Date: 20130826 Docket: T-153-13 Citation: 2013 FC 900 HUPACASATH FIRST NATION Applicant and THE MINISTER OF FOREIGN AFFAIRS CANADA AND THE ATTORNEY GENERAL OF CANADA Respondents

Date: 20130826
Docket: T-153-13
Citation: 2013 FC 900
Ottawa, Ontario, August 26, 2013
PRESENT: THE CHIEF JUSTICE
BETWEEN:
HUPACASATH FIRST NATION
Applicant
and
THE MINISTER OF FOREIGN AFFAIRS
CANADA AND THE ATTORNEY GENERAL
OF CANADA
Respondents
REASONS FOR JUDGMENT AND JUDGMENT
[1] This is an application for judicial review regarding the pending ratification of the Agreement
between the Government of Canada and the Government of the People’s Republic of China for the
Promotion and Reciprocal Protection of Investments [CCFIPPA].
[2] The Applicant, Hupacasath First Nation [HFN], seeks a declaration that Canada is required
to engage in a process of consultation and accommodation with First Nations, including HFN, prior
to ratifying or taking other steps that will bind Canada under the CCFIPPA.
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[3] For the reasons that follow, I have concluded that:
(i) The potential adverse impacts that HFN submits the CCFIPPA may have on its
asserted Aboriginal rights, due to changes that the CCFIPPA may bring about to the
legal framework applicable to land and resource regulation in Canada, are nonappreciable
and speculative in nature. I also find that HFN has not established the
requisite causal link between those alleged potential adverse impacts and the
CCFIPPA.
(ii) The same is true with respect to the potential adverse impacts that HFN submits
the CCFIPPA may have on the scope of self government which it can achieve.
(iii) Therefore, the ratification of the CCFIPPA by the Government of Canada
[Canada] without engaging in consultations with HFN would not contravene the
principle of the honour of the Crown or Canada’s duty to consult HFN before taking
any action that may adversely impact upon its asserted Aboriginal rights.
[4] This application will therefore be dismissed.
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I. The CCFIPPA
[5] The CCFIPPA was signed at Vladivostok, Russia, on September 9, 2012.
[6] Pursuant to Article 35, Canada and the Government of the People’s Republic of China [the
“Contracting Parties”] are required to notify each other through diplomatic channels that they have
completed the internal legal procedures for the entry into force of their agreement. The CCFIPPA
will enter into force on the first day of the month following the month in which the second of the
two notifications is received and shall remain in force for a period of at least 15 years.
[7] After the expiration of the initial 15-year period, either party may terminate the CCFIPPA.
Such termination will be effective one year after its receipt by the other Contracting Party.
However, the agreement will continue to be effective for an additional 15-year period with respect
to investments made prior to its termination.
[8] It appears to be common ground between the parties to this proceeding [Parties] that the
substantive provisions in the CCFIPPA are highly similar to those in the North American Free
Trade Agreement Between the Government of Canada, the Government of Mexico and the
Government of the United States, 17 December 1992, Can TS 1994 No 2, 32 ILM 289 (entered into
force 1 January 1994) [NAFTA] and closely resemble the provisions in Canada’s 2004 Model
Foreign Investment Protection Agreement [2004 Model FIPA]. Indeed, HFN acknowledged that the
provisions in the CCFIPPA that were the focus of this proceeding “are the same as those set out in
NAFTA” (Reply of the Applicant [Reply] at para 33).
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[9] According to the Explanatory Memorandum on the [CCFIPPA] [Explanatory
Memorandum], the CCFIPPA:
[…] is a bilateral treaty
designed to protect and promote
investment between Canada
and the People’s Republic of
China (the “Parties”) by
assigning legally binding rights
and obligations to both Parties
in foreign investment matters.
The Agreement provides
Canadian investors operating in
the People’s Republic of China
with additional legal protection,
setting out the manner in which
Canadian investors should be
treated and procedures through
which they may pursue alleged
breaches of the Agreement. Key
provisions include: national
treatment, most-favoured nation
treatment, minimum standard of
treatment, protection against
expropriation, obligations for
the free transfer of funds and an
investor-State dispute
settlement mechanism.
[…] est un traité bilatéral conçu
pour protéger et promouvoir les
investissements entre le Canada
et la République populaire de
Chine (les « Parties »), qui
définit des droits et des
obligations juridiquement
contraignants pour les deux
parties en matière
d’investissements étrangers.
L’Accord prévoit une
protection juridique
additionnelle pour les
investisseurs canadiens faisant
des affaires en République
populaire de Chine, établit la
manière dont doivent être traités
les investisseurs canadiens et
énonce les procédures visant les
mesures que peuvent prendre
ces investisseurs relativement
aux violations alléguées de
l’Accord. Les principales
dispositions de l’Accord
comprennent : le traitement
national, le traitement de la
nation la plus favorisée, la
norme minimale de traitement,
la protection contre
l’expropriation, les obligations
relatives au libre transfert de
fonds et un mécanisme de
règlement des différends
opposant un investisseur et un
État.
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[10] The CCFIPPA provides the same protections described above to investors of the People’s
Republic of China [China].
[11] The Explanatory Memorandum also notes that “[c]onsultations on the [CCFIPPA] took
place under the ongoing consultation process by the Department of Foreign Affairs and
International Trade with stakeholders.”
[12] It is common ground between the Parties that such consultations did not include the HFN or
other First Nations, notwithstanding that Canada released an initial Environmental Assessment of
the CCFIPPA for public comment in February 2008.
[13] Shortly following the announcement of the signing of the CCFIPPA, HFN wrote to Prime
Minister Harper to request that the ratification of the agreement be postponed “until there has been
full and proper consultation between the Crown and the founding First Nations, including [HFN].”
Representatives of other First Nations have made similar requests. To date, HFN’s request has not
been granted. It appears that the same is true with respect to the requests that have been made on
behalf of other First Nations.
[14] No legislative amendments are required to implement the CCFIPPA.
[15] The CCFIPPA is similar in many respects to 24 other foreign investment protection
agreements [FIPAs] that Canada has entered into since 1989, particularly those entered into since
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1995 (Affidavit of Vernon MacKay, [MacKay Affidavit], Respondent’s Record, Volume I, Tab 1,
at paras 20 - 31 and 39 - 44).
II. The HFN
[16] The HFN, formerly known as the Opetchesaht Indian Band, is a “band” within the meaning
of that term as defined in the Indian Act, RSC, 1985, c I-5 [Indian Act]. The Hupacasath Chief and
Council represent approximately 285 band members, all of whom are Indians as defined in the
Indian Act.
[17] According to an affidavit sworn by Carolyne Sayers [Sayers Affidavit], a Council member
of the HFN, the HFN’s band members live on two reserves near Port Alberni on Vancouver Island.
It appears that those reserves are located on the banks of the Alberni Inlet, and are approximately
53.4 and 2.6 hectares, respectively, in size. The HFN has three additional reserves in that territory
which are not occupied, due to the lack of infrastructure. In total, the HFN asserts Aboriginal rights
and title with respect to approximately 232,000 hectares of land in central Vancouver Island, as
reflected on the map set forth in Appendix 1 to these reasons.
[18] In her affidavit, which was authorized by, and sworn on behalf of, the HFN’s Chief and
Council, Ms. Sayers stated that she is concerned that if the CCFIPPA is ratified and implemented
the HFN will be negatively affected in a number of ways, including:
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a. HFN may be prevented from exercising its rights to conserve, manage and
protect lands, resources and habitats in accordance with traditional Hupacasath
laws, customs and practices, and in the best interest of its members;
b. HFN may be prevented from negotiating a treaty which protects its rights to
exercise its authority in the best interest of the Hupacasath people, including to
conserve, manage and protect lands, resources and habitats and to engage in
other governance activities, in accordance with traditional Hupacasath law,
customs and practices, and in the best interest of its members;
c. disputes over resource use between HFN and companies with Chinese investors
will be resolved by the application of international trade and investment law,
which Ms. Sayers believes does not provide the same protections for Aboriginal
rights and title as Canadian constitutional law;
d. because measures aimed at protecting HFN’s rights and title may give rise to
significant damage claims, the federal and provincial governments will be less
likely to take steps to protect those rights, including engaging in adequate
consultation and reasonable accommodation; and
e. the rights of Chinese investors, and the impact of any potential claim under the
CCFIPPA on Canada may be taken into account by the government and courts in
determining whether a specific measure HFN seeks to protect its rights and title
would constitute reasonable accommodation.
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III. Issue
[19] In its Application, HFN sought:
a. A declaration that Canada is required to engage in a process of consultation and
accommodation with First Nations, including HFN, prior to taking steps that will
bind Canada under the CCFIPPA;
b. An order restraining the Minister of Foreign Affaires or any other official or
representative of Canada from sending a letter to the People’s Republic of China
[China] stating that Canada has completed the internal legal procedures for the
entry into force of the CCPIFFA, until the appropriate consultation and
accommodation has been carried out; and
c. An interlocutory injunction restraining the Minister of Foreign Affairs or any
other official or representative of Canada from sending a letter to China stating
that Canada has completed the internal legal procedures for the entry into force
of the CCFIPPA, until this application has been heard and determined by the
Court.
[20] In their written submissions, the Respondents stated that if this Court finds that a duty to
consult with HFN has been triggered and breached, it would not be necessary for the Court to go
beyond making a declaration that a such a duty is owed to HFN, “as it can be assumed that the
government will comply with the law as stated by the courts.”
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[21] Based on that statement, HFN withdrew its request for the relief described in subparagraphs
19(b) and (c) above.
[22] The Respondents also submitted that any declaration that this Court may issue should be
confined to addressing the asserted duty to consult with HFN, and should not address whether a
duty to consult is owed to other First Nations. I agree.
[23] As the Respondents noted, HFN did not commence a class action or bring a representative
action on behalf of other First Nations. It also did not serve notice on all First Nations so that they
could be added as parties. No other First Nations sought to be added as a party to this proceeding.
[24] In these circumstances, I agree that it would not be appropriate for this Court to address, in
any declaration that may be made in this proceeding, the issue of whether a duty to consult is owed
to other First Nations, even if the formidable practical impediments to workable and meaningful
consultations with the over 600 First Nations bands that exist across the country could be overcome.
My conclusion in this regard is reinforced by the fact that Aboriginal rights are both band and factspecific
(R v Gladstone, [1996] 2 SCR 723, at para 65 and R v Van der Peet, [1996] 2 SCR 507, at
para 69); and representatives of Aboriginal groups need to be authorized to speak or to bring claims
on behalf of their groups (Sechelt Nation v Bell Pole, 2013 BCSC 892 (QL), at para 17).
Moreover, with one exception, no evidence has been led on behalf of other First Nations regarding
the potential impact of the CCFIPPA on their Aboriginal interests.
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[25] In its initial written submissions, HFN raised a threshold issue of whether the act of ratifying
the CCFIPPA is something that could be subject to judicial review. HFN maintains that ratification
of the CCFIPPA is subject to review on the basis that Canada’s failure to consult HFN prior to
ratification is a breach of its constitutional duty to consult with HFN in respect of a measure that
may affect HFN’s Aboriginal rights. That said, during the hearing, HFN underscored that it was not
suggesting that the Court can review either Canada’s prerogative to enter into the CCFIPPA or the
content of the CCFIPPA. HFN acknowledges that these are matters of “high policy” that are not
amenable to judicial review (Black v Canada (Prime Minister) (2001), 54 OR (3d) 215, at para 52).
The Respondents have not contested this threshold issue. Indeed, it is clear that the exercise of the
prerogative power of the Crown can be reviewed for constitutionality (Canada (Prime Minister) v
Khadr, 2010 SCC 3, at paras 36-37; Black, above, at para 50).
