security manager on 29 April 2013 for causing ‘serious injuries’ and obstructing justice.

A costly altercation

While the public prosecutor never charged Minera or Tahoe with wrongdoing, both companies nevertheless paid a hefty price for an incident that they otherwise might have averted. In 2014, seven of the protestors found legal representation in Canada and sued Tahoe Resources in British Columbia for personal injury damages in Adolfo Agustin Garcia Garcia et al v Tahoe Resources Inc² – a high profile international case underwritten by a Canadian social justice group. While six of the plaintiffs alleged minor injuries, a seventh claimed he was shot near the eye, requiring surgery. Beyond the human toll, the reputational damage clouded the business for years. In addition, the claim had significant implications for Canadian multinational corporations, as it sought to dramatically expand the legal duties and potential liability of parent companies operating abroad (this happened recently in Nevsun Resources Ltd v Araya³ when the Canadian Supreme Court held in February that modern corporations should not be excluded ‘under customary international law from direct liability for violations of “obligatory, definable, and universal norms of international law”’ – in this case, laws against forced labour, slavery, cruel, inhuman or degrading treatment, and crimes against humanity).

Represented by impassioned but distant plaintiffs’ counsel in Canada and encouraged by a non-governmental organisation (NGO) lawyer in Guatemala, four of the men refused to settle and for five years, their complaint remained in the public eye. International NGOs funded speaking tours for certain plaintiffs in the United States and Canada, where they and their counsel had a significant public platform from which to make allegations about Minera’s environmental and community record and allege that Tahoe is a reckless human rights abuser. Mining Watch Canada and anti-mining opponents in Guatemala set up a popular website – ‘Tahoe on Trial: Guatemalan plaintiffs seek corporate accountability in Canada for violence’.⁴ In 2015, the Norwegian pension fund divested its assets from Tahoe in a public document, citing an unacceptable risk of human rights violations. Between the incident and the final settlement of the case, the company paid costly litigation bills and spent countless hours of valuable management time.

A lesson learned

All of the above might have been avoided. When starting a business or building a new project, companies face tough decisions about how to allocate spending. This is especially true for small- to medium-sized companies. Thin margins and a ticking clock may discourage small and even mid-cap companies from commissioning costly and time-consuming impact assessments. The market and investors wait impatiently for the start of commercial production and signs of profitability. If the project is in a remote area and the government does not require this type of evaluation, many companies employ a strategy of ‘staying beneath the radar’ and not ‘poking the bear’.

While a company’s reluctance to embrace time-consuming voluntary community studies and ‘soft law’ standards is understandable, it is no longer justified. Nor is it smart business. Just as a responsible business would not settle for a mediocre engineering design or environmental plan (even if the host country permitted it), it should never defer early baseline work, social and security due diligence and strategic community plans.

After the Guatemalan mine gate incident, Tahoe’s Legal Department led an internal company alignment with the Voluntary Principles on Business and Human Rights (VPs). This resulted in the construction of a buffer zone at the gate, human rights training for contract and public security, a cooperation agreement with the Security Ministry to use force as a last resort, and quarterly human rights audits and workshops for contract security. Although it is impossible to demonstrate causation, Tahoe did not have another significant security incident at the entrance of the mine after taking these measures.

The company also adopted the United Nations Guiding Principles on Business and Human Rights (UNGPs) as an effective social risk mitigation tool. The UNGPs identify the independent responsibility of business to respect human rights: that is, to avoid people’s human rights being harmed through their activities or business relationships. They then provide a blueprint for business to meet its ‘respect’ obligations by doing things such as: (1) making a public commitment to respect human rights that is embedded into a business’ culture; (2) conducting human rights due diligence through which the business assesses risks to human rights, integrating those findings into its risk mitigation strategies, tracking effectiveness, and communicating efforts internally and externally; and (3) providing a remedy to anyone who is harmed where the business caused, or contributed to, that harm, whether it is actual or perceived.

Tahoe started its implementation of the UNGPs in the fall of 2013 and, over the next two years, adopted a human rights policy, conducted assessments and trainings under the UNGPs, and completed an internal impact assessment and management plan to identify and address project impacts through, among other measures, a UNGP-aligned grievance mechanism. The latter was a simple and accessible communications system enabling locals and employees to make a suggestion or lodge an anonymous complaint. The company then committed to resolve or close out all recorded complaints according to a specified timeline. The ‘Tú Cuentas’– ‘you tell’/or ‘you count’ – programme included an anonymous phone line and web-based means of communication, an office in the town of San Rafael Las Flores, and employee and community training on how to make best use of the system. The Tú Cuentas software did not cost a lot of money but it did help build trust with the community and the workforce. Non-judicial grievance mechanisms are especially important in developing countries that offer limited judicial recourse for individuals whose rights are infringed or negatively impacted by a multinational company.

As a company’s chief legal risk mitigator, corporate counsel plays a critical role here. Just as we business lawyers drive strategies around regulatory compliance and governance, we must help our clients develop tailored programs to measure and address human rights and other negative operational impacts early and often. Our communities and investors deserve it and business success depends upon it.

Notes

1 Edie Hofmeister is the Vice Chair of the International Bar Association’s Business Human Rights Committee. Between 2010 and 2019, she served as EVP General Counsel of Tahoe Resources, a precious metals mining company with operations in the Americas, where she headed the Legal and Sustainability Departments. All facts cited in this article are in the public record. The opinions are those of the author.

2 2017 BCCA 39.

3 2020 SCC 5, 12 March 2020.

4 At https://tahoeontrial.net accessed 24 September 2020.