Disputes often arise during contract negotiations. Yet when commercial disputes mix with matters of sensitivity, like one’s culture or an impending financial windfall, negotiations might not only break down if parties can’t agree, the whole project may unravel and a substantial amount of potential revenues, profit participation and employment contracting opportunities (usually involving a very significant, very substantial amount of money) could be lost. Impact and Benefit Agreements (IBAs) are formal contracts and crucially important in these situations. IBAs establish a framework of understanding between mining companies (or the like: developers, oil and gas companies or firms) that are proposing to work in proximity to, or within traditional Aboriginal territories, and the First Nations group(s) that occupy the region. IBAs are emerging as the primary means of establishing a formal relationship between the project developer and the local people. These agreements take into account financial benefits, long-term sustainability and cultural differences to arrive at a mutual understanding and benefit for both sides.
IBAs, also known as Community Benefit Agreements, have significant roles in pipeline and infrastructure projects, which affect numerous communities and groups simultaneously.
Potential for dispute is higher when cultural differences divide the two parties. While mining or development companies may stand to make a great deal of money with these projects, the First Nations groups can also benefit, not only financially, but directly and indirectly as well, through:
- Direct employment opportunities;
- The opportunity to gain work experience and develop specialized skills;
- Indirect economic effects – i.e. increased purchases of local goods and services;
- Improvements to community infrastructure and developments and to social programs through cash or royalty payments received from project developers;
- Business development opportunities – i.e. local businesses can act as suppliers or as contractors, subcontractors or joint venture partners; and
- Use of the project facilities and physical infrastructure – i.e. roads, ports, medical facilities, etc.
With the proverbial stakes as high as they are in these projects, IBAs can help move a project from planning to development, ensure fairness and protect the local people and their environment from long-term impact. When disputes do arise (especially regarding areas of sensitivity) it’s crucial to proceed cautiously. Not all conflicts need to be resolved through mediation; sometimes an issue requires a more creative solution.
The primary goal is to avoid disputes and the resulting conflict. A solid, in-depth IBA, coupled with functional Implementation Committee provisions and integral Dispute Resolutions, is the first step in navigating and avoiding such issues. A well-defined IBA is all-encompassing, detailed and outlines the requirements of both parties. It meets the needs and goals of each side and the Evolved IBA National Standards, and is inter-generational to ensure stability, protection and financial benefit for the long term.
However, if conflict does arise, the parties must attempt to resolve the dispute through discussion. If unable, the Implementation Committee is consulted. An Implementation Committee is the first line of defense at a sign of trouble. Created with representatives from each side, Implementation Committees oversee the IBA and recommend solutions when necessary. Beyond working through an Implementation Committee (if the Committee cannot recommend a suitable solution) a sole arbitrator or a panel of three is assigned. Each party would appoint an arbitrator and either the two appoint a third, or the third is Court appointed, in either case, a neutral third party is brought in to fact-find, make recommendations, or refer to formal mediation.
For the effective execution of an IBA, a highly-functional, disciplined and authoritative Implementation Committee must be crafted in alignment with the particular project and mandated to ensure the outlined procedures and agreements to providing benefits are adopted and adhered to properly. Within the committee, members representing Aboriginal parties must have decision-making power or direct access to decision makers; one member of the mining firm must also have such power. There is equal membership given and all areas are managed: employment, contracting, cultural aspects and community involvement. This committee:
- is the primary formal mechanism for communication and cooperation;
- resolves disputes under the Agreement;
- reviews and addresses issues arising from committee reports;
- reviews functions and structure of other committees to improve effectiveness and efficiency;
- carries out other functions as referred by the parties; and
- develops an action plan with timetables and procedures to ensure compliance. This includes annual reviews and reports, and recommendations for employment and contracting targets.
It must be recognized that a one-size-fits-all approach will never fulfill the necessary objectives.
When a dispute cannot be amicably resolved through negotiation, the aggrieved party submits a dispute to the Implementation Committee.
Issues arise from many different aspects of the project. Most common among them: employment opportunities. It often stipulates in an IBA that the mining company must employ a certain number of individuals from the local First Nations group, to provide skills training, stable income and boost local opportunities. Providing jobs seems like it would be a non-issue; an obvious benefit to both sides. However, when cultures differ, problems may result. Aboriginal people in Canada do not pay taxes while living on reserves, yet when they work off-reserve at a project site, they inevitably begin drawing an attractive salary, and therefore start paying taxes. For those not accustomed to paying taxes, they may not understand why, when they are technically making a salary of a certain amount (gross salary), they earn substantially less after deductions (net salary). This misunderstanding may lead to confusion and frustration among project workers.
In this instance, an Implementation Committee would provide clarification to resolve the frustration. The Committee might bring in an accountant to host a one-day training seminar on all the deductions of a T4, and all the benefits that come along with these deductions, such as employment insurance, child care benefits, pension plans, and health care benefits. Going forward, the project developers would then be able to offer such seminars to other groups when opening new sites, so this misunderstanding doesn’t reoccur.
Solutions such as these set forth by Implementation Committees don’t have to be complex. Sometimes, better communication is all that is needed to ease tensions. Sometimes it takes an objective third party to craft a creative solution so a small problem doesn’t turn into a long-term issue.
Disputes are inevitable in development projects, especially when drastic cultural differences exist. However with the proper communication channels in place, and a clearly outlined Agreement established from the beginning, resolutions can be reached more easily, and both parties will see the benefit.
Richter’s Harvey Sands firmly believes in the inherent value of IBAs as he has represented a large number of First Nations groups through these processes while leading Richter’s First Nations/Aboriginal Advisory Services group. He consults with Aboriginal and First Nations groups on joint ventures focused on: financial analysis and valuation of resource development projects, financial project participation and economic benefit matters, capacity building and various capital deployments, management, governance, investment matters and valuations in Land Claim financial negotiations.