[26] Accordingly, the only issue to be determined in this application is whether, prior to ratifying
the CCFIPPA in accordance with Article 33 of the CCFIPPA, Canada has a duty to consult with
HFN.
IV. Standard of Review
[27] The ratification the CCFIPPA is an exercise of a prerogative power. It is common ground
between the Parties that the exercise of this power is subject to review on constitutional grounds. In
this proceeding, HFN submits that Canada’s failure to consult with HFN prior to ratifying the
CCFIPPA would constitute a breach of Canada’s constitutional obligation to engage in
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consultations with HFN before taking any action which may adversely affect HFN. It also asserts
that such action would be contrary to Canada’s constitutional obligation to act honourably in all its
dealings with Aboriginal peoples (Tzeachten First Nation v Canada (Attorney General) 2007
BCCA 133, at paras 47-49; Nlaka’pamux Nation Tribunal Council v British Columbia (Project
Assessment Director, Environmental Assessment Office), 2011 BCCA 78, at para 68).
[28] Given the constitutional nature of this issue, it is subject to review on a standard of
correctness (Dunsmuir v New Brunswick, 2008 SCC 9, at para 58; Alberta (Information and Privacy
Commissioner) v Alberta Teachers’ Association 2011 SCC 61, at para 30).
V. Preliminary Issues
[29] In their written submissions, the Respondents requested the Court to strike four affidavits
sworn on behalf of the Applicant by individuals who are not members of HFN. In the alternative,
the Respondents requested that portions of those affidavits be struck. The Respondents maintain that
those affidavits or portions thereof, are clearly irrelevant.
[30] The affidavits in question were sworn by Grand Chief Stewart Phillip, Chief James
Ahnassay, Chief Bryce Williams and Chief Isadore Day.
[31] The first three of those affidavits focus primarily upon consultations that were requested in
respect of the CCFIPPA, and the affiants’ concerns regarding the potential implications of the
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CCFIPPA on (i) their bands’ Aboriginal interests, treaty rights and ability to protect the
environment in their territories or (ii) First Nations more generally. Grand Chief Phillip’s affidavit
also briefly discusses the history behind the establishment of the Union of British Columbia Indian
Chiefs and that organization’s principal objectives.
[32] Chief Day’s affidavit, written on behalf of the Serpent River First Nation and the Chiefs of
Ontario Organization [COO], also focuses upon the potential implications of the CCFIPPA on First
Nations’ treaty and other rights. In addition, it provides an overview of the history of relations
between First Nations and the Crown and a more detailed treatment of the concerns of First Nations
than is provided in the other three affidavits mentioned immediately above.
[33] Notwithstanding that Grand Chief Phillip, Chief Ahnassay, Chief Williams and Chief Day
are not authorized to represent HFN, and have focused on the potential impact of the CCFIPPA on
their respective First Nations groups, or on First Nations in general, I have decided to exercise my
discretion in favour of allowing their affidavits to remain on the Court record. My decision in this
regard is based on my conclusion that those affidavits may potentially assist my understanding of
the potential impact of the CCFIPPA on HFN. In the case of Chief Day’s affidavit, I consider the
history that he provides to be helpful in assisting me to understand the important context in which
the Crown’s legal duty to consult First Nations arose, particularly as that duty relates to the honour
of the Crown and the objective of reconciliation.
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VI. Experts
A. Mr. Gus Van Harten
[34] HFN’s expert evidence was provided by Mr. Gus Van Harten, in a letter dated February 13,
2013 [Van Harten Opinion] to HFN’s counsel.
[35] Mr. Van Harten is an Associate Professor at Osgoode Hall Law School, at York University.
He obtained his PhD in 2006 and has since published a number of articles, primarily on investment
treaty arbitration. He has also written a book on that topic.
[36] Mr. Van Harten was retained to provide his expert opinion with respect to various aspects of
the CCFIPPA. These include the obligations that it imposes upon Canada, the manner in which it
differs from other international treaties to which Canada is a party, how it will apply to federal and
provincial government action and legislation, how it will apply to domestic judicial decisions which
affect land and resources subject to Aboriginal or treaty rights claims, whether principles of
domestic law will be taken into account by international arbitrators who are appointed to adjudicate
under the CCFIPPA, and whether measures or actions taken by First Nations governments could
potentially put Canada out of compliance with the CCFIPPA.
[37] The Respondents submitted that Mr. Van Harten’s evidence should be accorded reduced
weight because he has been a vocal critic of the type of investor state arbitration provisions that are
included in the CCFIPPA and because he has frequently and publicly voiced his opposition to
ratification of the CCFIPPA.
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[38] Given that HFN acknowledged and did not dispute these allegations, I am inclined to agree
with the Respondents’ position, primarily on the basis that Mr. Van Harten’s ability “to assist the
Court impartially,” as required by the Court’s Code of Conduct for Expert Witnesses, SOR/2010-
176, would appear to be somewhat compromised.
B. Mr. J. Christopher Thomas, Q.C.
[39] The Respondents’ expert evidence was provided by Mr. Chris Thomas, Q.C. in a letter dated
March 13, 2013 [Thomas Opinion] to counsel to the Respondents.
[40] Mr. Thomas is a Senior Principal Research Fellow at the National University of Singapore’s
Center for International Law. He has also practiced in the field of international economic law for
over 25 years, taught at two Canadian universities, and worked for the Federal Minister for
International Trade during the launch of the Uruguay Round of Multilateral Trade Negotiations and
the Canada-United States Free Trade Agreement negotiations. In addition, he acted for the
Government of Mexico in relation to the negotiation of the NAFTA and two related agreements on
Labour and Environmental Co-operation. He has also practised as an international trade dispute
panellist and an international arbitrator.
[41] Mr. Thomas was retained to provide his views on the Van Harten Opinion, including its
criticism of international investor-state arbitration; the extent to which the CCFIPPA differs from
Canada’s past agreements on investment protection; the extent to which the CCFIPPA may prevent
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a government from determining an appropriate level of environmental protection, from managing its
international resources, or from making changes to its laws; the interaction between the CCFIPPA
and Canadian domestic law; remedies that may be granted by an arbitral panel constituted under the
CCFIPPA; the extent to which Canada can be held internationally responsible under the CCFIPPA
for legislative or judicial decisions with respect to HFN; and the scope of the Aboriginal affairs’
exception in the CCFIPPA.
C. General Observations
[42] Given Mr. Van Harten’s acknowledged partiality, and given that I generally found Mr.
Thomas to be more neutral, factually rigorous and persuasive, I generally accepted his evidence
over Mr. Van Harten’s when they did not agree. In any event, I found that Mr. Van Harten’s
evidence did not materially assist HFN to demonstrate that the potential impact of the CCFIPPA on
its Aboriginal interests is appreciable and non-speculative, as required to trigger a duty to consult.
To a large extent, this was due to the fact that his assertions on key issues were baldly stated and
unsubstantiated.
VII. Analysis
A. Duty to Consult – General Principles
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[43] The Government of Canada’s duty to consult with Aboriginal peoples, including HFN, and
to accommodate their interests in certain circumstances is grounded in the honour of the Crown
(Haida Nation v British Columbia (Minister of Forests), 2004 SCC 73, at paras 16 and 20 [Haida]).
In brief, “in all its dealings with Aboriginal peoples, from the assertion of sovereignty to the
resolution of claims and the implementation of treaties, the Crown must act honourably.” This is
necessary to achieve the important goal of “the reconciliation of the pre-existence of aboriginal
societies with the sovereignty of the Crown.” In turn, to achieve that goal, the principle of the
honour of the Crown must be viewed generously (Haida, above, at para 17). Likewise, the duty to
consult must be approached in a “generous” and “purposive” manner (Rio Tinto Alcan Inc v Carrier
Sekani Tribal Council, 2010 SCC 43, at para 43 [Rio Tinto].
[44] The honour of the Crown gives rise to different duties in different circumstances. Where, as
in the present circumstances with HFN, a treaty with a particular Aboriginal group remains to be
concluded, the honour of the Crown implies a duty to consult when the conditions described below
are met. Moreover, when those conditions are met, the honour of the Crown further requires that the
Aboriginal group’s relevant interests be reasonably accommodated, if appropriate (Haida, above, at
paras 18, 20, 27 and 33).
[45] The Aboriginal interests that are relevant for this purpose are those interests that are
protected by s. 35(1) of the Constitution Act, 1982, which recognizes and affirms “the existing
aboriginal and treaty rights of the aboriginal peoples of Canada” (Hiawatha First Nation v Ontario
(Minister of Environment), [2007] OJ No 406, at para 50). For greater certainty, subsection 35(3)
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clarifies that, for this purpose, “treaty rights” includes “rights that now exist by way of land claims
agreements or may be so acquired.”
[46] Given the constitutional dimension of the honour of the Crown, the duty to consult is a
“constitutional imperative” (Nlaka’pamux Nation Tribal Council v British Columbia (Project
Assessment Director, Environmental Assessment Office), 2011 BCCA 78, at para 68). It seeks to
provide protection to Aboriginal and treaty rights while furthering the goals of reconciliation
between Aboriginal peoples and the Crown (Rio Tinto, above, at para 34; Manitoba Metis
Federation Inc v Canada (Attorney General), 2013 SCC 14, at para 66).
[47] Once triggered, the content of the duty to consult and accommodate varies with the
circumstances. The jurisprudence in this area continues to evolve. However, in general terms “the
scope of the duty is proportionate to a preliminary assessment of the strength of the case supporting
the existence of the right or title, and the seriousness of the potentially adverse effect upon the right
or title claimed” (Haida, above, at para 39).
[48] The present case solely concerns whether the preconditions that must be met to trigger a
duty to consult were met. It does not concern the content of that duty, if the duty exists in respect of
the ratification of the CCFIPPA.
[49] In Haida, above, at paragraph 34, the Supreme Court stated that the duty to consult “arises
when the Crown has knowledge, real or constructive, of the potential existence of the Aboriginal
right or title and contemplates conduct that might adversely affect it.”
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[50] In Rio Tinto, above, at para 31, the Court elaborated on this test as follows:
[31] … This test can be broken down into three elements: (1) the
Crown’s knowledge, actual or constructive, of a potential Aboriginal
claim or right; (2) contemplated Crown conduct; and (3) the potential
that the contemplated conduct may adversely affect an Aboriginal
claim or right.
[51] I will address each of these three elements of the test separately below. Although HFN also
briefly stated in its Application that Canada’s duty to consult also arises from the Crown’s fiduciary
obligations towards First Nations Peoples and the United Nations Declaration on the Rights of
Indigenous Peoples, Resolution 61/295, 13 September 2007, I agree with the Respondents that the
question of whether the alleged duty to consult is owed to HFN must be determined solely by
application of the test set forth immediately above. I would add in passing that HFN did not pursue
these assertions in either written or oral argument, and that, in a press release issued by Aboriginal
Affairs and Northern Development Canada, entitled Canada’s Statement of Support on the United
Nations Declaration on the Rights of Indigenous Peoples, that Declaration is described as “an
aspirational document” and as “a non-legally binding document that does not reflect customary
international law nor change Canadian laws.” HFN did not make submissions or lead evidence to
the contrary.
B. The Crown’s Knowledge of HFN’s Claims or Rights
[52] It is common ground between the Parties that this element of the test is satisfied.
