Mining in the Courts

Transcription

Year in Review
Vol. VI – March 2016
Year in Review
Vol. VI – March 2016
mccarthy.ca
1
Table of Contents
Table of Contents
About the McCarthy Tétrault Mining Litigation Group . . . . . . . . . . . . . . . . . . . . 4
The Year in Review: Mining in the Courts Highlights . . . . . . . . . . . . . . . . . . . . . . 5
The United Nations Declaration on the Rights of Indigenous Peoples and Free,
Prior and Informed Consent – Where does Canada go from here?. . . . . . . . . . . . . . 6
Case Law Summaries - Aboriginal Law
Buffalo River Dene Nation v. Saskatchewan (Energy and Resources),
2015 SKCA 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Chippewas of the Thames First Nation v. Enbridge Pipelines Inc.,
2015 FCA 222 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Iron Ore Company of Canada, et al. v. Uashaunnuat (Innus de
Uashat et de Mani-Utenam), et al., 2015 QCCA 2. . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Moulton Contracting Ltd. v. British Columbia, 2015 BCCA 89. . . . . . . . . . . . . . . . . . 15
Prophet River First Nation v. British Columbia (Environment), 2015 BCSC 1682 . . 16
Red Chris Development Company Ltd. v. Quock, 2015 BCSC 589 . . . . . . . . . . . . . . 16
Saik’uz First Nation and Stellat’en First Nation v. Rio Tinto Alcan Inc.,
2015 BCCA 154. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Case Law Summaries – Administrative Law
Guindon v. Canada, 2015 SCC 41. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Tervita Corp. v. Canada (Commissioner of Competition), 2015 SCC 3 . . . . . . . . . . . 18
Payment Disclosure Now in Force: What Extractives Need to Know. . . . . . . . 20
Case Law Summaries – Class Actions
Canadian Imperial Bank of Commerce v. Green, 2015 SCC 60. . . . . . . . . . . . . . . . . . 28
Drywall Acoustic Lathing and Insulation, Local 675 v. SNC-Lavalin Group Inc.,
2015 ONCA 718 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Fairhurst v. Anglo American PLC, 2015 BCSC 1747. . . . . . . . . . . . . . . . . . . . . . . . . . 29
Mask v. Silvercorp Metals Inc., 2015 ONSC 5348 and 2015 ONSC 7780 . . . . . . . . 29
Rahimi v. SouthGobi Resources, 2015 ONSC 5948 . . . . . . . . . . . . . . . . . . . . . . . . . . 30
mccarthy.ca
2
Table of Contents
Case Law Summaries – Conflicts and Jurisdiction
Chevron Corp. v. Yaiguaje, 2015 SCC 42 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Garcia v. Tahoe Resources Inc., 2015 BCSC 2045. . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
JTG Management Services Ltd. v. Bank of Nanjing Co. Ltd., 2015 BCCA 200. . . . . 32
Yukon Zinc Corporation (Re), 2015 BCSC 1961. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
The Changing Regulatory Landscape for Canadian-Owned Extraction
Companies Operating Abroad. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Case Law Summaries – Contracts
American Creek Resources Ltd. v. Teuton Resources Corp., 2015 BCCA 170 . . . . . 37
B2Gold Corp. v. Condor Resources PLC, 2015 BCSC 1548. . . . . . . . . . . . . . . . . . . . 37
Case Law Summaries – Enforcement of Awards and Judgments
Empresa Minera Los Quenuales S.A. v Vena Resources, 2015 ONSC 4408. . . . . . . 39
Sistem Mühendislik İnşaat Sanayi Ve Ticaret Anomic
Sirketi v. Kyrgyz Republic, 2015 ONCA 447. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Stans Energy Corp. v. Kyrgyz Republic, 2015 ONSC 3236. . . . . . . . . . . . . . . . . . . . . 40
Back on the International Stage – Spotlight on Climate Change Policy,
the Paris Agreement, and Carbon Pricing Mechanisms. . . . . . . . . . . . . . . . . . . 41
Case Law Summaries – Environmental Law
Minnova Corp. v. Canada (Attorney General), 2015 FC 898. . . . . . . . . . . . . . . . . . . . 46
R. v. Stratabound Minerals Corp., 2015 NBPC 07. . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Voters Taking Action on Climate Change v. British Columbia
(Energy and Mines), 2015 BCSC 471. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Case Law Summaries – Expropriation
Lobo Del Norte Ltd. v. Whitehorse (City of), 2015 YKSC 40. . . . . . . . . . . . . . . . . . . 48
Case Law Summaries – Insolvency
Veris Gold Corp. (Re), 2015 BCSC 399 and 2015 BCSC 1204 . . . . . . . . . . . . . . . . . 49
Yukon Zinc Corporation (Re), 2015 BCSC 836 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
mccarthy.ca
Year in Review – Vol. VI, March 2016
3
Table of Contents
Case Law Summaries – Labour and Employment
Mosaic Potash Esterhazy Limited Partnership v. Unifor Local 892,
2015 SKQB 391. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Glencore Canada Corporation v. Sudbury Mine, 2015 CanLII 85298 (ON LRB)
and Vale Canada Limited v. USW Local 6500, 2015 CanLII 19525 (ON LRB) . . . . . 51
CSA Provides Guidance on Investor Presentations and Website
Disclosure for Mining Issuers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Case Law Summaries – Securities / Shareholder Disputes
Jaguar Financial Corp. v Alternative Earth Resources Inc., 2015 BCSC 2436 . . . . . 56
Rea v. Wildeboer, 2015 ONCA 373. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Case Law Summaries – Surface Rights/Access to Claims
Christmann v. New Nadina Explorations Limited, 2015 BCCA 243. . . . . . . . . . . . . . 58
Hawes v. Dave Weinrauch and Songs Trucking Ltd., 2015 BCSC 1727. . . . . . . . . . . 58
Pierre Gagné Contracting ltée v. Corporation minière Northern Star inc.,
2015 QCCS 1044 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Legislative Developments in Québec: An Act respecting
transparency measures in the mining, oil and gas industries and
changes to the Mining Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
About McCarthy Tétrault. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
All decisions that are reported in Case Law Summaries are accessible
in full by clicking on the titles. An Internet connection is required.
mccarthy.ca
4
About the McCarthy Tétrault Mining Litigation Group
McCarthy Tétrault LLP and
Mining in the Courts is produced by McCarthy Tétrault LLP’s Global Mining
Litigation Group. The publication provides an annual update on legal
developments impacting the mining industry and valuable insights on
current issues of interest to mining companies.
McCarthy Tétrault LLP is entrenched in the mining industry. We act for
industry clients on a full range of matters affecting them, including those
concerning mine ownership, class actions, environmental impacts and
approvals, construction, Aboriginal challenges, and mining agreement
disputes. Our Mining Litigation Group offers strategic approaches and
innovative strategies to appropriately resolve complex disputes through
any means available, including mediation, arbitration and litigation. A
testament to our Group’s depth and presence in the mining sector is the
sheer number of cases decided each year in which McCarthy Tétrault LLP
was counsel for the successful party.
Our Mining Litigation Group draws from one of Canada’s largest and
longest-standing litigation groups involved in many of the most highprofile, precedent-setting cases in Canadian legal history. Our Group also
has the benefit of being able to draw from the extensive expertise of our
mining business lawyers. Together we achieve positive outcomes for our
clients.
For more information please contact:
Co-Chairs, Mining Litigation Group
Editor-in-Chief
VANCOUVER
TORONTO
VANCOUVER
Nicholas Hughes
604-643-7106
nhughes@mccarthy.ca
David I.W. Hamer
416-601-7599
dhamer@mccarthy.ca
Aidan Cameron
604-643-5894
acameron@mccarthy.ca
Editors: Aidan Cameron (Editor-in-Chief) and Kate Macdonald (Assistant Editor)
Special thanks to our other contributors: Stephanie Axmann, Roya Baryole, Julia Bennett, Danielle Bensler,
John Boscariol, Robert Glasgow, Bryn Gray, Ryan Hornby, Nicholas Hughes, Andrew Kalamut, Miranda Lam, Gordon
Lamb, Selina Lee-Andersen, Zachary Massoud, Brandon Mattalo, Steven Molnar, Jack Ruttle, Dharshini Sinnadurai,
and Martin Thiboutot.
mccarthy.ca
5
The Year in Review: Mining
in the Courts Highlights
The Year in Review: Mining
in the Courts Highlights
Aidan Cameron and Kate Macdonald
It has been an interesting year for the mining sector, with legal developments inside and outside
of the courts. Of particular note are the continuing impact of Aboriginal law, ongoing jurisdictional
challenges to extra-jurisdictional claims, and significant changes in the regulatory landscape.
Aboriginal law. In 2015, the British Columbia Court of Appeal:
- Held that Aboriginal claimants were entitled to advance a claim in nuisance against a mining
company on the basis of asserted, but unproven, Aboriginal title and rights. A similar line
of cases is also developing in Québec. See Saik’uz First Nation (page 17) and Iron Ore
Company of Canada (page 14); and
- Reversed the British Columbia. Supreme Court’s holding that the province owed a duty to
inform a licence holder of Aboriginal opposition and threats to the licence holder’s
operations. See Moulton Contracting (page 15).
Jurisdictional disputes. Canadian courts continue to grapple with their jurisdiction in relation to
foreign disputes:
- The Supreme Court of Canada held that an Ontario court had jurisdiction in a proceeding to
enforce an Ecuadorian judgment against a company and its Canadian subsidiary. The
question of whether the judgment will ultimately be enforced against these parties has yet to
be decided. See Chevron Corp. (page 31); and
- The British Columbia Supreme Court declined to take jurisdiction over a proceeding in which
the plaintiffs sought to hold a parent company responsible for the alleged
human rights abuses of its foreign subsidiary in Guatemala. See Garcia (page 31).
Regulatory change. The regulatory landscape impacting mining companies
continues to evolve, including Canada’s renewed commitment to address
climate change (see article on page 41) and new transparency
and disclosure obligations in respect of foreign activities
(see articles on pages 20 and 60). Also of note is the
Supreme Court of Canada’s decision in Guindon
(page 18), confirming the constitutionality of large
administrative monetary penalties. This decision
aligns with the increased use and force of
administrative penalties to sanction statutory
and regulatory contraventions.
We hope you enjoy reading more about
these and the other legal developments
featured in this year’s edition of Mining
in the Courts.
mccarthy.ca
6
Prior and Informed Consent – Where does Canada go from here?
The United Nations Declaration
on the Rights of Indigenous
Peoples and Free, Prior and
Informed Consent – Where does
Canada go from here?
Stephanie Axmann and Bryn Gray
In 2015, Canada’s new federal government committed to implementing
the United Nations Declaration on the Rights of Indigenous Peoples
(Declaration). This has generated significant attention in the mining and
natural resource sectors due to the Declaration’s potential incompatibility
with Canada’s constitutional and legal framework for Aboriginal rights
and consultation, particularly the potentially broad interpretation of
“free, prior and informed consent” (FPIC) as a veto right against resource
development and administrative and legislative decision-making. While
FPIC is a potential game changer, ultimately its impact in Canada will
depend on how it is interpreted.
This article identifies the commitments of the federal government and
the provinces to date towards implementing the Declaration, and some
approaches and interpretations that Canada may look to for guidance. If
Canada follows the increasingly prevailing perspective that FPIC should
be viewed as an objective of consultation, except in limited circumstances
where consent may be mandatory, in our view this approach would be
generally consistent with Canada’s constitutional and legal framework.
However, this will still leave many unanswered questions with respect to
the implementation of the Declaration as a whole.
Canada’s commitments for implementation
Following Canada’s federal election in October 2015, Prime Minister
Justin Trudeau issued Ministerial Mandate Letters to the newly appointed
mccarthy.ca
7
federal Ministers.1 The Mandate Letter to Dr. Carolyn Bennett, Minister
of Indigenous and Northern Affairs Canada, includes several priorities
that are poised to generate attention from Aboriginal groups and the
mining and natural resource sectors beginning in 2016.2 Notably, the
Minister is directed to “implement the recommendations of the Truth
and Reconciliation Commission, starting with the implementation of the”
Declaration.3
This fresh approach is in sharp contrast to the position previously taken
by Canada since the UN General Assembly adopted the Declaration in
2007, when Canada voted against it. Canada eventually issued a statement
of support for the Declaration in 2010, but with caveats, including that
the Declaration is aspirational, non-legally binding, and does not reflect
customary international law nor change Canadian law.4 More recently, at
the UN World Conference on Indigenous Peoples in September 2014,
Canada opposed the UN General Assembly’s resolution to support the
conference’s outcome document,5 which reaffirmed support for the
Declaration and directed States to take steps to implement the Declaration
on a national level.6
Canada’s previous position was based mainly on concerns with the broad
provisions related to lands, territories and resources, and a concern that the
principle of FPIC could be interpreted as a veto. These concerns have been
echoed by the mining and other resource sectors in Canada, particularly
due to the lack of certainty about potential impacts of FPIC on Canada’s
current framework for consultation and accommodation.
Canada’s Premiers also recently expressed commitments that could be
seen as a step towards implementing the Declaration at the provincial
level. In a meeting in June 2015 with First Nations leaders, the Premiers
expressed support for the Truth and Reconciliation Commission’s
report and committed to act on its 94 recommendations (which as
noted above, include full implementation of the Declaration as the
basis for reconciliation).7 In July 2015, Alberta’s Premier took the
further step to mandate her cabinet ministers to review their ministries’
1.http://pm.gc.ca/eng/ministerial-mandate-letters
2.http://pm.gc.ca/eng/minister-indigenous-and-northern-affairs-mandate-letter
3. The Truth and Reconciliation Commission’s Calls to Action include 94
recommendations, including recommendation #43, which calls upon government to
fully adopt and implement the UN Declaration as the framework for reconciliation, and
#44 which calls upon government to develop a national action plan and measures to
achieve the goals of the UN Declaration.
4.http://www.aadnc-aandc.gc.ca/eng/1309374239861/1309374546142
5.http://www.un.org/en/ga/search/view_doc.asp?symbol=A/RES/69/2
6.http://www.canadainternational.gc.ca/prmny-mponu/canada_un-canada_onu/
statements-declarations/other-autres/2014-09-22_wcipd-padd.aspx?lang=eng
7.http://www.cbc.ca/news/canada/newfoundland-labrador/premiers-commit-tocommission-recommendations-after-meeting-with-native-leaders-1.3152840
mccarthy.ca
8
policies, programs and legislation to consider potential changes in
order to implement the Declaration in a way that is consistent with the
Constitution and Alberta law. Their reports and ideas were expected
by February 1, 2016.8 The federal government (and potentially also the
provinces) now face the challenge of achieving a workable means of
implementing the Declaration into Canadian law. At a high level, issues
requiring consideration include whether implementation will result in
changes to the current legal framework for Aboriginal rights, or whether
the Declaration can be interpreted within the existing constitutional and
legal framework.9 Government will also need to consider the appropriate
method of implementation, whether it is achieved through, for example,
a policy framework approach, changes to existing legislation, or adoption
of new legislation. In any event, it seems clear that any successful effort
at effective and meaningful implementation will require a consistent and
coherent interpretation of the Declaration that can be applied universally
across Canadian jurisdictions and aligns with Canada’s constitutional
framework for the protection of Aboriginal rights. One of the first
challenges will be to achieve consensus on the meaning of each of
the Declaration’s principles in the Canadian context. Clear interpretive
guidance on the Declaration, including how it may modify rights and
obligations, will be crucial for regulatory decision-makers, Aboriginal groups
and industry.
Free, prior and informed consent
There are many outstanding questions regarding the interpretation of the
Declaration’s principles in Canada. For example, depending on how each
provision is interpreted, the broad language of the Declaration may not fit
in seamlessly with Canadian realities, such as the existence of historic and
modern treaties, the distinctions among Aboriginal land use (ranging from
the exercise of traditional Aboriginal rights to Aboriginal title), or the legal
framework that has developed around the Crown’s constitutional duty to
consult. However, it is the concept of FPIC that seems to have received the
greatest attention in Canada to date.
FPIC is a prominent feature of the Declaration, referenced in Articles 10,
11(2), 19, 28(1), 29(2) and 32(2). Of particular relevance to resource
development are: Article 19, which provides that States shall “consult and
cooperate in good faith” with Indigenous Peoples “in order to obtain” FPIC
before adopting legislative or administrative measures that may affect
them, and Article 32(2), which similarly provides that States shall “consult
and cooperate in good faith” with Indigenous Peoples “in order to obtain”
FPIC “prior to the approval of any project affecting their lands or territories
and other resources, particularly in connection with the development,
8.http://aboriginal.alberta.ca/documents/Premier-Notley-Letter-Cabinet-Ministers.pdf
9. In Canada’s 2010 statement of support, it indicated that it felt confident that the
principles expressed in the Declaration can be interpreted in a manner consistent with
Canada’s Constitution and legal framework.
mccarthy.ca
9
utilization or exploitation of mineral, water or other resources.” Article 10
provides in more direct terms that “no relocation shall take place without”
FPIC of the Indigenous Peoples concerned.
Depending on how it is interpreted, FPIC could go beyond the Supreme
Court of Canada’s current jurisprudence on the duty to consult, which has
thus far limited the requirement of consent to established Aboriginal title.
Even this is not an absolute veto, however, as the Court has recognized
that the Crown could proceed without consent in the case of established
Aboriginal title if the requirements of the justification test are met. The
Declaration, by contrast, does not make a distinction between asserted or
established rights, Aboriginal rights and Aboriginal title, or contain a clause
similar in nature to the justification test.
