Guns, Dogs, and Lawsuits: Miners Risk Rising Legal Challenges When Operating in Conflict Areas

The legal risks for mining companies operating in conflict-affected areas are increasingly complex.

Mark Camilleri

African-soldier-hires-BLOGMining is, by its very nature, a global business. Unlike most other industries, the mining industry has little scope for choice about where to locate – it goes where the minerals are located. Today, many of the most exciting under-explored and under-developed projects are located in conflict-affected areas. While mining projects in these countries can do tremendous good for local economies, companies operating in these jurisdictions assume a great deal of risk.

Miners are particularly well versed in notions of risk and reward. Although proficient in managing traditional risks, mining companies in conflict-affected areas are also exposed to operational, security and, increasingly, legal risks. In enlisting the services of security forces, whether public or private, a mining company can find itself legally liable if these forces commit crimes. Even where legal liability is ultimately not attributed to a company, the costs and damage to a corporate reputation, and the costs associated with the loss of a social licence to operate, can be enormous.

Conflict-affected areas are not just war zones

While many would associate a conflict-affected area with a war zone, the term is much wider. For the purposes of this article, the definition given by the UN Global Compact (“Global Compact”) of conflict-affected areas (“CAA”) is a helpful one. According to the Global Compact, the term ‘conflict-affected area’ includes areas or regions which are not experiencing high levels of armed violence, but where political and social instability prevails; areas where there are serious concerns about abuses of human rights being committed; ones where violence is prevalent, including inter-state and civil wars; and ‘post-conflict’ societies which remain highly volatile. Violations, particularly those of the gravest nature (‘gross human rights violations’), are more likely to occur in CAAs. Companies, like mining companies, which rely on security for the protection of company personnel and assets, may face allegations of involvement in crimes committed by security forces.

Positive role of mining companies to economies in conflict-affected areas

Mining companies can be a force for positive change in CAAs, where economic development is one of the main avenues to breaking out of the cycle of violence and building lasting peace. Moreover, given that CAAs are often overly reliant on foreign aid, the private sector investment made by mining companies can facilitate longer-term structural improvements to the economies of these areas.

Mining companies and violations of gross human rights violations

Despite having a positive role to play in CAAs, mining companies have been attacked by civil society for their alleged responsibility for human rights violations. The growing consensus, as expressed in the UN “Protect, Respect and Remedy” Framework, ascribes businesses with a responsibility to respect human rights. Where CAAs are concerned, this responsibility is supported by potentially significant legal consequences.

The following is a brief overview of various ways mining companies operating in CAAs can find themselves caught in a web of legal liability.

International Humanitarian Law

As the above definition states, CAAs can include situations of on-going violence. In these situations, a CAA may be a non-international armed conflict for the purposes of International Humanitarian Law (“IHL”, that is, the law of armed conflict). In some circumstances, IHL can apply directly to companies. Even in situations of armed conflict, the application of International Human Rights Law continues to apply in law enforcement situations. As such, companies operating amidst armed conflicts must be well informed by experts in IHL (and human rights principles) in how to manage their business and relationships and avoid running afoul of this complex area of law.

International Criminal Law

In both CAAs and non-conflict environments, mining companies can find themselves liable for, or complicit in, breaches of International Criminal Law. Very simply, complicity occurs when a person knowingly helps another to commit a crime. In the case of mining companies in CAAs, corporate complicity has become a standard allegation where gross human rights violations are perpetrated by public or private security forces.

At present, international tribunals do not have jurisdiction over corporations (although the jurisdiction over individual directors and managers of corporations was established during the Nuremberg trials at the end of World War II). Nevertheless, many national jurisdictions (including Canada, Australia, South Africa and the United Kingdom) prohibit aiding and abetting and allow for the criminal prosecution of corporations.