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[53] In her affidavit, Ms. Sayers characterized HFN’s asserted Aboriginal rights as including the
following:
a. The right to harvest, manage, protect and use fish, wildlife, and
other resources in HFN’s traditional territory in priority to all
other users, subject only to conservation;
b. Rights to the commercial sale of fish, wildlife and other resources
to earn a livelihood;
c. The right to have access to exclusive and preferred areas to
harvest or use fish, wildlife and other resources in their traditional
territory;
d. The right to protect the habitats that sustain fish, wildlife and
other resources which the Hupacasath have a right to harvest;
e. The right to harvest, use and conserve fish, wildlife and other
resources and to protect and manage the habitat of fish, wildlife
and other resources in accordance with traditional Hupacasath
laws, customs, and practices both in their traditional and their
modern form; and
f. The right to build, maintain and occupy structures incidental to
harvesting, using, managing or conserving fish, wildlife and other
resources in HFN’s territory.
[54] The Respondents confirmed that they are aware that the foregoing Aboriginal rights have
been advanced by HFN, both in treaty negotiations and in litigation. As is immediately apparent,
those rights essentially relate to the use, management and conservation of land and resources within
HFN’s claimed territory. The Respondents acknowledge that those rights are rooted in section 35 of
the Constitution. It is those rights, and those rights alone, that are relevant for the analysis below.
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C. The Contemplated Crown Conduct
[55] It is common ground between the parties that the contemplated Crown conduct in question
is the ratification of the CCFIPPA.
D. The Potential That The Contemplated Conduct May Adversely Affect HFN’s
Asserted Aboriginal Rights
[56] In assessing whether this third element of the duty to consult test is met, it is critical to
determine “the degree to which the conduct contemplated by the Crown would adversely affect” the
asserted Aboriginal rights (Mikisew Cree First Nation v Canada (Minister of Canadian Heritage),
2005 SCC 69, at para 34 [Mikisew]). While a generous and purposive approach to this element is
required, “[m]ere speculative impacts” will not suffice. There must be “an appreciable adverse
effect on the First Nations’ ability to exercise their aboriginal right” (Rio Tinto, above, at para 46).
Moreover, the claimant “must show a causal relationship between the proposed government conduct
or decision and a potential for adverse impacts on pending Aboriginal claims or rights” (Rio Tinto,
above, at para 45).
[57] In this regard, adverse impacts extend to any effect that may prejudice a pending Aboriginal
claim or right. This includes high-level management decisions or structural changes to the
management of a resource that may adversely affect Aboriginal claims or rights, even if such
decisions have no immediate impact on the resource or the land upon which it is situated (Rio Tinto,
above, at para 47), and even if later opportunities for consultations exist in respect of specific
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actions that may be taken pursuant to such high level decisions or structural changes (Dene Tha’
First Nation v British Columbia (Minister of Energy and Mines), 2013 BCSC 977, at para 114).
[58] HFN submits that the ratification of the CCFIPPA is such a high-level management decision
or structural change and has a non-speculative potential to adversely affect its asserted Aboriginal
rights in an appreciable way, even if it will have no immediate impact on its lands or the resources
situated thereon. In this regard, HFN adds that Canada’s agreement to be bound by the CCFIPPA
“may set the stage for further decisions that will have a direct adverse impact on land and resources”
(Rio Tinto, above, at para 47), by granting Chinese investors enforceable rights which must be taken
into account when any level of government in Canada makes any kind of resource management
decision.
[59] For the reasons set forth below, I respectfully disagree. In my view, the evidence adduced
during this proceeding does not demonstrate that any adverse impacts that the CCFIPPA may have
upon HFN’s asserted Aboriginal interests will be appreciable and non-speculative. On the contrary,
I am satisfied that the adverse impacts which HFN has identified are speculative, remote and nonappreciable.
In addition, HFN has not demonstrated the required causal link between the CCFIPPA
and those claimed potential adverse impacts.
[60] HFN submitted that the ratification of the CCFIPPA is likely to give rise to the following
two general categories of adverse effects:
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a. The CCFIPPA will result in a significant change in the legal framework
applicable to land and resource regulation in Canada, and that various potential
adverse effects on its Aboriginal rights will flow from that change.
b. The rights granted to Chinese investors under the CCFIPPA will directly and
adversely impact the scope of self-government which HFN can achieve, either
through the exercise of its Aboriginal rights, through the treaty making process,
or through the exercise of delegated authority from Canada or the Government of
British Columbia.
[61] I will address these two broad categories of claimed adverse effects separately below.
However, I will first address a threshold issue raised by the Respondents.
(i) Can it be said that the CCFIPPA cannot, as a matter of law, trigger a duty to
consult?
[62] The Respondents submit that the ratification of the CCFIPPA cannot, as a matter of law,
trigger a duty to consult with HFN. This position is based primarily on its assertions that (i) the
ratification of the CCFIPPA will not alter Canadian domestic law or require existing laws or
regulations to be changed, and (ii) the authority of arbitral tribunals established under the CCFIPPA
will not extend into the domestic sphere. In this latter regard, the Respondents note that the remedial
powers of such tribunals will be restricted by the CCFIPPA to awarding monetary damages or
restitution of property, solely against Canada and China. As a result, in the event a measure passed
by HFN were found by an arbitral tribunal to be in breach of Canada’s obligations under the
CCFIPPA, the tribunal would have no power to enjoin the measure and it would be Canada, not
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HFN, that would be responsible for paying damages or providing restitution. Put differently, any
awards issued by arbitral panels under the CCFIPPA will have no binding effect upon HFN.
[63] In support of their position, the Respondents rely upon Council of Canadians v Canada
(Attorney General) [2005] OJ No 3422 [Council of Canadians – OSCJ]; aff’d [2006] OJ No 4751
[Council of Canadians – ONCA]. There, the Ontario Court of Appeal upheld a finding of first
instance that the fact that the arbitral tribunals set up under Chapter 11 of the NAFTA have not been
incorporated into Canada’s domestic law negated one possible basis for applying section 96 of the
Constitution to those tribunals (Council of Canadians – ONCA, above, at para 25). However, the
Court then declined to address the broader question of whether a tribunal established pursuant to an
international treaty is per se exempt from section 96, because it was satisfied that the NAFTA
tribunals do not violate section 96.
[64] Section 96 of the Constitution states:
The Governor General shall
appoint the Judges of the
Superior, District, and
County Courts in each
Province, except those of the
Courts of Probate in Nova
Scotia and New Brunswick.
Le gouverneur-général
nommera les juges des cours
supérieures, de district et de
comté dans chaque
province, sauf ceux des
cours de vérification dans la
Nouvelle-Écosse et le
Nouveau-Brunswick.
[65] In the course of its reasons, the Court of Appeal observed that although this provision is
“framed as an appointing power accorded to the federal government, it is now well established that
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section 96 was designed to ensure the independence of the judiciary and to provide some uniformity
to the judicial system throughout the country” (Council of Canadians – ONCA, above, at para 31).
[66] In reaching the conclusion that Chapter 11 of the NAFTA had not been incorporated into
Canada’s domestic law, the applications judge observed that international law, which governs
NAFTA tribunals, and domestic law, operate in different spheres (Council of Canadians – OSCJ,
above, at para 41). She then proceeded to conclude that the establishment of tribunals under
NAFTA cannot breach the Canadian Charter of Rights and Freedoms, Part I of the Constitution
Act, 1982, being Schedule B to the Canada Act 1982 (UK), 1982, c 11 [Charter], because (i) those
tribunals have no authority to change Canada’s domestic laws or practices, (ii) their jurisdiction is
limited to the international law issues before them and the remedies are also circumscribed, (iii)
nothing in the NAFTA compels Canada to amend its laws and practices, and (iv) the arbitration of
claims that Canada has failed to honour its treaty obligations does not affect or determine the rights
of Canadians (Council of Canadians – OSCJ, above, at para 65).
[67] The Respondents rely on the foregoing reasoning to assert that the CCFIPPA cannot, as a
matter of law, trigger the constitutional duty to consult.
[68] In my view, the fact that the arbitration provisions in the NAFTA, or similar provisions in
other FIPAs, may not attract section 96 of the Constitution or breach the Charter does not preclude
the possibility that the ratification of such agreements may trigger the application of the
constitutional principle of the honour of the Crown and a duty to consult with First Nations prior to
such ratification. One reason why this is so is that the duty to consult is triggered where there is
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simply a non-speculative possibility of appreciable impacts on asserted Aboriginal rights, whereas
Charter rights are only triggered when there is a more serious risk that the alleged violation will
occur (Phillips v Nova Scotia (Westray Mine Inquiry), [1995] 2 SCR 97, at para 108; Council of
Canadians – OSCJ, above, at para 62). Absent other legal considerations that have not been
addressed in this proceeding, the question may need to be determined on the basis of the facts and
evidence in each case, namely, whether they establish the three elements required to trigger the duty
to consult. In any event, given the conclusions that I have reached below regarding the facts and
evidence in this case, it is not necessary to make a definitive determination on the Respondents’
position that the CCFIPPA cannot, as a matter of law, trigger the duty to consult.
[69] However, I will note in passing that the Respondents’ position on this point is inconsistent
with provisions that are included in a number of final agreements that Canada has entered into with
First Nations, which require it to consult with those First Nations prior to consenting to be bound by
a new international treaty which would give rise to new international legal obligations that may
adversely affect a right of the First Nations. (See for example Maa-nulth First Nations Final
Agreement, December 9, 2006, at para 1.7.1; Lheidli Final Agreement, October 29, 2006, at para 11;
Tla’amin Final Agreement, at para 24; Yale First Nation Final Agreement, at para 2.8.1; and
Tsawwassen Final Agreement, clauses 30 and 31 in Chapter 2; see also Land Claims and Self
Government Agreement Among The Tlicho and The Government of the Northwest Territories and
The Government of Canada, at para 7.13.2).
(ii) Effects flowing from a change in the legal framework applicable to land and
resource regulation
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[70] HFN submits that the ratification of the CCFIPPA triggers the duty to consult because it
grants Chinese investors new, substantive, and enforceable rights with respect to any investments
they may hold, or maintain, in areas over which HFN asserts Aboriginal or treaty rights. HFN
maintains that this constitutes a significant change in the legal landscape pertaining to its lands and
resources because, among other things, those rights necessarily involve a restriction of the options
open to the Crown to address HFN’s asserted Aboriginal and treaty claims, and to protect the
resources which are the subject of those claims.
[71] It is common ground between the Parties that there does not appear to have been a previous
case in which the Courts in Canada have been called upon to assess whether a duty to consult exists
in respect of any other investment treaty or similar international agreement.
a. Duty to consult jurisprudence relied upon by HFN
[72] In support of its assertion that ratification of the CCFIPPA would constitute a high-level
management decision or structural change that has an appreciable and non-speculative potential to
adversely affect its asserted Aboriginal rights, HFN relies on a line of cases in which a duty to
consult was found to exist in respect of conduct that was found to meet this test.
[73] I agree with the Respondents that those cases are all distinguishable on the basis that the
high-level decisions or structural changes in each of those cases all directly related to land or
resources in respect of which Aboriginal peoples have asserted or established Aboriginal rights. By
contrast, the CCFIPPA is a broad, national framework investment treaty that does not directly relate
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to any particular lands or resources. Rather than being directly or even broadly related to land or
resources, it is designed to protect and promote investment between Canada and China by ensuring
basic legally binding rights and obligations to investors of both Contracting Parties.
