Innu lawsuit may reshape Canada’s natural resource landscape

Court case alleges British mining company has long discriminated against First Nations

How a $900-million lawsuit is shaping the future of Canada’s natural resource landscape

Damon van der Linde

http://business.financialpost.com/news/mining/how-a-900-million-lawsuit-is-shaping-the-future-of-canadas-natural-resource-landscape

15 April 2016

SEPT-ÎLES, QUE. — Flying in a helicopter over the Bay of Sept-Îles, Alexandre Pinette points to the mouth of the Moisie River where it empties from the north into the St. Lawrence River. Members of his Innu community used to live by the river every summer to fish salmon and trap, but he said they were moved by the government in 1949 to the permanent Uashat and Maliotenam reservations.  

“When the Innu came back in spring, their houses were destroyed. They had disappeared,” said Pinette, his voice crackling over the helicopter intercom. He adds that Innu were also displaced between 1948 and 1950 from what is now the Iron Ore Co. of Canada’s port, where huge mounds of the sparkling mineral are sorted and then loaded into waiting cargo ships.

A 578-kilometre railway stretches north from Sept-Îles’ deep-water port to where the mineral is dug from the ground. Here, the Innu claim the mines and other facilities have ruined the environment, displaced members from their territory and prevented them from practising their traditional way of life, while not giving much back to the community.

For the band councils of the Innu of Uashat-Maliotenam and Matimekush-Lac John, the almost 60 years of alleged damage is worth suing IOC for $900 million.

Although the allegations have yet to be proven in court, this case has already changed Canada’s natural resource landscape by clearing the way for Aboriginal communities to directly sue companies for damages instead of only being allowed to seek compensation from the government. The end result could be tens of billions’ worth of new lawsuits against Canadian companies.

The Innu have Impact Benefit Agreements with other companies in the area, including ArcelorMittal SA, which owns an iron ore mining operation just a few kilometers from IOC that started in the late 1950s.

Documents obtained by Radio-Canada show that the Uashat-Maliotenam band council receives between $12 and $15 million a year from these agreements, depending on the companies’ production.

But the Innu do not have one with IOC or its parent companies, global mining giant Rio Tinto, which acquired a 58.7-per-cent sake in 2000, Mitsubishi and Labrador Iron Ore Royalty Corp.

The Innu say IOC has sold nearly a billion tonnes of iron ore from its mines (at varying prices) in Schefferville, Que., and Labrador City, NL.

Negotiations broke down with Rio Tinto without a settlement in 2012 and the Innu got word the company was looking to sell its IOC assets. In March 2013, the Innu band councils sued.

“We sent a strong message to the company and all of their investors that would like to buy this company: before thinking to buy something, you should look at what is behind it,” said Jean-Claude Pinette, director of the Uashat mak Maliotenam land and protection office.

IOC was founded in 1949 and the success of its iron exports allowed the town to grow from 2,000 inhabitants in 1951, when the first ship carried ore from the port, to 14,000 in 1961 and a peak of 31,000 in 1981.  

The court case alleges IOC has long discriminated against First Nations. The most common complaint is that Innu workers were not given proper safety equipment, and were laid off after 59 days, just one shift short of the 60-day requirement for joining the union.

At the Uashat community centre, Bruno Jourdain, 84, said he worked for IOC in 1959 and wasn’t given a respirator when working around the iron dust.

“It was a deplorable situation, because everyone at that time wanted to work to support their family,” he said.

Although IOC declined to comment on the litigation, Arlène Beaudin, the company’s public affairs director in Sept-Îles, said its mining activities benefit everyone in the community.

“We share all the activities in town. We get together in schools, our kids and the Innu kids are all over the town and every time we invest in an activity in Sept-Îles, it’s good for everybody,” she said. “It’s not them or us, we are in Sept-Îles all together.”

The Innu say their complaint is with the company that has made profits, not the people who make their living directly or indirectly from it.

Florent Vollant, who was born in Labrador City near the Quebec border, said before the mine, his parents were trappers, hunters and fishers who traded furs with Hudson’s Bay Co. His parents also worked as guides when the prospectors came, helping them navigate the difficult terrain. But he said his family was displaced by iron mining operations close to to the Wabush mines.

