When a mining company wants to start digging, the community sitting on top of the resources has some things to say. To formalize has been said, community benefit agreements for mining are written to appease both sides.
In this article, we will give an overview of these agreements, and more importantly, how the law fits into these black-and-white contracts. For anything else you want to know more about, you can also reach out to a Lexpert-ranked mining lawyer.
What are community benefit agreements in mining?
In the mining industry, community benefit agreements are often used interchangeably with impact benefit agreements or relationship agreements. As one of the most common legal tools in the sector, community benefit agreements in mining are privately negotiated, legally enforceable contracts between:
- a mining project proponent, and
- one or more affected Indigenous communities or governments
These agreements set out two main things:
- how the community will share in the mining project’s economic benefits, and
- how the proponent will manage and mitigate the project’s possible impacts (e.g., social, cultural, and environmental)
Community benefit agreements in mining projects can also be a part of a memorandum between the two parties, such as in this case:
Learn more about these community benefit agreements by consulting the best mining lawyers in Canada as ranked by Lexpert.
What are the key clauses in these community benefit agreements?
Community benefit agreements in mining may vary, depending on its scope and actual circumstances. However, most agreements would include provisions across the following areas:
- employment and training
- procurement set-asides
- revenue sharing and royalties
- environmental and cultural oversight
- dispute resolution procedures
We’ll discuss these key provisions of community benefit agreements in mining below.
Employment and training
To show that communities do benefit from these mining projects, these agreements would usually specify the following:
- numerical targets for local community members and Indigenous Peoples to be hired at different skill levels
- employment details (e.g., timelines and training obligations) attached with these hiring targets
For instance, a community benefit agreement would set out the percentages by the job category and the period within which they must be achieved. This is to prevent vague aspirational contractual terms, which are sometimes unenforceable in practice.
In some cases, community participation is also manifested through board representation or joint management committees. These are in addition to employment opportunities, as these representations give the community a voice in project decisions throughout the mine’s life.
Procurement set-asides
Aside from hiring targets, a community benefit agreement would also lay down the requirements for the mining company to contract with Indigenous- and First Nation-based suppliers for specific services.
Mining lawyers have seen more of these procurement clauses in recent years, especially since these transactions have become one of the focuses in maintaining the relationship between mining companies and impacted Indigenous groups.
Revenue sharing and royalties
When it comes to the dollars in question, the following are the usual terms found in community benefit agreements in mining:
- financial payments
- royalties
- equity participation
These terms may also be tied to the production volumes or project revenues of the mining project involved.
One example of this is the Mary River Impact and Benefit Agreement (IIBA) between the Qikiqtani Inuit Association and the Baffinland Iron Mines Corporation. In this IIBA, royalties are set at 1.19% of the net sales revenue, which is approximately $66 million over the Mary River Mine’s life.
Environmental and cultural oversight
One of the very important parts of community benefit agreements in mining projects is the provisions for wildlife compensation and environmental monitoring. These provisions usually have certain conditions on:
- community-led monitoring programs, both for land and water resources
- time-bound reporting obligations imposed on the mining company
- contingency measures triggered by specific environmental thresholds
Both the community and the mining company benefit from identifying which environmental obligations are driven by the agreement, and which would exist regardless of it. This process is helpful, since it will keep negotiations at the start focused on what really actually matters for the two parties.
Cultural protections are also part of these community benefit agreements, such as measures to protect:
- traditional land use
- sacred sites
- cultural practices
These protections may start during the mine’s construction, while it is operating, and until the mine has been decommissioned.
Dispute resolution procedures
A good community benefit agreement would need clear and measurable targets, along with defined monitoring and enforcement mechanisms. However, when these targets and mechanisms fall below what is expected by one party, the agreement’s dispute resolution process kicks in.
Generally, CBA disputes are handled through private bilateral processes, instead of going to court. It would start in escalating processes, starting with negotiations, before moving to formal proceedings.
The reason is simple: a contractual dispute resolution process keeps conflicts confidential. One fallback of these internal processes is that it limits outside accountability, because not too much public eye has been observing the dispute.
In any case, alternative dispute resolution procedures come in handy when it comes to the infrastructure and mining industries, and community benefit agreements are proof of this.
Community benefit agreements in mining may also involve cross-border issues, similar to this recent issue in British Columbia:
If you’re looking for mining lawyers near you, check out the Special Reports by Canadian Lawyer, one of our sister publications, which ranks the best lawyers and firms across the country.
How can lawyers help clients with community benefit agreements?
There are several ways that mining lawyers can help mining companies, communities, and Indigenous Peoples when it comes to these community benefit agreements. Aside from your providing the usual legal advice and contract-drafting, here are the other ways that mining lawyers become relevant for these agreements:
Specifying the agreement to prevent future disputes
Some of the most common source of conflicts after the agreement has been signed are vague language on:
- employment targets
- procurement commitments
- environmental triggers
Agreements that use unclear phrases, like “best efforts” or “reasonable steps,” with no numbers and timelines tend to fail post-signing. As such, clearly specifying these targets, formulas, and conditions is one area where mining lawyers in Canada are sought after.
Telling the difference between what is binding and what is not
One of the most important things a lawyer can do early in the early processes of drafting the agreement is to help their client understand what kind of document they are dealing with. For instance, mining lawyers can expound more on these two instruments, as they usually confuse communities and companies:
- Community Benefits Agreement: a legally enforceable and gives the affected party legal recourse if terms are not met
- Community Benefits Framework: a set of guidelines with no binding force on the parties involved
For these, a lawyer’s job is to make sure their client, whether it is a community or a mining company, knows exactly what they are agreeing to before they sign.
Separating real costs from assumed ones
Not every provision in a community benefit agreement in mining projects represents a genuine additional cost to the developer. On the other side, some provisions like royalty payments, advance payments, and implementation funding, are genuine incremental costs to the mining company.
Mining lawyers who understand this can save their mining company clients a significant amount of negotiating time and money.
Drafting provisions that can actually be enforced
Vague language is the most common reason community benefit agreements fail in practice. For a successful community benefit agreement, it would require the following:
- clear and measurable targets
- defined roles and responsibilities
- implementation guidelines
- monitoring and enforcement mechanisms
When those elements are missing, communities have no practical way to hold companies accountable, and companies have no clear standard to meet.
For a lawyer drafting on behalf of a community, this means pushing for specific numbers and targets, which are all tied to specific timelines. For a lawyer acting for a mining company, it means making sure targets are realistic, given the actual capacities of the company.
Community benefit agreements in mining: Writing down what has been dug up
Not every community strikes gold when a mine opens nearby, and not every mining company walks away unscathed when a community feels shortchanged. Community benefit agreements for mining exist precisely to address these concerns.
As always, staying on top of that shifting ground needs legal counsel who knows the terrain. For this, a Lexpert-ranked mining lawyer can help make sure whatever gets dug up, whether it be in the ground or in the contract, that works in everyone’s favour.
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