In its effort to implement the Declaration
MANY QUESTIONS REMAIN
and to reach an understanding of FPIC,
AS TO HOW DECLARATION
Canada may draw upon a wide array of
WILL BE INTERPRETED IN
global resources for guidance, including:
(i) approaches taken by other States; (ii) CANADA.
global guidance documents, including
from organizations involved in the mining and resource development
sectors; and (iii) approaches taken in international court decisions.
Although the international community has yet to achieve consensus on
FPIC, we observe that an increasingly prevailing perspective on FPIC is
that in most circumstances, FPIC is considered an objective of a process of
consultation and participation with Indigenous Peoples, rather than a veto
right, except in certain limited circumstances.
(i) Other States
With a few exceptions, there has been little in the way of comprehensive
implementation of the Declaration by other countries to date. Bolivia was
the first country to implement the Declaration into law, expressly adopting
it into law in its entirety in 2007 and recognizing it in its new constitution
in 2009. Bolivia’s constitutional interpretation of FPIC is that it requires
good faith consultation with Indigenous Peoples prior to taking actions
that may affect them. In other words, consent is viewed as an objective of
consultation, but not a requirement or a veto. Similarly, in 2008, Ecuador
adopted a new constitution, which recognized a range of indigenous rights,
including the right to “free, prior and informed consultation.”
Australia initially opposed adoption of the Declaration in 2007 (along with
Canada, New Zealand and the United States) but released a statement
of support for the Declaration in 2009.10 It stated that the Declaration
is non-binding and does not affect existing Australian law, but it would
consider any future interpretations of FPIC. New Zealand also eventually
10.http://www.un.org/esa/socdev/unpfii/documents/Australia_official_statement_endorsement_UNDRIP.pdf
mccarthy.ca
10
expressed support for the Declaration in 2010, noting that its existing
legal and constitutional frameworks define its engagement with the
aspirational aspects of the Declaration. It stated that it will maintain its
existing legal regimes for ownership and management of land and natural
resources, including its own distinct processes for indigenous participation
in decision-making, including consultation and in particular instances where
consent is appropriate.11
In contrast to Canada, both Australia and New Zealand supported the
2014 outcome document from the World Conference on Indigenous
Peoples, setting the stage for them to consider potential steps towards
implementation of the Declaration. Given the relatively comparable
circumstances and concerns raised by these nations to Canada, we may be
able to draw from their approaches towards implementation.
(ii) Organizations
Many organizations have been developing guidelines and standards with
respect to the Declaration and FPIC that may also be instructive for
Canadian government. These include UN working groups on Indigenous
Peoples and human rights, international investment community
organizations, such as the International Finance Corporation, and
environment and industry organizations, such as the Forest Stewardship
Council and the Boreal Leadership Council.
Notably, in 2015, the International Council on Mining & Metals (ICMM)
updated its Indigenous Peoples and Mining Good Practice Guide.12 The
Guide provides guidance to companies for mining-related activities that
take place on or near indigenous lands. ICMM encourages members to
“work to obtain the consent of indigenous communities” for projects
located on “lands traditionally owned by or under customary use of
Indigenous Peoples and are likely to have significant adverse impacts on
Indigenous Peoples.” The phrase, “work to obtain consent” means that
all reasonable steps should be taken to secure FPIC of significantly and
adversely impacted indigenous communities regarding the basis on which
the project will go ahead. However, consent processes “should neither
confer veto rights to individuals or subgroups nor require unanimous
support from potentially impacted Indigenous Peoples (unless legally
mandated)” and companies should not be required to agree to aspects not
under their control.
In 2014, the UN Inter-Parliamentary Union released a Handbook for
Parliamentarians to provide guidance to governments on implementation
11.http://www.parliament.nz/en-nz/pb/debates/debates/49HansD_20100420_00000071/
ministerial-statements-%E2%80%94-un-declaration-on-the-rights-of
12. http://www.icmm.com/document/9520
13.http://www.undp.org/content/dam/undp/library/Democratic%20Governance/
Human%20Rights/RightsOfIndigenousPeoples-HandbookForParliamentarians-EN.pdf
mccarthy.ca
11
of the Declaration.13 It recognizes the distinction in the Declaration
between the duty of States to seek to obtain consent through
consultation in certain circumstances, versus the duty of States to in fact
obtain consent in others. It states that “obtaining consent becomes a
requirement in some situations, including when Indigenous Peoples are
subject to relocation, and in cases of storage or disposal of toxic waste
on indigenous lands or territories,” and potentially also “in matters of
fundamental importance for the rights, survival, dignity and well-being of
Indigenous Peoples.”
(iii) FPIC in Latin American Courts
Governments may look to the
interpretation of FPIC suggested by
DECLARATION NEEDS TO
the former UN Special Rapporteur
on the Rights of Indigenous Peoples, BE APPLIED CONSISTENTLY
James Anaya, and jurisprudence from ACROSS CANADA.
the Inter-American Court of Human
Rights (IACHR) and South American domestic courts on Aboriginal
consent in the absence of title to the lands. In a 2009 report, Mr. Anaya
stated that FPIC should not be interpreted as a veto right, but as the
objective of consultation. That said, he noted that consent might be
required in some situations, including actions with a “significant, direct
impact on Indigenous Peoples’ lives or territories.”14 Such a broadly
stated exception could, if implemented, include many mining and resource
development projects in Canada.
In Saramaka People v. Suriname, the IACHR considered a challenge by the
Saramaka people to several actions by the Republic of Suriname, including
the issuance of logging and mining concessions to private companies
without consultation. The IACHR considered the American Convention on
Human Rights and the Declaration, and held that Suriname has a duty to
consult the Saramaka people in good faith when planning development
or investment projects in their territory, with the objective of obtaining
consent. However, achieving consent was not required unless it was a
large-scale development or an investment project that could “affect the
integrity of the Saramaka people’s lands and natural resources” and their
ability to continue in their cultural practices, way of life, and their special
connection with their traditional territory.15
The Constitutional Court of Colombia has taken a similar approach. In
T-129-11, it identified three situations where consent would be required:
“...the Court finds prior consultation and informed consent of the
ethnic communities to be necessary in general to determine the least
14. James Anaya, “Report of the Special Rapporteur on the situation of human rights and
fundamental freedoms of indigenous peoples”, July 15, 2009, paras. 46-47.
15. Saramaka Interpretation at paras. 17, 37 & 42.
mccarthy.ca
12
harmful alternative in those events that (i) involve the moving or
displacement of communities for the work or project (ii) are related
to the storage or dumping of toxic waste in ethnic lands, and/or (iii)
represent a high level of social, environmental and cultural impact on an
ethnic community, which may lead to endangering its existence, among
other things.”16 (translated)
Conclusion
Although the international community, including stakeholders in Canada,
has yet to achieve consensus on FPIC, we have observed that an
increasingly prevailing perspective on FPIC at the international level is
that in most instances, FPIC is viewed as the objective of a process of
consultation and participation, rather than a veto right, which is limited
to certain narrowly defined circumstances. This approach appears to be
generally consistent with Canada’s constitutional and legal framework with
respect to the duty to consult and accommodate, and generally accepted
corporate social responsibility/best
practice approaches of government
FREE, PRIOR AND INFORMED
and industry to achieve a social
CONSENT IS USUALLY
licence to operate in Canada.
VIEWED AS THE OBJECT OF
Even if Canada were to follow a
CONSULTATION, NOT A VETO.
similar approach to interpretation and
implementation of FPIC and the Declaration, this still leaves unanswered
questions, such as what efforts must be made to attempt to obtain
consent in a given situation, what situations would require consent over
consultation, and how the justification defence in Canadian law might
apply. We also note that many other provisions of the Declaration,
particularly those pertaining to land use and resources, should not be
overlooked by government despite the spotlight on FPIC. Effective
implementation of the Declaration in Canada will first require a consistent
and coherent understanding of all provisions of the Declaration, as applied
to the unique Canadian context.
16. Constitutional Court of Colombia, 3 March 2011, Sentencia T-129/11, translated by Daniel
Bonilla Maldonado in “Self-Government and Cultural Identify: The Colombian Constitutional
Court and the Right of Cultural Minorities to Prior Consultation” in Constitutionalism of the
Global South: The Activist Tribunals of India, South Africa and Colombia.
mccarthy.ca
13
Aboriginal Law
Case Law Summaries
Aboriginal Law
BUFFALO RIVER DENE NATION V. SASKATCHEWAN
(ENERGY AND RESOURCES), 2015 SKCA 31
In this case, the Saskatchewan Court of Appeal held that the duty
to consult will only be triggered where a Crown decision will have an
“appreciable and current potential” to adversely impact a treaty or
Aboriginal right. The duty will not be triggered where adverse impacts are
merely speculative.
Buffalo River Dene Nation is a signatory of Treaty
10. The treaty obligates the Crown to consult
with the First Nation before authorizing activities
that could interfere with treaty rights. In this case,
the Ministry of Energy and Resources granted
an exploration permit in respect of subsurface
oil sands minerals located under Treaty 10 lands
without consultation. The First Nation applied for
judicial review, and asserted that the Crown had
breached its duty to consult.
The Saskatchewan Court of Appeal reviewed the
underlying decision on a correctness standard.
After an extensive review of the law, the Court
of Appeal determined that on its own, the
issuance of an exploration permit did not have any
meaningful impact on treaty rights and therefore, the duty to consult was
not triggered. The exploration permit itself did not give the recipient the
right to enter Treaty 10 lands or to engage in mineral extraction; it granted
no more than an inchoate interest in the minerals lying beneath the lands.
Any adverse impact would be the result of a subsequent, independent
administrative decision — governed by a “well-defined and linear
regulatory process” — such as a decision to grant the permit-holder the
right to commence mineral exploration or a lease to extract the mineral.
CHIPPEWAS OF THE THAMES FIRST NATION V.
ENBRIDGE PIPELINES INC., 2015 FCA 222
In this case, a majority of the Federal Court of Appeal confirmed that the
National Energy Board is not required, as a condition of undertaking its
mandate, to determine whether the Crown’s duty to consult has been
discharged in a proceeding where the Crown itself is not a participant.
The First Nation appealed a decision of the National Energy Board
mccarthy.ca
14
Aboriginal Law
approving an application by Enbridge Pipelines for a pipeline reversal and
capacity expansion project. The First Nation asked the Court to quash
the Board’s approval on the basis that the Board did not have jurisdiction
to issue exemptions and authorizations prior to the Crown fulfilling its
constitutional duty to consult and accommodate the First Nation. The
Court of Appeal had already decided the question in the negative in
Standing Buffalo Dakato First Nation v. Enbridge Pipelines Inc., 2009 FCA
308, but the First Nation argued that the Standing Buffalo decision had
been overtaken by the Supreme Court of Canada’s decision in Rio Tinto
Alcan Inc. v. Carrier Sekani Tribal Council, 2010 SCC 43.
The Crown had not undertaken any consultations and had not appeared
before the Board.
After reviewing the Standing Buffalo and Rio Tinto decisions, the Court
confirmed that Standing Buffalo continued to apply. Of particular
relevance for the Court was the fact that in Rio Tinto, the Supreme Court
of Canada did not address the issue of whether a tribunal is obligated to
make duty to consult determinations in proceedings where the Crown
is not a participant. The Court also determined that the Crown had not
given the Board the power to undertake or discharge any applicable
duty to consult on the Crown’s behalf as part of its regulatory oversight
jurisdiction.
The Crown is seeking leave to appeal this decision to the Supreme Court of
Canada.
IRON ORE COMPANY OF CANADA, ET AL. V.
UASHAUNNUAT (INNUS DE UASHAT ET DE MANIUTENAM), ET AL., 2015 QCCA 2
This case involves a claim by the plaintiff Innu communities for $900 million
in damages for infringement of Aboriginal title, Aboriginal rights and treaty
rights, and also a declaration recognizing Aboriginal title over the territory
they occupy in the Québec-Labrador border region where Iron Ore Company
of Canada and Québec North Shore and Labrador Railway Corporation
operate. The defendants unsuccessfully applied to the Quebec Superior
Court to have the claim dismissed. Their applications for leave to appeal
were also dismissed by the Québec Court of Appeal and the Supreme Court
of Canada. As a result, the case will be proceeding to trial.
Of note in this case is that the Crown was not named as a party.
In seeking leave to appeal, the applicants described the lower Court ruling
as holding that an action seeking recognition of Aboriginal rights and title
under s. 35 of the Constitution Act, 1982 can legally be brought against
private parties. They argued the perils of dismissing their application, which
mccarthy.ca
15
Aboriginal Law
they said would pave the way for a proliferation of claims against private
parties based on unproven Aboriginal rights. The Court of Appeal was not
convinced, noting that there was no requirement for an immediate ruling on
these issues. The Court also disagreed with the applicant’s characterization
of the lower court ruling.
To a similar effect, see the Saik’uz decision of the B.C. Court of Appeal,
described below, which also makes it possible for an Aboriginal claimant to
advance a private law claim on the basis of asserted, but unproven, aboriginal
title or rights.
MOULTON CONTRACTING LTD. V. BRITISH COLUMBIA,
2015 BCCA 89
In this important appeal decision, the British Columbia Court of Appeal
held that the province had no obligation to pass along information about
Aboriginal dissatisfaction that may threaten the
ability of a company to avail itself of rights under a
license.1
The B.C. Ministry of Forests entered into two timber
sale licence agreements with Moulton, permitting
Moulton to harvest timber near Fort Nelson. Before
entering into the licence agreements, the province
had consulted with the Fort Nelson First Nation.
When Moulton’s logging was impeded by a blockade
by a Fort Nelson First Nation trapper, Moulton
brought a claim against the province and was
awarded $1.75 million in damages. The trial judge
held that it was an implied term of the licences that
the province was not aware of any First Nations expressing dissatisfaction
with the consultation, other than what the province had already disclosed
to Moulton, and that the province had negligently breached an implied
continuing representation.
The Court of Appeal reversed the award, finding that the province was not
liable in breach of contract or negligent misrepresentation for its failure
to warn about the threat of a blockade. The Court noted that a term can
only be implied into a contract when it is necessary and is what the parties
intended, not when it would merely be reasonable, and it rejected Moulton’s
argument that the principle of good faith from Bhasin v. Hyrnew, 2014 SCC
712 justified implying such a term. Similarly, the Court found that there was
no support for imposing a positive duty on the province to inform Moulton
of the blockade threat. Finally, the Court upheld a clause in the licences that
1. Moulton’s application for leave to appeal to the Supreme Court of Canada has been
dismissed: 2015 CanLII 67634.
2. Bhasin v. Hyrnew was discussed in Mining in the Courts, Vol. V.
mccarthy.ca
16
Aboriginal Law
operated to exempt the province from liability for the acts of third parties.
For more on this decision and it potential impacts, see McCarthy Tétrault
LLP’s Mining Prospects blog post entitled “Appeals Court Overturns
Damages Award to Proponent for Aboriginal Blockade.”
PROPHET RIVER FIRST NATION V. BRITISH COLUMBIA
(ENVIRONMENT), 2015 BCSC 1682
In this decision, the British Columbia Supreme Court held that the B.C.
environmental assessment process is not a forum to determine whether
Aboriginal or treaty rights will be infringed.
Two First Nations, which were signatories to Treaty 8, sought an order
quashing an Environmental Assessment Certificate issued to BC
Hydro in relation to plans to construct a dam, power house and related
infrastructure on the Peace River at what is known as Site C. The First
Nations asserted that the Site C project infringed their treaty rights,
that the decision to issue the certificate was unreasonable, and that the
Ministers issuing the certificate were biased.
The certificate was issued to BC Hydro with 77 conditions after an
extensive environmental assessment process and consultations.
In refusing to quash the certificate, the Court held that it was not an
error for the Ministers to issue the certificate without deciding whether
the project infringed Treaty 8 rights. The Ministers’ decision was political
and policy-based, not rights-based, and the procedures set out in
the Environmental Assessment Act are inadequate for rights-based
determinations. The Court also rejected the arguments that the decision
to issue the permit was unreasonable and that the Ministers were biased in
favour of the project. The decision is under appeal.
For more on the Prophet River decision and other decisions related to Site
C, see McCarthy Tétrault LLP’s Canadian Energy Perspectives blog post
entitled “BC Hydro Site C Litigation Update – Appeals Pending.”
RED CHRIS DEVELOPMENT COMPANY LTD. V. QUOCK,
2015 BCSC 589
