The Globe and Mail: First published September 11 – It has the potential to be the biggest litigation award in Canadian history and it all hinges on a clause scrawled 173 years ago.

First Nations located around the resource-rich northern shore of Lake Superior are asking for $126-billion in compensation for the Crown’s failure to pay annuity increases promised in an 1850 treaty.

The figure is set out in submissions for a 24-year-old case entering final arguments this week, pitting the Anishinaabe signatories to the 1850 Robinson-Superior Treaty against the federal and provincial governments.

Legal experts say such an award could fundamentally alter Crown-Indigenous relations across the country. “The understanding of annuities might change as a result of this from nation to nation,” said lawyer and former Couchiching First Nation chief Sara Mainville, who’s been watching the case closely.

Like many historical treaties between the Crown and First Nations, the Robinson-Superior treaty carried a promise of annuity payments to First Nations in the region: a total of £500 to be delivered each summer to the signatories.

But the Crown’s negotiator, William Robinson, agreed to language that is somewhat unique in treaty history, shared only by the neighbouring Robinson-Huron treaty, whose nations are also involved in the litigation but have opted for settlement talks. The treaty states that if the land surrendered to the Crown produces enough wealth for the province to increase the annuity without incurring a loss, then the annual payment to First Nations would be adjusted “from time to time.”

The annuity increased to $4 a person in the 1870s and has remained there since.

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For decades, the Anishinaabe nations under the treaty have argued that the article amounts to an escalator clause – the more wealth extracted from the region, the more First Nations would be compensated.

Five years ago, during the first stage of the trial, Ontario Superior Court Justice Patricia Hennessy sided with the Anishinaabe, ruling the Crown had indeed broken a pledge to augment the annuity payments as resource revenues from the region poured in. A 2021 Court of Appeal decision upheld her finding.

During stage two, she determined that the Crown remains liable for compensation. Ontario is appealing the earlier stage decisions. The case is set to be heard at the Supreme Court of Canada in November.

The third and final stage could be the thorniest of all: calculating precisely how much the affected nations should be compensated and allocating liability between Canada and Ontario.

Since stage three opened in Sudbury this year, Ontario has argued it owes next to nothing. Provincial lawyers say annuity increases are entirely at the discretion of the Crown, not of the courts. What’s more, the province has calculated that it actually lost $4.2-billion on resource development in the region once it accounts for the cost of constructing railways, roads and other infrastructure.

“We find that to be a preposterous position,” said lawyer Brian Gover, who is representing seven First Nations involved in the claim. “We really challenged the way Ontario, in particular, comes up with its numbers.” Testimony for the third stage took place over 50 days and laid out competing visions for how compensation should be calculated.

Under the “net Crown resource revenue” model, the two governments would be on the hook solely for compensation as a share of royalties and other fees collected directly from resource extraction. Canada states in court submissions that such an award would range from $578-million to $2.45-billion, and that Ottawa should be liable for between 15 and 20 per cent, Ontario paying the remainder.

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The far higher award estimate arises from the economic rents model favoured by the plaintiffs. Under this formulation, laid out in testimony by Nobel-winning economist Joseph Stiglitz, the compensation is calculated as a share of direct fees and royalties, plus indirect revenue, such as taxes, and lost opportunity for First Nations to consult with the Crown on charging higher fees for resources.

With compound interest included, the money award to the plaintiffs under the economic rents model would be $126.285-billion.

“The major part of the compensation when we see these really big numbers is compound interest,” said Ms. Mainville. “It has to make up for the years and years of ignoring these claims. The sad thing is there are seven or eight generations of people that have been left in poverty because Canada has ignored these claims. These are real lives.”

To highlight that reality, the court heard testimony from Raymond Goodchild, an elder and member of the Pays Plat First Nation. He described growing up in a tarpaper shack with no plumbing and scavenging garbage cans along the highway for scraps of food.

“That evidence was a seminal part of the case, hearing from people who have been experiencing deprivations in the territory going back to their grandparents and their grandparents’ grandparents,” said lawyer Kaitlyn Lewis, who represents Red Rock First Nation and Whitesand First Nation in the case. “It left a mark on everyone in the courtroom.”

Final arguments are expected to run through September in Thunder Bay.

PATRICK WHITE, Staff Reporter, Toronto