Canada: Stuck In The Middle: Managing Litigation With First Nations

Challenges by First Nations of resource project approvals have become part of the legal landscape facing the mining industry in Canada. Project proponents find themselves stuck in the middle of a dispute that is legally between First Nations and the Crown. Such litigation is typically based on the allegation that the government (i.e. the "Crown") has breached its constitutional duty to consult a First Nation(s) whose interests may be affected by the government approval in issue. The government is often the primary defendant in the litigation, with the resource company named as a secondary party (or in a position to insist that it be named as a party) simply on the basis that its rights would be affected by the relief sought (which is generally to cancel, or suspend the effect of, the approval granted). While the company will have the right to introduce evidence and make legal arguments, the approval generally stands or falls based on the Court's assessment of whether the Crown's duty to consult has been satisfied.

The question then becomes: what can a resource company whose government approvals are caught up in litigation brought by a First Nation do to uphold approvals that, ultimately, have to be defended by the Crown?

Keep a complete record of the process

In Haida Nation v. B.C. and Weyerhaeuser,1 the decision of the Supreme Court of Canada that established the nature of the Crown's constitutional duty to consult First Nations, the Court stated that while "a meaningful process of consultation" is required, "... there is no duty to agree." This means that every consultation opportunity provided to First Nations potentially affected by the proposed activities for which government approval is sought is relevant, even if these consultations do not lead to agreement. It is therefore critical to keep complete records of all efforts to communicate with First Nations, even if unsuccessful, including attempts to arrange meetings and unanswered emails, letters and telephone calls. A First Nation has no legal obligation to participate in consultation about a proposed resource extraction activity, but its failure to do so can weigh against it if it subsequently seeks to challenge the government decision.2 Where the company can provide evidence of its own efforts to provide consultation opportunities to First Nations in addition to those offered by the Crown, this can be of real assistance in responding to allegations that the government approval has been issued in breach of the First Nations' rights to be consulted.

All communications with First Nations can form part of the consultation record before the Court in litigation. Retain copies of formal written correspondence providing information about the proposed project, documenting concerns raised by the First Nation and how the company responded. Informal communications can also form part of the evidence. Keeping track of emails and good contemporaneous notes of telephone calls and in-person meetings is also essential in order to ensure that a complete history of the consultation process can be provided.

Keep an eye on the Crown

Because the outcome of the litigation will depend to a significant extent upon the sufficiency of the consultation process, the project proponent has a vested interest in doing whatever it can to ensure that the Crown is in the best possible position to defend the adequacy of its engagement with First Nations. It is generally a good idea for the proponent to find out what steps have been taken by the Crown to consult with First Nations that claim rights in the area of the proposed activities, and where these seem to fall short, prompt the Crown to do more. Sometimes, it may be necessary to escalate matters to more senior government officials who can direct that further consultation be carried out and/or allocate more resources so that government staff on the front line are able to increase efforts to engage with potentially affected First Nations. In addition, current best practice is for the proponent to try to engage with First Nations to inform them about the proposed activities and to explore what might be done to address any concerns they have. Within the litigation, it may be appropriate for the project proponent's counsel to take a lead role in making submissions and presenting the case to the Court.

Tell the proponent's story

As a matter of law, the duty to consult is a constitutional obligation of the Crown alone. However, there is no question that a record of positive efforts on the part of a resource company vis-à-vis First Nations will assist if litigation arises. A proponent who is seen to have acted honourably towards First Nations (even if no agreement is reached) will fare better in Court. The Court's perception of the company is important because, even where the Crown's consultation efforts are found to have fallen short of what is legally required, there is a discretion to grant a remedy that does not affect the project or activities in issue. A Court can order more consultation while leaving the approval under challenge intact. Evidence of respectful communications with First Nations, efforts to elicit and accommodate First Nations' concerns, and provision of capacity funding by the proponent to assist First Nations to participate in the consultation process, can all assist in persuading the Court not to penalize the proponent even where it is held that the duty to consult was not fulfilled. Proponents who are seen to have acted fairly are more likely to be treated fairly by the Courts.

Making the case for the rights of proponents

Sometimes, through no fault of its own, a resource company will find itself in a situation where the Crown has not handled its dealings with affected First Nations well and the company's planned activities cannot proceed, either due to litigation brought by a First Nation or an unstable situation on the ground. In such circumstances, some hold the view that the resource company ought to be able to claim compensation from the government for the loss of the value of its investment.

In October 2013, Northern Superior Resources Inc., an Ontario-based junior mining company, sued the Ontario government to recover the value of the mineral property it walked away from after demands from local First Nations led it to conclude that it could not continue its exploration program.3 The company alleged that the situation was created by the failure of the Ontario government to discharge its duty to consult with First Nations and to provide an adequate framework for dealings between mining companies and First Nations in Ontario. It claimed $110 million in damages (the appraised value of its mineral claims). Whether or not this case proceeds to court, it provides an interesting precedent for Canadian companies whose projects founder over inadequate government processes. The process for reconciliation of Crown and First Nations' interests is an important issue in Canada, but so is what happens to business interests in the meantime. The time may be ripe for proponents whose approvals are tied up in consultation processes to consider seeking remedies from the courts to protect their own legitimate interests.

Footnotes

1. 2004 SCC 73

2. See for example, Louis v. British Columbia (Minister of Energy, Mines and Petroleum Resources), 2013 BCCA 412 (summarized on page 8).

3. Northern Superior Resources Inc. v. Her Majesty the Queen in Right of Ontario, Ontario Superior Court of Justice, Court File No. CV – 13 – 491444

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