Rio Tinto Now Has a Pair of 60-Year-Old Legal Problems in Canada

Rio Tinto's 60-Year Old Legal Problem
  • Supreme Court allows Aboriginals to sue over events from 1950s
  • Quebec and B.C. First Nations get together to discuss strategy

Rio Tinto Group has found trouble on both ends of Canada just as its woes -- and those of all commodity producers -- intensify everywhere.

The global mining giant is being told it can’t skirt a pair of lawsuits that reach back to projects built in the 1950s, a quarter-century before it first set foot in the country.

On a single day in October, the Supreme Court of Canada cleared the way for separate aboriginal groups to challenge the future operations of a Rio Tinto hydroelectric dam in British Columbia and an iron-ore mine, with accompanying railway and port, in Quebec and Labrador.

For Rio Tinto, which paid $38 billion in 2007 for Canadian-based Alcan Inc. and took control of The Iron Ore Company of Canada through a A$3 billion deal in 2000, the legal challenges come at a bad time. The company is already reeling from the plunge in global commodity prices, with its shares trading at a six-year low as iron ore prices have fallen 80 percent since their peak in 2011. On Tuesday, Rio cut it’s 2016 capital spending plan.

The rulings received scant notice during the final days of a dramatic Canadian election that brought Justin Trudeau and his Liberals to power. Now the cases are sparking a debate as to whether they will discourage investment in the resource sector, or perhaps instead force companies to treat Canada’s 1.4 million indigenous people as full partners.

Skirts of Government

“Private companies now have to face aboriginal peoples directly and can’t hide behind the skirts of the government,” said James O’Reilly, the lawyer who represented the Uashat Mak Mani-Utenam and Matimekush-Lac-John in the Quebec case.

“This is now an industry-wide issue that has to be faced by each and every one of the developers,” he said.

Canada’s top court has given two Innu First Nations in Quebec the go-ahead to proceed with a suit seeking damages of $900 million against IOC along with the closing of its iron ore mines, 260-mile railway and port facilities in Sept Iles on the Gulf of St. Lawrence.

In British Columbia, Rio Tinto is facing similar demands from the Saik’uz and Stellat’en First Nations that it restore much of the water flow to the Nechako River that was diverted by construction in the early 1950s of a hydroelectricity dam to generate electricity for a nearby Alcan aluminum smelter. Alternatively, the aboriginals want damages paid in compensation for harm to their traditional fishery.

The Supreme Court did not decide on the challenges, simply telling Rio Tinto it would not review appeal court findings in the two provinces. Both courts rejected Rio Tinto’s contention the aboriginal grievances should be addressed, as in past, with governments that approved the projects rather than corporations and that, at any rate, aboriginal groups shouldn’t be allowed to sue without proof of title to the land.

Virtually all resource developments in Canada come into contact with land claims or treaty rights of one or more of the country’s 617 First Nations or other indigenous people. Aboriginals are currently opposing uranium mine expansions in Saskatchewan, oil and gas drilling in the Gulf of St. Lawrence and pipeline proposals to the west and east coasts.

Projects in Jeopardy

The latest court decisions add a layer of uncertainty that “puts all current and future economic development projects in jeopardy,” the Fraser Institute, a conservative think tank, wrote in a November report on the B.C. case.

“If private parties are now going to be in litigation with First Nations for up to two decades on issues that were previously only brought against governments, it adds a lot of risk to potential projects, and ongoing projects, in Canada,” said Ravina Bains, associate director of Fraser’s Centre for Aboriginal Policy Studies and author of the report.

Rio Tinto refused to comment directly on the cases. Spokesman Bryan Tucker said in a statement the company has a strong record of Aboriginal relations in Australia and continues to make progress in Canada.

The grim commodity markets aside, resource companies should have seen claims like these coming, said BMO Capital Markets Vice Chairman Brian Tobin, a former federal industry minister, provincial premier and mining CEO. “I understand how fragile commodities projects are, but that’s not going to result in a get out of jail free card.”

While premier of Newfoundland and Labrador, Tobin helped forge a comprehensive land settlement with the Innu that paved the way for a giant nickel development at Voisey’s Bay in 1996. He did the same thing a decade later at Consolidated Thompson Iron Mines, which operated near the IOC mines in Labrador.

Out of Play

The recent court decisions “take a big area of risk and uncertainty out of play. You begin to develop projects very differently, right from the beginning,” he said.

Perrin Beatty, president and chief executive of the Canadian Chamber of Commerce, agrees that overseas customers for Canadian resources have watched impatiently as disputes drag on and “are looking for answers from us now, as to whether we can deliver.” To that end, anything that provides “clarity” can only be positive, he said.

The two Aboriginal groups, which were not initially aware of one another’s actions, met for the first time Monday on the sidelines of the annual gathering of the Assembly of First Nations to coordinate next steps. Their joining of forces comes as the Supreme Court decisions are advancing Aboriginal rights and the new Trudeau government calls for “a renewed nation-to-nation relationship with indigenous peoples that respects rights and honors treaties.”

Aboriginals aren’t feeling pressure for a quick resolution, especially with commodities in the doldrums, said Jean-Claude Therrien Pinette, an Innu who serves as lands and resources officer for his community. Pulling ever-cheaper ore out of the ground “is nonsense to us,” in any case, he said. Better to keep it in place to benefit future generations.

The complainant in the B.C. case, former chief Jackie Thomas, said: “If a project is good it will be good for everybody and it won’t be at the cost of our people -- and that’s what I come back to.”