In November 2015, closing arguments were heard in a lawsuit that may have important consequences for the Canadian mining industry. Northern Superior Resources Inc. (TSX-V:SUP), a Sudbury, Ont.-based junior exploration outfit, is seeking $25 million in compensation from the Ontario government after it had to abandon its interests in a promising gold project due to a financial dispute with the Sachigo Lake First Nation. In its lawsuit Northern Superior alleges that the impasse was created after the province failed to fulfill its legal duty to properly consult with the Sachigo.
“This case will test out what resource companies can expect from governments and whether they can be compensated when governments do not come through. It may also affect the readiness of entrepreneurial junior companies to take on the risks of mineral exploration in Canada,” says Dwight Newman, professor of Law and Canada Research Chair in Indigenous Rights at the University of Saskatchewan.
Lawsuits are routine in the extracting world, but more often they involve First Nations groups trading actions with government or a resources company. Legal actions by industry against the Crown, of which this is just one of four similar suits in recent years in Ontario, are relatively new phenomena. What’s going on?
The cause is a lack of clarity around the duty to consult with First Nations, Métis and Inuit peoples, a process that affects a vast number of resource projects across the country, from exploration starts to huge, multi-billion-dollar ventures like the proposed Northern Gateway pipeline in B.C. And while court rulings bring a focus to the concern, the actual fallout is widely felt, affecting existing relationships, potential new projects, community development and putting companies in a tough spot. It’s an issue that may become even more contentious in coming months, depending upon measures taken by the Liberal federal government, which has indicated that it will do more to accommodate First Nations’ interests.
THE STIPULATION FOR consultation and engagement with First Nations, Métis and Inuit groups is the 2004 legal decision by the Supreme Court of Canada in Haida Nation v. British Columbia (Minister of Forests). In that case, the court held that anytime the Crown considers a decision that could have an adverse impact upon aboriginal or treaty rights, the Crown must consult with aboriginal groups whose rights may be impacted. This is commonly referred to as the “duty to consult and accommodate.”
The type of consultation that may be required lies on a spectrum. At one end, the only duty on the Crown may be to give notice and discuss any issues raised in response to the notice. At the other end, deep consultation, including an opportunity to make submissions, formal participation in decision-making, and written reasons to show that aboriginal concerns were considered, and the impact they had on the decision may be required.
In the 12 years since the historic ruling, a myriad of court cases have brought a sharper understanding to the dimensions of duty to consult. Even so, the legal wrangling has not resolved all of the questions and any company going into a new venture should know there’s no standard duty-to-consult playbook.
According to Keith Bergner, who advises private and public sector clients on aboriginal law and regulatory matters for Lawson Lundell LLP in Vancouver, defining the scope of consultation and the extent of accommodation is difficult because there is a sliding scale of variables. “It differs from case to case and is driven by several factors, most notably the strength of a claim of aboriginal title and the potential impact of the project that is being considered,” says Bergner.
But it’s a bigger obstacle that’s upsetting the process and driving companies to the courts. Specifically, although the 2004 ruling allows the Crown to delegate procedural acts of consultation to third parties, the burden of ensuring that meaningful consultation occurs remains with the Crown—yet increasingly that is not what is happening today. In Ontario, Newfoundland, Labrador and B.C. much of the weight of consultation is being shifted to the proponent (i.e., mining or other resource companies). This tactic has put industry in a confusing position—being responsible for consulting, while having no legal requirement to do so.
For miners in Ontario, this “shifting” came with the rewriting of the provincial Mining Act in 2012—by which time the three duty-to-consult-based suits that preceded North Superior’s current action had been filed. Two were settled, while the third—in which junior miner Solid Gold Resources Corp. (TSX-V:SLD) sued the Ontario government for $110 million in damages after a First Nations group derailed the company’s exploration efforts near Lake Abitibi in 2012—has yet to make it to trial.
Under the revised rules, holders of mining claims have to file exploration plans and apply for exploration permits before commencing activities where aboriginal interests may be involved. That’s a major departure from the past, when companies had “free access” to any land that contained Crown-owned minerals. Prospectors could stake their claims with wooden posts and obtain mineral leases with no need to consider the interests of property owners or the public.
Neal Smitheman, a partner at Fasken Martineau DuMoulin LLP in Toronto who represented Solid Gold in its recent dispute with the provincial government and the 234-member Wahgoshig First Nation, says the new rules reinforce the image of a province washing its hands of its own duty to consult. “They’ve simply pulled a Pontius Pilate and downloaded the obligation to consult to industry.”
Smitheman claims that the new regulations place an added burden on junior mining companies who often don’t have the financial resources to provide what is now being asked of them. “I compare these junior companies to a prospector with a mule,” he says. “They operate on shoestring budgets and flow-through financing. They can’t afford to pay significant amounts of money to accommodate First Nations’ requests.”
The “free entry” mining policy still applies in Quebec, B.C. and the Northwest Territories, but it is starting to look like an endangered species as provincial governments assign more of their legal responsibilities to industry. In 2012, The Supreme Court of Yukon ruled in favour of the Ross River Dena Council, requiring the territorial government to consult the First Nation before opening up any of its asserted land for mineral staking. As a result, Yukon overhauled its mineral exploration code.
In another, high-profile case from outside the mining sector, the B.C. Supreme Court ruled in January that the B.C. government had “breached the honour of the Crown by failing to consult” with the Gitga’at and other Coastal First Nations on the Enbridge Northern Gateway pipeline. The court challenge stemmed from the B.C. government’s agreement with Ottawa to conduct a single environmental assessment process under the National Energy Board, rather than conducting parallel federal and provincial reviews. As a result, the B.C. government now has to start from scratch on consulting with affected First Nations to prepare its own review, creating a new obstacle for the project.
