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Bulletin

Court Declares Breach of Labrador Inuit Land Claims Agreement in Voisey’s Bay Area

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Indigenous Law Bulletin

The Supreme Court of Newfoundland and Labrador (the “Court”) recently released its decision in Nunatsiavut Government v. Newfoundland and Labrador, 2020 NLSC 129. The Court ruled in favour of the Nunatsiavut Government in a dispute with Newfoundland and Labrador (the “Province”) over the level of consultation and revenue sharing owed to the Nunatsiavut Government pursuant to the modern-day Labrador Inuit Land Claims Agreement, 2005 (the “Treaty”) in relation to the Voisey’s Bay mine.

The Voisey’s Bay deposit located in the heart of the traditional territory of the Labrador Inuit was first discovered in 1994. In the midst of ongoing treaty negotiations and in exchange for the Inuit not seeking title to Voisey’s Bay, the parties agreed to a revenue sharing arrangement comprising 5% of provincial revenue from the Voisey’s Bay project to be paid to the Nunatsiavut Government. This revenue sharing arrangement was later included as Section 7.5.1 of the Treaty, which also provides that the Province has a duty to consult the Nunatsiavut Government with respect to applications and permits in the Voisey’s Bay area. By 2005, the Province had entered into a development agreement with the developers of the Voisey’s Bay project and construction of the mine and related facilities was by and large complete, except for a refining facility planned for construction and operation in Newfoundland.

Construction of the refining facility faced numerous time delays and cost overruns, which resulted in the developer needing certain exemptions under the Mining and Mineral Rights Tax Act, S.N.L. 2002, c. M-16.1 (the “Act”) to allow it to ship concentrate out of the Province in excess of what had been agreed to. This resulted in various amending agreements and additional payments made to the Province as compensation, including a community investment fund for the benefit of the citizens of Newfoundland and Labrador (the “Additional Payments”). The Nunatsiavut Government did not receive a share of the Additional Payments and the Province allowed certain deductions to mineral taxation for the construction, operation and depreciation costs of the refining plant, resulting in a drastic reduction in payments to the Nunatsiavut Government. To illustrate, between 2006 and 2014, the Inuit’s revenue share from the Voisey's Bay project was approximately $53 million. Once the developer began making the deductions, the Inuit’s revenue share was dramatically reduced and would become zero.

The Nunatsiavut Government’s Claims

The Nunatsiavut Government claimed and sought declarations from the Court as follows:

1. their entitlement to a 5% share in revenues from the extraction of minerals at Voisey’s Bay was improperly calculated by taking into account the cost of refining ore in Newfoundland;

2. the Additional Payments should have resulted in a payment of 5% of such Additional Payments to the Nunatsiavut Government in accordance with the terms of the Treaty;

3. the Province breached its fiduciary duty in administrating the Inuit’s revenue share; and

4. the Province breached its duty to consult the Nunatsiavut Government as required under the Treaty and at common law.

Findings of the Court

Calculation of Revenue Payments

The Province argued that the Nunatsiavut Government was aware that processing would occur outside of Voisey’s Bay area and that processing expenses were deductible under the Act. The Court held that even if that were the case, the Nunatsiavut Government did not know that the Province would allow such deductions to completely negate the revenue sharing from mineral taxation payable to the Nunatsiavut Government and held that: (i) the Province should have alerted the Nunatsiavut Government of such possibility and breached its duty of full disclosure by not so disclosing, and (ii) the definition of “revenue” in the Treaty excluded activities outside of the Voisey’s Bay Area, which meant that the Nunatsiavut’s 5% share of revenues is to be calculated without reference to any costs incurred by the developer outside of the Voisey’s Bay area, including the refining facility. To find otherwise would mean that the Nunatsiavut Government would receive no share of revenue from the Voisey’s Bay project despite the fact that the ore is extracted from their traditional territory. The Court stated that such an outcome would be inequitable.[1]

Entitlement to Share of Additional Payments

The Province took the position that the Additional Payments were not “taxes” as defined under the Treaty, but rather were extraordinary payments. The Court disagreed and interpreted the Additional Payments as falling within the definition of a tax under the Treaty because they were made in consideration of extensions and exemptions under the Act and were payments made to further a right to continue to exploit a subsurface resource. As a result, the Court concluded that the Nunatsiavut Government is entitled to revenue sharing payments from the Additional Payments under the Treaty.

Breach of Fiduciary Duty

The Court found that the Province breached its fiduciary duty to the Nunatsiavut Government with respect to the administration of revenue sharing from the Voisey’s Bay project under the Treaty. The Court stated that “the honour of the Crown gives rise to a fiduciary obligation when the Crown assumes discretionary control over a specific or cognizable Aboriginal interest…The Crown’s fiduciary obligations includes fiduciary duties of loyalty, good faith and full disclosure.”[2] The Province did not disclose the potential impacts of the deductions on the portion of mineral taxes payable and improperly accounted for the Nunatsiavut Government’s share of revenue and, in so doing, breached its fiduciary duty.

Breach of Contractual Duty to Consult

The Court also found that the Province breached its duty to consult the Nunatsiavut Government, as required under the Treaty, by failing to advise them of a decline or elimination of the Voisey’s Bay mineral tax, and by failing to consult them in advance of negotiating and agreeing to the amending agreements. Having found a breach of the obligation to consult under the Treaty, the Court did not assess whether there was a common law breach.

Remedies and Implications

The Court’s findings and declarations with respect to the above resulted in its ordering that the Nunatsiavut Government was entitled to (i) an assessment of damages with respect to the improper mineral tax deductions, and the breaches of fiduciary duty and duty to consult under the Treaty, and (ii) to a 5% share of the Additional Payments.

Modern-day treaties, including the Treaty, are nation-to-nation agreements that courts interpret broadly and generously. The honour of the Crown makes such treaties different than international treaties or contracts between private parties and gives rise to a fiduciary duty when the Crown assumes discretionary control over a specific or cognizable Aboriginal interest. Such fiduciary duty introduces additional obligations of loyalty, good faith and full disclosure. In its dealings with Indigenous people, the Crown must always be mindful of the honour of the Crown, be proactive and provide full disclosure of information of relevance to Indigenous parties.



[1] Nunatsiavut Government v. Newfoundland and Labrador, 2020 NLSC 129 at para 69.

[2] Nunatsiavut Government v. Newfoundland and Labrador, 2020 NLSC 129 at para 42.

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