[74] In Hupacasath First Nation v British Columbia (Minister of Forests), 2005 BCSC 1712
[Hupacasath], the Crown conduct which gave rise to the duty to consult was the removal of certain
lands from a tree farm license [TFL] within claimed HFN territory. It was determined that the
removal of those lands from the TFL had the potential to result in a lower level of possible
government intervention in the activities on the land than existed under the TFL regime. Justice
Lynn Smith elaborated as follows at paragraph 223:
There is a reduced level of forestry management and a lesser degree
of environmental over-sight. Access to the land by the Hupacasath
becomes, in practical terms, less secure because of the withdrawal of
the Crown from the picture. There will possibly be increased
pressure on the resources on the Crown land in the TFL as a result of
the withdrawal of the Removed Lands. The lands may now be
developed and resold.
[75] Justice Smith added, among other things, that by agreeing to the removal of the lands in
question from the TFL, “the Crown decided to relinquish control over the activities on the land,
control that permitted a degree of protection of potential aboriginal rights over and above that which
flows from the continued application of federal and provincial legislation” (Hupacasath, above, at
para 225). As further explained in the reasons below, no similar relinquishment of control or nonspeculative
attenuation of the Crown’s ability to protect HFN’s asserted Aboriginal rights will occur
as a result of the ratification of the CCFIPPA.
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[76] In Gitxsan First Nation v British Columbia (Minister of Forests), 2002 BCSC 1701, Justice
Tysoe found that the Minister of Forests’ consent to a change in corporate control of a company
which held a TFL gave rise to a duty to consult. In reaching that conclusion, Justice Tysoe found
that the change in the controlling mind of the company, as well as the fact that the effect of the
change in control was to protect the company from bankruptcy, gave rise to a non-speculative
potential for an adverse effect on the First Nation applicant’s Aboriginal rights and title. This was in
part due to the fact that the philosophy of the persons making the decisions associated with the
licenses may have changed. In addition, any sale by a trustee in bankruptcy (in the absence of such a
change in control) would have required the Minister’s consent, and he would have been required to
consult with the applicants before giving such consent. Once again, ratification of the CCFIPPA has
no similar non-speculative potential to adversely impact upon any of the lands or resources over
which HFN has asserted Aboriginal rights.
[77] Likewise, the Crown conduct at issue in the other duty to consult cases relied upon by HFN
also directly concerned the applicant First Nations’ claimed lands or specific resources on those
lands. For example:
 In Huu-Ay-Aht First Nation v The Minister of Forests, 2005 BCSC 697, the Crown
conduct was a forest and range revitalization policy which, among other things, took
back 20% of the annual allowable cut from major replaceable forest licenses and tree
farm licenses throughout the province, and allocated back to First Nations some of what
was taken, based upon a formula that was rejected by the applicants. The Crown
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unsuccessfully argued that a duty to consult did not arise until a future point in time at
which decisions to grant or renew specific licenses on specific parcels of land occurred.
 In Dene Tha’ First Nation v Canada (Minister of Environment), 2006 FC 1354, the
Crown conduct at issue was the design of an oversight mechanism, or blueprint, for the
construction of the Mackenzie Gas Pipeline [MGP], from which all ensuing
environmental and review processes would flow. That mechanism, or Cooperation Plan,
conferred no rights, but established the means by which future activities in relation to the
MGP, which ran through the applicant’s territory, would be managed.
 In Kwicksutaineuk Ah-Kwa-Mish First Nation v Canada (Attorney General), 2012 FC
517, the Crown conduct at issue was the re-issuance of finfish aquaculture licenses in the
applicant’s territories by the federal government following the assumption of this
jurisdiction from the provincial government. The applicant sought consultation because
it was concerned that the licences authorizing aquaculture at particular farm sites posed
significant risks to the health of nearby wild fisheries, upon which the exercise of their
Aboriginal fishing rights depended.
 In Squamish Indian Band v British Columbia (Minister of Sustainable Resource
Management), 2004 BCSC 1320 [Squamish], the Crown conduct at issue was a decision
to allow a change in the control and expansion of a proposed ski and golf resort, on
lands over which the applicant claimed Aboriginal rights and title. In the course of
finding that a duty to consult existed, the Court characterized the practical implications
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of the decision to allow a change in control as having been “dramatic” (Squamish,
above, at para 78).
[78] The foregoing cases all involved Crown conduct which directly concerned the applicant
First Nation’s claimed territories or the resources situated upon those territories. They are all
distinguishable from the ratification of the CCFIPPA, because the CCFIPPA does not address any
specific lands, potential projects involving specific lands, or specific resources. It is simply a broad,
national, framework agreement that provides additional legal protections to Chinese investors in
Canada, and Canadian investors in China, which parallel the rights provided in several existing
investment protection and trade agreements to which Canada is already a party.
b. Potential adverse effects identified by HFN
[79] Nevertheless, it remains important to consider each of the principal adverse impacts on its
Aboriginal rights that HFN alleges may result from the ratification of the CCFIPPA. For the reasons
set forth below, I have concluded that each of those claimed impacts are speculative and nonappreciable.
In the absence of more specific asserted interests that may be adversely impacted and
more specific measures that may be found to contravene the CCFIPPA, it is also difficult to
ascertain the required causal link between the CCFIPPA and a potential adverse impact on HFN’s
asserted Aboriginal interests.
[80] It is common ground between the Parties that the jurisprudence on what is or is not a
speculative or non-appreciable impact is not well developed.
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[81] HFN’s principal concern appears to be the possibility that the rights conferred upon Chinese
investors under the CCFIPPA may be used to challenge or discourage measures which would have
the effect of preserving lands and resources that are the subject of its asserted Aboriginal claims.
Stated differently, HFN submits that the CCFIPPA may oblige or lead Canada to refrain from
taking certain types of measures which would otherwise have been open to it to address conflicts
that may develop between Chinese investors and HFN, for example, if HFN takes action to protect
its lands and resources for the future.
[82] With respect to the potential “chilling effect” of the CCFIPPA on the government, HFN
asserts that even the spectre of potentially substantial awards that may be issued by arbitral panels in
favour of Chinese investors may well factor into Canada’s analysis of whether to proceed with a
proposed measure to protect HFN’s asserted Aboriginal rights. In this regard, HFN placed
significant weight on evidence provided by Mr. MacKay, Acting Director, Investment Trade Policy
Division, Department of Foreign Affairs and International Trade [DFAIT]. In cross-examination,
Mr. MacKay confirmed that, when developing regulatory or other policy initiatives, including
measures that may be taken to accommodate Aboriginal peoples, the responsible government
department is strongly advised to consult with the government’s Trade Law Bureau to ensure that
the obligations or measures in question are consistent with Canada’s international trade and
investment obligations (Cross-Examination on Affidavit of Vernon John MacKay, April 3, 2013
[MacKay Cross], Applicant’s Record, Volume II, at pp 482-83 and 537).
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[83] Given the foregoing, HFN further maintains that ratification of the CCFIPPA will
significantly change the equation for the balancing exercise that the Crown is required to conduct
where accommodation is required in making decisions that may adversely affect HFN’s asserted
Aboriginal interests. As a result, HFN states that those interests will be less likely to receive the
protection which is currently required in order to maintain the honour of the Crown. For example, if
HFN’s preferred form of accommodation would expose Canada to significant potential liability to
one or more Chinese investors, this may be a factor in Canada’s determination of whether such a
measure is reasonable.
[84] In support of its positions, HFN relied primarily upon the experience to date under the
NAFTA, the international experience with agreements providing for investor-state arbitration, and
the ongoing uncertainty regarding how arbitral panels are likely to assess claims under the
CCFIPPA. However, HFN also encouraged the Court to look beyond the experience to date under
NAFTA and other international trade and investment agreements, because that experience has been
limited and continues to evolve. HFN also dismissed Canada’s experience under the approximately
24 bilateral investment protection treaties that are currently in force, on the basis that, in most cases,
the other party to the treaty has little investment in Canada. In contrast, HFN noted that Chinese
investment in Canada increased from approximately $228 million in 2003 to over $12 billion in
2009, prior to the acquisition earlier this year of Nexen Inc. by CNOOC Ltd., a Chinese stateowned
oil company, in a transaction valued at approximately $15 billion. HFN attaches further
significance to the fact that much of the investment in Canada by Chinese entities to date has been
by enterprises having links to the Chinese government, which HFN contends has been reported to
have a strong, centralized interest in securing natural resources in Canada and elsewhere.
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[85] With respect to the NAFTA, HFN notes that it is the only other international trade or
investment agreement with investor-state arbitration provisions, under which Canada hosts a
significant level of foreign investment. HFN observes that most of the obligations in the CCFIPPA
are the same as those set out in the NAFTA, and that as a result of its experience under the NAFTA,
Canada ranks sixth on a list of 90 countries published by the United Nations Conference on Trade
and Development in 2012, in terms of claims made by foreign investors against governments. HFN
further observes that whereas the NAFTA can be terminated at any time by any of its three
signatories with one year’s notice, the CCFIPPA has a minimum period of 15 years and its
protection for investments existing at the end of that period will extend for a further 15 years.
[86] With respect to legal uncertainty, HFN makes two general points. First, it notes that the
arbitrators who will be appointed to adjudicated claims brought under the CCFIPPA are not judges
and are not provided with the hallmarks of judicial independence, such as security of tenure and
financial security. It notes that Mr. Van Harten provided evidence, which does not appear to be
disputed, that many arbitrators work as counsel while also working as arbitrators. Second, it notes
that there is a significant level of uncertainty regarding how important provisions in the CCFIPPA
will be applied. This will be discussed further below. In general, it states that arbitrators’ decisions
under the CCFIPPA will be subject to judicial review on a very limited basis, and that to date,
judicial reviews of decisions by tribunals constituted under the NAFTA have been dismissed in their
entirety, with one exception (Metalclad Corporation v The United Mexican States, (August 30,
2000), ICSID Case No. ARB (AF)/97/1), where a portion of the award was set aside.
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[87] HFN acknowledges that arbitral awards under the CCFIPPA can only be made against, and
bind, the parties to the CCFIPPA, i.e., China and Canada, pursuant to Article 32 of the CCFIPPA.
Specifically, it acknowledges that an arbitral panel would have no power to invalidate a measure
that may be adopted by HFN or Canada to protect HFN’s asserted interests. It also acknowledges
the possibility that the parties to the CCFIPPA may choose to simply pay damage awards and
maintain regulations or other measures that have been found to contravene the CCFIPPA. However,
based on terms that are contained in various Final Agreements that the Government of Canada has
entered into with First Nations, it asserts that it is likely that HFN will be required to remedy any
measures that it may implement (assuming that it eventually enters into a Final Agreement
containing similar terms), if those measures are found to contravene the CCFIPPA. HFN maintains
that Canada is not likely to maintain any such measures in the face of such a finding.
[88] In addition to the foregoing general submissions, HFN makes various specific submissions
with respect to Articles 4 and 10 of the CCFIPPA, which deal with the minimum standard of
treatment to be accorded to Chinese investors, and expropriation, respectively. It appears to be
common ground between the Parties that, based on past experience internationally, if any challenges
are brought by Chinese investors under the CCFIPPA, they are more likely to be based on one or
both of these two provisions than on other provisions. HFN adds that these are the two provisions
that have been most likely to lead to significant awards under other investment treaties.
[89] HFN also made submissions with respect to the scope of certain of the exceptions in the
CCFIPPA, including (i) measures that Canada has reserved the right to adopt pursuant to Annex
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B.8, which includes measures denying Chinese investors any rights or preferences provided to
Aboriginal peoples, and (ii) environmental measures.
[90] The Parties’ submissions with respect to the provisions in the CCFIPPA pertaining to
minimum standard of treatment [MST], expropriation and exceptions are discussed separately
below.