In this case, the British Columbia Supreme Court awarded costs against
members of an Aboriginal group arising out of their illegal blockade of the
plaintiff’s mine.
Red Chris sought special costs arising out of its successful application
for an injunction and enforcement order to restrain the defendants from
blockading access roads to Red Chris’ mine. The same individuals had
mccarthy.ca
17
Aboriginal Law
previously blockaded the same mine access road and had a history of
disobeying injunctions in the absence of enforcement orders.
The Court rejected the defendants’ argument that costs should not be
awarded because the defendants were public interest litigants. While
Red Chris’ mining operation and attendant environmental impact on
the defendants’ traditional Aboriginal territorial may well be publically
important matters, the defendants’ illegal blockade of the access roads
was not. The Court noted that public interest is relevant to costs when the
public interest is properly pursued in litigation and not when it is pursued
through self-help remedies. Ultimately, the Court awarded costs but
refused to award special costs, holding that the conduct did not rise to the
level of “reprehensible” and general costs would be a sufficient deterrent.
To a similar effect, see Gagne v. Sharpe, 2015 BCSC 154, where the Court
confirmed that private parties will only be made to bear special costs in
public interest litigation in very exceptional circumstances.
SAIK’UZ FIRST NATION AND STELLAT’EN FIRST NATION
V. RIO TINTO ALCAN INC., 2015 BCCA 154
This important decision from the British Columbia Court of Appeal makes
it possible for an Aboriginal claimant to advance a private law claim on the
basis of asserted, but unproven, Aboriginal title or rights.3
Saik’uz and Stellat’en First Nations brought an action in nuisance and
breach of riparian rights against Rio Tinto Alcan based on Alcan’s operation
of the Kenney Dam across the Nechako River in northwestern B.C. The
First Nations alleged that their asserted (but not proven) Aboriginal rights
and title were sufficient to ground the claims.
The B.C. Supreme Court struck the claims on the basis that they could
not be supported by unproven Aboriginal title and rights,4 but the Court
of Appeal overturned that order. The Court held that a claim based on
asserted Aboriginal rights and title disclosed a reasonable prospect of
success. The Court noted that to hold otherwise would put Aboriginal
litigants at an unfair disadvantage contrary to the principle of equality
under the Charter. While most of the alleged claims were permitted to
proceed, the Court upheld the striking of the First Nations claim for breach
of riparian rights to the extent that those rights were alleged to arise from
an interest in reserve lands.
3. Rio Tinto’s application for leave to appeal to the Supreme Court of Canada was dismissed: 2015 CanLII 66255.
4. The BC Supreme Court’s decision was reported in Mining in the Courts, Vol. IV.
mccarthy.ca
18
Administrative Law
Administrative Law
GUINDON V. CANADA, 2015 SCC 41
In this case, the Supreme Court of Canada upheld the constitutionality
of administrative monetary penalties. Although the decision arose in
the context of the Income Tax Act, it is expected to have important
consequences in other contexts, including in environmental regulatory
matters where the imposition of monetary penalties is now common
practice.
Ms. Guindon was fined more than $500,000 by the Canada Revenue
Agency for knowingly making false statements in donation receipts she
issued. She argued that the penalty imposed upon her was criminal in
nature and that she was a person “charged with an offence” within the
meaning of s. 11 of the Canadian Charter of Rights and Freedoms and
entitled to the safeguards therein.
A majority of the Court considered the test for determining whether a
monetary penalty has “true penal consequences,” including the magnitude
of the penalty, to whom it is paid, whether the magnitude is determined
by regulatory considerations or principles of criminal sentencing, and the
stigma associated with the penalty. The majority concluded that the fine
in this case was meant to deter non-compliance with the Income Tax Act.
Although the fine was large, it served a regulatory, not a penal, purpose.
Thus, the proceedings were administrative (not criminal) in nature and Ms.
Guindon was not entitled to Charter protections.
LLP’s Canadian Energy Perspectives blog post entitled “Supreme Court
of Canada upholds the constitutional validity of administrative monetary
penalties.”
TERVITA CORP. V. CANADA (COMMISSIONER OF
COMPETITION), 2015 SCC 3
This Supreme Court of Canada decision provides a measure of certainty
to companies that intend to merge. It confirms the proper analytical
framework for “prevention” merger reviews under the Competition Act, and
the proper approach to the “efficiencies defence” exception.
Tervita Corp. operates two landfills for hazardous waste generated by oil
and gas operations in northeastern B.C. In February 2010, Tervita acquired
a company that held a permit for another landfill site. The transaction
attracted the attention of the Commissioner of Competition, who initiated
a merger review process, designed to identify mergers that will have anti-
mccarthy.ca
19
Administrative Law
competitive effects. Ultimately, the Competition Tribunal ordered that
Tervita divest itself of the acquired company, holding that the merger was
likely to prevent competition and that Tervita did not bring itself within the
“efficiencies” exception.
A majority of the Supreme Court of Canada set aside the divestiture order.
In doing so, the Court held that a two-stage, forwarding-looking “but
for” market condition analysis should be used
to determine if a merger prevents or lessens,
or is likely to prevent or lessen, competition
substantially. The first step is to identify the
potential competitor (typically one of the merged
parties). It then must be determined if “but for”
the merger, the potential competitor would have
likely entered the market and decreased the
market power of the acquiring firm. The timeframe
for likely entry must be discernable and based
on evidence of when the potential competitor
was realistically expected to enter the market in
absence of the merger. The Court emphasized
that, in performing this analysis, speculation is
improper and mere possibilities are insufficient.
The Court also confirmed that the proper approach to the “efficiencies
defence” is a balancing test, requiring analysis of whether the quantitative
and qualitative efficiency gains of the merger outweigh the anticompetitive effects. The Tribunal has flexibility to choose an appropriate
methodology, but the approach should be objectively reasonable,
quantifying all effects that are realistically measurable and ensuring that
the estimates provided are grounded in the evidence.
LLP’s Canadian Appeals Monitor blog post entitled “SCC Undoes the
Competition Tribunal and FCA Decisions in Tervita.”
mccarthy.ca
20
Payment Disclosure Now in Force:
What Extractives Need to Know
John Boscariol, Robert Glasgow, Roya Baryole, and Brandon Mattalo
Canada’s new regime for the mandatory reporting of payments to
government, the Extractive Sector Transparency Measures Act (ESTMA),
came into force on June 1, 2015. Companies must begin reporting under
ESTMA in their first full financial year after June 1, 2015.
ESTMA contains broad reporting obligations with respect to payments to
governments and state-owned entities, including employees and public
office holders, made by oil, gas and mining companies. It is intended to
supplement anti-corruption measures enshrined in the Corruption of
Foreign Public Officials Act (CFPOA) and the Criminal Code. The Canadian
government has also noted that the purpose of these new standards is to
improve transparency within the industry and to achieve alignment with
similar measures set out in the EU Accounting and Transparency Directives
(Transparency Directive) and the U.S. Dodd-Frank Wall Street Reform and
Consumer Protection Act.
Companies in the extractive sectors should be reviewing this legislation
closely in light of the significant penalties for non-compliance by firms and
their directors, officers and agents and its broader impact on compliance and
enforcement under the CFPOA, the U.S. Foreign Corrupt Practices Act and
other anti-corruption regimes.
NRCan Consultations and
Implementation Guidance
Natural Resources Canada (NRCan) released a suite of tools to
assist companies during implementation. The draft of ESTMA
implementation tools includes three separate documents:
Guidance, Technical Reporting Specifications, and Reporting
Template. These drafts were open for public consultation until
September 22, 2015, but the final version of the Guidance and the
Technical Reporting Specifications have yet to be issued.
These implementation tools are meant to provide guidance on
the interpretation of ESTMA. They are not designed to be freestanding supplemental legislation. They do not have the force
mccarthy.ca
21
of law, and companies should always defer to the actual wording used in
ESTMA.
Who Must Report?
The new reporting obligations apply broadly to not only entities listed on a
Canadian stock exchange but also certain private companies. Section 8 of
ESTMA sets out the organizations that are caught by the new obligations:
(a) an entity that is listed on a stock exchange in Canada;
(b) an entity that has a place of business in Canada, does business in Canada or has assets in Canada and that, based on consolidated financial statements, meets at least two of the following conditions for at least one of its two most recent financial years:
(i) it has at least $20 million in assets,
(ii) it has generated at least $40 million in revenue,
(iii) it employs an average of at least 250 employees; and
(c) any other prescribed entity.
These requirements are independent of one another, and if an entity falls
within any of (a) to (c), it will be considered a “Reporting “Entity.”
What is an Entity?
ESTMA provides an explicit and exhaustive definition of what constitutes an
entity. Under ESTMA, an entity is defined to mean a corporation or a trust,
partnership or other unincorporated organization
(a) that is engaged in the commercial development of oil, gas or minerals in Canada or elsewhere; or
(b) that controls a corporation or a trust, partnership or other unincorporated organization that is engaged in the commercial development of oil, gas or minerals in Canada or elsewhere.
Any company that is either Canadian or maintains operations or assets in
Canada will be subject to these requirements, even with respect to its nonCanadian operations. The Guidance also provides two points of clarification.
First, the company must be subject to Canadian law. Second, ESTMA does
not apply to parent companies not subject to Canadian law which have
subsidiaries operating in Canada.
There are four business forms that are considered entities under ESTMA:
corporations, trusts, partnerships and other unincorporated organizations.
The Guidance clarifies that these categories are intended to be interpreted
broadly and apply to similar forms of business organizations, including but
not limited to unlimited liability corporations, limited partnerships, royal trusts,
crown corporations or state-owned enterprises. However, sole proprietors
and individuals are not considered entities under ESTMA.
It is also important to note that, for the purposes of ESTMA (including part
mccarthy.ca
22
(b) of the definition of entity), control can be established directly or indirectly,
in any manner. One detail that should be carefully considered is the scope
of “indirect control,” and the potential for non-traditional extractive entities
(such as institutional financial or private equity investors) to be caught within
the scope of ESTMA. The definition of “control” is also subject to future
regulation, so this should be closely monitored. However, the Guidance
has stipulated that, at a minimum, if an entity controls another under the
appropriate accounting standards (e.g. IFRS, U.S. GAAP, etc.) it will generally
be considered to control that entity for purposes of ESTMA.
The Guidance provides the following approaches for determining the size
of an entity under s. 8(b) of ESTMA:
-
Financial statements: The $20 million asset and $40 million revenue figures are obtained from the company’s financial statements in the two previous years; it need only meet the requirements in one of the years to be considered a Reporting Entity.
- Gross assets: Assets should be calculated on a gross basis, not net.
-
Total global assets and revenues: Assets and revenues should be calculated on global revenues and assets from all business areas, not just commercial development of oil, natural gas or minerals.
- Exclude parent entities: Global assets and revenues do not include the assets or revenues of a parent company.
- Currency: All non-Canadian currency financial statements should be converted to Canadian currency for the purpose of these tests using:
- the exchange rate as of the entity’s financial year-end; or
- the entity’s method of translating the currency of assets or revenues in its financial statements.
- Employee Test: The test for 250 employees should be calculated using the average of all employees of the entity over the two most recent financial years; employees include full-time, part-time or temporary employees; independent contractors do not constitute employees.
What is “Commercial Development?”
“Commercial development of oil, gas, or minerals” is also exhaustively
defined under ESTMA to mean the exploration and extraction of oil,
gas or minerals and the acquisition or holding of a permit, lease or other
authorization to carry out any such activities. In addition, the definition
explicitly contemplates the prescription of other activities in relation to oil,
gas or mineral extraction.
The Guidance contains an explanation of what is meant by “commercial
development.” According to the Guidance, commercial development
mccarthy.ca
23
includes activities conducted in foreign jurisdictions. The definition of
commercial development also applies to temporary periods of inactivity.
This is especially important to note for entities with seasonal exploration
programs — such programs would be subject to reporting obligations
regardless of whether they were in an active or inactive season.
However, it is important to note that commercial development is not
meant to extend to ancillary or preparatory activities or to post-extraction
activities. Likewise, commercial development is not intended to include
businesses that provide goods or services associated with or related to
commercial development. Companies must still be vigilant about activities
that technically fall outside the scope of “commercial development” as
they are frequently intertwined with exploration or extraction activities
and, as such, are subject to the reporting requirements.
What Must Be Reported?
Under ESTMA, all payments made to payees must be reported annually so
long as the aggregate of all payments in a particular category of payment to a
particular payee exceeds a minimum threshold of $100,000 per financial year.
ESTMA also mandates that payments made to an employee or public office
holder of a payee, including a state-owned entity, are deemed to be made to
the payee and therefore such payments must be reported under the regime.
Payees
‘COMMERCIAL DEVELOPMENT’
The term payee is expansive and
NOT INTENDED TO CAPTURE
includes any government (either in
Canada or in a foreign state), any
POST-EXTRACTION
body of two or more governments, or ACTIVITIES.
other similar bodies conducting the
functions of a government. State-owned enterprises are considered payees
for the purpose of determining reporting obligations.
The Guidance clarifies that all payments made to a single payee should be
totaled for the year to determine whether they meet the definition of a
payment under s. 2 of ESTMA. Payments made by a Reporting Entity to the
same payee that meet the $100,000 threshold in one category of payment
must be disclosed. To determine if payment was made to the “same payee,”
the entity must group together departments, ministries, trusts, boards,
commissions, corporations, bodies or other authorities that are established to
perform a power, duty or function on behalf of a particular level.
In addition, ESTMA deems all payments made to all employees and public
office holders of a payee to be made to that same payee. This is especially
significant in the context of paying expenses or other monies to government
officials or employees. In some jurisdictions it is legal and expected that
private entities pay a per diem or other expenses of government inspectors
or agents. While any individual may accrue only small per diem payments, the
aggregate amount of all such payments made to the officials of a particular
mccarthy.ca
24
deemed payee may be significant.
This provides an additional concern for companies in regards to anticorruption compliance and controls. Payments that are otherwise legal under
the CFPOA, or for which corrupt intent would be difficult to prove, are likely
to be reportable. Failure to report payments could become a tool used by
the RCMP as a lesser included charge to allow for some sanctions even if a
corruption charge could not be fully made out.
Finally, ESTMA does not apply to payments made to Aboriginal governments
in Canada for the first two years during which the legislation is in force.
Aboriginal governments are intended to be within the scope of payee
under ESTMA, and will be included after this two-year period.
Payments
Payments that fall outside of the seven categories provided in s. 2 of
ESTMA do not need to be reported. The Guidance clarifies that the
substance of the payment and not the form should be considered when
categorizing a payment.
A Reporting Entity must report all payments made:
- by the Reporting Entity; and,
- by the entity controlled by the Reporting Entity.
The Guidance provides further clarification on the following categories of
payments, which we have summarized below:
-
Taxes: Taxes are intended to capture income, profit, and production tax payments in relation to commercial development of oil, gas or minerals. The term tax means any type of government charge that is enforceable by law. Withholding taxes need not be reported. Consumption taxes, even if related to the commercial development of oil, gas or minerals do not need to be reported. Examples of taxes that need to be reported include:
- income and profit taxes,
- capital gains taxes,
- capital taxes,
- mining taxes,
- windfall profits taxes,
- resource surcharges, and
- petroleum revenue taxes.
- Royalties: The Guidance suggests that royalties should be defined by their common meaning. Furthermore, it clarifies that in-kind royalties should be treated the same as other in-kind payments.
- Fees: It does not matter whether a payment, in cash or in-kind, is characterized as a fee. If it accomplishes the same purpose in substance as a fee it should be reported. This category is not mccarthy.ca
