In 2012, Canada signed a Foreign Investment Promotion and Protection Agreement with China1 to establish a legal framework for bilateral investment (the Investment Agreement). The Hupacasath First Nation (HFN), who assert aboriginal rights, including self-government rights and title, over roughly 573,000 acres of land on Vancouver Island, took legal action against Canada for failing to consult prior to signing the Investment Agreement.

The HFN applied to the Federal Court2 for a declaration to prevent the Investment Agreement from being ratified and coming into force because of the failure to consult and alleged potential impacts on their aboriginal rights.

The Federal Court held that the Investment Agreement could not harm the HFN’s asserted rights and interests, that any impacts on these rights were “non-appreciable” and “speculative,” and that Canada was not in violation of its obligations.3 This decision has now been affirmed by the Federal Court of Appeal.4


The issue before the Federal Court of Appeal was whether the Federal Court correctly held that Canada did not have a duty to consult HFN prior to ratifying the Investment Agreement with China.


Prerogative Power/Jurisdiction

As a preliminary matter, the court addressed whether it had jurisdiction to decide the issue.

On appeal, Canada raised a new objection on the basis that the Crown had prerogative powers to enter into international treaties and agreements and the exercise of these powers could not be reviewed by the Federal Court. The Federal Court of Appeal concluded, however, that it did have jurisdiction and Canada's exercise of its prerogative powers dealing with foreign policy and foreign relations was reviewable by the court.

Duty to Consult

To evaluate whether HFN was owed a duty to consult on the facts, the Federal Court of Appeal, like the lower court, applied the test set out in the Rio Tinto case5:

  • Whether the Crown had knowledge, actual or constructive, of a potential aboriginal claim or right;
  • Whether the Crown’s conduct could, potentially or actually, adversely impact aboriginal rights; and
  • Finally, whether there was a causal link between the Crown’s conduct and the alleged adverse effects on an aboriginal claim or right. As held in the Federal Court below, the first two conditions were satisfied while the final criteria was the source of contention.

In rejecting the HFN argument that it was owed a prior duty to be consulted, the Federal Court of Appeal held as follows:

  • There was no tangible evidence that the Investment Agreement would affect HFN aboriginal rights. The HFN failed to demonstrate through its expert evidence, as required in the Rio Tinto decision, “a causal relationship between the proposed government conduct or decision and a potential for adverse impacts”;
  • Until there was a non-speculative impact on rights, a duty to consult simply did not arise;
  • The Investment Agreement could be expected to increase Chinese investment and some of that investment could find its way into resource development companies. Whether that investment would affect aboriginal lands or lands claimed by aboriginal people was too speculative to be concluded at this time;
  • A duty to consult could arise in the future based on a decision or an event prompted by the Investment Agreement affecting aboriginal rights. The duty to consult was, however, not triggered by the Investment Agreement itself;
  • While high-level management decisions by government could trigger a duty to consult, the Investment Agreement did not address any specific lands, resources or potential projects and was instead a broad, national framework agreement providing certain protections to Chinese and Canadian investors.

HFN argued that based on reason and logic, the Investment Agreement would temper the federal government’s willingness to act aggressively to protect aboriginal rights because of the sanctions imposed under the agreement. The Federal Court of Appeal held this was “pure guesswork” and thus ruled that in the absence of a tangible risk or possibility of harm, there was no duty to consult.6

The Court of Appeal further stated that if investment started to flow, Aboriginal Peoples would be able to communicate with the corresponding government authorities and courts to protect their rights, including the right to self-government, if they were breached. The absence of a proven causal link between the investment from China and a possibility of risk to aboriginal rights was determinative in this case.


The Federal Court of Appeal's decision is significant in several respects:

  • The duty to consult does not extend to Canada's trade and investment agreements with other countries even where those agreements could potentially lead to investment in projects impacting asserted aboriginal rights. The duty to consult will only arise if and when a project or development has the potential to impact those rights;
  • Mere speculation without evidence is insufficient to establish a duty to consult.
  • The Federal Court of Appeal confirmed that the Supreme Court of Canada decision in Tsilhqot’in Nation v British Columbia7 did not change the law concerning the duty to consult.