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B.C. First Nations’ challenge to the ratification of an investment agreement with China dismissed

Fasken
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Aboriginal Bulletin

On August 26, 2013, in Hupacasath First Nation v. Minister of Foreign Affairs, 2013 FC 900, the Federal Court of Canada dismissed the application of the Aboriginal group Hupacasath First Nation[1] (“HFN”) for a declaration that Canada is required to engage in a process of consultation with First Nations, including HFN, prior to ratifying the Canada-China Foreign Investment Promotion and Protection Agreement[2] (“CCFIPPA”).  The Federal Court of Canada provided guidance regarding the issue in the case, concluding that the Government of Canada did not have a duty to consult HFN prior to ratifying the CCFIPPA because the potential adverse impacts asserted were non-appreciable and speculative in nature.

To view the decision, click here.

Background

Prior to the ratification of the CCFIPPA, Canada’s Department of Foreign Affairs and International Trade consulted with stakeholders, but those consultations were not extended to HFN or other First Nations.  Shortly following the announcement of the signing of the CCFIPPA, HFN wrote to the Prime Minister of Canada to request that the ratification be postponed until there has been full and proper consultation between the Crown and HFN.  Representatives of other First Nations bands made similar requests.  HFN’s request was not granted.  At the time of the court application, it appeared that the same was true with respect to the requests made on behalf of other First Nations.

In their application against the Government of Canada, HFN claimed that if CCFIPPA is ratified and implemented it will negatively impact the band in a number of ways: (1) by hindering its right to conserve, manage and protect lands, resources and habitats in accordance with traditional HFN ways; (2) by preventing negotiations towards a treaty that protects these rights; (3) by causing disputes over resources between HFN and Chinese investors to be resolved by international trade and investment law which would not include the same protections for Aboriginal rights and title as Canadian constitutional law; (4) by causing the federal and provincial governments to be less likely to take steps to protect HFN’s rights; and (5) by causing the unknown impact that the rights of Chinese investors and a potential claim under the CCFIPPA could have on HFN’s rights and title.

The issue before the Federal Court was whether Canada had a duty to consult HFN prior to taking steps that would bind Canada under the CCFIPPA.

The Decision

The Government of Canada’s duty to consult with Aboriginal peoples, including HFN, and to seek to accommodate their interest in certain circumstances is grounded in the honour of the Crown, derived from the case Haida Nation v. British Columbia (Minister of Forests), 2004 SCC 73. 

In its analysis, the Court applied the three part test derived from Rio Tinto Alcan Inc. v. Carrier Sekani Tribal Council, 2010 SCC 43 (“Rio Tinto”).  The test establishes that the duty to consult is triggered when (1) the Crown had knowledge, actual or constructive, of a potential Aboriginal claim or right; (2) contemplated Crown conduct; and (3) the potential that the contemplated conduct may adversely affect an Aboriginal claim or right.  The first two elements were acknowledged by both parties, thus the debate centered on the third element. 

The principal concern of HFN was the alleged “chilling effect” of the CCFIPPA: the concern that the Government might possibly be reluctant to take some measures that might benefit HFN out of fear that such a measure might result in a claim before an international arbitral tribunal which might award significant damages to one or more Chinese investors.  

In support of its position, HFN relied primarily upon the experience to date under the NAFTA, the international experience with agreements providing for investor-state arbitration, and the ongoing uncertainty regarding how arbitration panels are likely to assess claims under the CCFIPPA. 

The Court concluded that the chilling effect concern was not a serious risk.  In reaching this conclusion, the Court analyzed the minimum standard of treatment (“MST”) provisions set out in the CCFIPPA and expropriation provision.  The Court concluded that the MST provisions did not impose a risk since they are more narrowly framed than some of the fair and equitable clauses found in other Canadian foreign investment agreements.  The language in the CCFIPPA MST provisions was virtually identical to the language in the Note of Interpretation adopted by the parties to NAFTA, which similarly limited the scope of the MST.  In the court’s view, the expropriation provision did not impose a risk since there was little risk that measures taken by a government to protect an Aboriginal interest would be found to be in breach of the duties in relation to expropriation within CCFIPPA.  HFN did not provide any evidence of more favourable language in other Canadian international investments agreements, thus the arguments on the MST and expropriation provisions were found to be entirely speculative.

The Court relied on the principle established in Rio Tinto that the duty to consult must be approached in a “generous” and “purposive” manner, however mere speculative impacts do not suffice.  A causal relationship between the proposed government conduct or decision and a potential for adverse impacts on pending Aboriginal claims must be proven.  The Court found that the case law relied on by HFN was distinguishable from the case of HFN because those cases involved a direct connection between the policy decision and the First Nation’s claimed territories, or the resources located on those territories.  In the case of HFN, any claimed impacts were merely speculative and non-appreciable.   The Court therefore concluded that HFN was unable to establish the required causal link between the alleged potential adverse impacts and the CCFIPPA. 

The Court held that the ratification of the CCFIPPA did not breach either the asserted constitutional duty to act honourably in all of its dealings with HFN, or to consult HFN before taking any action that may adversely affect those rights.

Conclusion

This is an important case on the development of what is a “speculative” or “non-appreciable impact” such that the Haida duty does not arise.  The jurisprudence in this area continues to evolve. 

While this judgment is limited to the HFN’s challenge and does exclude other First Nations groups from bringing forth a similar challenge to the CCFIPPA or other Canadian trade or investment treaties, the Court’s findings in this case are likely to be applicable.

This case illustrates the tension between a state’s obligations towards Aboriginal people and investors’ rights.  In Canada, Aboriginal groups have constitutionally protected rights and the Canadian Governments have a duty to consult with them if they contemplate conduct that may affect those rights.  However, this duty will only arise if an Aboriginal group is able to provide evidence to suggest a causal link between the ratification of the treaty in question and potential adverse impacts that are non-speculative in nature.      

Internationally, Canadian investors seeking to conduct business outside of Canada need to be aware of special regimes that protect indigenous rights in other countries.  For example, in Colombia, the 1991 Constitution grants indigenous communities special protections, and among other rights, the Constitutional Court’s jurisprudence provides for the protection of the social, cultural and economic integrity of indigenous communities, particularly within the context of projects and developments involving use of natural resources.  Rights granted by governments to vulnerable communities may affect how governments respond to an alleged investment treaty obligation or its breach.  To defend their actions, States may seek to invoke the right to self-determination or other special rights of indigenous or aboriginal communities as a justification for their government actions or measures that have affected investors.

 



[1] HFN is a band of 285 members who have rights and title with respect to approximately 232,000 hectares of land in central Vancouver Island.    

[2] The CCFIPPA is a bilateral treaty aimed at protecting and promoting investment between Canada and China through legally-binding rights and obligations to both parties.  These include the manner in which Chinese investors operating in Canada should be treated and procedures through which they could pursue alleged breaches of the treaty.  The treaty allows Chinese investors to seek damages before a tribunal if measures are taken by the Canadian government which negatively affect their investment in Canada.

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