25
meant to capture amounts paid in the normal course of commercial transactions in exchange for services provided by the government or their entities.
- Production Entitlements: A payee’s share of oil, gas or mineral production extracted as part of a commercial development under a production sharing agreement or similar contractual or legislated arrangement should be categorized as a production entitlement. In-kind entitlements should be reported in their equivalent cash value. Volumes of production entitlements paid do not have to be reported.
-
Bonuses: Payments which are in substance, regardless of their label, signing, discovery, production and any other type of bonuses paid to a payee in relation to the commercial development of oil, gas or minerals must be reported.
- Dividends: Dividends paid to a payee who is a normal shareholder of the entity need not be reported so long as the payee acquired the shares on the same terms available to others in the market and the dividend is paid to the payee on the same terms as other shareholders.
-
Infrastructure Improvements: Whether they are cash or in-
kind payments, and whether they are payments made pursuant to a contract or not, they must be reported. The purpose is not to capture infrastructure improvement payments that relate primarily to the operational purposes of the Reporting Entity.
Reports under ESTMA are due within 150 days of the end of the financial year
and must be accompanied by an attestation by a director or officer of the
entity. If the entity retains an independent auditor, the auditor may certify that
the report is true, accurate and complete in place of the attestation.
The form of the report is to be
A PAYMENT THAT GOES
prescribed by the Minister in
UNREPORTED FOR ONE YEAR
writing, and can be prescribed on a
COULD YIELD $9 MILLION
project-by-project basis. However,
LIABILITY.
the aggregate thresholds will not
be segregated by project. These
requirements, and the reports themselves, will be public unless the
regulations provide otherwise.
Penalties: Exposure for Companies,
Directors and Officers
A compliance failure is punishable upon summary conviction with a fine
of up to $250,000. This fine applies to any entity that fails to comply with
the reporting requirements or orders issued by the Minister. The fine also
applies to every person or entity that structures any payments or any other
financial obligations or gifts with the intention of avoiding the requirements
to report those payments. Notably, under ESTMA, each day that passes
mccarthy.ca
26
prior to a non-compliant report being corrected forms a new offence.
Therefore, a payment that goes unreported for a year could result in more
than $9 million in total liability.
ESTMA also applies to all officers, directors and agents of the offending
entity who directed, authorized, assented to, acquiesced in or participated
in the commission of the violation. Companies may consider retaining
independent auditors to verify their financial reports as this could help
minimize the possibility for any personal liability.
Due Diligence Defence
ESTMA includes a broad due diligence
ESTMA PART OF GLOBAL
defence against liability. Paragraph
TREND TO REDUCE
26(b) creates a defence to liability if the
CORRUPTION.
person or entity can establish that it
“exercised due diligence to prevent” the
commission of the offence. This provides a strong incentive for companies
to adopt rigorous compliance regimes with the input of external counsel and
the oversight of independent auditors.
While ESTMA provides for a due diligence defence, it makes no provision for
any exemptions or exceptions where, many thought, one would be absolutely
necessary: in regard to actions required by local law or contract. The
reporting regimes of both the U.S. and EU also have no such exception. This
may create serious conflicts for many companies, particularly multinational
entities, where conflict exists between reporting obligations under Canadian
law and confidentiality or privacy obligations in a foreign jurisdiction.
Substitution Determinations and the Global Trend
Towards Transparency
The Canadian government’s recent commitment to mandatory reporting
builds on a global trend towards increased disclosure by extractive sector
companies in hopes of reducing corruption related to resource development.
The EU has established transparency rules for extractive industries (including
the forestry sector) through its Transparency Directive.1 Similarly, the
Securities and Exchange Commission (SEC) recently re-proposed rules
under the Dodd-Frank Wall Street Reform and Consumer Protection Act to
require that “resource extraction issuers” file annual reports disclosing the
payments that they have made to domestic and foreign governments in
relation to the commercial development of oil, natural gas, and minerals.2
The Canadian government has already made an effort to align its legislative
requirements with those of the EU. As of July 31, 2015, reports submitted
to EU and European Economic Area member-states that have implemented
1.
http://register.consilium.europa.eu/doc/srv?l=EN&f=PE%2037%202013%20INIT
2.
http://www.sec.gov/news/pressrelease/2015-277.html
mccarthy.ca
27
the EU Transparency Directive at a national level may be submitted to
the Minister of Natural Resources as a substitute for a report prepared
under ESTMA. In order to use the substitution determination, a Reporting
Entity must include an attestation statement in its report and specify the
jurisdiction in which the substituted report was originally filed. It must
also file within the timeline prescribed by the other jurisdiction. If the filing
deadline in the other jurisdiction extends beyond 150 days after the end of
a Reporting Entity’s financial year, the Reporting Entity must inform NRCan
within the deadline under the ESTMA.3
If the payment disclosure rules that have been endorsed by the SEC
are enacted in the U.S., it is anticipated that NRCan will similarly issue a
substitution determination in an effort to ease regulatory burdens and
harmonize Canadian anti-corruption and transparency legislation with that
of its close trading partners.
Conclusions – An Eye to the Future
ESTMA compliance will be critical for both traditional extractives and
private equity or institutional investors that maintain significant interests
in the extractive sector. However, full implementation of the regime is not
complete. The Guidance and other technical implementation tools remain
in draft form, and firms should be attentive for completion and release of
the finalized versions. The definition of control remains subject to future
regulation. Finally, the implementation of ESTMA’s provisions vis-à-vis
Aboriginal governments remains in abeyance.
3. ESTMA, at s. 10(1) authorizing Extractive Sector Transparency Measures Act – Substitution Determination, July 31, 2015, http://www.nrcan.gc.ca/acts-regulations/17754
mccarthy.ca
28
Class Actions
Case Law Summaries
Class Actions
CANADIAN IMPERIAL BANK OF COMMERCE V. GREEN,
2015 SCC 60
In this highly anticipated trilogy decision, the Supreme Court of Canada
made three important determinations regarding secondary market liability
class action cases.
The Court unanimously confirmed that the merits test for leave to proceed
with a proposed securities class action is to be construed as a “robust
deterrent screening mechanism” across Canada. The Court emphasized
that judges should apply real scrutiny to the evidence presented by
investors to show a “reasonable possibility of success” for their proposed
statutory claim.
By a 4–3 majority, the Court also clarified that the limitation period
applicable to statutory secondary market misrepresentation claims in
Ontario continues to run until the plaintiff obtains leave to proceed. The
impact of this determination is limited given amendments to Ontario’s
Securities Act, which prescribe a different limitation period going forward.
Finally, of benefit to issuers, the Court unanimously rejected the argument
that Canadian courts should endorse a U.S.-style “fraud on the market”
theory, which would allow reliance to be inferred on a class-wide basis
instead of requiring individual investors to establish actual reliance after a
common-issues trial.
LLP’s Canadian Appeals Monitor blog post entitled “Setting Limits: The
Supreme Court Confirms a Robust Gatekeeper Approach to Secondary
Market Liability Actions.”
DRYWALL ACOUSTIC LATHING AND INSULATION, LOCAL
675 V. SNC-LAVALIN GROUP INC., 2015 ONCA 718
This was a decision in a class proceeding against SNC-Lavalin and its
directors and officers by shareholders who alleged misrepresentations in
secondary market disclosure documents.
As required by s. 138.8(1) of the Ontario Securities Act, the plaintiffs had
obtained leave of the Court to bring their claims. The plaintiffs then sought
to amend their claim to add new allegations of bribery, embezzlement, and
other wrongful conduct following criminal and regulatory investigations.
The Ontario Court of Appeal held that depending on the nature of
mccarthy.ca
29
Class Actions
proposed amendments, additional leave may be required under s. 138.8(1)
to amend pleadings and advance new claims. In this case, the plaintiffs were
entitled to add new particulars of a misrepresentation already alleged, but
claims that were founded on other misrepresentations were statute-barred
by the three-year limitation period imposed by s. 138.14(1) of the Act.
FAIRHURST V. ANGLO AMERICAN PLC, 2015 BCSC 1747
In this class proceeding concerning alleged price-fixing of diamonds, the
plaintiff sought leave to amend its statement of
claim to speak to issues raised by the defendants
in the course of the certification application and
hearing. The order certifying the class proceeding
was under appeal.1
The British Columbia Supreme Court held that
leave was not required as a procedural matter,
because there had been no previous amendment
and no notice of trial had been issued. The Court
also noted that pleadings are meant to permit the
parties to know the case they are to meet, and it
is therefore not improper to address, in pleadings,
arguments made by opposing parties.
MASK V. SILVERCORP METALS INC., 2015 ONSC 5348
and 2015 ONSC 7780
This was a leave and certification motion in a proposed securities class
action for secondary market misrepresentation. The Ontario Superior Court
denied leave for the statutory misrepresentation claims proposed under s.
138.8 of the Ontario Securities Act on the basis that the plaintiff’s case had
no reasonable possibility of success. The Court also refused to certify the
two common law claims for negligent misrepresentation and negligence.
The plaintiff claimed he suffered financial losses because he purchased
Silvercorp shares at an artificially inflated price due to representations made
by the company that were subsequently revealed to be allegedly untrue by
an anonymous Internet posting that resulted in a significant drop in share
price. In denying leave for the misrepresentation claim, the Court observed
that anonymous Internet postings could qualify as corrective disclosure for
purposes of the Securities Act, an interpretation that the Court found to be
consistent with securities class actions law in the United States.
In a subsequent application for costs, the Court held that costs awarded on
1. Earlier decisions in this proceeding have been discussed in previous versions of Mining
in the Courts. See Mining in the Courts, Vol. II, Vol. III and Vol. V (certification decision).
mccarthy.ca
30
Class Actions
an unsuccessful leave application under s. 138.8 of the Securities Act “will
almost always be higher” than costs awarded on a certification motion. The
Court fixed costs at $500,000.00.
Both of the above decisions are under appeal.
RAHIMI V. SOUTHGOBI RESOURCES, 2015 ONSC 5948
In this motion for leave, the defendants relied upon the reasonable
investigations defence in s. 138.4(6) of the Ontario Securities Act.
A coal mining company, SouthGobi, had issued a press release announcing
a restatement to consolidated financial statements after the company
began using GAAP. The press release resulted in a dramatic decrease in
the share price. Rahmini sought leave under s. 138.8 of the Securities Act
to bring a secondary securities market misrepresentation claim against
SouthGobi and a number of its directors and officers.
The defendants raised the “reasonable investigation” defence, which
requires a defendant establish (1) that reasonable investigations were
conducted before the document was released and (2) it had no reasonable
grounds to believe the document contained the misrepresentation.
While the onus at trial would be to prove the defence on a balance of
probabilities, the Ontario Superior Court noted that at the leave stage,
defendants must establish that there is no reasonable possibility that
they will not be able to establish one or both branches of the reasonable
investigation defence.
The Court found that the directors and officers were protected by the
reasonable investigation defence, but granted leave to bring the statutory
misrepresentation claim as against SouthGobi.
mccarthy.ca
31
Conflicts and Jurisdiction
CHEVRON CORP. V. YAIGUAJE, 2015 SCC 42
In this important decision, the Supreme Court of Canada confirmed that
in recognition and enforcement proceedings, the plaintiff does not need
to prove a “real and substantial connection” between the province and
the defendant or the subject matter in order to establish jurisdiction
simpliciter. The only pre-requisite is that the foreign court properly
assumed jurisdiction.
The case involves an attempt to enforce an Ecuadorian judgment in
Ontario against Chevron and Chevron Canada. Although Chevron Canada
was a wholly-owned subsidiary of Chevron, it was not a party to the
Ecuadorian case.
In reaching its decision, the Court noted that the purpose of a recognition
and enforcement proceeding is not to evaluate the underlying claim, but
to facilitate the enforcement of an already-adjudicated obligation. Such a
purpose does not require proof of a real and substantial connection to the
enforcing jurisdiction. Nor is it necessary that the defendant have assets
in the province at the time of the proceeding. In the era of globalization,
assets move quickly between jurisdictions and judgment creditors are
entitled to enforce their judgments where they wish.
With respect to Chevron Canada — a stranger to the original foreign
judgment — the Court confirmed that Ontario had jurisdiction, but noted
that a finding of jurisdiction only affords the opportunity to recognize and
enforce the judgment. The Court specifically took no position on whether
Chevron Canada could properly be considered a judgment debtor.
LLP’s Canadian Appeals Monitor blog post entitled “Chevron Corp v.
Yaiguaje: SCC Decision Highlights Increased Litigation Risk for Canadian
Companies for Misdeeds of their Foreign Affiliates.”
GARCIA V. TAHOE RESOURCES INC., 2015 BCSC 2045
In this case, the British Columbia Supreme Court declined jurisdiction
in a proceeding in which the plaintiffs sought to hold a parent company
responsible for the actions of its subsidiary.
Seven Guatemalans commenced an action in British Columbia against Tahoe
in connection with an alleged shooting that took place at Escobal mine
(a gold, silver, lead and zinc mine) in Guatemala. The plaintiffs claim they
were shot at close range by security personnel while peacefully protesting
mccarthy.ca
32
outside the mine gates. The mine is owned by a Guatemalan subsidiary of
Tahoe. Tahoe itself has its headquarters in Nevada, but is registered in British
Columbia.
Tahoe conceded that the B.C. Court had jurisdiction simpliciter, but argued
that jurisdiction should be declined on the basis that Guatemala is clearly the
more appropriate forum.
The Court agreed. Among other factors, the Court considered the
greater inconvenience and expense required to litigate in B.C. due to the
evidence being in Guatemala and Nevada, that all of the plaintiffs resided
in Guatemala, and that none of the plaintiffs speak English. The Court also
found a risk of duplicative proceedings because there was a related criminal
prosecution underway in Guatemala. The plaintiffs argued, relying on Choc v.
Hudbay Minerals Inc.,1 that their cause of action against Tahoe directly could
not be advanced in Guatemala. Although the Court agreed that was a factor
weighing in favour of accepting jurisdiction, it ultimately declined jurisdiction,
noting the importance of proceeding cautiously in finding that a foreign
court is incapable of providing justice to its own citizens.
JTG MANAGEMENT SERVICES LTD. V. BANK OF NANJING
CO. LTD., 2015 BCCA 200
In this decision involving an international letter
of credit, the British Columbia Court of Appeal
clarified the analysis required to determine
whether a contract is to be performed “to a
substantial extent” in British Columbia in order to
establish territorial competence under the Court
Jurisdiction and Transfer Proceedings Act.
A B.C. company agreed to sell softwood lumber
to a Chinese company, the payment of which
was secured by an irrevocable export letter of
credit issued by a bank. A dispute arose over the
documents provided by the lumber company to
Nanjing Bank to obtain payment, and the lumber
company sued the bank in B.C. for breach of the letter of credit. The
bank challenged the jurisdiction of the B.C. courts, arguing, among other
things, that the lower Court improperly interpreted s. 10(e)(i) of the Court
Jurisdiction and Transfer Proceedings Act, which provides that the Court
will have territorial competence if the contract underlying the proceeding
was to be performed “to a substantial extent” in B.C.
1.In Choc v. Hudbay Minerals Inc., 2013 ONSC 1414, the Ontario Superior Court of
Justice declined to strike a pleading, which alleged that a Canadian parent company
was liable in negligence for failing to prevent alleged human rights abuses. See Mining
in the Courts, Vol. IV.
mccarthy.ca
33
The Court of Appeal held that the analysis under s. 10(e)(i) must focus
on the nature of the obligations arising under the contract and the
expectations of the parties at contract formation. The fact that more than
one court may assert jurisdiction over a dispute is no bar to finding a real
and substantial connection under s. 10(e)(i) because in an international
contract, both parties may perform the obligations “to a substantial
extent” in their home jurisdictions. The Court held that the receipt of
payment and the preparation of documents necessary to obtain payment
constituted the requisite performance “to a substantial extent” in B.C.
The Court of Appeal also upheld the lower Court’s decision to not decline
jurisdiction in favour of China.
LLP’s Canadian Appeals Monitor blog post entitled “Jurisdiction in
International Commercial Contracts: New Guidance from the B.C. Court of
Appeal.”
YUKON ZINC CORPORATION (RE), 2015 BCSC 1961
Yukon Zinc, the owner of the Wolverine Mine in the Yukon, commenced
restructuring proceedings in March 2015 under the Companies' Creditors