WHY IS ALL THIS conflict happening? Attorneys who specialize in aboriginal law contend that several factors are involved. On one hand it’s a bid by government to reduce costs and minimize its own risks. Political will, or the lack of, also plays a part. “There is no such thing as an industry standard. It’s a messy, unregulated business,” declares Robin Junger, an industry consultant with McMillan LLP, and a former B.C. Deputy Minister of Mines, Energy and Petroleum and a Chief Treaty Negotiator for B.C. The situation becomes even more muddled when the Crown shirks its duty, says Junger. “It takes strength and backbone for government regulators to do what the courts say they must. It’s incredibly frustrating for industry when government won’t take positions in the face of First Nation opposition.”
Governments may also be delegating because from a purely practical standpoint there are some things they can’t possibly do as well as industry. “The crown often doesn’t have either the funds or the resources to engage in meaningful consultation,” notes Alex Monem, a partner with Pape, Salter, Teillet LLP in Toronto. In the case of a mining project, for example, modifying the design, addressing environmental concerns and cutting financial deals are all things that the Crown can’t do.
Short of fighting the government, then, companies trying to advance projects have to adapt and be prepared to do more of the groundwork and heavy lifting. And to do it well, which is in itself a huge challenge. “The object is to establish a dialogue, set up a consultation program and decide what topics it will cover, who is involved and when things will happen,” says Keith Bergner. “Get on it early and with vigour.”
Bruce McIvor, a principal with First Peoples Law, a Vancouver firm that serves First Nations clients, says in his experience industry and government often do the opposite, treating consultation merely as a means to allow First Nations to blow off steam. “Companies will make notes and check off all the appropriate boxes and then do what they intended to do in the first place.
“One chief told me, ‘When company people come to talk about our concerns I want them to show up with a blank piece of paper.’” It’s a sign of respect and a willingness to listen, says McIvor, but too often a company will set a combative tone by talking about how aboriginal groups don’t have a veto or referring to them as ‘stakeholders.’ “Ducks Unlimited is a ‘stakeholder,’” says McIvor. “First Nations have constitutional rights.”
When companies and those communities do get to dialogue, social values must be taken into account. First Nations often want to be involved in environmental assessments because of the importance of the issue in their culture. There is a custodial element in play. “My clients believe that they have an obligation to protect the land for future generations,” explains McIvor.
First Nations are also unhappy with other procedural aspects of the process. Because of where they are located, many bands are simply overwhelmed by the number of development applications that they are supposed to be reviewing. In parts of B.C. where oil and gas, forestry and mining projects overlap, some First Nations will receive hundreds of different land-use applications annually, each with a tight time limit for a response.
Then, too, there is also the government requirement that every piece of conversation between the proponent and the First Nation must be entered into consultation logs. “It’s difficult to build trust when you know that every time a phone rings the conversation is going to find its way onto a consultation log,” explains Monem. “The strict formality of the process gets in the way of successful negotiations.”
Not surprisingly, perhaps, all these frustrations are leading to unintended workarounds. According to Dwight Newman, it is becoming more common today for companies to shut the government out of the discussion entirely by devising comprehensive impact benefit agreements that typically offer a community a number of economic perks including training, employment and a share of profits, in return for signing a “reserve clause” that forbids the First Nation from raising any duty to consult issues with governments or in the courts. “The irony is that all these benefits are obtained by deliberately circumventing the uncertain and unwieldy duty to consult,” says Newman.
LURKING BEHIND THE continuing debate over consultation is another C-word—consent.
This is what First Nations are striving to get, and it is something that government and many in industry are determined to prevent because they see it as a tool that would enable First Nations to shut down projects unless their demands are met. Legally, we’re not there. “The law is very clear that consultation does not grant First Nations a veto,” says Bergner. Yet, as Smitheman observes, “Consultation is moving closer to consent because if you don’t reach an agreement with a First Nation it becomes very difficult to get a permit.”
One aspect of the debate on which all sides agree is a need for clear national rules—or at least firm guidelines—for discharging duty to consult. Some suggest the answer might be a quasi-government agency positioned between the Crown, aboriginal people and project proponents.
But while the search for the elusive solution continues, other events are injecting new uncertainty. The Northern Superior decision pending in Ontario may move matters forward. Less clear is what’s to come of the federal Liberal Party’s campaign pledges to repeal or reform many pieces of legislation that do not respect the rights of indigenous peoples, including their right to be adequately consulted. One subject that the Liberals will almost certainly address is restoring tighter environmental standards, which were gutted by Stephen Harper’s government. But other initiatives remain hazy.
Perhaps the most controversial of these moves to promote reconciliation is the government’s indication that it will implement the United Nations Declaration on the Rights of Indigenous Peoples (UNDRIP), which calls for the “free and informed consent” of aboriginal peoples before green-lighting any projects affecting “their lands or territories.” This language raises a few questions, most notably whether it amounts to a blanket veto for aboriginals.
In order to gauge how significant a move this might be largely depends on the interpretation of the word “implement” says aboriginal law expert Thomas Isaac of Osler, Hoskin & Harcourt LLP. If “implement” is seen as an aspirational statement then it poses no great threat to the status quo. On the other hand, “If ‘implement’ means adopt into domestic law every provision of UNDRIP, then we’re going to have some real challenges in Canada,” says Isaac. “And that’s putting it lightly.”
Photography: Adam Blasberg