[91] However, before addressing those submissions, I pause to note that, in the absence of a
modern treaty, it appears to be common ground between the Parties that the HFN’s existing law
making powers are limited to the authority provided under sections 81 and 83 of the Indian Act,
above. Section 81 authorizes band councils to make by-laws that are not inconsistent with that
legislation or any regulation made by the Governor in Council or the Minister, regarding various
purposes, including health, traffic, zoning and land use planning, construction and maintenance of
buildings and infrastructure, the protection of wildlife and gaming. Section 83 provides the authority
for band councils to make by-laws, subject to the Minister’s approval, pertaining to matters such as
local taxation, the licensing of businesses, the appointment of local officials, the payment of local
officials and the raising of money from band members to support band projects. HFN laws passed
pursuant to sections 81 and 83 apply only on HFN reserves (R v Alfred, [1993] BCJ No 2277, at
para 18).
[92] HFN also has a Land Use Plan that Ms. Sayers acknowledged is consultative in nature
(Cross-Examination on Affidavit of Carolyne Brenda Sayers [Sayers Cross], Respondent’s Record,
Volume III, at pp. 919 – 921). An important component of that plan is HFN’s Cedar Access
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Strategy, which, like the Land Use Plan, HFN seeks to implement with the consent and cooperation
of third parties (Sayers Cross, at p. 922). It appears to be common ground between the Parties that,
as consultation documents (rather than legal instruments), the Land Use Plan and the Cedar Access
Strategy are not instruments that fall within the potential scope of the CCFIPPA.
1. Minimum standard of treatment
[93] The provisions with respect to MST are set forth in Article 4 of the CCFIPPA. Pursuant to
Article 4(1), the Contracting Parties are required to “accord to covered investments fair and
equitable treatment and full protection and security, in accordance with international law.” Pursuant
to Article 4(2), the concepts of “fair and equitable treatment” and “full protection and security” do
not require treatment in addition to or beyond that which is required by the international MST of
aliens, as evidenced by general state practices accepted as law. It is common ground between the
Parties that this latter provision, which is virtually identical to the language in the Note of
Interpretation issued by the NAFTA Free Trade Commission in 2001 [2001 Interpretation Note]
regarding the MST provisions in Article 1105 of the NAFTA (Thomas Opinion, at para 102),
contemplates the minimum standard of treatment required by customary international law.
[94] Apparently relying largely upon decisions that pre-date the 2001 Interpretation Note, HFN
asserts that “fair and equitable treatment” includes a wide range of procedural and substantive
protections, including a requirement for states to satisfy legitimate expectations of foreign investors
and to maintain a stable legal or regulatory framework for foreign investors. It adds that this
standard would not allow Canada to defend a challenge based on an argument that the measure in
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question was required to fulfill Canada’s constitutional responsibilities under section 35 of the
Constitution. Citing the recent Notice of Intent filed by Eli Lilly and Company, HFN states that it
would even be open to a Chinese investor to challenge judicial doctrines developed to give effect to
section 35, on the ground that those doctrines give rise to an unstable regulatory framework for
investment. In its Notice of Intent, Eli Lilly challenges the “promise of the patent” doctrine
developed in this Court, and in the Federal Court of Appeal (Eli Lilly and Company v Canada,
NAFTA Ch 11 Panel, Notice of Intent, 7 November 2012).
[95] By contrast, the Respondents took the position that the MST obligation simply provides for
a very low procedural “baseline” below which the treatment of Chinese investors may not fall. This
position was supported by Mr. Thomas, whose evidence on this point I accept. In this regard, he
observed that the MST obligation in Article 4 “is considered to be a basic standard of treatment that
all members of the international community are capable of meeting” (Thomas Opinion, at para 119).
Citing the recent arbitral panel ruling in Glamis Gold Corporation v United States of America,
NAFTA Ch 11 Panel, Award, 8 June 2009 [Glamis Gold], at para 627, the Respondents described
this standard as:
[…] sufficiently egregious and shocking – a gross denial of justice,
manifest arbitrariness, blatant unfairness, a complete lack of due
process, evident discrimination, or a manifest lack of reasons – so as
to fall below accepted international standards […]
[96] Based on Mobil Investments Canada Inc & Murphy Oil Corporation v Canada, NAFTA Ch
11 Panel, Decision on Liability and on Principles of Quantum, 22 May 2012, at para 153 [Mobil],
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the Respondents maintain that this standard does not prohibit regulatory changes even if they have a
negative effect on an investor. In that case, an arbitral panel stated:
Article 1105 [of the NAFTA] may protect an investor from changes
that give rise to an unstable legal and business environment, but only
if those changes may be characterized as arbitrary or grossly unfair
or discriminatory, or otherwise inconsistent with the customary
international law standard. In a complex international and domestic
environment, there is nothing in Article 1105 to prevent a public
authority from changing the regulatory environment to take account
of new policies and needs, even if some of those changes may have
far-reaching consequences and effects and even if they impose
significant additional burdens on an investor.
[97] According to Mr. Thomas, whose evidence I once again accept, the fact that a regulatory
measure may adversely affect an investment, increase the investor’s cost of doing business, or result
in reduced profitability does not, in and of itself, constitute indirect expropriation (Thomas Opinion,
at paras 32 and 131).
[98] In support of its position that Chinese investors may rely on the MST provisions in Article 4
to challenge measures that may be adopted to protect or accommodate HFN’s asserted interests, and
to seek substantial damages claims, HFN refers to several claims or notices of intent to file claims
which have been made against Canada under NAFTA (e.g., SD Myers, Inc v Government of
Canada, NAFTA Ch 11 Panel, Partial Award, 13 November 2000 [SD Myers]; Windstream Energy
LLC v Government of Canada, NAFTA Ch 11 Panel, Notice of Intent, 17 October 2012; Lone Pine
Resources Inc v Government of Canada, NAFTA Ch 11 Panel, Notice of Intent, 8 November 2012;
Pope & Talbot Inc v Government of Canada, NAFTA Ch 11 Panel, Award in Respect of Damages,
31 May 2002 [Pope & Talbot] as well as claims that have been made against other countries (e.g.,
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Tecnicas Medioambientales TECMED SA v United Mexican States, ICSID Case No. ARB
(AF)/00/2; Occidental Exploration and Production Company v Republic of Ecuador, (Final Award,
1 July 2004) LCIA Case No. UN 3467).
[99] HFN acknowledges that the above-mentioned 2001 Interpretation Note was issued in
response to the expansive interpretation given to that provision in prior decisions, particularly Pope
& Talbot, above. HFN also acknowledges that the interpretation of the MST obligation in NAFTA
has been incorporated into the language of Article 4 of the CCFIPPA, as quoted above. However,
HFN maintains that the most-favoured nation [MFN] obligations in Article 5 of the CCFIPPA may
lead an arbitral panel to interpret the MST obligation in the same “expansive” manner as in Pope &
Talbot and other cases that were decided prior to the adoption of the 2001 Interpretation Note. HFN
further notes that, in the more recent decision of Merrill & Ring Forestry LP v Canada, ICSID
Administrated, Award, 31 March 2010 [Merrill & Ring], the arbitral panel adopted an interpretation
of the MST obligations in NAFTA that was broader than the interpretation advanced by Canada,
and found that the MST established in customary international law continues to evolve in
accordance with the realities of the international community (Merrill & Ring, above, at para 193).
The arbitral panel proceeded to find that this standard “provides for the fair and equitable treatment
of alien investors within the confines of reasonableness” (Merrill & Ring, above, at para 213).
Nevertheless, as noted by the Respondents, the arbitral panel then concluded that regardless of
whether the lower standard advocated by the investor or the higher standard advocated by Canada
were adopted, damages had not been established (Merrill & Ring, above at para 266).
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[100] Professor Van Harten stated in his affidavit that the MFN provisions in Article 5 of the
CCFIPPA would likely be found by an arbitral tribunal to have the effect of negating the language
in Article 4 that incorporates the “customary international law” standard that was articulated in the
above-mentioned 2001 Interpretation Note (Applicants’ Record, at p.85). He appears to base this
belief on the view that there are some bilateral investment treaties that entered into force subsequent
to January 1, 1994 which do not contain that language, and the limitations that it imports into the
MST standard. (Pursuant to Article 8(1) of the CCFIPPA, the MFN provisions in Article 5 do not
apply to treatment afforded under any bilateral or multilateral agreement in force prior to January 1,
1994.) However, Mr. Van Harten did not identify any post-1993 trade agreements or FIPAs that
contain broader protections for investors than those set forth in Article 4 of the CCFIPPA.
[101] In cross-examination, Mr. MacKay acknowledged the possibility that the MFN provision in
Article 5 could potentially negate the language in Article 4 that was incorporated from the 2001
FTC Interpretation Note. However, he maintained that the 2001 Interpretation Note simply clarifies
the standard that has been in the NAFTA from the outset, and that is embodied in each of the other
post-1993 international trade agreements and FIPAs to which Canada is a party (Applicants’
Record, at pp 509-510).
[102] Mr. Thomas did not address this specific issue, although he testified on cross-examination,
in the context of discussing the interpretative note on expropriation in Annex B.10 of the CCFIPPA,
that the specific language of the substantive provisions in a treaty would likely be given very serious
consideration by an arbitral tribunal, and perhaps ultimately given priority to the MFN clause
(Applicants’ Record, at pp. 769 – 772).
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[103] In my view, the evidence on this point is inconclusive. I accept HFN’s position that there is
some uncertainty as to whether a Chinese investor may be able to persuade an arbitral tribunal
constituted under the CCFIPPA to give it the benefit of any MST obligation negotiated in another,
post-1993 investment protection treaty, which does not contain the limiting language set forth in
Article 4. However, HFN led no evidence to demonstrate that there is any more favourable language
in the MST provisions of other agreements that are within the scope of Article 5. As a result, I am
left speculating as to whether this may in fact be the case.
[104] I also accept HFN’s position that, even without considering the MFN provisions in Article
5, there is some ongoing uncertainty regarding the scope of the MST obligation enshrined in Article
4. (See also Margaret Clare Ryan, “Glamis Gold, Ltd v The United States and the Fair and
Equitable Treatment Standard”, (2011) 56:4 McGill LJ 919 at 957). However, once again, HFN did
not lead any material evidence to demonstrate how, as a practical matter, it would face a nonspeculative
possibility of an appreciable adverse impact on its asserted Aboriginal interests, if an
arbitral panel were to give a Chinese investor the benefit of a standard that is different from the one
contemplated by the quotes above from Glamis Gold and Mobil. Indeed, Mr. Thomas’
uncontradicted evidence is that only one of eleven cases that post-date the 2001 Interpretation Note
and that have raised a challenge under the MST obligation in Article 1105 of the NAFTA have
succeeded (Cross Examination on Affidavit of John Christopher Thomas [Thomas Cross],
Applicant’s Record, at p 785). That said, I recognize that the tribunal in Pope & Talbot, above,
concluded that the measure challenged under Article 1105 in that case would have contravened even
the more limited interpretation of MST reflected in the 2001 Interpretation Note. However, I also
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note that the total number of cases in which Canada has been found to have violated the MST
obligations set forth in the NAFTA and the other 24 FIPAs to which Canada is a party is extremely
small.
[105] Considering the foregoing, together with the fact that the current aggregate level of
investment from Chinese investors into Canada is only a small fraction of the aggregate level of
U.S. investment in Canada in each year over the last two decades, I am satisfied that the potential
for HFN’s asserted Aboriginal rights to be adversely impacted as a result of the MST obligations in
the CCFIPPA is speculative and non-appreciable.
2. Expropriation
[106] Among other things, Article 10(1) of the CCFIPPA provides as follows:
Covered investments or returns of investors of either Contracting
Party shall not be expropriated, nationalized or subjected to measures
having an effect equivalent to expropriation or nationalization in the
territory of the other Contracting Party … except for a public
purpose, under domestic due procedures of law, in a nondiscriminatory
manner and against compensation.
