Activists Cheer Access to Canadian Courts for 13 Guatemalans

There is something of a celebration going on in Canada’s activist community over the recent ruling by an Ontario Superior Court judge that will allow 13 Guatemalans to bring three lawsuits against HudBay Minerals Inc. to Canadian courts.

Double standard on choice-of-law benefits?

The case is nothing if not complicated (see the position of the Canadian lawyers representing the plaintiffs here, and the position of HudBay here). But one of the most puzzling aspects of this case is why it has drawn the support of some of the very same activist organizations that oppose extending choice-of-law provisions to Hondurans, so that they, too, might have the opportunity to access a world-class legal system.

Startup Cities in Honduras

Those familiar with startup cities will know that no country has gone further to facilitate the emergence of new entrepreneurial communities with choice-of-law provisions than Honduras. In 2011, Honduras passed a constitutional amendment that permitted the creation of special development regions (regiones especiales de desarrollo, or REDs). While remaining “an inalienable part of the State of Honduras,” REDs were defined as “autonomous” legal entities with the power to “promulgate their own rules and have their own judicial entities.”

In effect, the special development regions were designed to offer startup communities in Honduras — a country with one of the highest homicide rates in the world and a 97 percent impunity rate for violent crimes — the chance to adopt the legal system of another jurisdiction with a stronger history of respect for the rule of law, all in the hope of establishing the stability and trust necessary to kick-start economic development.

Proposals to develop the REDs were diverse, from Paul Romer’s plans for a massive charter city that would accommodate millions and enlist the Supreme Court of Mauritius to hear judicial appeals (in turn providing upstream access to the UK Privy Council) to Michael Strong’s more modest proposal for free cities based on Texas state law that would start small and aim to scale up.

But resistance to the REDs was swift, particularly from the transnational activist community. Rights Action, which has tax-charitable status in Canada and the United States and works with civil society groups in Mexico and Central America, hit the ground running. Annie Bird, co-director of Rights Action, penned a widely circulated article that rejected RED development writ large, collapsing proposals for charter and free cities, admixing stories about a Canadian porn king and Salvadoran death squads, and suggesting, at the end of it all, that the adoption of a distinct legal system in the REDs amounted to “neocolonialism.”

Interestingly, however, while Bird and colleagues were arguing against the choice-of-law provisions made possible by startup cities in Honduras, Rights Action was throwing its support behind the case of 13 Guatemalans seeking to bring three lawsuits against Toronto-based HudBay Minerals to Canadian courts.

Impunity and Double Standards

In 2011, the year the lawsuits against HudBay were filed, Rights Action announced that it was “funding and working directly” with the families and communities involved in the case. The following year, Rights Action organized a fundraising drive to support what it described as a “precedent-setting corporate accountability lawsuit,” asking supporters to send contributions to the Canadian law firm representing the Guatemalan plaintiffs, Klippensteins, Barristers and Solicitors of Toronto.

Source: Canadian Press/Nathan Denette

The law firm launched a website dedicated to the HudBay case that invited visitors to consider a simple but important question: Why sue in Canada? The bulk of the firm’s response to that question centers on the failings of the judicial system in Guatemala. The Klippensteins quote the United Nations, Human Rights Watch, and the Inter-American Commission on Human Rights — all of which have issued statements decrying the level of impunity in Guatemala, where 98 of every 100 cases never make it to court.

Given that these same international monitoring institutions have pointed to a comparable level of impunity in Honduras (for example here, here, and here) and that representatives of Rights Action have stated categorically that “there is no rule of law” in Honduras, it is unclear why activists seem to have adopted a double-standard on choice-of-law benefits, supporting Canadian arbitration of the Guatemalan case but preferring Hondurans remain trapped in domestic legal dysfunction.

Democracy and Its Discontents

The situation in Honduras is dire. Every year, 80,000 to 100,000 people leave the country in search of informal (officially, illegal) work in the United States. Hundreds die en route. Among those who make it, more than 50,000 face deportation annually.

Activists are correct to say that Honduras does not meet the minimum requirements of a robust democracy, particularly considering the 2009 constitutional crisis which resulted in the removal of then-President Manuel Zelaya. However, critics in the mainstream media and the transnational activist community who reject startup cities wholesale on the grounds that they are “anti-democratic” overlook two key points.

First, multinational corporations in Honduras, as elsewhere, already benefit from choice-of-law clauses that allow the parties to a contract to designate the jurisdiction whose law will govern the arbitration of disputes. Startup cities offer the possibility to extend analogous choice-of-law benefits to individuals, who can opt-in (as residents and entrepreneurs) to a legal system that is distinct from Honduran law. To the extent that a startup city adopts a legal system from a jurisdiction internationally recognized for respecting the rule of law, this leads to the democratization of good law. (It is worth underscoring that no one who feels the legal system adopted by a startup city to be inferior to Honduran law is compelled to move there.)

Second, longitudinal data from Latinobarómetro (1995-2010) reveal that more than 70 percent of Honduran respondents regard economic development as either more important than (49.4 percent) or equally as important as (22.8 percent) democracy. Moreover, when asked about the most important characteristics of democracy, Honduran respondents give equal emphasis to “regular and transparent elections,” “equality before the law,” and “freedom of speech” as they do to “an economy that ensures a decent income.” In other words, economic development is central to the way in which Hondurans conceptualize democracy.

To insist that Honduras shelve plans for startup cities and close its doors to foreign investment — as transnational activists have argued in both the press and parliamentary testimony in Canada — is to disregard Latinobarómetro polling that shows 93.8 percent of Honduran respondents regard foreign investment as beneficial for economic development. While 70 percent of Hondurans polled fear they might lose their job in the year ahead, the majority say free trade agreements (65 percent) and private investment (75 percent) have a positive or very positive impact on opportunities for work.

Activists concerned with ensuring that Hondurans have “a voice” ought to at least pay attention to what they are saying.

The Burden of Proof

In late 2012, the Honduran Supreme Court ruled that the legislation facilitating the creation of special development regions (REDs) was unconstitutional. However, the objections raised by the Supreme Court were reconciled by three constitutional amendments passed by the Honduran Congress in January 2013. This was followed, in June of 2013, by the passing of a law governing the creation of Zones of Employment and Economic Development (Zonas de Empleo y Desarrollo Económico, or ZEDEs, which are the revised version of REDs). The new legislation not only allows undeveloped land to be dedicated for startup cities, but also allows existing municipalities to opt-in to ZEDE status through a referendum process, addressing concerns that startup cities would unfairly disadvantage existing municipalities. (For an English-language overview of the ZEDE legislation, click here).

Source: Associated Press/Fernando Antonio

Against this backdrop, the debate over startup cities continues.

By supporting the pursuit of the HudBay case in Canadian courts, transnational activist organizations such as Rights Action and the North American Congress on Latin America (see a previous post on NACLA here) have signaled the importance of choice-of-law benefits in principle.

Now, the burden of proof is on these organizations to explain why, if justice demands Canadian law be used to adjudicate the cases of 13 people from a Maya Q’eqchi community in Guatemala, thousands of Hondurans should be denied the opportunity to opt-in to choice-of-law benefits in startup cities.

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