CORPORATE ENVIRONMENTAL OBLIGATIONS AND DIRECTORS LIABILITY SEPTEMBER 30, 2013

Overview Liability of Corporations Directors and Officers Liability Financial Disclosure Obligations and Shareholder Accountability Sustainability Reporting

Liability of Corporations Corporations have legal personality distinct from shareholders (Salamon) Parent corporation have legal personality distinct from subsidiary Corporate veil can shield directors and officers from criminal accountability for environmental wrongdoing Criminal law applied to corporations “a vigorous form of administrative law”?

Liability of Corporations How to influence corporations to avoid such wrongdoing? How to establish corporate guilty mind? Fair to treat individual polluters differently from corporate polluters? Corporations can’t be put in prison Vicarious liability? Alberta EPEA Corporations may be held liable directly if “directing mind(s)”

Choc v. Hudbay Allegations of murder/rape against security personnel engaged by Hudbay subsidiary in Guatemala Plaintiff argued evidence that Hudbay had control over security personnel, Hudbay senior executives in charge Piercing the corporate veil or direct accountability of directors/officers of Canadian parent corporation Hudbay?

Choc v. Hudbay Under what circumstances is corporate veil allowed to be pierced? “complete domination and control and shield for fraudulent conduct” “Wrongdoing not enough” “Very use of [subsidiary] must be to avoid responsibility for wrongful conduct” Amnesty arguments that international norms support broader piercing of corporate veil?

Criminal Code S.22.2 In respect of an offence that requires the prosecution to prove fault... an organization is a party to the offence if, with the intent at least in part to benefit the organization, one of its senior officers (a) acting within the scope of their authority, is a party to the offence; (b) having the mental state required... and acting within the scope of their authority, directs the work of other representatives of the organization so that they do the act or make the omission specified in the offence; or (c)... does not take all reasonable measures to stop them from being a party to the offence.

Directors and Officers Liability Assuming imposition of liability, what is the impact on corporate behaviour Fines (even when imposed) are modest Imposing personal liability on corporate decision-makers as an effective approach to affect behaviour? Require directors present at sentencing (Northwest Territories Power) Impose order for an apology?

Directors and Officers Liability CEPA 1999 S. 280 If a corporation commits an offence under this Act, an director... who directed, authorized, assented to, acquiesced in or participated in the commission of the offence is a party to and guilty of the offence, and is liable on conviction to the penalty provided for by this Act... whether or not the corporation has been prosecuted and convicted.

Directors and Officers Liability CEPA 1999 What conduct would amount to assent or acquiescence? S.280.(2) Every director and officer of a corporation shall take all reasonable care to ensure that the corporation complies with (a) this Act and regulations; and (b) orders and directions...

Duty of Care and Onus of Proof Must the Crown prove failure to prove failure to take reasonable care as element of the actuus reus? Bata, Commander Business Furniture Director or officer has onus on a balance of probabilities to prove reasonable care carried out (Ontario EPA s.194.(2) Order prohibiting corporation from indemnifying director for fine levied Bata

Financial Disclosure Obligations Disclosure of environmental information under securities laws Canadian Securities Regulators: key environmental matters to be disclosed: –Environmental risks –Trends and uncertainties –Environmental liabilities –Asset retirement obligations –Financial/operational effects of environmental protection requirements

Shareholder Accountability Shareholder activism –Participation in corporate shareholder meetings –Call for distribution of shareholder motions –Solicitation of proxies Sustainability reporting Corporate social responsibility: a fig leaf or what?

Concluding Thoughts Arguably, private sector corporations concern themselves about compliance out of proportion to the risks of prosecution or public opprobium Would increasing enforcement increase compliance? What law reforms make sense?