Why a B.C. court is hearing a Guatemala mining case

Three years of legal wrangling lands Tahoe Resources lawsuit back in BC Supreme Court

Standing above Guatemala's Escobal mine in 2015, Artemio Castillo Herrera (left) and his son are among 20 protesters who claim they were shot by mine security personnel. Castillo is one of the seven Guatemalan men who filed the Canadian lawsuit against Tahoe Resources Inc. three years ago. | Credit: Hayley Woodin

It took three years and three courts to determine where to sue Tahoe Resources Inc. (TSX:THO; NYSE:TAHO) for battery and negligence.

The original lawsuit – a response to a violent altercation at a Tahoe subsidiary’s Guatemalan mine site – was filed in June 2014, then set aside, as lawyers on both sides of the case argued whether British Columbia or Guatemala was the more appropriate forum for the suit.

In 2015, the Supreme Court of British Columbia ruled it was the latter; earlier this year, the BC Court of Appeal decided it was the former.

Most recently, Tahoe applied for leave to appeal to the Supreme Court of Canada. The court’s decision not to hear the case means the lawsuit will proceed in British Columbia.

“We’re of course disappointed that the Supreme Court took a pass,” said Edie Hofmeister, vice-president of corporate affairs and general counsel at Tahoe. “We’re kind of at Square 1 here, really.”

Square 1 meaning Tahoe will now respond to the original notice of claim filed three years ago, though with one notable difference: three of the seven plaintiffs who first filed the suit settled with the company in April.

Hofmeister said the details of the settlement are confidential, but confirmed that the three men negotiated as a group. Only four of the plaintiffs will be pursuing legal action in B.C.

Guatemala vs. British Columbia

Tahoe has spent years arguing that the lawsuit, filed by Vancouver law firm Camp Fiorante Matthews Mogerman, was better suited to Guatemala. It’s the location of the Escobal mine, which is owned by Minera San Rafael, Tahoe’s Guatemalan subsidiary. It’s where the original seven plaintiffs alleged the mine’s private security personnel deliberately shot and injured them during a protest.

Michael Feder, a Vancouver-based partner with McCarthy Tétrault LLP, represented Tahoe in its application to the Supreme Court of Canada. Before the court decided against hearing the case, he told Business in Vancouver why Tahoe was applying for the right to appeal to Canada’s highest court.

“The dispute is not about whether these plaintiffs should be able to sue. No one is saying they shouldn’t be able to sue. The dispute is about where the suing should happen,” he said.

“Everything points to Guatemala. B.C. is simply not the natural place to litigate this case. The fact that Tahoe happens to be a company incorporated in British Columbia is the most that can be said.”

That Tahoe is registered in the province, however, is enough for a B.C. court to claim jurisdiction over it, according to Joe Fiorante, a partner at Camp Fiorante Matthews Mogerman who has represented the plaintiffs throughout all stages of the case’s progression through the Canadian court system.

“The basic rule across Canada has been established,” he said, “and that’s that Canadian courts have jurisdiction over companies that are incorporated here, and in normal circumstances, they will allow a case against a Canadian company to go forward in Canada.”

The exception to the rule is that in some circumstances, a court may decline to hear a case on the grounds that another forum would be more appropriate. The BC Supreme Court did that in 2015 when it dismissed the lawsuit.

In a similar case – a lawsuit brought by three Eritrean workers against Nevsun Resources Ltd. (TSX:NSU) – the BC Supreme Court dismissed the mining company’s application to have the case tried in Eritrea.

In both cases, B.C.’s courts took into account the level of corruption in the foreign country. In Tahoe’s case, the Court of Appeal ruled the Supreme Court did not place enough weight on the risk that the plaintiffs would not receive a fair trial in Guatemala, noting “evidence of endemic corruption in the Guatemalan judiciary.”

“We don’t have a single Supreme Court of Canada case that deals with the issue of alleged corruption or incompetence in the foreign legal system,” said Elizabeth Edinger, an associate professor at the University of British Columbia’s Peter A. Allard School of Law, who has expertise in private international law.

Before the Supreme Court decision, she gave Tahoe a 50-50 chance of being successful in its application. It’s rarely clear why Canada’s Supreme Court accepts or rejects a case: judges do not need to disclose their reasons.

However, Edinger noted that whether a case is of national public importance is typically a factor. Another is whether there have been conflicting decisions made by lower courts on similar matters across the country.

In arguing against the application, Fiorante said this hasn’t been the case with Tahoe.

“When it’s come up, the lower courts have not had any difficulty assessing whether the evidence that’s been presented is adequate or sufficient or reliable enough to show that there are significant weaknesses [in a foreign judicial system],” he said.

Edinger, Fiorante and Feder all stated that the Supreme Court’s decision against hearing the case does not mean the court approves of the BC Court of Appeal’s decision that the case should be allowed to proceed in B.C.

“It’s a process,” said Fiorante. “The fact is they have so many applications, and only a small percentage are granted leave. You can’t read anything into it.”

From where, to whether

Fiorante was not surprised that Tahoe tried to have Canada’s highest court hear the case. He expected a decision by the fall of 2017.

With the application’s rejection this month, and a decision by the BC Court of Appeal on where the case should be tried, the question now becomes whether, and to what extent, Tahoe is liable for the actions of mine security personnel hired by its subsidiary.

“We’ll be vigorously defending our case on the merits,” said Hofmeister, who reiterated that Tahoe believes Guatemala would provide the better forum for the suit.

“We would contend that under the law in Canada, Guatemala law applies. So a lot of that law will give us a good defence to some of the Canadian claims,” she said, declining to elaborate further on the company’s strategy.

At press time, Fiorante was unavailable for comment on the plaintiffs’ settlement or their strategy.

Hofmeister noted that Tahoe remains interested in working toward a settlement with the remaining four plaintiffs.•