But in a world of constantly evolving laws governing mineral extraction, indigenous rights and environment, having a good lawyer might be just as important.
If McCarthy Tétrault’s latest report on Mining in the Courts is any indication, Canadian mining and exploration companies might need a whole team of lawyers just to stay on top of some of the legal precedents set in 2015 and new regulations that are coming into play.
From Canada’s commitment to adopt the United Nations Declaration on the Rights of Indigenous Peoples to hefty new fines in place in B.C. to back up rules governing management of tailings ponds, B.C.’s mining and exploration sectors have a lot to digest if they don’t want to run afoul of the law at home or abroad.
One new law that public companies with at least $40 million in revenue will need to study closely is the new Extractive Sector Transparency Measures Act, which came into effect in June 2015.
The legislation, a supplement to the Corruption of Foreign Public Officials Act, requires that payments of $100,000 or more to foreign officials or entities be reported in annual financial statements. The payments, including those to First Nations, can include taxes, royalties and infrastructure improvement investments. Fines for running afoul of the new act can be as high as $250,000 per day.
Companies with a December fiscal year-end will need to make their first reports under the act at the end of May 2017.
“Different companies are going to have different abilities to comply with those obligations,” said Nicholas Hughes, co-chairman of McCarthy Tétrault’s mining litigation group and co-author of the Mining in the Courts report. “They’re not minimal obligations, and it will take some effort to identify what’s onside, what’s offside.”
Although it adds some complexity to the financial reporting requirements of public companies, Gavin Dirom, president and CEO of the Association for Mineral Exploration British Columbia, says the new act improves transparency and prevents corruption.
“In principle what’s trying to be achieved here is positive,” he said.
One trend Hughes sees in the mining sector is the proliferation of administrative fines. Administrative penalties are designed to prevent governments from having to go to court to prove legal or regulatory breaches.
“They are playing an ever-increasing role in the regulation of the extractive industry,” Hughes said. “Slowly, over time, there’s been penalty inflation going on and there’s also been more and more numbers of sections and statutes that contain administrative penalties.”
One example of penalty creep in B.C. can be found in tailings pond management. The penalties were among the recommendations of a review panel that investigated the Mount Polley mine disaster. The fines are intended to give the Ministry of Energy and Mines more clout to ensure compliance. Maximum penalties have increased to $1 million from $100,000.
One new international law that could have an effect in Canada is the UN’s Declaration on the Rights of Indigenous Peoples. The new federal government committed to implementing the declaration.
It requires “free, prior and informed consent” of indigenous peoples for activities in their claimed territories.
Whether “consent” translates into a veto remains to be seen.
“On your first read of that, you would think ‘consent’ means ‘consent’ and that means a veto,” said Stephanie Axmann of McCarthy Tétrault’s environmental, regulatory and aboriginal law group.
But a lot will depend on how the federal and provincial governments decide to dovetail the UN declaration with existing Canadian laws. Currently, governments in Canada need only demonstrate that First Nations have been properly consulted on major projects like pipelines and mines.
Consent is not required, unless aboriginal title is established, as in the Tsilhqot’in First Nation case. And even then, senior governments have the power to infringe on aboriginal title for projects for the greater public good.
One important legal precedent set last year in B.C. that could have implications for all extractive companies in Canada, especially within the province, was a BC Court of Appeal decision that ruled First Nations do not have to prove aboriginal title before suing a company for damages.
Before that decision, claims made by First Nations asserting aboriginal title against private companies were not entertained, unless they had proven aboriginal title. But in Saik’uz and Stellat’en versus Rio Tinto Alcan Inc., the Court of Appeal ruled that title does not have to be proven to allow a court action to proceed against a private company.
The case involved the Kennedy hydroelectric dam on the Nechako River built by Rio Tinto for its aluminum smelter in Kitimat. The two First Nations undertook a claim against Rio Tinto for damage to riparian areas.
A lower court ruled against the action proceeding because the First Nations had not proven aboriginal title, but that decision was overturned by the appeals court. The claim has not been heard yet – it’s just been given the green light to be heard.
The Rio Tinto case is one of three in Canada in which First Nations have launched legal claims against private companies. In the past, such claims were typically launched against the Crown, not private companies.
“In these cases, you’re seeing the Crown is being excluded so far, so I think that has the potential to change the stakes a little bit,” Axmann said. “No one wants to be involved in litigation, so if this is another means of challenging a project, that is a potential concern.”