[107] It is common ground between the Parties that this obligation protects investors against both
direct and indirect expropriation.
[108] HFN maintains that the prohibition on direct and indirect expropriation without
compensation is specifically designed to ensure that Chinese investors will be compensated in
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circumstances where they would not be compensated under domestic law. Stated differently, HFN
asserts that once the CCFIPPA is ratified, it will no longer be open to any Canadian legislative body
to expropriate investments of Chinese investors without full compensation. As a result, HFN
submits that Canada will have given up a significant degree of flexibility in its ability to protect
lands and resources that are within the scope of its asserted Aboriginal interests.
[109] In response, the Respondents state that Canada has a longstanding policy of not
expropriating third party interests in order to settle land claims, and that lands held by third parties
are only ever acquired on a “willing seller, willing buyer” basis. This was supported by
documentation from the Department of Aboriginal Affairs and Northern Development Canada. As a
result, the Respondents maintain that, as a practical matter, there will be no change in the range of
potential options that would be realistically considered and available to Canada to protect or
accommodate HFN’s asserted Aboriginal interests. Citing Toronto Area Transit Operating
Authority v Dell Holdings Ltd, [1997] 1 SCR 32, at paras 20-23, the Respondents note that there is a
strong presumption in Canadian law that whenever land is expropriated, compensation will be paid,
unless the words of the statute authorizing expropriation clearly state otherwise.
[110] In the absence of any evidence to suggest the existence of a non-speculative possibility that
Canada or the Province of British Columbia may, in the absence of the CCFIPPA, have otherwise
entertained the possibility of expropriating without compensation, I am left to conclude that the loss
of this theoretical possibility is not likely to have the non-speculative potential to result in adverse
impacts on HFN’s asserted Aboriginal rights.
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[111] HFN also submits that the prohibition on indirect expropriation will reduce the scope of
potential measures that may be taken to preserve its land and resources. As with the MST obligation
in Article 4, HFN states that there is a significant level of uncertainty regarding the extent to which
measures may be found to constitute indirect expropriation. It adds that it is clear that legitimate
government measures enacted in the public interest can constitute expropriation, even in the absence
of discrimination. In addition, citing the decision of the NAFTA panel in Metalclad, above, it states
that the investment-backed legitimate expectations of an investor will be taken into account in
assessing whether there has been an indirect expropriation. Furthermore, it maintains that a measure
which has a substantial adverse impact on the value of an investment may be found to constitute
indirect expropriation.
[112] In support of its position that the expropriation provisions in Article 10 may lead Canada to
refrain from adopting a measure that would otherwise likely be embraced to protect or
accommodate HFN’s asserted Aboriginal interests, HFN noted that Canada has paid a total of
approximately $160 million to settled claims based on expropriation under the NAFTA. Those
claims were brought by Ethyl Corporation, in respect of a ban on the import and interprovincial
trade of MMT, a suspected neurotoxin; and by Abitibi Bowater, in respect of legislation passed by
the Government of Newfoundland to expropriate certain of the company’s lands and assets,
including resource rights, after it announced that it intended to close a pulp & paper mill located in
that province.
[113] In response, the Respondents note that Annex B.10 of the CCFIPPA defines indirect
expropriation in terms of “a measure or series of measures of a Contracting Party that has an effect
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equivalent to direct expropriation without formal transfer of title or outright seizure.” In addition,
the Respondents note that Annex B.10 clarifies that “the sole fact that a measure or series of
measures of a Contracting Party has an adverse effect on the economic value of an investment does
not establish that an indirect expropriation has occurred.” Moreover, they assert that the following
provision in paragraph 3 of Annex B.10 makes it clear that the circumstances in which bona fide
regulation may constitute indirect expropriation are rare:
Except in rare circumstances, such as if a measure or series of
measures is so severe in light of its purpose that it cannot be
reasonably viewed as having been adopted and applied in good faith,
a non-discriminatory measure or series of measures of a Contracting
Party that is designed and applied to protect the legitimate public
objectives for the well-being of citizens, such as health, safety and
the environment, does not constitute indirect expropriation.
[114] In Reply, HFN noted that Mr. Thomas agreed on cross-examination that bona fide
regulation with a public purpose may constitute expropriation under the CCFIPPA, and that the
form of a measure and the intent of a state are not determinative. HFN observed that Mr. Thomas
further agreed that the question of when regulation crosses the line and constitutes a measure
“tantamount to expropriation” is a contentious issue, and that there is no bright line which identifies
when compensation will be required, because each case is very fact dependent (Thomas Cross,
Applicant’s Record, at pp 754 – 760).
[115] In addition, HFN noted that Annex B.10 does not provide any protection for measures
whose purpose is to protect Aboriginal rights and title, or to otherwise fulfill Canada’s obligations
under section 35 of the Constitution. In this regard, it underscored that Mr. MacKay acknowledged
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that no attempt was made to negotiate specific protection for such measures, because Canada did
not want “to enter that trading game” (MacKay Cross, Applicant’s Record, at p 535). It concludes
from this that a measure aimed at protecting the rights of Aboriginal peoples would not benefit from
Annex B.10.
[116] As with the MST provision in Article 4 of the CCFIPPA, discussed above, HFN submits
that the MFN provision in Article 5 would effectively negate the limitations in Annex B.10, which
Canada and the U.S. added to their respective model foreign protection agreements in 2004, to
clarify the framework for determining whether an indirect expropriation has occurred. The evidence
relied upon by HFN in this regard closely tracks that which was discussed at paragraphs 100-102
above, in respect of the interplay between the MFN and MST provisions in Articles 5 and 4 of the
CCFIPPA, respectively.
[117] For essentially the same reasons set forth at paragraph 103 above, I have been left to
speculate as to whether the MFN provision would be applied so as to negate all or some of the
limitations set forth in Annex B.10, notwithstanding the fact that Article 35(4) specifically states
that the Annexes and footnotes to the CCFIPPA constitute integral parts of that agreement.
[118] Indeed, I am satisfied that even without considering the MFN provisions in Article 5, it is
not entirely clear how the language in Annex B.10 and Article 10 may be applied to measures that
may be alleged to constitute indirect expropriation. This was conceded by Mr. Thomas (Thomas
Cross, Applicant’s Record, at pp. 754-755).
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[119] However, I accept Mr. Thomas’ evidence that the circumstances in which a nondiscriminatory
measure that is designed and applied to protect the legitimate public objectives, as
contemplated in Annex B.10, might be found to constitute indirect expropriation are likely to be rare
(Thomas Opinion, at para 33). I also accept his uncontested evidence that, apart from one notice of
intent to file a claim, which did not proceed to the establishment of a tribunal, there have been no
other claims, let alone a tribunal finding, against Canada, for any federal, provincial or territorial
measures taken in relation to Aboriginal rights or interests, or for allegedly unlawful measures taken
by First Nations themselves (Thomas Opinion, at paras 29-30 and 127). Likewise, I accept Mr.
Thomas’ evidence that there has only been one such claim brought against the United States
(Glamis Gold, above), to challenge regulatory measures taken to protect Aboriginal interests, and
that this claim not only was rejected, but provides a good example of how such interests would be
taken into consideration by an arbitral panel applying the standards set out in the CCFIPPA
(Thomas Opinion, at paras 31 and 199-204).
[120] Given the foregoing, and in the absence of any evidence to the contrary, I have not been
persuaded that there is an appreciable and non-speculative potential for either (i) an arbitral tribunal
to find that measures designed to protect or accommodate HFN’s asserted Aboriginal interests
contravene the expropriation provisions in Article 10 of the CCFIPPA, or (ii) Canada to refrain
from implementing a measure that would otherwise be implemented for that purpose, due to a fear
of being found liable to pay significant damages to one or more Chinese investors.
3. The Exceptions in the CCFIPPA
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[121] In support of its position that Canada continues to have ample policy flexibility to protect
and accommodate HFN’s asserted Aboriginal interests, the Respondents note that, as with each of
the other FIPAs that Canada has entered into, the CCFIPPA contains general exceptions to ensure
that the federal government and sub-national governments retain policy flexibility in key areas. In
this regard, they note that “specific exemptions,” sometimes called “reservations,” are used to
exempt specific matters from the application of some or all of a FIPA’s obligations; whereas
“general exemptions” are typically used to carve out broad subject-matter areas from a FIPA’s
application.
[122] With respect to specific exceptions, the Respondents assert that, pursuant to Article 8,
existing non-conforming measures are grandfathered against the application of the MFN provisions
in Article 5, the national treatment provisions in Article 6, and the provisions relating to senior
management and boards of directors in Article 7. In addition, the Respondents note that, pursuant to
Article 8, Canada has also reserved policy flexibility with respect to measures that may be adopted
in the future pursuant to certain programs or in sensitive sectors, by exempting such measures from
the application of Articles 5, 6 and 7. For example, the Respondents note that, pursuant to Article 8,
procurement and subsidies are exempted from these obligations in the CCFIPPA. Moreover,
through the application of Annex B.8, Article 8 also provides that Articles 5, 6 and 7 do not apply to
measures relating to, among other things, social services that are established or so maintained for a
public purpose, and, most importantly for present purposes, any rights and privileges accorded to
Aboriginal peoples [the “Aboriginal Reservation”].
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[123] The Respondents submit that the Aboriginal Reservation allows all levels of domestic
governments, including Aboriginal governments with legislative and regulatory powers, to provide
rights and preferences to Aboriginal people that may otherwise be inconsistent with the obligations
set forth in the CCFIPPA. The Respondents observe that Canada has ensured that policy flexibility
is retained to provide preferences for Aboriginal interests, in each of the other FIPAs that it has
entered into.
[124] It appears to be common ground between the parties that the Aboriginal Reservation does
not apply to the MST provisions in Article 4, the expropriation provisions in Article 10 or the
performance requirements provisions in Article 9 (which apparently reiterate obligations already
covered by the separate Agreement on Trade Related Investment Measures, to which all WTO
Members are a party and against which reservations may not be taken). According to Mr. MacKay’s
uncontradicted evidence, the various FIPAs to which Canada is a party, including the CCFIPPA, do
not extend reservations with respect to MST and expropriation because such reservations “would
defeat the purpose of the treaty, which is to create reciprocal legal stability for foreign investors in
the host state.” Mr. MacKay added that the MST and expropriation obligations are simply “basic
protections against lack of due process, denial of justice and confiscatory conduct” (MacKay
Affidavit, at para 58).
[125] With respect to the general exceptions in the CCFIPPA, the Respondents noted that Canada
has exempted various types of measures from the application of the CCFIPPA’s obligations
generally. This includes, pursuant to Article 33(2), environmental measures that are (i) necessary to
ensure compliance with laws and regulations that are not inconsistent with the provisions of the
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CCFIPPA, (ii) necessary to protect human, animal or plant life or health, or (iii) relate to the
conservation of living or nonliving exhaustible natural resources, if such measures are made
effective in conjunction with restrictions on domestic production or consumption.
[126] HFN maintains that the foregoing exceptions and the Aboriginal Reservation do not
preserve sufficient policy flexibility for Canada to protect and accommodate its asserted Aboriginal
interests. With respect to the environmental exception in Article 33(2) in particular, it notes that the
first two of three types of measures described therein are confined to measures that are necessary to
achieve the stated objectives, and that the burden to demonstrate such necessity would be upon
Canada. Relying upon Andrew Newcombe and Lluis Paradell, Law and Practice of Investment
Treaties (Austin, Tex.: Wolters Kluwer, 2009), pp 500-506, HFN suggests that the meaning of
“necessary” can be situated on a continuum ranging from indispensable or of absolute necessity, to
a contribution to achieving the stated objectives. Newcombe and Paradell also note, more broadly,
that general exceptions such as those discussed above raise many interpretive issues that have not
yet been clarified in the jurisprudence.