Arrangement Act (CCAA). This decision concerns the question of which
court — B.C. or Yukon — should resolve the miners’ lien claims advanced by
two trucking companies in the insolvency proceedings.
The B.C. Court declined jurisdiction, finding the Yukon Court to be the
more appropriate forum to determine issues arising under the Yukon Miners
Lien Act, which the Court characterized as a unique piece of legislation
that the Yukon courts have familiarity and expertise with. The stay was
lifted, but only to resolve specific issues concerning lien validity and
priority. Remaining issues, such as the quantum of the claims, remain to be
determined within the CCAA process.
Other decisions arising out of the Yukon Zinc restructuring are discussed
under the heading “Insolvency” beginning on page 49.
mccarthy.ca
34
The Changing Regulatory Landscape for
Canadian-Owned Extraction Companies Operating Abroad
The Changing Regulatory
Landscape for Canadian-Owned
Extraction Companies
Operating Abroad
Andrew Kalamut
Canada is often considered to be the mining capital of the world. More
than three-quarters of the world’s mining and exploration companies are
based in Canada. Canada’s extractive sector typically amounts to more
than one-third of the total value of Canadian domestic exports, and its
natural resource sector directly and indirectly accounts for almost one-fifth
of the country’s nominal GDP and 1.8 million jobs.
While many extractive companies are based in Canada, these companies
also operate in more than 100 countries abroad, participate in thousands
of projects and account for almost half of the world’s mining and mineral
exploration activity.1 These global mining operations result in direct
benefits to the host country, including the development of infrastructure
and the creation of jobs. However, over the past decade, reports from
Human Rights Watch, Mining Watch, and the United Nations Human Rights
Committee have also cast these operations in an unfavorable light.
At present, there is no overarching Canadian law that directly regulates
overseas operations of Canadian-registered mining companies. Instead,
there is a legislative “patchwork” that governs these companies’
compliance with various standards, including those applicable to
international environmental, labour and human rights, and policybased initiatives and other measures aimed at encouraging
corporate social responsibility in host countries.2
In response to this patchwork and the reproaches
levelled by industry critics, federal politicians
1.
http://www.international.gc.ca/media/
aff/news-communiques/2014/11/14a.
aspx?lang=eng
2.
See, for example, the Corruption of
Foreign Public Officials Act, S.C. 1998,
c. 34, Extractive Sector Transparency
Measures Act, S.C. 2014, c. 39, s. 376,
and the Canadian Extractive Sector
Trade Strategy overseen by the Office
of the Extractive Sector Corporate
Social Responsibility Counsellor.
mccarthy.ca
35
have begun developing a new regulatory framework for Canadian
companies operating abroad. In 2009, during the previous Conservative
government’s tenure, Liberal MP John McKay tabled Bill C-300, a private
member’s bill that called for the creation of a regulatory system that
would allow citizens of host countries to file complaints against Canadianbased mining companies directly with the Minister of International Trade
and the Minister of Foreign Affairs. At the time, industry groups, including
the Prospectors & Developers Association of Canada and The Mining
Association of Canada3 firmly opposed the bill, stating that it ignores the
competitive nature of the industry and that the regulations may infringe on
the laws of the host state.
Bill C-300 was defeated in 2010. However, in 2014, the Conservative
government gave its diplomacy-based corporate social responsibility
strategy more teeth by giving the Office of the Extractive Sector
Corporate Social Responsibility Counsellor the ability to revoke funding if a
company refuses to participate in a review or comply with guidelines.
During the 2015 federal election
THERE IS CURRENTLY
campaign, the issue of increased
NO OVERARCHING LAW
regulatory oversight of Canadian
REGULATING CANADIAN
extractive sector companies
MINING OPERATIONS ABROAD.
operating abroad gained more
traction. The Liberal party’s position
on increased regulation made specific reference to Mr. McKay’s past
efforts to increase regulation abroad. The Liberal party took the position
that, if elected, it would act upon the 2007 National Roundtables on
Corporate Social Responsibility and the Canadian Extractive Industry
in Developing Countries Advisory Group’s recommendations. The 27
recommendations proposed by the advisory group included, among other
things:
- the adoption by Canadian companies of the Global Reporting
Initiative reporting standards;
- the disclosure of project information and data from Export
Development Canada;
- the appointment of an independent ombudsman and compliance
review committee; and
- the amendment of the Corruption of Foreign Public Officials Act to
clarify that it applies extraterritorially to Canadian nationals.4
To a certain extent, extractive companies and the communities that host
them abroad have dove-tailing interests. For instance, high standards
of corporate social responsibility, including proper health and safety
3.
Canada’s Mining Industry: Socially Responsible Global Leader – Bill C-300 Will Hurt
Canadian Mining Companies
4.
National Roundtables on Corporate Social Responsibility (CSR) and the Canadian
Extractive Industry in Developing Countries, Advisory Group Report, March 29, 2007.
mccarthy.ca
36
standards, improved efficiency of operations, and a company’s reputation
for demonstrating strong corporate social responsibility can improve share
prices at home. These are strong motivating factors that have led, and
continue to lead, mining companies to self-regulate their activities abroad.
That, however, may no longer be enough. The extractive industry in Canada
is clearly facing a shifting landscape of regulatory oversight and policy
that will continue to change with the new Liberal government. It will be
important for Canadian extractive companies to keep a watchful eye on
the current government’s willingness to increase its oversight to levels
potentially above and beyond those applicable to U.S., European and
Australian competitors.
mccarthy.ca
37
Contracts
Case Law Summaries
Contracts
AMERICAN CREEK RESOURCES LTD. V. TEUTON
RESOURCES CORP., 2015 BCCA 170
This British Columbia Court of Appeal decision involves the contractual
interpretation of the phrase “exploration expenditures” within an option
agreement.
Teuton and American Creek had an option agreement related to
property in northwestern B.C. Under the agreement, American
Creek would earn a controlling interest in the property upon
completion of certain conditions, including spending at least
$5 million on “exploration expenditures”. While American Creek
said it spent over $6 million on exploration expenditures, Teuton
challenged certain expenditures as not being reasonable, and
refused to complete the transfer.
The trial judge rejected Teuton’s argument, construing
“exploration expenditures” (which was undefined in the
agreement) as expenses that were actually incurred, in good
faith, in connection with the property and in relation to
exploration and development work within the Mineral Tenure Act regime.
He granted an order for specific performance requiring Teuton to transfer
title to the property.1
In upholding the order, the Court of Appeal applied the recent decision
of the Supreme Court of Canada in Creston Moly Corp. v. Sattva Capital
Corp., 2014 SCC 53,2 holding that contractual interpretation is a question
of mixed fact and law, and as such, a judge’s findings are entitled to
deference. Particular deference was paid to the trial judge’s appreciation of
the factual matrix and his finding that there was no prior custom or usage
as to the phrase “exploration expenditure”. The trial judge’s finding of
reprehensible conduct sufficient to order special costs was a discretionary
decision and was also upheld.
B2GOLD CORP. V. CONDOR RESOURCES PLC, 2015
BCSC 1548
This British Columbia Supreme Court decision emphasizes the importance
of due diligence in the specific context of an agreement that incorporates
a second agreement by reference.
1. The underlying decision, indexed as 2014 BCSC 636, is discussed in Mining in the Courts,
Vol. V.
2. Creston Moly Corp. v. Sattva Capital Corp. is discussed in Mining in the Courts, Vol. V.
mccarthy.ca
38
Contracts
B2Gold entered into a letter agreement with Condor, a U.K.-based gold
exploration company, for the exchange of concessions in Nicaragua. To
carry out the exchange, B2Gold was to cause its subsidiary, Triton, to
transfer two concessions to Condor, one of which the letter agreement
specified was “subject to a 3% NSR in favour of Royal Gold.” The NSR
originated in a royalty agreement between Triton’s predecessor and Royal
Gold’s successor, RG Exchangeco.
The royalty included provisions entitling RG Exchangeco to request further
security. When further security was requested, Condor refused to grant it,
arguing that it was not aware of the terms of the royalty agreement and
that the royalty agreement was not binding upon it. The letter agreement
was signed by Condor without it having obtained a copy of the royalty
agreement, but there was considerable evidence that Condor knew of its
existence.
The Court concluded that the reference to the “3% NSR in favour of Royal
Gold” operated as an assignment of Triton’s obligations under the royalty
agreement to Condor by which Condor was bound. Condor could not avoid
being bound by it by refusing to enquire into its terms and conditions.
mccarthy.ca
Year in Review – Vol.VI, March 2016
39
Enforcement of Awards and Judgments
Enforcement of Awards
and Judgments
CHEVRON CORP. V. YAIGUAJE, 2015 SCC 42
This important Supreme Court of Canada decision confirms that the only
prerequisite to finding jurisdiction simpliciter in enforcement proceedings is
that the foreign court that issued the award properly assumed jurisdiction.
See full case summary on page 31, under "Conflicts and Jurisdiction."
EMPRESA MINERA LOS QUENUALES S.A. V VENA
RESOURCES, 2015 ONSC 4408
This Ontario Superior Court case concerned an arbitral award obtained in Peru
by Empresa Minera Los Quenuales S.A., a Peruvian subsidiary of Glencore plc,
and attempts to have the award recognized and enforced in Ontario against
Vena Resources Inc. and its subsidiaries. Vena’s head office is in Toronto.
Ontario’s International Commercial Arbitration Act incorporates Article 35
of the Model Law on International Commercial Law. Pursuant to Article 25,
a Court must enforce an arbitral award upon receipt of a certified copy of
the authenticated arbitration agreement and arbitral award. The Court has
discretion to refuse enforcement if the party resisting enforcement can
bring itself within Article 36, such as by demonstrating that the arbitral
award may be set aside by a pending annulment proceeding.
In this case, Vena had commenced an annulment application in Peru, and
the Ontario Court exercised its discretion to adjourn Empresa’s application
until the annulment decision is delivered. In doing so, the Court considered
the three-part test set out in RJR-MacDonald v. Canada, [1994] 1 S.C.R.
311, and found that a modified version of the test applied to adjournment
applications under Article 36. The party resisting the enforcement
application must show that there is an issue to be tried and the court must
consider the balance of convenience. As a condition of the adjournment,
Vena was ordered to post security in the amount of $250,000.
SISTEM MÜHENDISLIK İNŞAAT SANAYI VE TICARET
ANOMIC SIRKETI V. KYRGYZ REPUBLIC, 2015 ONCA 447
In this case, the Ontario Court of Appeal discussed what constitutes proper
service of a foreign state under the federal State Immunity Act (Act).
Sistem obtained an order in the Ontario Superior Court of Justice to
mccarthy.ca
40
Enforcement of Awards and Judgments
enforce an international arbitral award it had obtained against the Kyrgyz
Republic. The Court declared that the Kyrgyz Republic had an equitable
interest in shares of Canadian mining company Centerra Gold Inc., which
were held by a state-owned company. The Court granted an order for
the seizure of the shares to satisfy the award. The Kyrgyz Republic did
not participate in the hearing or the appeal, but the state-owned Kyrgyz
company did. On appeal, the Kyrgyz company argued that the Kyrgyz
Republic had not been properly served with the initiating documents in
accordance with s. 9 of the State Immunity Act, and without proper service
the application judge could not properly proceed as it did.
The Court of Appeal agreed and set aside the lower Court’s decision.
Under s. 9 of the Act, a state may be served in any manner agreed on by
the state, in accordance with an international convention to which the state
is a party, or through the Deputy Minister of Foreign Affairs or a designate.
In this case, Sistem served the application by courier at the Kyrgyz
Republic’s embassy in Washington, D.C., based on an opinion Sistem
obtained from a Kyrgyz Republic law firm that this would be in accordance
with the Vienna Convention. The Ontario Court of Appeal noted that there
was no provision in the Vienna Convention dealing with service, and that
service on an embassy is not available as a means of effecting service on a
foreign state in any event.
STANS ENERGY CORP. V. KYRGYZ REPUBLIC,
2015 ONSC 3236
In another decision regarding the enforcement of a foreign arbitral award
under Articles 35 and 36 of Ontario’s International Commercial Arbitration Act,
the Ontario Superior Court provided an important reminder of the obligation
to make full and frank disclosure when seeking an ex parte injunction.
Stans Energy applied in Ontario to enforce an award issued by a Moscow
arbitration panel, and obtained an ex parte Mareva injunction freezing shares in
Toronto-based Centerra Gold Inc. that were held by a company owned by the
judgment debtor. The injunction was later made indefinite, and the judgment
debtor appealed that decision arguing that Stans had failed to disclose that
the Economic Court of the Commonwealth of Independent States had
determined that the arbitration court had no jurisdiction to issue the award.
Stans had stated that the Economic Court’s decision was an “advisory
opinion” and had failed to include a translation of the decision.
Just before the hearing of the appeal, the Moscow State Court set aside the
arbitral award. That evidence was adduced on the appeal, and the Ontario
Superior Court set aside the injunction on that basis. In doing so, the Court
noted that it would have set aside the injunction in any event because Stans
did not inform the Court about the Economic Court’s decision.
mccarthy.ca
41
Back on the International Stage – Spotlight on Climate Change
Policy, the Paris Agreement, and Carbon Pricing Mechanisms
Back on the International Stage –
Spotlight on Climate Change Policy,
the Paris Agreement, and Carbon
Pricing Mechanisms
Selina Lee-Andersen
Over the years, climate change policy has experienced its ebbs and flows.
Climate change landed on the international stage at the Rio Earth Summit in
1992, where 154 countries signed the United Nations Framework Convention
on Climate Change (UNFCCC) to stabilize atmospheric concentrations
of greenhouse gas (GHG) emissions at a level to prevent “dangerous
anthropogenic interference with the climate system.” The UNFCCC came
into force on March 21, 1994 and, to date, has been ratified by 195 countries.
Subsequent international negotiations led to the Kyoto Protocol, an
international treaty which extends the UNFCCC and commits its signatories to
reduce GHG emissions. The Kyoto Protocol was adopted in December 1997
and came into force on February 16, 2005. There are currently 192 signatories
to the Kyoto Protocol. While Canada withdrew from the Kyoto Protocol
effective December 2012, a newly elected federal government has indicated
its willingness to re-engage in international efforts to implement a new global
climate change treaty for the post-Kyoto era.
Following the anticlimactic outcome of the 15th session of the
Conference of the Parties to the UNFCCC (COP 15), which
produced the non-legally binding Copenhagen Accord in 2009,
there was cautious expectation of a legally binding successor
agreement to the Kyoto Protocol as countries convened
in Paris for the latest round of international climate
change talks held from November 30 to December
11, 2015 (COP 21). After marathon negotiations
and compromises on all sides, COP 21 reached a
successful conclusion on December 12, 2015
with the adoption of the Paris Agreement by
195 member nations of the UNFCCC.
Paris Agreement – Key
Provisions
The Paris Agreement, which contains
both binding and non-binding
commitments, will come into force
30 days after the date on which at
least 55 parties to the UNFCCC,
mccarthy.ca
42
accounting for at least 55% of total global GHG emissions, deposit their
instruments of ratification, acceptance, approval or accession. The Paris
Agreement aims to hold the increase in global average temperature to well
below 2°C above pre-industrial levels, while countries pursue efforts to limit
the temperature increase to 1.5°C above pre-industrial levels. In addition,
the Paris Agreement articulates a series of global goals to enhance climate
adaptation efforts and build capacity, as well as strengthen resilience and
reduce vulnerability to climate change. Beyond the temperature limit, the
Paris Agreement also establishes a long-term emissions goal of peaking
global GHG emissions as soon as possible, with a view to achieving net-zero
emissions — i.e. a balance between anthropogenic emissions by sources and
removals of GHG emissions by sinks — in the second half of this century.
In 2018, member parties will convene a facilitative dialogue to assess their
collective efforts in relation to their progress towards the long-term goal.
The outcomes of this dialogue will likely inform future climate policies and
actions.
Since national pledges to reduce emissions are voluntary, the success of
the pact in achieving meaningful GHG emissions reduction will likely turn on
the willingness of future governments to take action as well as global peer
pressure. Ahead of COP 21, countries were invited to submit their Intended
Nationally Determined Contributions (INDCs), which set out what post2020 climate actions they intend to take under a new international climate
agreement. As of December 12, 2015, 187 parties to the UNFCCC had
formally submitted INDCs, covering approximately 94% of global emissions
in 2010 and 97% of global population. There is wide variation among national
plans in terms of scope and ambition. Member nations are required to put
forward a plan, but as noted above, the pledges by countries to reduce
emissions are voluntary and there are no legal requirements around how — or