“My parents believed in the mining companies,” he said. “But after a few years, the land became inhospitable and we left.”

Now a renowned Innu singer, Vollant in October 2014 was among those who hauled two enormous chunks of iron ore that were presented to the Sept-Îles Innu communities by Prime Minister Pierre Trudeau in 1970 to mark 100 years since the discovery of deposits in the Schefferville area onto a flatbed truck and dumped them 900 kilometers away in front of Rio-Tinto’s Montreal office. The chunks were dubbed the “Stones of Shame.”

That symbolic protest came one month after the Quebec Superior Court rejected a motion to dismiss the Innu’s lawsuit, which the company said should be between the Innu and the government.

The IOC’s motion was the rejected in October 2015 by the Supreme Court of Canada, creating a precedent in the country’s highest court for native communities to seek compensation directly from companies for alleged violations of Aboriginal title.

On the same day, the Supreme Court also rejected a motion to throw out a case against another Rio Tinto subsidiary, Rio Tinto Alcan, brought by First Nation groups in B.C.

“It was a significant victory for all First Nations and an important legal precedent,” said Montreal-based lawyer James O’Reilly of O’Reiley and Associates, which is representing the Innu. “The result is an immutable right to sue a company.”

Lawyers from both sides met on March 21, 2016, at a courthouse in Montreal for a preliminary hearing just days after the three-year anniversary of the lawsuit’s launch.

Norton Rose Fullbright is representing IOC with a team that includes François Fontaine, who has worked on such high-profile cases as defending SNC-Lavalin Group Inc. in its Libya fraud case.   

IOC now states that the action brought against it seeks recognition of Aboriginal rights over a large territory that includes land in Newfoundland and Labrador. As a result, it intends to present a motion to strike the Quebec Superior Court ruling, saying the court doesn’t have jurisdiction over land outside the province.

Legal experts say this is the beginning of a long process that could take about seven years to unwind.

IOC has estimated crude iron reserves will last about 27 years at the current production rate, meaning operations will be technically viable long after the case is likely over.

Rio Tinto could, however, still sell the project to another company.

“They will not buy only the installations, they will not buy only claims and mining operations,” Pinette said, “they will have to buy also the problems from this lawsuit.”

Justin Connidis, a professor who teaches mining law and policy at Queen’s University in Kingston, said the government could potentially force a settlement if it believes the lawsuit would cause severe damage to the national or provincial economy.

He said this is part of a larger change to Canada’s natural resource landscape — one where local communities, whether they are First Nations or not, must be consulted.

“You should be very concerned about having social licence from that community regardless of what their black letter rights are because there are so many things in terms of valid protest and legal protests people can do to make the process uneconomic that you’re far better to say, ‘How can we all work together?'” Connidis said.

Connidis said what is even more important than this individual case is that the federal government has indicated it plans to implement recommendations from the Truth and Reconciliation Commission, which will require the corporate sector to have free and prior consent before starting resource projects on Aboriginal land.

But the biggest problem IOC faces in the short term is not litigation, but the low price of iron ore, which has fallen from a high of nearly US$190 a tonne in early 2011 to a low of US$37 in mid-December 2015. Prices have rallied since then, to $63.74 in the first quarter of 2016, but analysts warn of more downside ahead because there hasn’t been any real increase in steel consumption.

“It’s probably at a price that is not economic for (IOC) to operate,” Connidis said.  

With economic difficulties caused by the drop in global iron price, the population of Sept-Îles has fallen to just over 25,000.

“The Innu are our economic partners. It’s a reality that we are used to working with these people,” said Marc Brouillette, Sept-Îles chamber of commerce president.

Although Maliotenam is surrounded by trees and the St. Lawrence River, Uashat is not separated from the city of Sept-Îles by anything other than a street sign. Houses on one side of the sign are in Sept-Îles and the others are in Uashat.

“We’re not the only ones here and we have to respect that,” said Brouillette, referring to Sept-Îles’ non-First Nations community. “Sometimes there are divergences like the litigation, but (the Innu) are a people of compromise and a people of consensus.”