[127] I accept that there is some uncertainty regarding the scope of the general and specific
exemptions discussed above. However, it remains far from clear how this uncertainty assists HFN to
establish that the potential adverse effects on its asserted Aboriginal rights are appreciable and nonspeculative.
[128] When pressed during the hearing on this point, and more broadly on how the CCFIPPA in
general gives rise to the potential for such effects, HFN struggled. At one point, it stated that “it is
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not unreasonable to imagine a scenario where taking steps to protect aboriginal rights might result in
the cancellation of the permit, which in turn, then … [might be claimed to result in a] substantial
reduction in the value of [a Chinese investor’s] investment” (Transcript, at p 178). This is similar to
its written submission that an arbitral panel might find a contravention of the CCFIPPA, and impose
substantial damages on Canada, in respect of the quashing of a resource extraction permit by the
Courts, on the ground that either (i) Canada failed to adequately consult or accommodate asserted
Aboriginal rights, or (ii) the permit authorizes development which unjustifiably infringes Aboriginal
or treaty rights. In the absence of any evidence to demonstrate that there is a non-speculative and
appreciable risk that an arbitral panel might not only make such a finding in respect of an
identifiable permit, but also that such a finding would adversely impact upon HFN’s asserted
Aboriginal interests, I am unable to agree with HFN that the ratification of the CCFIPPA gives rise
to such a non-speculative and appreciable risk.
[129] HFN also stated that the ratification of the CCFIPPA gives rise to an appreciable and nonspeculative
risk that its asserted Aboriginal interests will be adversely impacted by virtue of the fact
that Canada will take into account the risk of an adverse arbitral panel ruling, in deciding how to
accommodate those interests. This is discussed in greater detail at paragraphs 82 and 83 above.
However, HFN has not adduced any evidence to persuasively demonstrate that as a result of the fact
that Canada will take such risk into account when developing measures to protect or accommodate
HFN’s asserted Aboriginal interests, there is an appreciable and non-speculative possibility that
Canada’s scope of action will be constrained, fettered or influenced in a way that will leave HFN
worse off, in terms of those interests, than if the CCFIPPA is not implemented. In the absence of
such evidence, and considering the very basic nature of the MST and expropriation obligations, as
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well as the fact that the general and specific exemptions discussed above will afford policy
flexibility to Canada, I find that this assertion is entirely speculative in nature. My conclusion in this
regard is reinforced by Mr. MacKay’s evidence that he is “unaware of any decision of a Canadian
court finding that either the minimum standard of treatment or expropriation provision interferes
with or are incompatible with Aboriginals’ claims or rights” (MacKay Affidavit, at para 59).
[130] Another example HFN provided as to how, as a practical matter, ratification of the
CCFIPPA might adversely impact upon its asserted Aboriginal interests was the possibility that
HFN might want to place a moratorium on land development until regulations governing a land use
plan on its reserves or broader territory have been enacted. HFN observed that the Tlicho
Government [Tlicho] did something similar and then was unable, in proceedings before the
Supreme Court of the Northwest Territories, to prevent an environmental assessment from
proceeding. This occurred notwithstanding that the assessment included within its scope potential
access roads that the Tlicho did not want included in the assessment (Tlicho Government v
MacKenzie Valley Impact Review Board, 2011 NWTSC 31). Extrapolating from this case, HFN
submitted that it is not difficult to envision a scenario in which a similar moratorium could give rise
to an adverse arbitral ruling against Canada, if it were found to violate the MST or expropriation
provisions in the CCFIPPA. In such a case, HFN submitted that it could be pressured by Canada to
either abandon the moratorium or pay any damages levied against Canada (Transcript, at pp 212-
218). In the latter regard, HFN noted that Tlicho has a Land Claims and Self Government
Agreement with Canada and the Government of the Northwest Territories, and that paragraph
7.13.6 of that agreement requires Tlicho, at the request of Canada, and in the event of an adverse
ruling by an international arbitral panel in respect of any law or other exercise of Tlicho’s powers, to
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remedy such law or other measure, to enable Canada to perform its international obligations. HFN
suggested that it was not unreasonable to expect that it will be required to agree to a similar
provision in any similar agreement that it ultimately may negotiate with Canada and the
Government of British Columbia.
[131] Once again, I have not been persuaded that there is an appreciable and non-speculative
possibility of this scenario occurring, particularly given the absence of any evidence that (i) HFN is
considering such a moratorium, (ii) such a moratorium might somehow adversely impact upon a
potential Chinese investment in HFN territory, (iii) there would be a non-speculative possibility of
such moratorium being found to contravene the CCFIPPA, and (iv) Canada would not retain
sufficient policy flexibility to deal with this in a way that would avoid any adverse impact upon the
HFN’s asserted Aboriginal interests.
c. Conclusions regarding the potential effects that HFN claims will result from
a change in the legal framework applicable to land and resource regulation
[132] For the reasons given above, HFN has not demonstrated that the ratification of the
CCFIPPA has the non-speculative and appreciable potential to adversely impact HFN’s asserted
Aboriginal interests, as a result of any changes that the CCFIPPA will make to the legal framework
applicable to land and resource regulation in Canada.
[133] My conclusion in this regard is reinforced by the following:
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a. Canada’s experience under NAFTA and the 24 FIPAs that it has entered into
with other countries is perhaps the best available evidence that is relevant to an
assessment of the potential for the CCFIPPA to have the effects identified by
HFN. Indeed, that experience is more relevant than the international experience
under agreements to which Canada is not a party, and in respect of which HFN
identified only a very small number of arbitral decisions in the course of this
proceeding.
- As discussed at paragraph 104 above, Mr. Thomas’ uncontradicted evidence
is that only one of eleven cases that post-date the 2001 Interpretation Note
and that have raised a challenge under the MST obligation in Article 1105 of
the NAFTA have succeeded. In any event, the total number of cases in which
Canada has been found to have violated that obligation is extremely small.
- Likewise, as discussed at paragraph 119, above, Mr. Thomas also provided
uncontested evidence that, apart from one notice to file a claim, which did
not proceed to the establishment of a tribunal, there have been no other
claims, let alone a tribunal finding against Canada, in respect of any federal,
provincial or territorial measures taken in relation to Aboriginal rights or
interests, or in respect of allegedly unlawful measures taken by First Nations
themselves; and there has only been one such claim filed against the United
States, which was rejected.
- Only two judgments for damages have ever been rendered against Canada
(Pope & Talbot and SD Myers, above), in an aggregate amount of less than
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$7 million, although there has been an adverse finding of liability against
Canada in a third case (Mobil, above), in which damages remain to be
determined; and there are approximately six others in which claims have
been filed but not resolved, and a further two in which a notice of intent has
been filed but no formal claim has been made.
- As discussed at paragraph 112 above, only two claims against Canada under
the NAFTA have ever been settled with compensation, for an aggregate
amount of approximately $160 million (Transcript, at pp 343-348).
- Mr. MacKay, whose evidence on this point does not appear to have been
contradicted, stated in his affidavit that he is not aware of any evidence
suggesting that any of the aforementioned losses or monetary settlements
have implicated or impaired Canada’s ability to regulate in the public interest
in a non-discriminatory manner, and none of the claims that have ever been
brought against Canada have involved Aboriginal rights (MacKay Affidavit,
at para 69). He also provided uncontested evidence that, to his knowledge, no
Canadian court has ever found that either the MST or expropriation
provisions in international agreements to which Canada is a party interferes
with or are incompatible with Aboriginals’ claims or rights; and, indeed, no
litigation has ever been initiated in Canada by Aboriginal groups regarding
an alleged impact on Aboriginal rights of any FIPA or other investment
treaty, including the NAFTA, since 1989 (MacKay Affidavit, at paras 59 and
69).
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- It appears to be common ground between the parties that, to date, there have
been no claims filed against Canada under any of the 24 FIPAs that it has
entered into.
b. The aggregate existing level of investment in Canada by Chinese investors is a
small fraction of the level of aggregate level of investment in Canada by U.S.
investors in each year since the NAFTA came into force on January 1, 1994.
According to Mr. MacKay’s uncontested evidence, in 2011, the latest year for
which data is available, Chinese investors had an aggregate of approximately
$10.9 billion in investment in Canada, versus approximately $326 billion from
U.S. investors – almost 30 times the level of aggregate investment from China.
Although CNOOC Ltd. subsequently purchased Nexen, Inc. in a transaction
valued at approximately $15 billion, Mr. MacKay’s uncontested evidence is that
most of Nexen’s assets are located outside Canada (MacKay Cross, Applicant’s
Record, at p 485). According to data included at Exhibit H to Mr. MacKay’s
affidavit, the level of aggregate investment in Canada from U.S. investors was
approximately $103 billion in 1994 and has steadily increased since that time.
c. No evidence was led to demonstrate or to even suggest that the experience under
the CCFIPPA is likely to be any different than the experience to date under the
NAFTA or the 24 FIPAs to which Canada currently is a party.
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d. There is no evidence that any sub-national governments in Canada have been
fettered or “chilled” by NAFTA or the 24 FIPAs in force, from legislating in the
public interest. Indeed, the moratoriums imposed by the Government of Quebec
against natural (shale) gas fracking (in respect of which a Notice of Intent was
filed in 2012 by Lone Pine Resources Inc) and by Ontario against offshore wind
farms (in respect of which Windstream Energy LLC filed a claim in 2013)
suggest that they have not been so fettered or “chilled.”
e. Apart from Ms. Sayers’ hearsay evidence obtained from the Wall Street Journal,
which reported that China Investment Corp. was close to purchasing a 12.5%
stake in some timber assets held by Island Timberlands LP for approximately
$100 million, there is no evidence regarding actual or potential future investment
in HFN’s claimed territory, let alone on its reserves, by Chinese investors.
f. No evidence was led to demonstrate or even to suggest that any existing federal
or sub-national measures, including any measures established by HFN, might
contravene or be in conflict with any of the provisions in the CCFIPPA.
g. There is very little, if any, evidence of a causal link between the CCFIPPA and
potential investment in Canada by Chinese investors, and there is no such
evidence of such a link to any potential investment in HFN territory. The only
evidence that was adduced in this case was in a document entitled Final
Environmental Assessment of the China Foreign Investment Protection
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Agreement (FIPA), included at Exhibit BB to Mr. MacKay’s affidavit. At page 2
of that document, the following statement is made:
In the initial [Environmental Assessment], it was found that
significant changes to investment in Canada were not expected to
occur as a result of the Canada-China FIPA … In this Final
[Environmental Assessment], the claim that no significant
environmental impacts are expected based on the introduction of a
Canada-China FIPA are upheld; however, over time, Chinese
investors have shown greater interest in investing in Canada, and
this trend is likely to continue, if not increase with the introduction
of a FIPA.
h. Even if the only reasonable accommodation of an Aboriginal right asserted by
HFN would require action such as the expropriation of lands or a moratorium, an
arbitral panel would have no power to enjoin such action, and any award that
may be made on behalf of a Chinese investor would be made solely against
Canada. HFN will never be a respondent in any action initiated by a Chinese
investor under the CCFIPPA.
i. HFN’s existing law making powers are those conferred under the Indian Act to
over 600 bands, and are confined to zoning and land use planning, the
preservation, protection and management of animals and fish, and business
licensing and regulation (sections 81 to 83 of the Indian Act).
j. HFN’s existing Land Use Plan and Cedar Access Strategy can not be challenged
by a Chinese investor.