how much — countries should reduce emissions. That said, negotiators have
built certain legally binding commitments into the Paris Agreement, including
a requirement that countries present updated plans every five years (starting
in 2020) with ever-tightening emissions reduction targets. Countries will
also be required to undertake a global review in 2023 (and every five years
thereafter) to assess their collective progress toward achieving the goals
of the Paris Agreement. Further, they will be required to monitor and report
on their national GHG inventories based on standardized requirements.
Developed countries have been called on to mobilize financial resources to
assist developing countries with respect to both mitigation and adaptation,
and other parties are encouraged to provide or continue to provide such
support voluntarily.
The adoption of the Paris Agreement marks the start of a renaissance
period for climate change policy, one that represents a global paradigm
shift towards a lower-carbon economy. The process for renewing Canada’s
climate action plan is only just starting now, but Canada has already
expressed its support for more ambitious climate action by endorsing the
global goal of keeping rising average temperatures to within 1.5°C above
mccarthy.ca
43
pre-industrial levels. How this ambition will translate into federal, provincial
and municipal climate action remains to be seen. One thing is clear: in 2016,
policy-makers, businesses, non-governmental organizations and individuals
will come together in a collective conversation about the kinds of policies
and actions that will be needed to bring Canada closer to meeting its
commitments under the Paris Agreement.
Climate Change Policy in Canada
In May 2015, Canada submitted its INDC to the UNFCCC Secretariat,
pledging a 30% reduction from 2005 levels — approximately 523 megatonnes
(Mt) — by 2030. In its Sixth National Report on Climate Change, Environment
Canada projected Canada’s emissions to be 815 Mt of carbon dioxide
equivalent, or 11% above 2005 levels, with current measures in place. Given
the overall increase in Canada’s emissions over the past two decades and
continuing upwards trajectory, achieving Canada’s INDC will require ambitious
federal and provincial policies. The new federal Liberal government is expected
to update Canada’s emissions reduction targets following COP 21 and
further consultation with the provinces and territories, which was confirmed
by Canada’s Environment Minister in November 2015 when she stated that
the current INDC will be considered a floor for future action. As a result, it
is widely expected that a new federal climate change strategy will call for
more stringent targets and actions. In advance of COP 21, the federal Liberal
government announced that Canada would contribute an additional $2.65
billion over five years to the international Green Climate Fund, which is looking
to raise US $100 billion annually by 2020 to help developing countries adapt
to the impacts of climate change.
Provincial and territorial leaders have taken a leadership role on the climate
change file and have recognized the importance of joint action to adapt to
and combat climate change. At the Québec Summit on Climate Change held
in April 2015, all of the provinces and territories issued a joint declaration in
which they committed to foster the transition to a lower-carbon economy and
increase adaptation initiatives to build resiliency. A more detailed look at each
of the climate change programs of each province and territory is set out in
McCarthy Tétrault LLP’s Climate Change Essentials guide.
The Role of Carbon Pricing Mechanisms
Carbon pricing is increasingly seen as the key mechanism by which
meaningful GHG emissions reduction can be achieved. As a result, there
has been growing pressure on governments to account for the societal
costs of climate change and put a price on carbon. A price on carbon looks
to capture what are referred to as the external costs of carbon emissions,
i.e. costs that the public pays for indirectly, such as damage to crops and
damage to property as a result of flooding. By placing a monetary value
on carbon, governments, business and individuals will have an incentive to
change their behaviour to less carbon intensive alternatives.
mccarthy.ca
44
Market instruments are perceived as providing more cost efficient and
flexible compliance mechanisms, so governments are now looking to
the market for solutions. There are two main types of carbon pricing
mechanisms available to policymakers:
-
Emissions trading systems (ETS): ETS is a market-based approach used to manage GHG emissions by providing economic incentives for participants to reduce emissions. While emissions trading systems tend to be complex, the economic concept behind it is straightforward: since climate change is a shared global burden and the environmental impact of reducing emissions is the same wherever the reductions take place, it makes economic sense to reduce emissions where the cost is lowest. Under an ETS, an annual limit or cap is set on the amount of GHG emissions that can be emitted by certain industries. Regulated entities are then required to hold a number of emissions allowances equivalent to their emissions. Regulated entities that reduce their GHG emissions below their target will require fewer allowances and can sell any surplus allowances to generate revenue. Regulated entities that are unable to reduce their emissions can purchase allowances to comply with their target. By creating demand and supply for emissions allowances, an ETS establishes a market price for GHG emissions. In order to achieve absolute reductions in GHG emissions, the limit or cap is gradually lowered over time.
- Carbon taxes: A carbon tax puts a price on each tonne of GHG emissions generated from the combustion of fossil fuels. The idea is that over time, the carbon price will elicit a market response from all sectors of the economy, i.e. consumers and businesses will choose less carbon intensive alternatives, thus resulting in reduced emissions. The design and implementation of carbon taxes varies widely across jurisdictions. Design aspects such as the scope of coverage, point of application, and tax rate will depend on the jurisdiction’s energy mix, composition of its economy, existing tax burdens, existence of complementary environmental policies, and political considerations. With respect to scope, some jurisdictions have focused on a narrow category of energy users and large emitters, while others such as British Columbia have adopted a broader scope where the carbon tax covers GHG emissions from the combustion of all fossil fuels. According to the Institute for European Environmental Policy, there are currently no schemes that cover all GHG emissions in a given jurisdiction.
There are some key differences between the mechanisms. With an ETS, the
quantity of emissions reduction is known, but the price is uncertain, whereas
with a carbon tax, the price is known, but the quantity of emissions reduction
is uncertain. A tax requires decisions on the scope and rate of the tax, while
within a trading system, a firm can acquire or bank emissions allowances
over multiple years depending on the program. Therefore, emissions trading
offers a broader range of compliance options, thus increasing flexibility for
mccarthy.ca
45
participants and potentially lowering compliance costs. Both carbon pricing
mechanisms can generate revenue that can be used to lower other taxes or
invest in “green” initiatives. Both mechanisms also have related monitoring,
reporting, verification and compliance obligations, and both need special
provisions to minimize the effects on certain energy intensive, trade exposed
industries. The choice of the instrument will depend on each jurisdiction’s
national and economic circumstances. There are also more indirect carbon
pricing tools, such as fuel taxes, the elimination of fossil fuel subsidies, and
regulations that incorporate a social cost of carbon.
In its report, State and Trends in Carbon Pricing 2015, the World Bank and
Ecofys estimate that almost 40 countries and more than 20 cities, states
and provinces currently use carbon pricing mechanisms or are planning to
implement them. These jurisdictions are responsible for more than 22% of
global emissions. Others are developing or considering systems that will put a
price on carbon in the future. Altogether, these actions will encompass almost
half of global carbon dioxide emissions. While climate policy in jurisdictions
around the world tended to lag early on, recent developments have signaled
a general move towards cap-and-trade as the preferred market tool for
addressing climate change. In North America, both Québec and California
launched cap-and-trade systems in January 2013 and linked their programs
one year later, creating North America’s largest carbon market. Ontario’s
cap-and-trade program is expected to come online in 2017, which will link to
the existing programs in Québec and California. In January 2009, the Regional
Greenhouse Gas Initiative (comprising nine states in the U.S. Northeast)
began operating the first market-based regulatory program in the United
States to cap and reduce carbon dioxide emissions from the power sector.
Industry Leads the Way
In recent years, companies have been working hard to reduce their carbon
footprints and signal corporate support for the transition to a lower-carbon
economy. In particular, an increasing number of companies are setting
emissions reduction targets and taking action to address climate change
impacts in both their own operations and their supply chain. Since many
companies operate in jurisdictions where GHG emissions are subject to
mandatory reduction programs or carbon taxes, they are well attuned to
carbon pricing issues as a response to the regulatory environments in which
they operate. However, given the diversity in scope and timing of climate
policies, companies are faced with having to consider multiple carbon
compliance costs in their business decisions. As a result, there have been
increasing calls from the private sector for governments to establish clear
pricing and regulatory certainty to support climate-related investments
and climate risk assessment efforts. In the meantime, companies have been
managing their emissions, assessing risk and developing business plans based
on a real or internal carbon price that is incorporated into their planning and
investment decisions. This means that companies worldwide are already
advanced in their use of carbon pricing and in planning for climate change
risks, costs and opportunities.
mccarthy.ca
46
Environmental Law
Case Law Summaries
Environmental Law
MINNOVA CORP. V. CANADA (ATTORNEY GENERAL),
2015 FC 898
In this case, the Federal Court decided that an application for judicial
review was premature, but nevertheless agreed with the applicant that the
impugned decision was unreasonable.
In 2014, Minnova Corp. decided to re-open the Puffy Lake Mine in northern
Manitoba, a gold mine that was operated
between 1987 and 1989 under a licence
issued under the Manitoba Environment Act.
Minnova became the licencee under that
licence in 2012. The Canadian Environmental
Assessment Agency determined that the reopening of the mine would constitute a “new”
mine, and that as a result a project description
was required by s. 16(c) of the Schedule to
the Regulations in order to decide whether the
project required an environmental assessment.
Minnova sought judicial review of the Agency’s
decision, acknowledging that it wanted to
avoid the environmental assessment process.
The Court held that the real issue was whether
an environmental assessment is required, not whether Minnova was
required to submit a project description. The decision requiring a project
description was not final and accordingly was not fit for judicial review.
Although obiter, the Court then went on to consider the propriety of the
agency’s decision, and agreed with Minnova that the project should be
considered an “existing mine,” not a “new mine,” based on a purposive
construction of those phrases.
R. V. STRATABOUND MINERALS CORP., 2015 NBPC 07
In this New Brunswick Provincial Court case, a $75,000 administrative fine
for polluting was issued in circumstances where there was low culpability,
a clean record, an acceptance of guilt and no proof of actual harm to the
environment.
Stratabound Minerals Corp.’s mine near Bathurst, New Brunswick included
a holding pond, which had been constructed by the previous mining
operation. Largely unbeknownst to Stratabound, its attempts to treat the
water in the pond were unsuccessful, and on two separate occasions, it
mccarthy.ca
47
Environmental Law
released over one million litres of mining effluent. After discovering the
extent of the toxicity of the water, Stratabound was forced to discharge
more effluent to avoid an uncontrolled overflow due to unseasonably high
rains.
Stratabound pleaded guilty to two offences under the federal Fisheries
Act, for the three discharges of mine effluent and for failing to notify an
inspector without delay. The only issue before the Court was the amount of
the fine. The Court considered the relevant factors from the jurisprudence
for assessing the appropriate fine, including that Stratabound’s acts were
negligent and not deliberate, Stratabound’s reputation was “sterling,”
Stratabound had pleaded guilty and accepted responsibility, there was no
proof of actual harm to the environment (though the potential harm was
significant), and the need for general deterrence in spite of the financial
position of the company. Ultimately, the Court ordered a fine of $75,000
— half of what the Crown asked for, but three times what Stratabound
supported.
VOTERS TAKING ACTION ON CLIMATE
CHANGE V. BRITISH COLUMBIA (ENERGY AND MINES),
2015 BCSC 471
In this case, the British Columbia Supreme Court refused to grant standing
to an environmental advocacy group seeking to challenge decisions of the
Chief Inspector of Mines and the Minister of Environment in connection
with the expansion of Texada Quarrying Ltd.’s coal handling and storage
operation. The advocacy group did not represent any resident of Texada
Island, and the nearby First Nation said it did not oppose the project.
Voters Taking Action on Climate Change brought a petition challenging
2013 decisions to amend permits issued to Texada Quarrying. The first
decision was that of the Chief Inspector of Mines, amending the permit to
allow increased coal storage at the quarry. The second decision was that of
the Minister of Environment, determining that Texada did not also require a
permit under the Environmental Management Act.
While the Court agreed that a clearly framed issued had been established
— whether the exercise of statutory authority to regulate coal storage
and handling facilities is regulated by the Mines Act or the Environmental
Management Act — the advocacy group had failed to connect the issue
to a matter of sufficient public importance so as to ground public interest
standing to proceed. The Court also held that even if standing had
been granted, the decisions were reasonable and would not have been
overturned.
mccarthy.ca
48
Expropriation
Expropriation
LOBO DEL NORTE LTD. V. WHITEHORSE (CITY OF),
2015 YKSC 40
In this case, the Yukon Supreme Court considered whether a zoning bylaw
and Official Community Plan (OCP) designating lands as green space
amount to de facto expropriation or injurious affection of mineral claims on
those lands.
In 1998, Lobo Del Norte Ltd. acquired nine mineral claims in the City of
Whitehorse registered under the Quartz Mining Act, but did not apply for
the required approvals or land-use permits from the Yukon government.
Lobo had, however, performed some mineral
assessment, drilling and geophysical work
costing approximately $350,000. At the time
Lobo acquired the claims, the city zoning
bylaw did not permit mining. In 2012, the city
passed a zoning bylaw and implemented an
OCP that designated the area with the claims
as a “Greenbelt,” and informed Lobo that it
would have to apply to the city to amend
both the OCP and bylaw in order to conduct
mining operations. Lobo instead applied
for a declaration that the OCP and bylaw
had resulted in a de facto expropriation or
extinguishment of its mineral rights.
The Court found that the actions of the city
did not amount to expropriation, which requires a finding of a confiscation
or removal of virtually all of the aggregated incidents of ownership or
all reasonable private uses. There was no evidence that Lobo’s rights in
the lands had been completely confiscated. The mineral claims remained
vested in Lobo, and Lobo had not been denied permission to mine. In
addition, Lobo had not made any efforts to exercise its rights, such as by
applying for an amendment to the bylaw.
The Court went on to consider Lobo’s claim for injurious affection under
the Expropriation Act, which can be made out where some of the incidents
of ownership are lost or damaged. The Court held that the test had not
been met because the status of the mineral claims was the same as when
Lobo acquired them. Even if the new OCP and zoning bylaw could lead to
more scrutiny of Lobo’s activities, mining had not been permitted at any
time that Lobo had owned the claims.
mccarthy.ca
49
Insolvency
Insolvency
VERIS GOLD CORP. (RE), 2015 BCSC 399 AND 2015
BCSC 1204
In 2014, Veris Gold Corp. and its subsidiaries began experiencing financial
difficulties due to, among other things, the declining price of gold. It also
received notice from its major secured creditor, Deutsche Bank A.G., that
it was in default under its security agreements. What followed was a filing
under the Companies' Creditors Arrangement Act (CCAA) and Chapter 15
proceedings in the United States. The principal assets of Veris included a
gold mine in Nevada and mining properties in the Yukon.
The first decision, indexed as 2015 BCSC 399, involved an application for
an order authorizing the payment of fees to a special committee of Veris’
board of directors. The committee had been formed prior to filing under the
CCAA for the purposes of investigating various restructuring options. The
committee had decided on the remuneration to be paid to each of them,
which they performed both before and after filing under the CCAA, but the
fees had not been approved by the board. The British Columbia Supreme
Court rejected the application. Because the board had not approved the
fees, there was no contractual obligation to pay them. The Court also found
that even if the board had approved the fees, it would been inappropriate to
pay them for other reasons, including because the payment of pre-filing fees
would be a preference as against other unsecured creditors and because the
application had not been brought in a timely manner.
In the second decision, indexed as 2015 BCSC 2014, the Court-appointed
monitor, Ernst & Young, applied for approval of an asset sale agreement
and assignment of contracts to an entity wholly owned by a company that
