It’s estimated that Ottawa would eventually have to pay out total of nearly $20 billion to cover Indigenous land claims, and smaller specific claims including those related to residential schools. (Photo by THE CANADIAN PRESS)

Focus on rising costs of Indigenous legal claims as Ottawa preps financial books

OTTAWA — The federal government’s forthcoming annual public accounts will release a trove of numbers that will show how much more Ottawa expects to pay to settle billions of dollars in legal claims made by Indigenous Peoples and their communities.

The contingent liabilities section in last year’s public accounts estimated Ottawa would eventually have to pay out total of nearly $20 billion to cover 70 outstanding comprehensive Indigenous land claims, 528 smaller specific claims and thousands of other cases of litigation, including those related to the legacy of residential schools.

The total is expected to grow again when the newest documents come out — as it has over the past several years.

The gradual climb of the government’s contingent liabilities is raising questions about how the payments could eventually affect the federal bottom line as each claim is settled.

A source with knowledge of the government’s deliberations on Indigenous claims says Ottawa has grappled internally with how best to account for the climbing contingent liabilities and how they could ultimately impact the federal books. The source spoke on condition of anonymity because they were not authorized to discuss the issue publicly.

In recent years, the federal public accounts have gradually raised the contingent liability estimates for each of these types of claims. Combined, the public accounts pegged them at a combined $18.4 billion in 2016, $16.6 billion in 2015 and less than $14.5 billion in 2014.

The annual financial documents, which are typically released to the public in October, define contingent liability as ”a potential debt which may become an actual financial obligation if certain events occur or fail to occur.”

But even with the steady, year-to-year increases in the public accounts, some observers believe the government has still underestimated just how much Ottawa could eventually be on the hook for.

Lawyers who have spent years representing Indigenous communities in their land claims warn that Ottawa’s numbers are far too conservative — and could ultimately be at least four or five times larger.

“It does seem to me that this is probably a very unrealistic assessment of what their contingent liability might look like,” said Ron Maurice, managing partner and co-founder of Maurice Law Barristers & Solicitors in Redwood Meadows, Alta.

“It’s growing and it’s silently chipping away, and creating a massive debt that at some point we need to come to terms with.”

Maurice said one reason the government might be keeping the contingent liabilities lower than they should be is because it hopes to avoid making a negative impression with ratings agencies.

He said recent cases have shown the government has been paying out far greater sums for compensation after spending years fighting land claims in the courts. In many cases, he believes Ottawa would have been able to settle for much smaller amounts and lower legal fees by avoiding a drawn-out process.

For instance, Maurice pointed to the 2016 decision in a case involving 14 Indigenous communities, including a First Nation that he represented — Saskatchewan’s Beardy’s and Okemasis.

He said the group of First Nations was prepared to accept a settlement of $31 million about 10 years ago, but Ottawa argued the value of the claim was about zero. In the end, he said the court ruled in favour of the communities and ordered Ottawa to pay them a total of $50 million, including compounded interest.

The example, if projected onto all of the outstanding claims, raises questions about the reliability of the government’s figures as well as their risk management strategies, he said.

Perry Bellegarde, national chief of the Assembly of First Nations, wants the Auditor General and other fiscal economists to help gauge just how much of a hit these claims will be for Ottawa.

“I don’t exactly know how they’re quantifying that right now,” Bellegarde said of the federal assessments in a recent roundtable interview with The Canadian Press.

“All I know is it’s a very big concern and it’s a very legitimate legal concern.”

He said it’s crucial for the federal government to deal with the outstanding claims as soon as possible for two main reasons: putting a stop to Ottawa’s ballooning costs and providing a jolt of economic support for Indigenous communities.

“The sooner you get it off Canada’s books, the sooner you’re going to have a positive economic growth within Canada’s economy because First Nations people will have access to capital. One of the biggest challenges for First Nations people is lack of access to capital,” said Bellegarde, who noted that delaying the claims also leads to higher interest payments.

“If you don’t deal with these claims now, the claim is just going to get bigger and bigger and bigger.”

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