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k. The boundaries of HFN’s claimed traditional territory remain uncertain. There
are at least nine First Nations whose claimed traditional territory overlaps with
HFN’s claimed traditional territory (Affidavit of Jim Barkwell, Respondents’
Record, Volume II, Tab 34, at para 16).
[134] I agree with the Respondents that HFN’s submissions ultimately may be reduced to the
assertions that, irrespective of Canada’s experience to date under the NAFTA and the 24 other
FIPAs to which it is a party, and with Chinese investment in Canada in general, (i) such investment
in its territory may occur in the future, (ii) a measure may one day be adopted in relation to that
investment, (iii) a claim may be brought against Canada by the hypothetical investor, (iv) an award
will be made against Canada in respect of the measure in question, notwithstanding the basic nature
of the obligations in the CCFIPPA, the Aboriginal Reservation, and the other exceptions therein,
and (v) Canada’s ability to protect and accommodate HFN’s asserted Aboriginal interests will be
diminished, either as a result of that award, because Canada would be chilled by the prospect of
such an award. HFN has failed to demonstrate that this scenario is anything other than speculative
and remote.
(iii) Adverse impacts on the scope of self-government that HFN may be able to achieve
[135] HFN submits that the legal rights granted to Chinese investors under the CCFIPPA will
have a direct adverse impact on the scope of self-government which it can achieve either through (i)
the exercise of its Aboriginal rights, (ii) the treaty-making process, or (iii) the exercise of delegated
authority from the federal or provincial governments. HFN maintains that no matter what type of
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governance structure it utilizes, its authority will be limited or constrained by disciplines in the
CCFIPPA, including the rights that it grants to Chinese investors. It asserts that this adverse impact
is sufficient to trigger Canada’s duty to consult with it prior to ratification of the CCFIPPA. I
respectfully disagree.
[136] In support of its submissions on this point, HFN notes that, pursuant to Article 2(2) of the
CCFIPPA, the treaty will apply to any entity whenever that entity exercises any regulatory,
administrative or other governmental authority delegated to it by a Contracting Party. Accordingly,
it states that it will be subject to the CCFIPPA, whether it exercises law making or governance
powers pursuant to an aboriginal right, through a delegation agreement with a province and/or the
federal government, or through a treaty protected by s. 35 of the Constitution.
[137] It is common ground between the parties that HFN has never signed a treaty or “land claim
agreement” with the Crown in right of Canada or British Columbia. However, HFN is a party,
together with Canada and the Government of British Columbia, to a non-legally binding agreement
entitled Framework Agreement to Negotiate a Treaty [Framework Agreement], dated July 27, 2007.
According to Mr. Barkwell’s uncontested affidavit evidence, that agreement was entered into within
the framework of the British Columbia Treaty Process [BC Treaty Process]. By 2009, HFN had
advanced to Stage 4 of that process, which has six stages and is not structured to require any
assessment or proof of Aboriginal rights or title. While there have been no active negotiations since
2009, the uncontested evidence of Ms. Sayers is that HFN remains committed to that process
(Sayers Cross, Respondents’ Record, Volume III, pp. 915-916). The substantive matters under
negotiation, and reflected in the Framework Agreement, include the following:
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a. Land, including title, law-making authority, selection and access;
b. Water and water resources;
c. Forestry and forest resources;
d. Fisheries and marine resources;
e. Language, heritage and culture;
f. Mining and subsurface resources;
g. Wildlife and migratory birds;
h. Governance;
i. Financial matters including, but not limited to, fiscal arrangements and sharing
of resource revenues and royalties;
j. Environmental management;
k. General provisions, including, but not limited to, certainty, eligibility and
enrollment, ratification, amendment, implementation and dispute resolution; and
l. The settlement of HFN’s claims of aboriginal rights and title, including but not
limited to, the related financial component and certainty issues referred to above.
[138] In addition to the foregoing, HFN notes that it already engages in some land use regulation
through its Land Use Plan and the associated Cedar Access Strategy.
[139] HFN asserts that because of Canada’s agreement to be bound by the CCFIPPA, the HFN
may be prevented from negotiating an agreement or treaty which protects its rights to exercise its
authority in the best interests of the Hupacasath people, including to conserve, manage and protect
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lands, resources and habitats and to engage in other governance activities, in accordance with
traditional Hupacasath laws, customs and practices.
[140] It is important to distinguish between potential adverse effects on asserted Aboriginal rights
and potential adverse effects on a First Nation’s future negotiating position. The duty to consult
applies solely to the former, where they are demonstrated to be non-speculative, appreciable and
causally linked to particular conduct contemplated by the Crown. Stated alternatively, that duty does
not apply to contemplated conduct that may simply have potential adverse effects on HFN’s future
negotiating position (Rio Tinto, above, at paras 46 and 50). It also does not apply to other interests
of HFN that do not specifically concern HFN’s asserted Aboriginal rights, as listed at paragraph 53
above.
[141] Accordingly, to the extent that any of the potential adverse impacts identified by HFN
concern matters that may, as a result of the CCFIPPA, be more or less likely to be addressed in any
future treaty that HFN may negotiate with Canada, and that do not directly concern HFN’s asserted
Aboriginal rights themselves, those potential impacts cannot give rise to a duty to consult. This
includes adverse impacts on those dimensions of “the best interests of the Hupacasath people” and
“other governance activities” which do not directly concern HFN’s asserted Aboriginal rights
(Ahousaht Indian Band v Canada (Minister of Fisheries and Oceans), 2007 FC 567, at paras 31-32;
aff’d 2008 FCA 212 [Ahousat FCA], at para 37).
[142] HFN expressed a specific concern that any governance rights to be included in any treaty
that may be negotiated as part of the BC Treaty Process, or otherwise, will have to conform to
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Canada’s international legal obligations, including those under the CCFIPPA. In this regard, it
identified a number of agreements concluded between First Nations and the federal, provincial or
territorial governments which make this clear. These include the Yekooche First Nation Agreement
in Principle (at paragraph 24(b)) and the K’ómoks Agreement in Principle (at paragraph 35), which
require that any Final Agreement provide for the consistency of the First Nations’ laws and other
exercises of power with Canada’s international legal obligations. Similarly, the Westbank First
Nation Self-Government Agreement (paragraph 36) requires that First Nation take all necessary
steps to “ensure compliance of its laws and actions with Canada’s international legal obligations”
and requires it to “remedy any Westbank Law or action found to be inconsistent with Canada’s
international legal obligations by an international treaty body or other competent tribunal.” A
number of other agreements identified by HFN contain similar provisions.
[143] If HFN’s position is that the CCFIPPA increases, to a non-trivial degree, the probability that
these types of provisions will be required to be included in any Final Agreement or other treaty that
it may ultimately negotiate with Canada, this was not supported by any evidence. The same is true if
HFN’s position is that the ratification of the CCFIPPA will reduce the scope for HFN to avoid
having to agree to these types of provisions, or to negotiate alternative provisions that may impose
lesser constraints on its ability to protect its asserted Aboriginal rights. Indeed, HFN repeatedly
asserted during its oral submissions that it is already highly probable, if not virtually certain, that
Canada will insist on the inclusion of these types of provisions in any Final Agreement or other
treaty that it may ultimately negotiate with HFN (Transcript, at pp. 23 and 153 – 157). The
presence of those provisions in the above-mentioned agreements, and others appended to Ms.
Sayers’ Affidavit, lends support to this view.
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[144] Given the existence of those provisions in those agreements, and in the absence of evidence
to suggest that, but for the ratification of the CCFIPPA, HFN may have been able to negotiate
different provisions that provide greater scope for HFN to protect its asserted Aboriginal rights, I am
satisfied that HFN has not established the required causal link between the ratification of the
CCFIPPA and the potential adverse impacts that it has identified. Stated differently, I am satisfied
that HFN has not established a causal link between the ratification of the CCFIPPA and the types of
treaty provisions that it has identified, and that it may have to agree to include in any future treaty
that it ultimately negotiates with Canada. The evidence suggests that Canada is likely to require
HFN to exercise its treaty rights in a manner consistent with the types of obligations that are in the
CCFIPPA, in any event.
[145] In its written and oral submissions, HFN placed great significance on the fact that the
ratification of the CCFIPPA would extend the benefit of the provisions described above to Chinese
investors. For example, HFN maintained that the CCFIPPA will require HFN to refrain from
regulating in a manner which has the effect of substantially diminishing the value of an investment
owned by a Chinese national without paying compensation. It further maintained that the CCFIPPA
will require HFN to ensure that it provides Chinese investors with “fair and equitable treatment,” as
that term has been interpreted by arbitrators; and that HFN will not be able to impose performance
requirements which require the use of local products. While it acknowledges that it will still be able
to provide preferential treatment to First Nations, it stated that it will be constrained from making
distinctions between other companies if some of them have Chinese investors.
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[146] However, once again, HFN did not adduce any evidence to suggest that there is a nonspeculative
and appreciable prospect that, in the absence of the CCFIPPA, HFN may have somehow
legislated or acted in a manner that (i) is inconsistent with one or more of the obligations
contemplated in the CCFIPPA, but (ii) nevertheless respects Canada’s existing obligations to
investors from NAFTA countries and the 24 countries with which Canada has entered into a FIPA
(Ahousaht FCA, above).
VIII. Conclusion
[147] The potential adverse impacts that HFN claims the ratification of the CCFIPPA would have
on its asserted Aboriginal rights, due to changes that the CCFIPPA may bring about to the legal
framework applicable to land and resource regulation in Canada, are non-appreciable and entirely
speculative in nature. Moreover, HFN has not established the requisite causal link between those
potential adverse impacts and the CCFIPPA.
[148] The same is true with respect to HFN’s assertions that the rights granted to Chinese
investors under the CCFIPPA will directly and adversely impact the scope of self-government
which HFN can achieve, either through exercising its Aboriginal rights, through the treaty making
process, or through the exercise of delegated authority from Canada or the Government of British
Columbia.
[149] Accordingly, the ratification of the CCFIPPA by Canada without engaging in consultations
with HFN would not breach either (i) Canada’s constitutional obligation to act honourably with
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HFN in all of its dealings with HFN, and particularly in respect of HFN’s asserted Aboriginal rights,
or (ii) Canada’s duty to consult with HFN before taking any action that may adversely impact upon
those rights.
[150] This application will therefore be dismissed.
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JUDGMENT
THIS COURT DECLARES, ADJUDGES AND ORDERS that this Application
is dismissed with costs.
"Paul S. Crampton"
Chief Justice

FEDERAL COURT
SOLICITORS OF RECORD
DOCKET: T-153-13
STYLE OF CAUSE: HUPACASATH FIRST NATION v THE MINISTER
OF FOREIGN AFFAIRS AND THE ATTORNEY
GENERAL OF CANADA
PLACE OF HEARING: VANCOUVER, BRITISH-COLUMBIA
DATE OF HEARING: JUNE 5, 6, and 7, 2013
REASONS FOR JUDGMENT
AND JUDGMENT: CRAMPTON C.J.
DATED: August 26, 2013
APPEARANCES:
Mark Underhill
Catherine Boies Parker
FOR THE APPLICANT
Tim Timberg, Judith Hoffman
Mara Tessier, Shane Spelliscy
Pierre-Olivier Savoie
FOR THE RESPONDENTS
SOLICITORS OF RECORD:
Underhill, Boies Parker
1320 – 355 Burrard Street
Vancouver, BC V6C 2G8
FOR THE APPLICANT
William F. Pentney
Deputy Attorney General of Canada
Vancouver, BC
FOR THE RESPONDENTS