had provided interim financing to Veris. The Court reviewed the factors
set out in ss. 36(3) and 11.3 of the CCAA and the case law, and approved
the proposed transaction, finding that it was fair and reasonable. The
restructuring efforts had met with little success and the Court found that
the proposed transaction was the only realistic alternative to obtain value
for the assets and see the continuation of operations.
YUKON ZINC CORPORATION (RE), 2015 BCSC 836
Yukon Zinc, owner of the Wolverine Mine in the Yukon, commenced
restructuring proceedings in March 2015 under the Companies' Creditors
Arrangement Act (CCAA). In addition to the jurisdictional dispute
discussed above under the heading “Conflicts and Jurisdiction,” (page
33) an issue arose about entitlement to over 14,000 tonnes of zinc
concentrate, worth US$8 million.
mccarthy.ca
50
Insolvency
The dispute was between Transamine Trading S.A., which claimed to
have purchased the zinc concentrate from the mine, and Procon Mining
and Tunnelling Ltd., which had supplied mining services, equipment and
materials to Yukon Zinc at the mine. Procon had filed a miner’s lien under
the Yukon Miners Lien Act in January 2015, but Transamine said that title to
the concentrate had already been transferred to it.
The British Columbia Supreme Court found in favour of Transamine,
ordering that the concentrate was held
for its benefit and was not encumbered by
Procon’s lien. In determining the timing of
Transamine’s interest, the Court considered
that the purchase contracts expressly
stipulated that title transferred on payment,
which in this case occurred before the lien was
registered. Further, Transamine had control
over the concentrate in transit and in amounts
segregated and intact at the mine site (even
if Yukon Zinc retained some of the risk) before
the lien was registered because the terms
of the contracts and the holding certificates
made it clear that, upon ascertainment of the
concentrate it was at the “irrevocable and
unconditional disposal” of Transamine. The
Court also concluded that Procon had released
its interests created by two previous liens for the very purpose of allowing
Yukon Zinc to enter into the purchase contracts with Transamine.
In a subsequent decision, indexed as 2015 BCSC 1991, the Court denied
Transamine’s application for special costs from Procon, finding that Procon
had defended the application in good faith and that ordinary party and
party costs were appropriate.
mccarthy.ca
51
Labour & Employment
Labour and Employment
MOSAIC POTASH ESTERHAZY LIMITED PARTNERSHIP
V. UNIFOR LOCAL 892, 2015 SKQB 391
This case, which was a judicial review of an arbitral award, involved a form of
settlement agreement known as a “last-chance” agreement.
Mosaic Potash Esterhazy Limited Partnership initiated a drug and alcohol
testing program at its mine. An employee who worked in a “safetysensitive” position tested positive for alcohol well over the legal limit,
and, after receiving an assessment under Mosaic’s Employee Assistance
Program, again tested positive for cannabinoids. The employee was issued
a last-chance agreement, which set out that the failure of another drug
test would be sufficient grounds to terminate his employment. He tested
positive a third time for the presence of alcohol and was terminated.
Unifor Local 892 brought a grievance on behalf of the employee, arguing
that he was fired on the basis of a substance abuse disability, which
is a recognized disability in The Saskatchewan Human Rights Code.
The arbitrator determined that she was not bound by the last-chance
agreement because it did not form part of the collective agreement, and
even if it did, it improperly attempted to limit the employee’s right to
accommodation for his disability under the Human Rights Code. She also
concluded that Mosaic had failed to accommodate the employee.
Mosaic sought judicial review of the arbitrator’s decision. The
Saskatchewan Court of Queen’s Bench dismissed Mosaic’s application,
holding that, although it did not agree with all of the arbitrator’s findings,
the standard of review was reasonableness and the arbitrator’s conclusions
were reasonable. In doing so, the Court noted in obiter dicta that, among
other things, it is not open to parties to contract out of human rights
legislation. The arbitrator was correct to conclude that the last-chance
agreement was an impermissible attempt to fetter her jurisdiction by
pre-determining the result of her inquiry in a way that would diminish the
grievor’s protection under the Human Rights Code.
GLENCORE CANADA CORPORATION V. SUDBURY MINE,
2015 CANLII 85298 (ON LRB) AND VALE CANADA LIMITED
V. USW LOCAL 6500, 2015 CANLII 19525 (ON LRB)
In these two cases, the Ontario Labour Relations Board considered
applications under Ontario’s Occupational Health and Safety Act (Act)
regarding requirements for workplace inspections at two mines in Sudbury,
Ont. In both cases, the Board considered the importance of achieving a
mccarthy.ca
52
Labour & Employment
reasonable level of protection for workers without creating absurd results by
trying to eliminate every risk.
In Glencore Canada Corporation v. Sudbury Mine, the Board rescinded the
orders of a Ministry of Labour inspector, which had prohibited skipping
(the process of bringing mined or muck ore to the surface after it has been
mined) and required the lock out and tag out of the production hoist while
inspections of the main shaft at the Nickel Rim South Mine were being
conducted. The Board considered the circumstances at the mine (including
the dry, cement-lined shaft with brattice) and the nature of the industry,
the operation and particular process, as well as the objective of the Act and
found that, provided other precautionary measures were followed, Glencore
could lawfully resume skipping and the use of the production hoist while the
shaft inspections were being carried out from the main
cage and auxiliary cage inspection decks. The Board
found that this struck an appropriate balance between
the risk of harm on the one hand and the ability to
carry out business on the other. The Board also noted
that due to the differences between mines and mine
designs, an industry standard was not an appropriate
measure.
In Vale Canada Limited v. USW Local 6500, the Board
considered the appropriate frequency of a certain
aspect of safety testing of the cage at Garson Mine.
The Board interpreted s. 248(2)(a)(ii) of the Mines
and Mining Plants Regulation as requiring the cage
(used for hauling supplies, equipment and personnel, rather than ore) to
be chaired on a daily rather than weekly basis, to ensure the dogs (clawlike clams which are an essential part of the safety braking mechanism
to prevent the cage from falling down the shaft) could rotate. The Board
found that the dogs could seize in less than a week, with potentially
life-threatening consequences for the workers if they did, and the only
reasonable way to determine if the dogs have seized is to simulate a freefall to see if the dogs rotate. In determining that this achieved a reasonable
level of protection for workers without creating absurd results, it was also
significant to the Board that it was an industry-wide practice to chair the
cage on a daily basis.
mccarthy.ca
53
CSA Provides Guidance on Investor Presentations
and Website Disclosure for Mining Issuers
CSA Provides Guidance on
Investor Presentations and Website
Disclosure for Mining Issuers
Ryan Hornby, Steven Molnar and Zachary Masoud
While investor presentations and other forms of investor relations materials
provided on company websites are an effective tool for communication,
mining issuers should remain alert that such materials are captured by the
definition of “written disclosure” and the associated disclosure rules in
National Instrument 43-101 Standards of Disclosure for Mineral Projects. A
review of such investor presentations and other website disclosure was the
subject of the Canadian Securities Administrators (CSA) Staff Notice 43309 – Review of Website Investor Presentations by Mining Issuers (Staff
Notice) issued on April 9, 2015.
Overall, the CSA found that there is substantial room for improvement for
mining issuers to comply with disclosure requirements. Of the 130 investor
presentations reviewed, only 18% were found to be substantially compliant
with NI 43-101, while 57% had issues of minor non-compliance and 25%
suffered from major non-compliance concerns. The CSA sent letters to 49
mining issuers requiring them to take remedial action, including providing
undertakings regarding future compliance, issuing a corrective news
release and, in the most severe cases, filing or refiling a technical report.
Key Findings
The Staff Notice highlights the need for mining issuers to
improve their disclosure in order to effectively comply with the
requirements of NI 43-101. The most significant areas of noncompliance identified by the CSA review include:
- Naming the qualiﬁed person: Of the 130
investor presentations reviewed, only 54
provided the qualified person’s name and
relationship to the issuer. The Staff Notice
states that the foundation of NI 43101 is that scientific and technical
information must be prepared
or approved by a
qualified person
mccarthy.ca
54
and that compliant disclosure must state the name of the qualified person and their relationship to the issuer. The CSA noted that overall compliance was significantly higher among presentations that were reviewed by a qualified person.
-
Preliminary economic assessments: The Staff Notice advises issuers to ensure that disclosure of the results of a preliminary economic assessment provides appropriate cautionary statements for the public to understand the limitations of the results of such assessments and to highlight the viability of mineral reserves vis-à-
vis mineral resources.
-
Inclusion or exclusion of mineral reserves in mineral resources: The Staff Notice states that when reporting both mineral resources and mineral reserves, a clear statement as to whether the mineral resources include or exclude mineral reserves is required.
-
Exploration targets: The Staff Notice states that both the potential quantity and grade of an exploration target must be expressed as ranges. In addition, accompanying statements outlining the target limitations must be provided.
-
Historical estimates: The Staff Notice states that disclosure of historical estimates must include reference to the source, date, reliability and key assumptions of such estimates, and must be accompanied by the required cautionary statements.
- Overly promotional terms and potentially misleading information: The Staff Notice cautions against the use of statements that are overly promotional or misleading, which could potentially result in a misrepresentation under securities legislation. Terms such as “world class,” “spectacular and exceptional results,” “production ready,” “ore” in relation to mineral resources, and “management estimates” are specifically identified as examples of statements that could be misleading, particularly when used by exploration stage or mineral-resource stage issuers.
Other notable areas mentioned for additional improvement include: (i)
reporting only pre-tax financial results or providing no information about
the applicable tax rate in preliminary economic assessments or other
economic reports; (ii) a lack of disclosure regarding assumed metal prices
used for determining mineral resource estimates; and (iii) disclosure of
drilling results that failed to include information on the true width of
mineralized zones or failed to provide results of significantly higher grade
intervals enclosed in a lower grade intersection, which were cited by the
CSA as being particularly important for early-stage projects.
The Staff Notice also reminds issuers that first-time written disclosure of
mineral resources, mineral reserves or the results of a preliminary economic
assessment (or a change to any of these that constitutes a material
mccarthy.ca
55
change for the issuer) triggers an obligation to file a supporting technical
report. The CSA cautions that it has significant concerns about preliminary
economic assessment disclosure on mining issuers’ websites, including
in investor presentations, fact sheets, and posted or linked third-party
reports, which is not supported by an existing technical report.
Conclusion
The Staff Notice should be used as a “self-assessment tool” and provides
mining issuers with practical information to strengthen their compliance
and improve the quality of their disclosure to investors. The Staff Notice
recommends that the qualified person responsible for particular technical
information review all investor presentations and other website disclosure
prior to the posting of such materials.
The CSA has indicated that it will continue to review mining issuers’
website disclosure as part of its overall continuous disclosure review
program. Issuers identified as having material disclosure deficiencies will
be required to correct the deficiencies and may be subject to further
sanctions depending on the severity of the non-compliance and the
issuer’s response. The Staff Notice further cautions that if non-compliant
disclosure is discovered in the context of a prospectus offering, the
offering will likely be delayed while the deficient disclosure is corrected.
mccarthy.ca
56
Securities/Shareholder Disputes
Case Law Summaries
Securities / Shareholder Disputes
JAGUAR FINANCIAL CORP. V ALTERNATIVE EARTH
RESOURCES INC., 2015 BCSC 2436
Jaguar Financial Corporation, the largest shareholder of Alternative Earth
Resources Inc., brought a petition against Alternative Earth and three of its
directors seeking to prevent a transaction from completing until Alternative
Earth’s shareholders could vote on it at an annual general meeting. The
proposed transaction was to acquire purported mineral rights in Turkey,
and was between Alternative Earth and Black Sea Copper & Gold Corp.,
a closely-held company that owned no properties with proven mineral
resources, was in debt with no working capital, and required a loan from
Alternative Earth to take the regulatory steps required
for the proposed transaction. A condition precedent to
execution of the agreement was that it not be subject
to shareholder approval.
The British Columbia Supreme Court found resoundingly
in favour of Jaguar. Jaguar had satisfied the
requirements in the B.C. Business Corporations Act to
establish that its directors and officers had a disclosable
interest in the transaction, and Alternative Earth had
failed to show that the shareholders had received
proper disclosure and approved the transaction, or, that
the transaction was fair and reasonable to Alternative
Earth and its shareholders. The transaction was neither
procedurally nor substantively fair and reasonable. While the foregoing
conclusions were sufficient to grant Jaguar the declaratory relief it sought,
the Court went on to find that Alternative Earth’s directors had conducted
the affairs of the company in a manner that was oppressive and unfairly
prejudicial to Jaguar.
The Court ordered that Alternative Earth was enjoined from completing
the proposed transaction unless and until it obtained shareholder approval.
In addition, in light of what the Court characterized as “the conflicts and
conduct of members of the board and management”, the Court issued
additional orders aimed at avoiding any attempts to dissipate shareholder
value , including, among others, an order that Alternative Earth publish on
SEDAR particulars of its unencumbered cash reserves on a bi-weekly basis.
REA V. WILDEBOER, 2015 ONCA 373
In this decision, the Ontario Court of Appeal reviewed the history of,
and clarified the difference between, two frequently-used shareholder
mccarthy.ca
57
Securities/Shareholder Disputes
remedies: the oppression remedy and the derivative action.
Mr. Rea was a founder, former director and minority shareholder of
Martinrea, a publicly-traded Canadian auto parts manufacturer. Mr. Rea
resigned and sued a group of the Martinrea’s directors and officers,
alleging breach of fiduciary duty and misappropriation of $50-$100 million
for their personal benefit through a series of improper transactions. Mr. Rea
sought relief under the oppression remedy to circumvent the requirement
to obtain leave if he commenced a derivative action on behalf of the
shareholders collectively.
The Court of Appeal clarified, and upheld, the distinction between the
derivative action and the oppression
remedy. While noting that there
DERIVATIVE ACTION IS
may be some overlap between the
FOR HARM TO COMPANY;
two remedies in some cases, the
OPPRESSION REMEDY IS
Court stressed that the legislation
creates two remedies with two
FOR HARM TO PERSONAL
different rationales and foundations: INTERESTS.
a corporate remedy and a personal
or individual remedy. Where a wrong is done to the corporation, and
there is no indication that the wrong also harmed the complainant in
a manner distinct from that of the corporation, the claim should be
brought, with leave of the Court, as a derivative action. In contrast, the
oppression remedy is only available where the harm impacts individualized
personal interests, and not simply the claimant’s interests as a part
of the collectivity of shareholders as a whole. The Court held that Mr.
Rea’s oppression claim did not disclose a reasonable cause of action
because all of his allegations, if proved, would establish losses sustained
by the corporation to its financial bottom line and not to any particular
shareholder.
For a more detailed discussion of this decision and its implications, see
McCarthy Tetrault LLP’s Canadian Appeals Monitor blog post entitled “Pick
Your Poison: the Court of Appeal Clarifies the Distinction between the
Oppression Remedy and the Derivative Action.”
mccarthy.ca
58
Surface Rights/Access to Claims
CHRISTMANN V. NEW NADINA EXPLORATIONS
LIMITED, 2015 BCCA 243
This is an appeal from a decision discussed in Mining in the Courts, Vol. V,
which confirms that free miners may enter land for exploration once the
seasonal opportunity to harvest or pasture a crop has passed.
New Nadina, a junior mining exploration company, sought access to the hay
meadow on Mr. Christmann’s ranch to explore mineral tenures it held below
the land. Mr. Christmann denied access on the basis that the land was “under
cultivation” within the meaning of s. 11 of the Mineral Tenure Act (Act),
despite seasonal inactivity. Section 11 of the Act permits “free miners” to
enter lands and explore provided that the land is not “under cultivation.”
The British Columbia Court of Appeal affirmed the Surface Rights Board and
the B.C. Supreme Court’s decisions that the term “land under cultivation”
means land that is currently and actively being cultivated, not land that was
or might be cultivated in the future. The Court also clarified the difference
between “free miners” and “recorded holders,” and the requirements for each
to explore for minerals. A free miner has the right only to enter on lands and
explore, subject to the requirements in s. 11 of the Act. A recorded holder,
