In the recent case of Nunatsiavut Government v. Newfoundland and Labrador Justice Vikas Khaladkar of the Supreme Court of Newfoundland and Labrador held that the Province had improperly calculated the Labrador Inuit revenue share from the Voisey's Bay mine and failed to discharge its duty to consult pursuant to the Labrador Inuit Land Claims Agreement (the Treaty). The Court further ordered that the Inuit were entitled to damages.
In addition to being a significant victory for the Labrador Inuit, the decision recognizes the Crown's obligation to consult, reaffirms the principles of modern treaty interpretation, and finds that the Crown's fiduciary obligations apply to the administration of the revenue sharing provisions.
The Treaty and the Voisey's Bay Project
The Treaty is a constitutionally protected modern land claim agreement between the Labrador Inuit (now represented by the Nunatsiavut Government), the Province, and Canada. After decades of negotiation, the Treaty came into effect in December 2005.
In 1994, during negotiation of the Treaty, a world-class nickel deposit was discovered in Voisey's Bay which is located in the heart of the Labrador Inuit's traditional territory south of the community of Nain.
In exchange for the Inuit not seeking title to Voisey's Bay and other consideration, the Treaty provides that the Nunatisavut Government shall receive 5% of the provincial revenue from the Voisey's Bay Project as defined therein. The Treaty also provides that the Province has a duty to consult with the Nunatsiavut Government prior to deciding an application for permits, orders, or other work or activities in the Voisey's Bay Area.
In order to complete the Voisey's Bay project, the Province entered into a Development Agreement with the developer. The Inuit were not party to the negotiation of the Development Agreement, nor were they consulted as to its terms.
The Development Agreement provided, among other things, for the construction of a smelter at Long Harbour on the island of Newfoundland to process ore from Voisey's Bay within the province. Under the applicable mining tax legislation, the developer could deduct the costs of the smelter after it had been built. Amending agreements to the Development Agreement also resulted in the Province receiving substantial payments from the developer to compensate for delays in construction of the smelter which was not completed until 10 years after the Treaty came into force. These payments were not shared with the Inuit.
Between 2006 and 2014, the Inuit revenue share from the Voisey's Bay Project totalled approximately $53M. However, once the developer began to deduct the costs of the Long Harbour smelter in 2014, the Inuit revenue share under the Treaty decreased dramatically and has now been reduced to zero for the foreseeable life of the Voisey's Bay mine.
The Nunatsiavut Government filed a statement of claim in 2016.
At trial, the Nunatsiavut Government sought declarations that the Province had improperly calculated the Inuit share of revenue from the Voisey's Bay Project by allowing the deduction of the developer's costs of the Long Harbour smelter, which was located outside the Voisey's Bay Area; that the payments under amendments to the Development Agreement constituted revenue from the Voisey's Bay Project to be shared with the Inuit; that the Province breached its fiduciary obligations in its administration of the Inuit revenue share and finally that the Province failed to consult the Inuit as required under the Treaty and at common law.
Before trial, the Court ordered that the trial be bifurcated into an initial liability phase, and if necessary, a damages phase. The trial on liability took place over five days in May and October of 2019 in St. John's, Newfoundland.
Justice Khaladkar found in favour of the Nunatsiavut Government on all issues and made the following findings:
- Revenue sharing payments under the Land Claims Agreement should be determined by the Province without reference to credits or amounts relating to the developer's costs incurred off-site – that is outside of the Voisey's Bay Area as defined in the Land Claims Agreement. For greater certainty, the Province is to refrain from using the developer's capital costs and operating expenses of the processing plant in Long Harbour, or any other costs not directly related to mining, as deductions;
- The payments to the Province pursuant to the Development Agreement amending agreements are revenues subject to resource revenue sharing under the Land Claims Agreement;
- The Province is in breach of its fiduciary obligations to the Nunatsiavut Government in its administration and determination of revenue sharing payments under the Land Claims Agreement;
- The Province is in breach of its duty to consult the Nunatsiavut Government by:
- Failing to consult with the Nunatsiavut Government prior to entering into the amending agreements and issuing exemption orders under the Mineral Act; and
- Failing to consult with the Nunatsiavut Government with respect to the anticipated decline or elimination of Voisey's Bay mining tax and, as well, in relation to the determination of the Inuit share of revenue under the Land Claims Agreement.
Having found that the Province breached its consultation obligations under the Treaty, the Court did not consider whether a breach had also occurred at common law.
The Court further ordered that the Inuit were entitled to an assessment of damages with respect to the improper Long Harbour deductions, the breach of fiduciary duty, and the breach of the obligation to consult and that the Inuit were entitled to 5% of the payments made by the developer pursuant to the amending agreements to the Development Agreement.
Brian A. Crane Q.C., Graham S. Ragan, and John J. Wilson represented the Nunatsiavut Government in this matter.