Civil litigation

In addition to criminal law, companies can be held civilly liable for breaches of human rights law or complicity in respect of such breaches. The United States in particular has witnessed a number of high profile cases involving companies (many of which have been extractive companies) sued for their role in gross human rights violations outside the U.S. The high number of cases in the U.S. is largely attributed to the existence of the Alien Tort Statute (the “ATS”), an 18th century piece of U.S. legislation that allows non-Americans to sue a party under civil law for violations of the law of nations.

The ATS jurisprudence is complex and not entirely consistent, which represents a risk to companies in terms of the predictability of litigation outcome. Recent ATS rulings (including the U.S. Supreme Court ruling of Kiobel v Shell which limits the ATS to claims that “touch and concern” the U.S.) have raised questions about the future application of the ATS in the business and human rights field. Nevertheless, ATS cases have advanced the concept of corporate complicity, raising issues of business and human rights more generally.

Recently, there has been a rise in civil actions outside the U.S. for corporate breaches of human rights. In the UK, London-listed Monterrio Metals plc was charged with complicity in the torture of 33 Peruvian farmers (leading to an out-of-court settlement in 2011); and in Canada, Hudbay Minerals Inc. and Tahoe Resources Inc. are each facing civil actions over allegations of human rights violations in connection with their respective mining operations in Guatemala.

International Codes

A number of voluntary multi-stakeholder initiatives have been developed in recent years to assist companies with their responsibility to respect human rights. While companies are not legally obliged to adopt these codes, adhering to them demonstrates their commitment to respecting human rights. In addition to the Guiding Principles on Business and Human Rights (the “GPs”), mining companies can benefit from the International Council on Mining and Metals Ten Principles as well as the Voluntary Principles on Security and Human Rights (the “VPs”).

Mining companies would be well advised to comply with one or more of these voluntary regimes. However, without a proper understanding, implementation and monitoring of these commitments, companies can find themselves subject to further legal liability. In particular, companies that fail to adhere to the voluntary codes of conduct that they have committed to are increasingly at risk of direct claims of negligence. In this way, these voluntary codes – or, more specifically, the failure to understand, adopt and apply them – can give rise to their own legal risks.

Managing risk

At the heart of corporate human rights codes is the need for companies to engage in human rights due diligence. While the concept of due diligence is one that is well understood by companies, the unique and evolving nature of human rights makes the concept of human rights due diligence a particularly dynamic process. Human rights due diligence is an on-going process – as opposed to a single one-off exercise – as the risk of violating human rights (or being complicit in such violations) is ever present, particularly in CAAs. Moreover, human rights due diligence requires experts with specific expertise. In CAAs, where business takes place in less stable and more uncertain operating and legal environments, on-going risk assessments on third parties (particularly public or private security companies) are particularly important to avoid complicity (or allegations of complicity) in the crimes these forces may commit. As part of its risk management strategy, companies should also make use of third party assurance providers, such as Tsamota Natural Resources, to ensure that they are correctly complying with their codes of conduct and limiting their exposure to legal liability.

Conclusion

In conclusion, the legal risks for mining companies operating in conflict-affected areas are real and increasingly complex. Mining companies are, of course, not without resources, not least codes and third party experts who exist to manage these risks. Prudent miners, particularly those operating in conflict-affected areas, are advised to draw on these resources to uphold a legacy in CAAs that is – and remains – a positive one.

About the Author: Mark Camilleri is General Counsel of Tsamota Limited and a member of Tsamota Natural Resources. He is a lawyer qualified in Canada and England and Wales. He was a partner in the London office of an international law firm where he practised as a mining law specialist. He holds an LL.B., MBA and LL.M. Tsamota Natural Resources offers assurance services to help mining and oil and gas companies manage legal, reputational, and financial risks associated with the contracting of private and public security forces.

This article was featured in the Mining in Africa Country Investment Guide (MACIG) 2015, which was published in February 2015 and can be viewed here. To participate with your comments, please contact Sharon Saylor at ssaylor@gbreports.com.

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