on the other hand, is a registered owner of a mineral title who is not subject
to the limitations in s. 11 and with a permit may “use, enter and occupy” the
surface of a claim.
HAWES V. DAVE WEINRAUCH AND SONGS TRUCKING
LTD., 2015 BCSC 1727
This case involved the propriety of a sale of subsurface rights.
The plaintiffs were caretakers of a former mine site that had been active
until 1960. They resided in buildings on the former mine site and paid rent
to the owner of the mineral claims, Boliden Westmin (Canada) Ltd. The
owner commenced steps to sell the property to the plaintiffs, but the
contract was never executed. Assurances were made, however, that the
plaintiffs should treat the buildings “as theirs.”
In 2004, Boliden was sold to another company and changed its name to
NVI Mining Ltd. NVI sold the property, including the subsurface rights,
to the defendant, Dave Weinrauch and Sons Trucking Ltd. The plaintiffs
commenced an action and argued that they had an equitable interest in
the property based on the fact that the former holder of the mineral rights,
Boliden and NVI, agreed to quitclaim the portion of the mineral claim under
the lots they live on. They also argued that the buildings in which they
mccarthy.ca
59
resided had not been sold and that they were the property of the Crown.
The British Columbia Supreme Court rejected the plaintiffs’ arguments,
finding that the plaintiffs had no equitable claim to the subsurface rights
and that the conveyance was lawful. Although Boliden had made a
representation, it was repudiated when Boliden was sold, had its board
replaced, and changed its name to NVI. At the time, NVI made it clear that it
would not act on the representation and the Court found that the plaintiffs
had accepted the repudiation.
PIERRE GAGNÉ CONTRACTING LTÉE V. CORPORATION
MINIÈRE NORTHERN STAR INC., 2015 QCCS 1044
This case is one of the first to follow Anglo Pacific Group PLC v. Ernst & Young
inc., 2013 QCCA 1323, discussed in Mining in the Courts, Vol. IV.
Corporation minière Northern Star inc. entered into an agreement with a
contractor, Pierre Gagné Contracting ltée, for the construction of two access
vent shafts at North Star’s mine. Pierre Gagné commenced construction and
performed the work over a period of several months. When North Star stopped
paying, Pierre Gagné ceased work and removed its equipment from the site.
It then published a notice of legal hypothec in the public register of real and
immovable mining rights kept by Ministry of Energy and Natural Resources. The
notice claimed that the hypothec was against North Star’s 92 mining claims,
and did not mention the immovable property on which the mining shafts Pierre
Gagné had constructed were built. Several months later, Pierre Gagné applied
to exercise its hypothecary right by a court-approved sale of the mining claims.
The Court recognized that Pierre Gagné had taken part in the construction
or renovation of an immovable as required under s. 2724 of the Civil Code of
Quebec. Its claim could therefore give rise to a legal hypothec. However, the
Quebec Court of Appeal dismissed Pierre Gagné’s application and ordered
the cancellation of the hypothec on the basis that, first, mining claims are
not “immovable” property pursuant to the Civil Code of Quebec (even
though they are immoveable real rights), and, second, as mining claims are
not subject to the construction or renovation work, they cannot be covered
by a legal hypothec in favour of persons having taken part in such work. The
Court also noted that it was unclear whether such work brought an actual
increase in value to an immovable.
In addition, following the Quebec Court of Appeal decision in Anglo
Pacific Group PLC c. Ernst & Young inc., the Court held that registration of
hypothecary rights against mining claims in the mining register does not
make such rights enforceable against third parties. To make those rights
enforceable, registration in the land register is required. While this would have
been sufficient to dismiss the application, the Court also found that Pierre
Gagné had not registered its legal hypothec within the prescribed period.
mccarthy.ca
60
Legislative Developments in Québec: An Act respecting transparency
measures in the mining, oil and gas industries and changes to the Mining Act
Legislative Developments in
Québec: An Act respecting
transparency measures in the
mining, oil and gas industries and
changes to the Mining Act
Martin Thiboutot
In 2015, the government of Québec introduced legislative changes that
have a direct impact on the mining industry. In October, An Act respecting
transparency measures in the mining, oil and gas industries came into force
(Act). By the end of the year, significant changes had also been introduced
to the province’s Mining Act. Each of these legislative developments is
described below.
Coming into force of An Act respecting transparency
measures in the mining, oil and gas industries
The government of Québec fulfilled a commitment announced in the
March 2015 budget when the Quebec National Assembly passed An Act
respecting transparency measures in the mining, oil and gas industries on
October 21, 2015. The Act follows the coming into force of the federal
Extractive Sector Transparency Measures Act (ESTMA) on June 1, 2015,
although the disclosure regimes they each introduce vary in certain ways.1
As its title suggests, the Act aims to impose measures to discourage and
detect corruption and to foster social acceptability of natural resource
exploration and development projects.
The Act sets forth a disclosure regime applicable to any legal person,
corporation or other organization (Entity) that engages in exploration
or development of mineral substances or hydrocarbons, or engages in
other activities relating to mineral substances or hydrocarbons, that
holds a permit, a right, a licence, a lease or another authorization for such
1.
Editors Note: For more on the ESTMA, see the
article entitled “Payment Disclosure Now in Force:
What Extractives Need to Know” on page 20.
mccarthy.ca
61
exploration or development activities, or that controls such an Entity,
directly or indirectly and in any manner whatsoever, and that complies with
one of the following:
- it is listed on a stock exchange in Canada and has its head office in
Québec, or
- it has an establishment in Québec, exercises activities or has assets
in Québec and, based on its consolidated financial statements,
meets at least two of the following conditions for at least one of
its two most recent fiscal years: (a) it has at least $20 million in
assets, (b) it has generated at least $40 million in revenue, or (c) it
employs an average of at least 250 persons.
The Act requires an Entity to submit an annual statement within 150
days of the end of each fiscal year
to Québec’s Autorité des marchés
NEW ACT GIVES SECURITY
financiers (Quebec’s security
COMMISSION (AMF) POWERS
commission) (AMF). The statement
TO COMPEL INFORMATION.
must include all payments that fall
within certain categories related to
exploration or development of mineral substances or hydrocarbons if the
total value of payments made to a single payee during the fiscal year for
a specific category is equal to or greater than $100,000. Both monetary
and in-kind payments are covered for purposes of the annual statements
requirements.
The form of annual statements, the manner of presenting or breaking
down the payments, as well as the procedure for the transmittal of such
statements will be prescribed by government of Quebec regulation.
The Act currently sets out the following categories of payments:
- taxes and income taxes, other than consumption and personal
income taxes;
- royalties;
- fees, including regulatory fees, fees for rental or entry, or any other
consideration for licences, permits or concessions;
- production entitlements;
- dividends, other than those paid as an ordinary shareholder of
an Entity;
- bonuses, including signing, discovery of a deposit and production
bonuses; and
- contributions for the construction or improvement of an
infrastructure.
An Entity must make an annual statement public in the manner determined
by the government of Quebec for a period of five years from the date of
its transmittal. The Entity must also keep records of all payments made in a
mccarthy.ca
62
fiscal year for a seven-year period following the applicable transmittal date.
A payment made on behalf of an Entity is deemed to have been made
by such Entity. A payment made by a legal person, corporation or other
organization that is not an Entity, but that is controlled by an Entity, is
deemed to be made by such controlling Entity. Moreover, a payment due to
a payee and received on the payee’s behalf by another body that is not a
payee is deemed made to the payee to whom the payment is due, such as
is a payment made to an employee or a public office holder of a payee.
The Act also states that the following people and bodies count as payees:
- a government;
- a body established by two or more governments;
- a municipality or the Kativik Regional Government;
-
an Aboriginal nation represented by all the band councils, or councils in the case of northern villages, of the communities forming the Aboriginal nation, the Makivik Corporation, the Cree Nation Government, a Native community represented by its band council, a group of communities so represented or, in the absence of such councils, any other Native group (any of the preceding and the Kativik Regional Government (Aboriginal payee); and
- any board, commission, trust or corporation or other body that exercises, or is established to exercise, public powers or duties of government for a payee described above.
There are mechanisms to avoid duplication of the disclosure requirements.
The Act provides that a wholly-owned subsidiary Entity of another Entity
will be deemed to have filed its annual statement if the parent Entity
has transmitted its annual statement to the AMF and provided that
certain other prescribed conditions have been met. Further, if another
competent authority is determined by the government of Quebec to be
an acceptable substitute because it achieves the same purposes as the
Act, a statement produced in compliance with such other authority’s
requirements may be substituted for an annual statement, provided certain
prescribed conditions are met. While the Act duplicates, to a large extent,
the requirements of ESTMA, to our knowledge, no such determination
has been made yet. In addition to ESTMA, the European Union adopted
in 2013 its Transparency Directive Amending Directive, which has to be
implemented by each of the EU members, and s. 1504 of the United States
Dodd-Frank Act, which is not in force, provides for the implementation of a
similar regime. It remains to be seen to what extent an Entity will be exempt
from the requirements of the Act based on these similar regimes.
The Minister responsible for the application of the Act, which will be
determined by the government of Quebec, is allowed to enter into an
agreement with a government of another competent authority or with
one of its bodies, for purposes of implementing the Act or concerning
mccarthy.ca
63
the requirements pertaining to the statements required by such other
government or body. Such an agreement must contain, among other
things, provisions for the sharing of information needed for purposes
of said requirements between the Minister or the AMF and such other
government or body.
In addition to the powers to investigate already granted to the AMF
pursuant to its implementing statute, the AMF now has the power
to compel an Entity to provide it with any document or information it
considers useful for purposes of the application of the Act. This includes
a list of the mining, oil or gas exploration or development projects in which
the Entity has an interest and the nature of that interest, an explanation
of how a payment was calculated for the purpose of preparing any annual
statement, and a statement of any policies implemented by the Entity
concerning its obligations under the Act. The AMF may also require that an
annual statement or the records of payments made during the fiscal year
to which such statement relates be audited by an outside independent
auditor.
For enforcement, the Act establishes an administrative monetary penalty
regime similar to those already in place under various statutes, such as the
Environmental Violations Administrative Monetary Penalties Act (federal),
the Environmental Quality Act (Québec) and the Income Tax Act (federal).
The Minister has the authority to designate who the administrative
monetary penalties will be imposed on when an Entity fails to comply with
the Act.
The Act also gives authority to the government of Quebec to create
regulations that can exclude a certain Entity, payee or payment from the
application of the Act, as well as to determine applicable exchange rate (to
Canadian currency) and regulate what contraventions constitute an offence.
While the Act received assent on October 21, 2015, an Entity is not
required to file an annual statement for the fiscal year ending in 2015.
Further, an Entity is not required to report with respect to payments made
to an Aboriginal payee before June 1, 2017.
Key Changes to Mining Act
On May 6 and December 31, 2015, the government of Quebec brought
into force significant changes to the Québec Mining Act.
As of May 6, 2015, s. 71.1 of the Mining Act requires holders of mining
claims in Québec to submit to the Minister of Energy and Natural
Resources, on each anniversary date of the registration of a claim, a report
on the work performed in the previous year. This obligation is in addition to
the existing obligation to renew the claim.
Also on this date amendments to s. 75 of the Mining Act came into force.
These amendments modify the rules regarding the minimum cost of work
mccarthy.ca
64
to be performed on lands that are subject to a claim in Québec. In the past,
any amount spent in excess of the prescribed requirements for the term of
the claim could carry over and be applied to subsequent terms. Now, any
excess can only be carried over for six subsequent terms. This modification
limits the ability of claim holders to conduct significant work in a short
period of time and then sit on their claim rights for decades without
conducting additional exploration work.
Other changes came into force on December 31, 2015 following the
publication on December 16, 2015 of the Regulation to amend the
Regulation respecting mineral substances other than petroleum, natural gas
and brine (Amending Regulation). The Amending Regulation triggered the
coming into force of certain provisions of An Act to amend the Mining Act
(Amending Act), which was enacted several years ago. These provisions,
which came into force pursuant to s. 127 of the Amending Act, relate, in
particular, to:
-
the notice that the claim holder must now send to the owner, the lessee, the holder of the exclusive lease to mine surface mineral substances and the local municipality of the claim, within 60 days after registering the claim;
-
the declaration that a claim holder is now required to make to the Minister of Energy and to the Minister of Sustainable Development, Environment and Parks, of any discovery of mineral substances containing 0.1% or more of triuranium octaoxide within 90 days after the discovery;
-
the public consultation that the proponent of a metal mine project that has a production capacity of less than 2,000 metric tons per day must conduct before submitting the application for a mining lease with respect to such a project; and
- committees to foster the involvement of the local community in the mining project that any lessee of a mining lease must establish.
Finally, we note that the government of Quebec, pursuant to one of the
provisions of the Mining Act, which came into force on December 10, 2013,
must draw up, make public and keep up to date an Aboriginal community
consultation policy specific to the mining sector. Although the policy in its
final form has yet to be made public, the Ministry of Energy and Natural
Resources has published a draft version and held a workshop in November
2015. The ministry is now seeking input on the draft, and it intends to
consult all Aboriginal communities.
mccarthy.ca
65
About McCarthy Tétrault
About McCarthy Tétrault
McCarthy Tétrault LLP provides a broad range of legal services, advising on
large and complex assignments for Canadian and international interests. The
firm has a substantial presence in Canada’s major commercial centres and in
London, U.K.
Built on an integrated approach to the practice of law and delivery of
innovative client services, the firm brings its legal talent, industry insight and
practice experience to help clients achieve the results that are important to
them no matter where situated.
Our lawyers work seamlessly across practice groups and regions
representing Canadian, U.S. and international clients. Over the past five
years, McCarthy Tétrault has acted for 83 of the largest 100 (83%) Canadian
companies and for 18 of the 20 largest foreign-controlled companies in
Canada (90%).
McCarthy Tétrault’s clients include mining companies, public institutions,
financial service organizations, manufacturers, the pharmaceutical industry,
the oil and gas sector, energy producers, infrastructure companies,
technology and life sciences groups, and other corporations. We have acted
for our clients in all practice areas, including:
- Aboriginal Law
- Antitrust & Competition
- Bankruptcy & Restructuring
- Capital Markets
- Class Actions
- Commercial Litigation
- Construction
- Environmental Law
- Intellectual Property
- International Trade & Investment Law
- Labour & Employment
- M&A
- Private Equity & Venture Capital
- Procurement
- Professional Responsibility
- Real Estate
- Securities
- Tax
- Toxic Torts
For more information, please visit www.mccarthy.ca to contact any of our lawyers.
Recipient
mccarthy.ca
VANCOUVER
Suite 1300, 777 Dunsmuir Street
P.O. Box 10424, Pacific Centre
Vancouver BC V7Y 1K2
Tel: 604-643-7100
Fax: 604-643-7900
CALGARY
Suite 4000, 421 7th Avenue SW
Calgary AB T2P 4K9
Tel: 403-260-3500
Fax: 403-260-3501
TORONTO
Suite 5300, TD Bank Tower
Box 48, 66 Wellington Street West
Toronto ON M5K 1E6
Tel: 416-362-1812
Fax: 416-868-0673
MONTRÉAL
Suite 2500
1000 De La Gauchetière Street West
Montréal QC H3B 0A2
Tel: 514-397-4100
Fax: 514-875-6246
QUÉBEC CITY
500, Grande Allée Est, 9e étage
Québec QC G1R 2J7
Tel: 418-521-3000
Fax: 418-521-3099
LONDON, U.K.
125 Old Broad Street, 26th Floor
London EC2N 1AR
UNITED KINGDOM
Tel: +44 (0)20 7786 5700
Fax: +44 (0)20 7786 5702

Mining in the Courts

Transcription

Similar documents

Events - PDAC Mining Matters Diamond in the Rough Golf Classic

NBI Complaint vs Tallado PDF 13 - Sagip

Aley Niobium Project

Rehabilitation of mining areas in Durango, Mexico

IN REVENUES - SNC

Field Trip to Toveco Mining, Tripp and Clark Mines in New

Santiago, Chile - Motion Metrics

View Sample PDF - IRMA

Building what matters - SNC

Message from Chief Echum A New Opportunity The TransCanada